KENYA – The Kenyan government is considering a ksh. 1.6 billion (US$15.5 million) financing option for small-scale tea farmers to diversify from black CTC tea to orthodox type in the wake of low prices.
Black orthodox tea produced using the traditional method, fetches almost double the price of CTC type.
Agriculture Cabinet Secretary Mwangi Kiunjuri says the plan involves a funding model for smallholder tea factories to set up black orthodox tea production units and in a move to reduce reliance on Black crush tear curl (CTC) tea.
“In a bid to help our tea farmers realise better earnings, I have written to both the Head of Public Service Joseph Kinyua as well as the Cabinet, requesting the government consider the option of extending Sh1.6 billion (US$15.5 million) concessional loan for putting up orthodox tea production units over the next one year,” the CS said.
Mr Kiunjuri said financing will come with the respite of a one-year moratorium to further cushion farmers from repaying immediately.
He added that the proposal is to have a concessional interest rate of 3 percent per year on the facility – down from the current market rate of 13 percent for commercial loans.
The main markets for orthodox teas are Russia, Germany, USA, Dubai, Taiwan, Turkey, Iran, The Czech Republic, Kazakhstan and Canada.
Over the years, the Kenya Tea Development Agency has informed farmers that for Kenyan tea to fetch higher prices, there is a need to venture into the processing of orthodox tea specialities which fetch higher prices in the global market.
The move by the government will propel the industry, powering it to penetrate both local and international markets.
Kenyan tea has been the leading major foreign exchange earner for the country. As per the last auction prices, traditional black tea, on average, fetched US$2.67 per kilo of made tea; while black orthodox tea fetched US$3.70 per kilo of made tea.
Reports by the East African Tea Trade Association show that Rwanda fetched better prices both in regional and international markets this year compared to Kenya, thanks to their orthodox mode of production, which only seven out of 68 factories managed by KTDA are now producing.
Currently, only seven smallholder tea factories in Kenya (Kangaita, Imenti, Micimikuru, Itumbe, Kiru, Thumaita and Gitugi) have black orthodox tea production units with a further three (Chinga, Kimunye and Kagwe) scheduled for completion by end of the year – bringing the total number to 10.