An Ethiopian firm has signed a $300 million joint venture deal with a Dubai company to develop a 5,000 hectare tea plantation.

'The joint venture agreement to develop tea on 5,000 hectares of land in Illubabor, at a cost of nearly $300 million, was signed between East Africa Agri-business and Dubai World Trading Company,' said Agriculture and Rural Development Ministry senior agronomist Berhanu Tesfaye.

'They plan to produce 421,348kg of black tea annually within three years,' he said.

Ethiopia's current annual tea production from three private estates is around 7,000 tonnes, he said.

The country, Africa's biggest coffee producer, expects to export over 1,300 tonnes of tea this year, for about $2m, according to government statistics. The remainder will be consumed locally.

'Tea plantations in Ethiopia have failed to expand as expected due to lack of investors with money and the patience to wait for three years to get returns,' Berhanu said.

'The country's investment code is also inviting. But the initial investment for tea is high and the fact that it requires three years to mature has discouraged investors.'

Ethiopia has identified up to 500,000 hectares suitable for tea production. Two state-owned estates covering 2,109 hectares were privatised in 2000 for $27m but there as been little or no expansion of the plantations since, Berhanu said.

Tea growing was introduced in Ethiopia in the early 1900s, but the initiative failed because of lack of official support in a nation of heavy coffee drinkers.