Kenya tea farmers in to earn Sh63b in bonuses

David Emilio pick tea leaves from a farm in Kahuro area in Tetu, Nyeri County. PHOTO: MOSE SAMMY/STANDARD

NAIROBI: Tea farmers across the country will receive Sh63.6 billion in bonuses next month, thanks to the weakening Kenyan shilling, better prices and higher sales volumes. Those in Murang’a, Nyeri, Kiambu, Thika and Kericho counties will be some of the biggest beneficiaries.

The figure represents a 21 per cent increase from the previous year’s payment of Sh52.6 billion.

Leading tea producer, Kenya Tea Development Agency Holdings Limited, said out of this, smallholders will walk away with Sh43.25 billion with the rest going to estates.

Some farmers in high yielding areas will walk away with as much as Sh183,000 per acre of tea, with others in the average category taking home Sh91,000 per acre with the lowest paid pocketing Sh61,000 per acre.

KTDA said yesterday Sh14.55 billion has already been paid out monthly to farmers as initial payment, based on monthly green leaf deliveries to factories, at the rate of Sh14 per kilo of green leaf.

“The balance will now be released as second payment, commonly referred to as ‘bonus’, and will be paid out in October,” the agency said.

The bonus will be paid at an average rate of Sh27.61 per kilo of green leaf, representing a 56.8 per cent increase over the 2013-2014 average rate of Sh17.61 per kilo of green leaf.

KTDA Group Chief Executive Lerionka Tiampati said the improved earnings was as a result of improved tea prices, favourable exchange rates and high demand in the first half of the financial year due to low production.

The reduction in supply, especially in the first half of 2015, was caused by a prolonged drought earlier in the year, where production dropped by 6 percent, pushing up auction prices. However, from the start of this calendar year to date, production has gone down by 30 per cent, he told a news conference.

Price of tea at the auction averaged USD 2.60 in the 2014-15 financial year, up from an average of USD 2.43 in the 2013-14 year, a 7 per cent increase. Tea prices have reached highs of over USD 4 per kg of made tea for some primary grades at recent auctions during the current financial year.


The weakening of the Kenyan shilling against the dollar has also boosted farmers’ earnings because tea exports are paid in dollars. “This is good for us but not importers,” Tiampati said. Kenya exports as more than 95 per cent of its processed tea.

A total of 240 million kilos of made tea was processed from 1.039 billion kilos of green leaf delivered to the factories during the financial year, compared to a total of 256 million kilogrammes of processed tea from 1.124 billion kilos of green leaf delivered to the factories during the 2013-14 financial year.

This represents a 6.3 per cent drop in processed tea production. It takes on average 4kg of green leaf to make 1kg of made tea.

The average net income to the farmer has been rising over the years, reflecting an overall improvement in efficiency and cost management at the factory level, he said.

“Next year will even be a better year,” he said but cautioned that unpredictable effects of climate change as well as rising cost of production pose a threat.

“Cost of production has continued to rise due to high energy, labour, financing and transport costs. To manage these challenges, KTDA has focused on cost management and efficiency enhancement,” he said.

The agency, in addition, plans to introduce new varieties including Orthodox tea to sell in new markets such as Russia and Germany. The agency has also invested in small hydro-power stations that are expected to lower energy costs in a number of KTDA-managed factories.

Recently, KTDA procured 77,050 metric tonnes of fertiliser for farmers at competitive rates, marking yet another milestone this year.