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Thursday, December 1, 2016

Mombasa Tea Auction to go Digital

By Esther Nakkazi

After years of refusing to go digital, East Africa tea traders and growers have accepted to replace the current manual open outcry system, with the computerized electronic auction.

Today, East Africa Tea Trade Association (EATTA) signed a financing agreement with TradeMark East Africa (TMEA) to provide financing provide of US$ 1.5 million that will enable automation of the tea auction in Mombasa.

A statement from TMEA says the automation is expected to reduce the tea trading cycle by about 65% from the current 45 - 60 days to less than one month. Reduced delays will also ensure that farmers receive timely payments negating need to take loans to finance their producer operations.

The Mombasa tea auction is the world’s largest black tea auction and handles about 75% of tea exported through the port of Mombasa covering shipments from the EATTA member countries of Burundi, Kenya, Rwanda, Uganda, DRC, Tanzania, Ethiopia, Malawi, Madagascar and Mozambique.

In 2015, the auction handled more than 350 million kilos of tea, providing a platform through which more than one million farmers in Africa could sell their tea, before shipping it across the world.

The proposed integrated Tea Trading System (iTTS) will encompass the entire tea export processes including pre-auction, auction, post-auction and a Business to Business marketing network says a statement from TMEA.

“This portal will simplify the tea auction with the added benefit of increasing transparency and thus gaining stakeholder confidence in the auction,” said Mr. Nicholas Munyi, EATTA chairperson, at the signing ceremony.

“TMEA is committed to boosting intra- Africa trade and also East Africa’s trade with the world by reducing the barriers to trade. Automation of key trade systems is one way that has enabled us move closer to achieving this vision,” said Frank Matsaert TMEA CEO.

“I am excited to see that tea, a major forex earner for the region, will reach the breakfast tables across the world in an efficient and cost effective way and that the farmers working hard on their farms will regain confidence in the trading process as a result of the transparency and accountability the system will give,” explained Matsaert.

Once fully implemented, the platform, will ensure that, stakeholders of the tea auction including farmers, buyers and sellers, receive real time information on what is happening on the auction bourse.

Further, the automation will reduce delays and paper work, which is synonymous with the manual systems. The tea brokers will benefit from an automated and streamlined trading platform that reduces complex and bureaucratic trading processes and physical movement of documents to various players.

The tea producers both in Kenya and other countries in the region will have real time access to information on the tea sales as well as have lower logistics costs as they will be able to access the information online eliminating the need for travel to Mombasa.

Automation for the Mombsa auction was supposed to be implemented by 2013 using the Indian tea e-auction model, the only country in the world using it. A team from EATTA left for India on a fact-finding mission but found that despite it operating for eight years, the Indians still preferred the manual open outcry system.

The report presented by the team to EATTA said 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.

So EATTA stakeholders, overwhelmingly, voted against it in a meeting saying the auction, which basically, is a ‘public sales’, would lose its transparency, competition and risk technology failure without a guaranteed power supply at Mombasa.

The traders and growers said 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.

It is interesting that these now don’t see it as a health hazard and are willing to move with the times embracing technology.

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