Tea producers in Uganda are struggling against a liquidity crisis that is characterised by high operational costs as farmers cannot access affordable capitalisation loans.
Mabale Growers Tea Factory Limited Managing Director Roger Siima said despite the booming tea business, financial institutions are not supporting the sector.
“We face challenges that include high interest rates on short-term loans and the absence of long term capitalisation schemes. The Uganda Development Bank (UDB) does not yet understand the importance of the tea industry as a pillar of national economic development,” Siima said.
Further, he said producers are charged high power tariffs while supplies of quality inputs are limited. The absence of research into the full potential of the sector was also seen as impeding growth. Lack of farmer training, a poor qualify leaf and poor harvesting practices have lowered Ugandan tea prices.
Siima said due local scarcity, tea farmers are forced to import basic inputs at high costs. “With the (value of the) US dollar firming against the local currency, the importation of inputs has become more expensive for the tea farmer,” Siima said.
Very few Ugandans consume tea and the bulk of local produce is exported to Mombasa, where it is sold in the low-grade market due to poor quality.