Determinants of Tea Export supply in Kenya (1970-2007)
The aim of the study was to identify the factors that determine tea export supply in Kenya. Specifically, the study attempts to describe the tea export performance of Kenya for the period 1970 -2007, investigate the determinants of tea exports and make policy recommendations for improving tea export performance in Kenya. It explains how real exchange rate, input prices, price of tea substitute, weather pattern, real wage rate in tea sub industry and structural adjustment programme affect the tea export supply in Kenya. To do. this, a simple log linear model was estimated using ordinary least squares (OLS)reviews Statistical Program was used to analyze the time series data for the period 1970-2007. The finding of the study indicate that real producer price of tea and the real exchange rate are highly significant in explaining tea export performance at any given time period. The real milk price and input price variables were also found to be significant in explaining amount of tea exported from the country. The weather variable was also found to influence amount of tea exported at a given time period. However, the SAP and input price variables were found to be insignificant in explaining tea export supply. Based on the findings of the study, policy recommendations have been made which can remedy the situation. This includes price stabilization or price guarantee scheme, flexibility in the exchange rate movements in line with the economic fundamental, value addition and innovative marketing designed to improve tea producer prices. To compete globally, the government should help toreduce costs including transaction costs like electricity and fuel that make tea production and marketing expensive and hence uncompetitive in the region. The government through ministry of trade should also take the advantage of economic integration, particularly the East Africa Cooperation, COMESA, together with African Growth Opportunity Act (AGOA); in these partnerships there is potential for export opportunities that can be explored to Kenya's advantage.