Efficiency link to record tea bonus payouts

By Wainaina Ndung’u

Tea farmers across counties in Mt Kenya region will share Sh40.5 billion as a second payment — popularly known as bonus — for their crop.

But even as the farmers attached to some 35 tea factories spread from Kiambu to Meru counties head for the banks, not all will be smiling.

For one, tea farmers are usually highly indebted to commercial banks as well as to their own savings and credit co-operatives (Saccos), which will be getting the first and prime chunk of the second payment.

The bonus follows the release of Sh10 billion to farmers as initial payment on a monthly basis at a rate of Sh12 per kilo of green leaf delivered to tea factories.

In Nyeri County, where the bonus is a total of Sh1.66 billion, a local politician claims Sh1.3 billion has already been used to repay bank loans while a further Sh266 million may be swallowed by interest on the same.

"Were the banks to recover their full amounts from the farmers from the bonus?" asked the Othaya politician, a prominent Party of National Unity activist, at the weekend. She added: "They would be left with less than Sh100 million in bonus payouts."

Efficiency

There are also huge disparities between what farmers earn from one factory to the other, because the payments are based on the production efficiency in each unit.

Farmers at Imenti Tea Factory in Meru County will earn the highest bonus per kilo at Sh45.80, underlining the benefits of a mini-hydroelectric generation plant commissioned almost two years ago.

It will be followed closely by Ngere Tea Factory in Thika at Sh45.20, a high payment hinged on the fact that this is one of the biggest players in private tea sales.

Unlike Imenti, which will be reaping the benefits of decreased operation overheads attributed to generating its own power, Ngere, which is aligned to Britain’s tea packaging giant, Lipton, is reaping the benefits of an exclusive export agreement.

This ensures it gets better pricing than most tea factories in the Mombasa Tea Auction stable. Also registering impressive earnings will be tea factories of Makomboki (Sh45.15), Kagwe (Sh42.40), Rukuriri (Sh42.70), and Mungania (Sh42.25).

Like Ngere, Makomboki factory is also a major player in private sales, and its impressive earnings may also show farmers where their factories should be headed.

Looking at this year’s tea bonus payments, there is certainly a marked improvement in factory efficiency throughout the country, even in the wake of high electricity and fuel prices.

The most efficient factories such as Ngere, Makomboki and Rukuriri paid Sh8 for every Sh10 they made from tea sales. Again, here, it was Imenti, which recorded the highest payout at 82 per cent.

New factories such as Gachege in Thika, Gacharage, Nduti in Murang’a and Kathangariri in Embu, which are still shouldering the cost of construction loan repayments, paid above the 75 per cent average for the whole country.

Some observers and leaders in the tea catchment areas, however, think the future of increased earnings in the sector lie in value addition, a project that the present institutions in the sector have proved hopeless in implementing.

Even where some factories appear to be doing well through private sales, all their transactions strictly remain in terms of bulk tea, which overseas companies later package and sell with their mark of quality.

Mr Nderitu Gachagua, an aspirant for the Nyeri County governor seat in the 2012 General Election, has set the establishment of a value addition factory as one of his priorities if elected.

Such a factory, he says, might end up withdrawing their produce from the Mombasa Auction and concentrating on online marketing and direct sales of produce with a mark of origin.