East Africa Tea Growers reject electronic auction

By Esther Nakkazi

East Africa tea traders and growers have rejected the replacement of the current manual open outcry system, with the computerized electronic auction.

After sensitization of all users of the Mombasa tea auction, about switching to computer screens, or the ‘mouse’, stakeholders voted to retain the usual haggling over prices using the open outcry system, using the ‘hammer’.

Electronic auctioning was meant to improve efficiency-reduce auction time, transaction costs, improve transparency, and directly involve more players with no limitations on space by the auction halls.

It would also guarantee remunerative prices to tea growers and provide real-time information to all stakeholders through the tea growing and selling chain.

Tea auctioning at Mombasa, which sells all the teas grown in the East African region, and provides 20 percent of the teas on the world tea market, was to go electronic by 2013 and be implemented using the Indian tea e-auction model, the only country in the world using it. 

But stakeholders, overwhelmingly, voted against it, in a meeting held last month by the East African Tea Trade Association (EATTA) saying the auction, which basically, is a ‘public sales’, would lose its transparency, competition and risks technology failure without a guaranteed power supply at Mombasa.

“There is likely to be a loss of negotiation advantage offered by face to face and the system will reduce transparency. As Uganda, we confirm that due to the majority expression we do not want the e-auction for now,” said William Ssekitoleko, the Chairman of Uganda Tea Association.

While some members from the Kenya Tea Development Agency (KTDA) agreed to since they have already automated from farm to warehousing, James Finlay and Sotik tea felt EATTA should automate live capturing or recording of data and information, but not replace the ‘Hammer’ with the mouse.

For over 50 years now, buyers and brokers have haggled over tea prices, at the Mombasa tea auction, watching each other’s body language and facial expressions while endlessly sipping cups of tea and adding a dollar to become the highest bidder for the 8 hours that the auction runs with no health breaks.

Using the e-auction would be a health hazard if buyers were to sit uninterrupted through the 8 hours looking at computer screens and the auction would lose its gusto, those in favor of keeping the traditional ‘hammer’ or open outcry system said, in an EATTA report published last month.

Besides, Uganda, Rwanda, and Tanzania tea stakeholders also complained of a not so well developed IT system in their countries so they would not have access to computers and the internet all the time.  

Unconvinced that the e-auction would reduce costs, tea buyers say they would have to engage technology-savvy personnel, adding extra costs, and most of the brokers would lose their jobs since it would be possible for potential customers to buy directly from producers. 

To become a tea broker takes many years of developing skills of tasting, valuation, market reviews, and giving independent quality perceptions to buyers and producers, which makes them respectable and professional at their job.

Electronic auctioning would lessen the relevance of brokers in the tea auction process and their expertise would be lost, says the EATTA report with suggestions from tea buyers, packers, producers, and brokers from Uganda, Kenya, Tanzania, and Rwanda.

As it was supposed to be modeled alongside the Indian tea e-auction, a team from EATTA left for India on a fact-finding mission but found that despite it operating for eight years now, the Indians still preferred the manual open outcry system.

The report presented by the team to EATTA says the Indian government imposed the e-auction on them in order to collect more taxes from tea but they were unhappy with it because it was not interactive and it was too commercialized without meeting in the auction room.

But there are also differences in the Mombasa and Indian tea auctions. While Mombasa is unique, trading in dollars, dealing in different teas originating from all East African countries and exporting almost all its leaf, India trades in the local currency, the Rupee and the domestic market consumes most of the tea from the auction.

Some Indian tea producers felt there was reduced competition after the e-auction, which was now losing 3-4 percent of their annual production, although the loss was not entirely placed on it.

For instance, one type of tea, the Orthodox tea, had a price decline of 40 rupees (US $1) per kilogram in one year since going through the e-auction. But Indian producers of premium teas were happy that they gained good prices says the report.

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