Meru farmers Sh640m tea unit face turbulence

The resolve by farmers at the Michimikuru Tea Factory in Meru to actualise a plan to build a Sh640 million satellite factory may face setbacks.

The plant was mooted 10 years ago and farmers who have contributed almost Sh310 million would need to take a loan of another Sh350 million to hit the target.

This is as 11,000 farmers in the factory ponder the repercussions of a stormy meeting last week - with production figures for the factory showing that a satellite unit may be an unnecessary burden.

In a good year, Michi farmers produce about 21 million kilos while the factory has 18 million kilo capacity - meaning some of its leaves are sent to neighbouring Igembe Tea Factory for processing.

The three-line factory still has room for installing a fourth line that would take its capacity to 24 million kilos.

Peak production

Factory managers say on average, Igembe - a small one-line unit which is a satellite of Keigoi Tea Factory, handles two million kilos of Michi’s production each year.

Michi Factory Chairman Francis Gakura said their quality is compromised during peak production seasons due to late leaf collection leading to lower earnings for their farmers.

“Basically, Igembe was a bad idea because it always has idle capacity. It is unfortunate that Michi farmers are likely to plunge into a similar venture,” said another director of Michi speaking on condition of anonymity.

Igembe’s idle capacity could be attributed to the withdrawal of almost one million kilogrames production from Njeru Estates after the farm owners set up Njeru Tea Factory in Meru town a few years ago.

When the satellite factory idea for Michi was hatched in 2006, factory directors had hoped production in the area would have substantially risen to double the present levels, which never happened.

That was probably why some farmers openly opposed the greenfield proposal. The final decision will now be ratified at the factory’s annual general meeting in October.

Farmers in some of the factory’s six electoral zones have opposed the construction of a new unit saying it would put them in debt and lower their earnings per kilo, which is already the lowest in Meru County.

But those from Amugaa electoral ward were lobbying for the construction saying there was enough land and financial backing for the project.

Thangatha Ward MCA Jefferson Gituma said the farmers had every right to demand for the project having contributed Sh268.9 million through deductions of earnings since 2007 which had earned Sh40 million interest.

“We are already above the 50 per cent threshold for international financing to kick start the construction,” said Gituma.

Mr Gakura said they would support the farmers wishes though he advised them to look at the bottom lines of quality and quantity production to ensure their earnings do not dip further.

Even with a 500 acre former Eastern Produce tea estate and over 100 acres on Eucalyptus for powering boilers, Michi always lagged behind its Meru competitors when it comes to bonus rates.

Whether adding a satellite will further diminish their earnings and bonus rates is food for thought.

Farmers in the area additionally need to source for Sh350 million loan for the greenfield to commence. 
Kenya Tea Development Agency, which manages the smallholder factory, said it had advised farmers to consider getting into a joint venture with Keigoi Factory by purchasing 50 per cent of Igembe Factory.

KTDA Operations Director Alfred Njagi said the farmers will be presented with both proposals for structured voting during the October AGM.

“Our advise is that this is the cheaper option and the five million kilos capacity at Igembe can be easily upgraded to 10 million kilos by adding another processing line,” he said.

But there are hindrances such as Meru sub-tribal fault lines which make it complicated for Michi farmers from Tigania to want to support “development” in Igembe.

Meru KTDA Director Paul Ringera said they wanted the tea farmers in the factory to look at issues from a business perspective though shareholder resolutions will give the final say.

Farmers at KTDA managed tea factories vote through their share strength. Some such as Geoffrey Muriungi said they wanted a refund of their 12-year contributions.