Intervention by the Competition Authority of Kenya and the World Bank Group has led to market barriers being removed that were preventing a new product, purple tea, from joining the market
Intervention by the Competition Authority of Kenya and the World Bank Group has led to market barriers being removed that were preventing a new product, purple tea, from joining the market.
Kenya’s emerging purple tea production has the potential to become a highly profitable part of Kenya’s tea industry, with projections stating that new tea varieties could generate up to US$60 million in the next 3-5 years and comprise up to 5% of the country’s vital tea export market.
The country is Africa’s largest tea producer and the third biggest globally.
The rich volcanic soil in the Great Rift Valley region in particular has made Kenya a leading global producer of tea and provides the country’s second highest foreign income earnings.
Tea cultivation sustains an estimated 3 million Kenyan farmers and their families, from small farms to large plantations.
Black tea is the region’s most popular product, with its exportation totalling over a quarter of Kenya’s annual export earnings.
Farmers began experimenting with a new variety, purple tea, ten years ago and found it contained higher levels of antioxidants than black and green tea, with a dark reddish colour and fruity flavour.
It was a promising new market, but rules governing Kenya’s tea industry blocked the entry of new producers into the market.
After being approached by several investors interested in purple tea, the Competition Authority of Kenya (CAK), which has previously collaborated with the World Bank Group’s Competition Policy team, worked to remove these barriers to new tea market entrants.
Meanwhile, the World Bank Group provided technical support to calculate the additional income farmers could earn by switching to growing purple tea, figures that would be essential in making the case for potential purple tea investors to be granted operation licenses.
Using this economic analysis, CAK secured licenses for five producers to enter the market.
The Kenyan government is now updating the whole regulatory framework to address investment barriers in tea and other industrial crops.
This will transform livelihoods by generating higher income, offering opportunities to diversify production, and inciting competition in order to raise prices.
The five purple tea production factories now in operation employ more than 2,000 workers, including small and medium farming enterprises, and exports are reaching the United States and Europe.
Barriers to market entry and competition exist in markets all over the world and can cost countries at least 1% of GDP growth, hindering the poorest economies the most.
The World Bank Group’s Trade & Competitiveness Global Practice works to break down barriers in competition policies alongside governments and industries from more than 60 developing countries.
Competition policy is key to creating new markets and growth opportunities, with countries increasingly focusing on solutions that foster greater innovation and diversification.
Francis Kariuki, Director General of CAK, said: “We approached the sector regulator in terms of [demonstrating] the benefits of allowing other investors into the specialty tea industry, and showed them the negative impact of the then regulatory framework.”
“We appreciate the support that we have received from the World Bank, and we expect that this support will continue as we endeavour to dismantle regulatory obstacles which are hindering economic growth in this country.”