03 Jan

Reforms in the tea sector that took shape last year will continue into this year, Kenya Tea Development Agency (KTDA) has affirmed, as farmers reap big from the state-driven initiative. These include the minimum price in the market, fertiliser subsidy, increase in monthly payments to farmers, payment of bonuses in July as opposed to October of each year, and reduction of interest rates by Greenland Fedha which has ensured affordable loans. There are also ongoing negations on the existing management agreements between the factories and the managing agent. The KTDA board has continued to champion a minimum reserve price of $ 2.43 (Sh300.11 ) for a kilo of made tea for its managed factories. Prior to the introduction of the minimum price, a kilo of tea was selling at $1.94 (Sh239.5), at current exchange rate, at the Mombasa Tea Auction. While the weak shilling increased the cost of imports and commodity prices in the country, tea farmers on the contrary have continued to earn more as the commodity is traded in dollars. The shilling has been on a losing streak against the US dollar, currently exchanging at 123.37, from 113.14 in January last year. The fertiliser subsidy plan being championed by the agency has also paid out with the most recent being the importation of 88,000 metric tonnes for tea farmers. The subsidised key input has saved farmers from prices of 5,700 for a 50-kg bag with the product currently averaging Sh3,500. “We will continue to ensure this critical commodity is availed to farmers to improve the productivity of their tea farms,” group CEO Wilson Muthaura said. Last year, the board also approved an increase in monthly green leaf payments for farmers in KTDA regions five, six,and seven by 11 per cent and 17 percent respectively. Farmers in KTDA region five comprising Kericho and Bomet counties now earn Sh20 per kilo of green leaf delivered, up from Sh18 previously. Farmers in both region six (Kisii and Nyamira) and region seven (Nandi, Trans-Nzoia and Vihiga) now also earn Sh20 per kilo of green leaf up from Sh17. The monthly greenleaf payments will continue to be by the fifth day of the subsequent month, KTDA has affirmed, being an improvement from the previous payment by 20th of the following month. “Farmers now receive their money early enough to meet their financial obligations. I am pleased to note that the reforms that had been promised by the board have largely started to bear fruit,” KTDA chairman David Ichoho told the Star. For the first time in the history of smallholder tea subsector, farmers received their second payment (bonus) in July 2022 just after the close of the financial year. The trend, which is expected to continue is an improvement from previous practices where farmers would wait for months to receive their pay. “This allows farmers to meet their most pressing needs without delay,” Ichoho said. The KTDA Holdings Company Limited is the Holding Company for seven 7) majority-owned subsidiary companies and a Foundation. KTDA is owned by 54 tea factory companies, which are in turn owned by the approximately 620, 000 smallholder tea farmers. There are in total 71 smallholder tea factories managed by KTDA on behalf of the smallholder farmers. The smallholder tea subsector, which supports the over 620,000 farmers, employs more than 10,000 staff across the group and indirectly over five million Kenyans. It accounts for about 60 per cent of Kenya’s tea production, four per cent of the GDP and over 15 per cent of the global tea exports, providing tea to many tea packers across the world. The factories are located in rural areas which create rural employment and rural infrastructure. These farmers produce over one billion kilogrammes of green leaf with last financial year’s production being 1.254 billion kilogrammes. Performance The total income last year was a record Sh93.03 billion out of which farmers were paid Sh62.89 billion, compared to Sh44.15 billion the previous year, an increase of 42 per cent. This, even as the average cost of production increased by two per cent from Sh84.76 to Sh86.04 per kilogram of made tea. Ketepa recorded a turnover of Sh2 billion compared to Sh2.2 billion the previous year, a nine per cent drop. This has been attributed to lower tea prices. Last year, Majani Insurance registered revenues of Sh396 million compared to Sh371 million the previous year, an increase of nine per cent. It posted a profit before tax of Sh255 million in the year under review, up from Sh238 million the previous year. Greenland Fedha on the other hand recorded revenues of Sh720 million with a gross profit of Sh110 million. It disbursed a total of 265,698 loan contracts compared to 177,809 contracts the previous year. “This means that we were able to avail more affordable loan to 87,889 farmers compared to the previous year,” Muthaura said. Chai Trading recorded a turnover of Sh16.47billion up from Sh11.8 billion. The increase is attributed to freight division which made significant progress in the business. KTDA is keen on ensuring affordable credit for farmers as the year starts. This is after the reduction of interest rates by Greenland Fedha Ltd to eight per cent. “Easy access to affordable credit for our tea farmers remains the key objective of the company,” Ichoho said. Meanwhile, tea exports are expected to improve this year after hiccups in key markets of Pakistan and Sudan, which were affected by currency depreciation which reduced disposable income for consumers. This made Kenyan tea more expensive. Pakistan accounts for about 38 to 40 per cent of Kenyan tea exports. It is followed by Egypt (18%), the UK(9%), UAE, Russia and Sudan each five percent, Yemen (3%) while Afghanistan and Poland each take up two per cent share of the exports. The Russia-Ukrainian war affected global logistics which has escalated the competition for sea vessels and led to an increment in freight costs. 

Source: The Star