KENYA – Kenya Tea Development Agency (KTDA), a Kenyan-based private holding company owned by more than 600,000 small-holder tea farmers, has disbursed Kshs 5.5 billion (US$44.5m) as payment to their smallholder tea farmers for the December 2022 green leaf deliveries, inclusive of mini-bonuses for the half year ending December 31st, 2022.
Out of the amount, 2.7 billion (US$21.7m) is the payment concerning mini bonuses for the factories whose directors passed resolutions to pay mini bonuses to their farmers while the balance of Kshs 2.8 billion (US$22.6m) will go towards paying farmers for the December green leaf delivered to factories.
Only farmers in factories in Zones 1–9 will be receiving the mini bonuses, with those in Zones 10 to 12 traditionally holding off from paying, instead making a singular payment as part of the final payment (bonus) later in the year.
KTDA operates a two-step payment model where farmers are paid monthly, and an additional interim payment (mini bonus) and a final payment (bonus), based on the performance of each factory.
The company said the model allows farmers to spread their earnings through the year to cater to their needs.
Early payment of farmers’ dues is part of reforms being instituted by the KTDA Holdings Board, the introduction of the reserve price for teas from KTDA-managed factories of US$2.43 per kilo of made tea.
The Board has also held a meeting with Deputy President Rigathi Gachagua, where he challenged the KTDA directors to work with the government in its bid to streamline the sector.
Gachagua also said he will constitute a small team of industry representatives to lead the reforms in the tea sector.
This is part of the DP’s accord from President William Ruto through executive order 1 tasked to lead the government’s agenda to reform the coffee, milk, and tea sub-sectors.
The DP had, in past events, complained that the KTDA had been infiltrated by cartels and brokers who have exploited farmers.
Market analysts have recently noted that tea farmers in the East African countries Kenya, Uganda, Tanzania, Rwanda, and Burundi have had low prices for their products due to overproduction in the world market, lack of bargaining power, and low levels of value-addition.
Funds to cater to these payments have been generated through the sale of tea over the period under consideration, at which average tea prices for KTDA at the auction stood at Kshs 326 (US$2.63) per kilogram of made tea compared to Kshs 306 (US$2.47) over the same period in the 2020/2021 financial year.
Towards the end of last year, some factories affiliated with KTDA were forced to revise their minimum price by reviewing the cost at which they sell their teas to release thousands of kilos of the commodity held in the warehouses.
Kapsara Tea Factory, which is West Rift and affiliate to KTDA, directed its teas to be sold at US$2.30, way below the minimum price of US$2.42 set by the State in 2020 to free thousands of kilograms of the beverage held in warehouses in Mombasa.
It was also set to protect farmers’ earnings after the price of the beverage fell below the production price, subjecting growers to huge losses.
“The board of directors of this factory has noted with concern the rising quantity of its unsold tea at the Mombasa auction. Some of these teas date as far back as July 2021,” the Kapsara board of directors in a resolution.
“To stop further losses in value and to alleviate the worsening factory cash flow position, the board has resolved that all manufactured tea between July 2021 and June 2022… be sold for $2.30.”
Of the 63,300 packages offered for sale, only 31,600 packages were absorbed in the trading, highlighting the adverse effect of the minimum price that has seen buyers concentrate on high-quality teas.
Tea has been trading below the minimum price since August last year as demand for the commodity remains low at the auction.
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