The automation of trading at Kenya’s weekly tea auction is set to start with the provision of a Sh150 million grant in what would increase transparency in dealings and curb price manipulation.
Trade Mark East Africa (TMA) has provided the money that will help in developing an online platform that will enable farmers and traders to participate in the auction without their physical presence at the Mombasa based auction.
The automated system will enable farmers to monitor the process at the auction and get to know the actual price that their produce will fetch.
“The introduction of ICT in the tea export process is expected to increase tea trade efficiency, transparency and overall governance,” says EATTA managing director Edward Mudibo.
Players at the Mombasa Tea Auction were accused of colluding to fix prices and deny small-scale farmers their deserved earnings, according to a report filed by the tea regulator.
The Competition Authority of Kenya (CAK) also accused various players of manipulating the price of the highest tea grade, PF1, which is mainly produced by small-scale farmers.
EATTA, which runs the auction, reckons that prices are influenced by demand and supply and that the automation will also help clear the negative assumption of market manipulation.
“The auction process offers an opportunity for tea producers who do not have the marketing power to source and reach new or potential buyers, to access this buyer through a centralised process that is cost effective to them,” said Mr Mudibo.
Kenya’ hosts the world’s biggest tea auction, selling produce from nine African nations, including from Burundi, Rwanda, Uganda, Malawi and Mozambique. Ethiopia is due to join in March.
EATTA has 200 members drawn from growers, buyers, warehouse operators and brokers from regional African nations.
The country is the top producer of black tea and earns about Sh100 billion a year from exports, making it one of the nation’s main sources of foreign exchange earnings. Complete automation of the 60-year-old auction would be completed next year.
Some of the key challenges being experienced in the tea auction today include long tea trading cycle, difficulties in accessing tea trade data, complex and bureaucratic trading process and limited tea trading window.
The weekly auction is the main outlet for Kenyan tea and was found to be in the hands of only a few buyers. Some regulations of the tea traders association were said to hinder competition.
Source: business daily africa
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