1 November 2017

Kenyan Banks Give Iran Wide Berth

Kenyan banks are reluctant to have anything to do with Iranian lenders even after lifting of sanctions against the Middle East country leaving tea traders scratching their heads on how to recover their debts.

Officials from the Kenya Tea Directorate were in Iran last week to try and solve the stalemate that has locked Sh120 million that Iranian buyers owe tea traders.

The United Sates lifted sanctions on Iran last year a move that opened doors for other countries to trade with the oil rich Asian state.

"We have just come from Iran where we held meeting with the officials in regard to outstanding payments that Iranian traders owe our exporters," director general of Agriculture and Food Authority Alfred Busolo told Smart Company in an interview last week.

"Though sanctions with Iran were lifted, no local bank is willing to handle transaction. We shall address this with the relevant ministry," he said.

Mr Busolo said buyers in Iran had advised Kenyan traders to open bank accounts in either Europe or United Arab Emirates so that they can be paid through these countries.

He said the dealers want to remit payments to local banks but none of the lenders want to receive cash from Iran.

"The buyers argue that the exporters need to open account with banks that allow transaction with Iran for them to get their payments," he said.

Kenya is targeting Iran as one of the major buyers of its beverage and it has since the lifting of the sanctions tried to promote the produce there.

According to AFA, Iran has a larger population of over 80 million people with a per capita consumption of 1.4 kilogrammes of tea against Kenya's half kilogramme creating a huge potential for the country's produce.

Iran normally gets the bulk of its tea from India and Sri-Lanka with Kenya supplying about 20 million kilogrammes of the 120 million kilogrammes that Iran imports every year.

The volume of tea exported to Iran in August declined 55 per cent to 197,000 kilogrammes from 437,905 in corresponding period last year.

The International Atomic Energy Agency, which is the UN nuclear watchdog, in 2016 certified Iran was in compliance with the July 2015 agreement on limiting nuclear development, opening the country to trading with banks and companies outside US.

Lifting of sanctions

Kenya had been banking on the lifting of sanctions that had been imposed on Iran to improve trade between the two States in the fields of medicine, energy and agriculture.

Deputy President William Ruto said last year that Kenya was willing to facilitate Iranian investors and private companies to construct low-cost pharmaceutical plants in the country.

Iran's minister for Industry, Mine and Trade Mohammad Nematzadeh, in interview with the Business Daily last year said his country was planning to invest in agriculture following the lifting of the sanctions.

Mr Nematzadeh said Iran was planning to partner with Kenya in mechanisation of the country's agriculture sector. He said the move will see investors from Iran pump money into the sector to boost crop production. The crop produced would have a direct market in Iran in order to raise the volume of agricultural exports to the country.

Kenya is the leading exporter of black CTC teas in the world accounting for about 24 per cent of the global exports.

The total export volume of tea for the month of August 2017 rose 24 per cent to register 28 million kilogrammes compared with 36.9 million kilogrammes registered in a corresponding period last year.

During the month, Kenyan tea was shipped to 38 export destinations compared with 39 destinations for the same period of 2016. Among these markets, Pakistan was the leading export destination for Kenyan tea having imported 8.07 million kilogrammes, accounting for 29 per cent of the total export volume.

The 10 export destinations, most of which are traditional markets for Kenyan tea, accounted for 88 per cent of the total export volume. The UK, Nigeria, Poland and India markets recorded higher tea imports from Kenya during the month.

The tea directorate has been banking on emerging markets and an increase in local consumption to improve the sale of the beverage and boost revenues for farmers.

Amongst the emerging markets that recorded significantly higher tea imports from Kenya in August included Indonesia, Japan, Ukraine, Belgium, Sri-Lanka, China and Hong Kong.


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