UGANDA – Kayonza Tea Factory in Uganda has secured a US$ 3.15 million long-term loan from social impact investor Oikocredit for establishing a second factory to double its capacity to 38,000 metric tonnes per year.
Construction of the new factory is set to begin in January 2020 to process soaring yields, improving the livelihoods of the 7,500 smallholder farmers who own it and allowing the processor to make the most of growing international demand and government support of the tea industry.
“As soon as we get the funds, we will roll into action,” confirms Christopher Turyatemba, General Manager of Kayonza Tea Factory. “In two years’, time, the satellite factory will be a reality for the Mpungu community.”
The new plant will employ 220 workers from the area and serve the 3,000 Kayonza smallholders who grow tea there.
This is the first project in Solidaridad’s impact investment pipeline to win financing.
Solidaridad is an international solution oriented civil society organization working through eight regions on transforming agriculture markets to make them more inclusive and sustainable.
“It’s really inspiring to work with Kayonza, a good partner in consistently purchasing tea from smallholder farmers,” says Rachel Wanyoike, Solidaridad’s Director East and Central Africa.
“We work to improve outcomes for farmers who often struggle to find strong off-takers for their produce. Kayonza has proved to be reliable and is aligned with our goal of improving farmer’s lives.” She added.
Kayonza bought the land for the new plant in 2018, but sought a loan to pay for the construction of the factory and to purchase processing machinery.
Solidaridad’s East and Central Africa office brought in tea experts from Solidaridad India to assess whether Kayonza’s yields warranted a second factory.
They also ensured projected machinery costs were realistic. Using sophisticated financial modelling, Solidaridad then worked with Kayonza’s management team to develop the business plan and investment proposition, before introducing the project to potential investors.
The tea factory is currently running at full capacity. Deliveries to the processing plant in the remote highlands of southwestern Uganda have risen by 60% since 2016.
Its suppliers’ smallholders mostly farming one- and two-hectare plots are achieving higher yields thanks to adopting better agricultural practices.
The tea factory’s exemplary role was recognised by the United Nations Development Programme (UNDP) which awarded Kayonza the Equator Prize in 2015.
UNDP selected Kayonza for its efforts to help its local community to adapt to climate change, drive back deforestation and soil degradation, and encourage local people to adopt land management techniques and diversify their crops.
Social impact investor and worldwide cooperative Oikocredit has over 40 years’ experience funding organizations active in financial inclusion, agriculture and renewable energy.
Oikocredit’s loans, equity investments and capacity building aim to enable people on low incomes in Africa, Asia and Latin America to sustainably improve their living standards.
Oikocredit finances close to 700 partners, with total outstanding capital of over US$ 1 billion at 30 June 2019.