High global tea prices lift farmer earnings to record Sh84 billion

KTDA Chairman Peter Kanyago (left) and CEO Lerionka Tiampati consult during the release of results yesterday. The agency said tea farmers will earn Sh84 billion bonus for the year ended June 30, 2016. (PHOTO: WILBERFORCE OKWIRI/ STANDARD)

Small-scale tea farmers are set to earn more after revenue for the year 2015-2016 rose by a third on higher production and stable Kenyan shilling.

The farmers’ marketing agency, Kenya Tea Development Agency (KTDA) has announced Sh84 billion in revenue for the financial year ending June 30, 2016. In the last financial year, the agency made Sh63.5 billion.

While addressing the media yesterday at a Nairobi hotel, KTDA Chief Executive Officer Lerionka Tiampati said Sh62 billion will be paid directly to farmers at an average rate of Sh50.26 per kilogramme of green tea delivered to KTDA-managed factories. This is an increase of 21 per cent from the Sh41.6 per kilograme that was paid last year.

The balance, which constitutes a quarter of the total revenue, will go into covering the costs of production.

This means farmers will earn Sh44 billion at an average rate of Sh36.26 per kilogramme as the final payment, normally referred to as bonus. Sh17 billion has already been paid to farmers as initial payment at an average rate of Sh14 per kilogram.

Tiampati said the increased earnings were due to improved tea prices in the international market as well as favourable exchange rates for the Kenyan shilling. This is in addition to increased volumes of tea due to the El-nino rains. The green leaf volumes increased to 1.23 billion kilogrammes this year, compared to 1.04 billion produced last year.

“There was an increase in demand for tea in new markets like the US, Australia and Iran; and existing markets like Egypt and Pakistan,” Tiampati said.

However, the CEO complained of high energy, labour and transport costs as the reasons the industry did not perform even better. “Energy remains the single largest contributor to the cost of production. This is the reason our factories are investing in small hydro-power stations to lower energy costs,” Tiampati said.

He also painted a pessimistic picture of what is expected in the following year, saying unreliable weather conditions have already started to affect yields. “The year has stated out a bit bad. Bad weather conditions and little demand for our tea don’t look promising for what to expect next year,” said the CEO.

The money will be distributed differently among factories in the seven tea producing regions in the country, with Kericho/Bomet region getting the lion’s share of Sh13.18 billion. Kiambu/Thika region will get the second highest share of Sh12.74 billion.

The amount of payment per region depends on the volume of tea as well as the quality that each region produces.

Imperial Bank

The bonus payment comes after farmers especially those in the central region complained of poor pay blaming factory directors of bad management. The farmers notably in Kirinyaga County ran berserk attempting to burn factories. Tiampati accused local leaders and social media of inciting the farmers, by giving wrong bonus payment figures.

“I know of leaders who want to vie as MCAs and they keep lying to farmers that their tea is fetching higher prices while it is not,” said Tiampati. “Also there were figures that were passed on through social media which were not true and incited farmers into violence,” he added.

The CEO also confirmed that KTDA money that was held both in Imperial Bank and Chase Bank before both banks went into receivership is yet to be released. “Some Sh2.9 billion is still held in Imperial Bank, while Sh1.8 billion is at Chase Bank,” said Tiampati. “We are awaiting orders from the Central Bank of Kenya, and the the Kenya Depositors Insurance Corporation on the way forward on recovering our money,” he added.

The CEO again confirmed that the International Finance Corporation (IFC) has pumped Sh420 million into KTDA to help with research that will enable farmers determine the best fertiliser to use, according to the soil type. He said that this year, the tea agency imported 74,800 metric tonnes of NPK fertiliser on behalf of the farmers.