The regional auction in Mombasa has recorded its highest volume of unsold tea this year, a development industry players have linked to a newly introduced export levy and persistent logistics challenges arising from the ongoing Middle East crisis.
Stakeholders say the combination of higher export costs and increased shipping expenses has made Kenyan tea less competitive in the international market, leading to reduced demand at the Mombasa Tea Auction, the world’s largest black tea trading hub.
The latest weekly auction session (Sale 22) recorded a sharp increase in unsold tea after only 9.19 million kilogrammes of the 12.52 million kilogrammes offered for sale secured buyers.
This translated to approximately 27 percent of the tea remaining unsold, the highest level recorded this year.
The trend has been steadily worsening over the past month. Sale 20 registered 22 percent unsold tea, while Sale 21 recorded 23 percent before the figure climbed to 27 percent last week.
Bitter brew
The worrying development has raised concern within the East African Tea Trade Association (EATTA), which oversees tea trading activities at the Mombasa auction.
EATTA Managing Director George Omuga said the tea industry was facing significant challenges arising from disruptions to global shipping routes and the introduction of a new export levy that came into effect on May 1.
“We are experiencing logistics challenges as a result of the Middle East crisis, which has increased transportation costs and disrupted shipping schedules. At the same time, the recently introduced export levy has increased the cost of doing business and affected demand for tea at the auction,” said Mr Omuga.
The Tea Levy Regulations, 2026 reintroduce a levy payable by tea exporters at 0.8 percent of the auction value or customs value for direct sales, and by tea importers at 100 percent of the import value per consignment of made tea.
Unlike tea originating from other countries and traded at the Mombasa auction, the levy applies exclusively to Kenyan tea, making it more expensive than competing products from neighbouring countries.
Industry players argue that the levy has made Kenyan tea less competitive and prompted some buyers to shift their focus to tea from Rwanda and Burundi, which is not subject to similar charges.
The impact has been particularly severe for tea marketed through the Kenya Tea Development Agency (KTDA), which handles about 60 percent of all tea traded at the auction.
Tea Buyers Association Chairman Peter Kimanga warned that the levy would ultimately reduce farmers’ earnings by increasing operational costs across the tea value chain.
“Since May 1, KTDA, which handles the largest percentage of tea from Kenya, has been paying substantial amounts in export levies every week. If the government does not suspend the levy, those costs will inevitably be transferred to farmers through lower returns and reduced bonus payments,” said Mr Kimanga.
He noted that tea exporters are currently paying about Sh80,000 per container in export levy charges before the tea leaves the country.
“This year may not be good for tea farmers because transportation costs have already increased due to the Middle East conflict, which has forced shipping companies to use longer routes at higher costs. Now, with the introduction of the 0.8 percent levy, farmers will have to absorb an additional burden through reduced earnings,” he said.
Mr Kimanga said buyers in Pakistan, one of Kenya’s largest tea export markets, had raised concerns about the levy and warned that the measure could affect future purchases of Kenyan tea.
“Pakistan has protested the levy because it only affects Kenyan tea. Buyers will naturally compare prices and opt for tea from other countries. Kenyan tea remains one of the best in quality, but it risks becoming too expensive in the market,” he said.
Revenue target
The Ministry of Agriculture projects to collect Sh1.38 billion annually from the newly introduced tea export levy, raising total tax collections from the beverage to more than Sh1.4 billion.
Data from the ministry shows the State also projects to collect Sh40 million annually from the tea import levy, raising total revenue from tea taxes to Sh1.42 billion a year.
The levy will operate as a ring-fenced fund. Fifty percent will go towards farmer income and price stabilisation, 20 percent will be channelled to research and development through the Tea Research Institute, 15 percent will support regulatory functions through the Tea Board of Kenya, and the remaining 15 percent will be used to maintain and develop county infrastructure within the tea sector.
