Malawi tea earnings down 14%

Earnings from tea, one of Malawi’s reliable foreign exchange earners, has slumped 14 percent year-on-year to $3.1 million (K1.2 billion, at the current exchange rates) from $3.6 million (K1.4 billion) same period last year affected by a drop in prices.

The earnings drop, despite the sales of the tea being in progress, is obviously not good for the economy which requires foreign exchange for procurement of critical imports such as fuel and medical drugs.

The prices dropped to an average of $1.54 (K634) per kilogramme (kg) from $1.99 (K819) per kg the year before, according to the Reserve Bank of Malawi (RBM) economic report.

“The drop in prices was attributed to increased supply on both local and international markets. In addition, the quality of the leaf was compromised by excessive rainfall,” said the RBM.

Figures show that tea sales at Limbe Auction Floors located at Kidney Crescent in Blantyre amounted 900 000 kg in February compared to 700 000 kg during the same time last year.

But the figures show that cumulative volume of tea sales amounted to two million kg, an increase of 9.4 percent from 1.8 million kg sold in a similar period in 2013.

Apart from tea, Malawi also relies a great deal from tobacco, which wires in more than half of the country’s foreign exchange earnings in a year. Currently, earnings from the leaf have surpassed $50 million since the selling season opened on March 24.

Last year, export revenue for tea peaked at K16 billion, a 50 percent jump from the previous year’s K10.7 billion.

But Tea Association of Malawi (Taml) chief executive officer Clement Thindwa then argued that in dollar terms, the earnings had not gone up due to the devaluation of the kwacha in May 2012.

The RBM devalued the local unit by 49 percent and subsequently floated it to be dictated by the forces of demand and supply.

But commodity experts have said this year, tea earnings are expected to rise largely buoyed by sustained growth in world demand and weak output which is expected to create a deficit in the commodity’s global supply.