Tea sector in crisis

The tea industry information indicates that 60,000 smallholder farmers still earn a paltry Shs183-Shs330 ($0.05- $0.09) per kilo of green leaf, which is hardly enough to recoup the capital they invest in producing green tea leaves.

 To break even,  the Uganda Tea Association (UTA) leadership indicates that the farm gate price of green tea should hover above $0.13.

Mr Onesimus Matsiko, a Ugandan-based tea industry consultant, explains that increasing green leaf farm gate prices highly depends on the factory’s respective business capacities.

The challenge, he says, is that most of the processors who set the prices are barely earning enough to cover production costs, highlighting the crisis facing Uganda’s multi-million-dollar tea industry, which is affecting export earnings.

 A February 25, 2025 report from the Committee on Tourism, Trade, and Industry confirms the ongoing crisis in Uganda’s tea industry.
 The report highlights that the sector, a cornerstone of the country’s economy since its commercial introduction around 1925-1930, has been struggling to survive since the outbreak of the Russia-Ukraine war in February 2022.

 The war triggered a global economic shock, which led to reduced demand for tea and a decline in prices.

 The slow recovery of the industry has caused anxiety among some farmers, especially those from the Rwenzori region in western Uganda, who are protesting against what lawmakers call absurdly low prices, with some cutting down their tea bushes to replace them with bananas.

 The situation is dire, with the average price of Ugandan black tea in the Mombasa auction falling sharply from around $2 (Shs7338) per kilogramme of made tea to the current less than $1 (Shs3,670) per kilogramme, below the production cost, the lawmakers noted.

 With the processors earning minimal profits, the green leaf price has declined by over 50 per cent, from Shs600 ($0.16) to Shs200 ($0.05) per kilogramme, with some farmers fetching as low as Shs14O ($0.03) per kilogramme.

With the recent decline in tea sales at the Mombasa Tea Auction 2024, Uganda's tea farmers are grappling with low farm gate prices for green leaf tea, forcing them to sell their produce below the cost price. This has led to a vicious cycle of inferior quality, low prices, and uneconomical operations, causing many farmers to abandon or uproot their tea plantations for banana plantations.

 There is growing fear that the decline of the tea industry will result in the loss of more than 100,000 jobs, primarily in tea factories, and along the value chain, including tea pickers, plantation labourers, suppliers, transporters, and others.
 Furthermore, the economic collapse of business centres established around tea factories would have a devastating impact on local communities.

While the Uganda government has tried to revitalise the industry, including providing subsidised fertilisers and allocating Shs126 billion ($32.6m) as working capital for tea processing factories, the legislators are concerned that there is little progress.

The Uganda tea industry is also impacted by the effects of the climate, with tea growing areas in East Africa facing longer dry seasons due to climate change which stresses tea plants, leading to reduced yields and quality.
Uganda faces low tea production capacity, according to industrial players.

“The crop levels of Uganda are very low as is across the region. We, therefore, expect that the quantities shall remain low for a while till after the expected rains of the upcoming season, set it, the Uganda Tea Association board chairperson Victoria Ashabahebwa said.

While the packers are back at the Mombasa auction, the leadership of the tea industry is still grappling with unsold tea.
The trading report shows that, from the market, overall, Egyptian packers lent strong support with the Pakistan Packers. There was improved interest from other Middle Eastern countries while Bazaar maintained participation, but at lower levels; Afghanistan was less active.

 “There was support from Kazakhstan and Sudan, while the UK was active but selective. Somalia showed good activity at the low end of the market. Whereas over 20.4 million kilos were offered for sale in Mombasa during the eighth sale from February 24th-25th, 2028, the previous week’s supplies dropped to 13.1 million kilos.