Why Uganda’s tea market struggles to grow despite modest price gains

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Despite modest farm gate price improvements, Uganda’s tea market continues to struggle. The current tea market data displays the same level of performance for the same sale (Number. 41-2024) one year ago at the Mombasa Tea Auction Centre.

In this week’s sale number 41-2025, Uganda averaged $1.01 per kg compared with $1.05 for sale 41 of 2024. This is only one US cent below the previous week’s sale 40-2025, which averaged $1.02.

Regional performance

In this week’s sale, Kenya averaged $2.17 while Rwanda averaged $3.12. According to Onesimus Matsiko, a tea sector consultant, this pattern has been maintained for a long period, where Uganda’s average performance is half of Kenya's and one-third of Rwanda's.

A lot has been discussed on the causes of this disparity, and the major cause is relative product quality, exacerbated by prejudice arising from consistent lower performance.

Uganda’s production volumes drop

During this week’s sale, Uganda sold only 538 tons of tea compared with 765 tons on the corresponding sale in 2024; a 42% drop in volumes according to Tea Brokers East Africa Limited (TBEA).

While some factories have upscaled direct sales outside the auction, the massive evident abandonment of tea gardens in Tooro and Kigezi sub-regions aligns with these market statistics.

Fortunately for the industry, Matsiko said there is more hope for industry recovery compared with cases of permanent exit, as demonstrated in more abandonment than uprooting of tea gardens.

The continued malnourishment of tea gardens with excessive fertiliser deficiency also aligns with this drop in market offerings.

Owen Ayebare, a tea farmer, noted, “As farmers, we are the backbone of our nation’s food security and economy. However, we face significant challenges in accessing essential inputs like fertilisers, which are crucial for improving crop yields and production.”

Ayebare said the high cost of fertilisers has made it difficult for them to afford them, resulting in reduced yields and lower incomes.

“This not only affects our livelihoods but also impacts the nation’s incomes and economic growth. We urge the government to consider providing subsidies or support programs that can help make fertilisers more affordable and accessible to farmers like us,” he said.

He explained that government can support the sector by subsidising fertiliser prices, providing interest-free loans for fertiliser purchases, establishing fertiliser distribution centres in rural areas and promoting sustainable fertiliser use practices.

This, when done, Ayebare said, will help increase crop yields, improve food security, and boost the national economy. “We believe that with the right support, we can produce more, earn more, and contribute to the nation's prosperity.”

Farm-gate green leaf prices

While there is a significant improvement in farm-gate prices around sh300 per kilo of green leaf compared with sh200 same time last year, there is no evidence for sustainability or further improvement of these prices according to Matsiko.

He said the current prices appear to be supported by the artificial shortage of green leaf to processors due to acreage out production and low productivity due non-application of fertilisers.

According to him, the main survival attribute is a squeeze on the cost of production. “This is currently working out (the hard way) with lean governance structures of “investor factories” and plantation-based factories which buy outgrowers’ leaf as a supplementary operation,” he noted.

The heavily structured farmer-owned factories are all struggling to maintain the democratic structures and processes of massive shareholder numbers, cost control as cash-flow squeezes shift to essential business operations, resulting in processing capacity under-utilisation.

Matsiko said gross payment delays gradually compound the situation, as farmer-owned factories are practically the least appealing destinations for outgrowers’ leaf.

President Museveni engaged tea stakeholders on August 19, 2025, in Bushenyi and appreciated the tea industry challenges which can be overcome by domestic interventions.

He pledged to support the availability of subsidised fertilisers, bail out tea processors with working capital and clear outstanding bills for tea seedlings, among other interventions. All these long-overdue interventions are still in waiting.

Smallholder tea farming feasibility

According to Matsiko, recognition of smallholder high-value tea growing segment will be very useful for government policy support.

Industry experts have generated analysis showing how the current smallholder tea farming without intensive practices is either loss-making or generating very low meaningless income per acre.

The popular defence for masses of smallholder tea farmers is to generate around sh200,000 per acre per month with optimum performance.

Majority of tea farmers find this level good enough for government support to provide a monthly income to farmers, an opportunity difficult with many other enterprises away from intensive agriculture, according to Matsiko.

William Mbonigana noted that the tea sector revival is going to be in phases. “One is immediate or emergency resuscitation with a fertiliser subsidy. Midterm phase, however, requires continued fertiliser support, improved regulation, crop protection and marketing,” he noted.

Breakthrough strategy

Matsiko highlighted a breakthrough strategy for smallholder tea farmers is two-fold manner.

One, he said, is to generate high-quality green leaf leading to high-quality made tea that earns at least $2.5 per kg from the current cut, tear and curl (CTC) black tea product, where Rwanda is averaging above $3.00.

This price, he said, will support intensive agriculture practices resulting in the realisation of Uganda’s yield potential. Matsiko said this scenario will lead to over sh500,000 net profit per acre per month.

“The second strategy is to tread the path of speciality teas, which earn between $20 to $300 per kg. The ultimate profitability is above sh1 million per acre per month,” he noted.

On the other hand, the specialty tea market is at $9 billion and still growing and difficult to be served by mass tea producers. This is a niche Uganda should enter.

Maclean Mutungi Kyamutetera, the producer of Mackie Organic Tea, said that some farmers have bumped into a fatty market for speciality teas only, but they still need more expertise to process these teas.

“The problem is that some people are not aware that under speciality teas, several types of black teas are processed, and these earn white highly,” she said.

Other Government Interventions

Promotion of cottage tea processing is aligned with speciality teas and is affordable in capital requirements. A unit of machinery demands as low as $30,000 to $60,000 compared with millions of dollars for CTC standard line processing machinery.

The low volumes of green leaf requirement render cottage tea processing an insignificant actor that does not compete with existing mass production factories.

Alternative tea marketing strategies, including common user facilities, are also worth exploring. However, Matsiko said protection of farmer-owned tea processing factories against extinction is an industry stabilisation intervention amidst a liberalised industry that needs urgent attention.

“On top of grants, lending and patient capital to turn around Uganda’s tea industry should be dominated by patient affordable capital in the form of equity."

Matsiko said Uganda Development Corporation (UDC) should be deliberately capitalised to execute this natural mandate and further noted that equity into farmer-owned factories, rolling out cottage tea processing units and development of tea marketing business infrastructure is key to reviving the sector.