Revealed: Kenya Risks Losing Crucial Tea Market Following Iranian Corruption Scandal Involving Rigathi’s Ally

Kenya faces yet another potential blow to its tea industry, risking the loss of a key global market in the wake of a corruption scandal involving an Iranian company, Debsh Tea Co.

This comes shortly after the fallout with Sudan, further compounding the challenges for Kenya’s tea sector, which plays a vital role in the economy, contributing nearly a quarter of the country’s foreign exchange earnings.

At the center of the scandal is a Kenyan company owned by a businessman allied with former Deputy President Rigathi Gachagua, who was impeached.

The company has been linked to Debsh Tea Co, the Iranian firm embroiled in a $3.7 billion embezzlement case.

Dubbed the Debsh Tea Scandal, the case has implicated high-ranking Iranian officials and threatens to disrupt diplomatic and trade ties, leaving Kenyan tea farmers and exporters bracing for significant impact.

The Debsh Tea Scandal

Debsh Tea, Kenya’s primary tea buyer in Iran, stands accused of siphoning off $1.4 billion through fraudulent practices, including misrepresenting low-grade Kenyan tea as premium Indian tea.

An Iranian court has sentenced the company’s CEO, Akbar Rahimi-Darabad, to 66 years in prison—effectively 25 years under concurrent sentencing—for disrupting Iran’s economy, smuggling foreign currency, and engaging in bribery.

Two former ministers, Javad Sadatinejad and Reza Fatemi Amin, received one- and two-year sentences, respectively, for their roles in the scheme, which unfolded under the late President Ebrahim Raisi.

Iranian authorities allege that between 2019 and 2022, Debsh Tea received $3.37 billion in subsidized foreign currency to import tea and machinery but diverted $1.4 billion to the free market for profit.

Adding to the fraud, the company imported Kenyan tea at $2 per kilogram and sold it as high-grade Indian Darjeeling tea, fetching up to $14 per kilogram—a $12 price gap that has raised serious questions about the integrity of Kenya’s tea exports.

Cup of Joe’s Role

The Iranian company sourced its tea leaves from Dubai through Kenyan exporter Cup of Joe, which recently became a key partner in the Kenya Tea Development Agency (KTDA), the country’s leading private consortium.

Cup of Joe is owned by Kenyan businessman Joseph Njuguna Wainaina, who has extensive connections in Iran, including supplying bitumen from the Middle East to the South African market. Wainaina is also closely associated with former Deputy President Rigathi Gachagua.

Former DP Rigathi Gachagua during a media interview at Karen residence.

Reports suggest that the close relationship between the Kenyan government (prior to Gachagua’s impeachment) and the Iranian tea company began in late 2022 when the new administration came into power.

At the time, Kenya faced a significant exodus of tea buyers. Cup of Joe acted as an intermediary between KTDA and Debsh Tea, reselling tea stocks and supporting small producers.

Notably, Cup of Joe paid for the goods not only in U.S. dollars but also in UAE dirhams, a move that surprised other exporters.

By the end of 2023, Kenya faced difficulties selling its tea stocks. Major buyers like Egypt and Pakistan, which together account for more than half of Kenya’s tea exports, had reduced imports due to a lack of foreign currency.

Reports seen by Kenya Insights, indicated that Chai Trading, a subsidiary of KTDA in Dubai, held most of the product in warehouses, hoping to sell it in bulk to Iran’s Debsh Tea despite the ongoing corruption scandal.

Market Manipulation Allegations

Market participants have accused KTDA and the Kenyan government of colluding to set a high reserve price at the Mombasa tea auction.

Critics argue that this was done to eliminate competition, as former Deputy President Gachagua had promised higher revenues for tea producers in an effort to broaden his electoral base among communities in the regions, where tea is a major crop.

Cup of Joe, a Kenyan trader independent of KTDA, operates from Mombasa and maintains its own warehouses in Dubai. Its involvement in the scandal has raised further questions about the integrity of Kenya’s tea export practices.

Diplomatic Tensions

The scandal has strained diplomatic relations between Kenya and Iran.

Iranian authorities are pressuring Kenya to take action against local intermediaries allegedly involved in facilitating Debsh Tea’s corrupt activities.

Tehran’s impatience with Kenya’s perceived inaction has raised concerns that Iran may seek alternative tea suppliers, potentially dealing a devastating blow to Kenya’s tea industry.

Iranian officials have accused Kenyan intermediaries of complicity in Debsh Tea’s fraudulent activities, including the mislabeling of tea origins and the laundering of illicit funds.

However, Kenyan authorities have been slow to respond, further frustrating Iranian officials who are eager to see accountability and recover stolen funds.

Kenya’s Response

Kenya’s response to the Debsh Tea scandal has been indirect.

President William Ruto’s administration established a task force in late 2023 to address the broader crisis of unsold tea stocks.

However, there has been no specific public statement from the Tea Board of Kenya directly addressing the scandal or outlining measures to protect Kenyan tea exports from its fallout.

If Kenya fails to address these concerns, Iran may reduce its tea imports from Kenya or shift to other suppliers, such as India or Sri Lanka. Such a move would have dire consequences for Kenya’s economy, which is already grappling with high inflation.