KTDA announces major bonus for tea farmers

By Macharia Kamau

The Kenya Tea Development Agency will pay  Sh45.3 billion to tea farmers towards end of this year.

The payment is Sh4.8 billion more than the Sh40.5 billion paid to KTDA affiliated tea farmers last year.

KTDA has paid an initial Sh11.3 billion to farmers that supply it with green leaf and plans to payout the second tranche of Sh34 billion in November. This second payment is popular as ‘bonus’ payout in tea growing regions.

The increase in earnings by farmers followed increased earnings for the tea industry last year, which was in part due to a favourable exchange where the weak shilling favoured exporters.

Total proceeds for tea sold by KTDA increased 12.5 per cent to Sh61.4 billion in the 2011/2012 financial year. This is compared to Sh54.6 billion in the 2010/2011 year.

Revenues for the entire tea industry reached Sh109 billion the period to December last year, making it the largest foreign exchange earner in the country.

KTDA Holdings Chief Executive Officer, Lerionka Tiampati, attributed the results to better tea prices in international markets and favourable exchange rates. He also said effective cost management by the tea factories, efficient management and higher tea production contributed to better earnings. The agency markets tea from 54 factories that receive tea from over 560 000 farmers.

KTDA, however, warned that climate change could affect production in the coming years, which could with time see farmers’ earnings decline.

Mr Tiampati said tea growers were affected by a frost bite early this year that resulted in the withering of the crop and poor harvests.

More extreme
He added that dry spells experienced in the country were becoming more and more extreme, which poses a threat for the crop that is grown in cooler Kenyan highlands.

Other challenges that the industry faces include high cost of production, unpredictable exchange rates and decreasing farm sizes.

Over the 2011/2012 financial year, the average net selling price for a kilogramme of tea increased to $3.2 (Sh273) from $3.07 (Sh248.95) the previous year, which is a 9.7 per cent increase.

The average exchange rate for the financial year was Sh89.16 to the dollar as compared to the previous year’s average rate of Sh82.79 to the dollar.

Towards end of last year, the shilling had weakened to about Sh107, which was a boon for players in export oriented businesses.

Tiampati said the average payment rate per kilo of greenleaf rose from Sh48.40 in 2010/2011 to Sh50.01 in 2011/2012, adding that KTDA’s small-scale tea farmers were among the highest paid in the world.

Energy costs
He also said KTDA had embarked on a number of initiatives aimed at reducing energy costs, such as development of small hydro power stations, to diversify revenue streams.

KTDA is also is investing in the manufacture of orthodox teas to complement revenues from Black CTC teas. This is to cater for a growing diverse clientele that have taste for different teas other than the black tea.