KTDA rejects claims of Sh26 billion debt mismanagement

KTDA Chairman Chege Kirundi during an interview at Majani Plaza along Koinange Street on March 19, 2025. [Standard, Kanyiri Wahito]

The Kenya Tea Development Agency (KTDA) has dismissed allegations of financial mismanagement, insisting that all commodity loans flagged by the regulator were fully cleared as of September 2025, while long-term inter-factory borrowings remain under structured repayment schedules and within approved policy guidelines.

Responding to an audit report by the Tea Board of Kenya (TBK) that alleged KTDA-run factories owe more than Sh26 billion in improperly sanctioned loans, the agency said it had not officially received the audit findings and are willing to clarify any outstanding issues.

According to KTDA, all commodity loans highlighted were short term and have since been retired as of September 2025.

The inter-factory loans are being wound down while all asset and project loans (which have longer) tenures are well within their repayment schedules.

"The commodity loan was borrowed as a bridging finance on the background of high tea stocks," KTDA said in a statement.

"The commodity loan was a year facility that is fully paid by September 2025. The other loans of inter-factory borrowings and asset based financing projects are being serviced and gradually being ran down," it added.

The TBK analysis presented to Parliament alleged that inter-factory lending and commodity loans were issued without proper oversight, with some factory managers exceeding their borrowing mandates.

But KTDA maintained all borrowings are approved through board resolutions. "We provided the resolutions to TBK during the referenced audit," stated the statement.

The agency pointed out that factory managers do not possess borrowing powers, which lie exclusively with the factories' boards of directors. It emphasized that all loans undergo continuous appraisal and approval during statutory board meetings.

KTDA attributed its financial challenges to external policy changes, citing the Tea Act 2020, which introduced a reserve price of $2.43 per kilo of made tea at the Mombasa tea auction and outlawed direct sales overseas, interrupting factories' cash flows.

The reserve price has since been vacated. The reserve price, once vacated, saw market prices fall from $2.43 to below $1.5.

"Stocks valuation was based on reserve prices set for respective tea gardens/factories," KTDA said.

It also pointed to a pending Sh4.67 billion fertiliser subsidy refund owed by the government from 2022, which has further tightened finances, particularly for West of Rift factories already hit by quality-linked lower auction prices and the rising cases of tea hawking.

Addressing TBK's claim that some factories misused project-related loans, KTDA noted that the delays to disburse the loans forced some factories to resort to the use of internal resources to keep work progressing.

"For example, Kebirigo requested a loan in 2021, but the money delayed. The project commenced using its own revenues, and once the loan was received, it was used to replenish those funds. There is no diversion," the agency explained.

KTDA added that project oversight and utilisation are embedded in factory decision-making, not directed centrally at its Nairobi headquarters.

TBK accused KTDA of overvaluing tea stocks used as collateral for commodity-backed loans, especially in WoR factories, and warned against reliance on borrowing to boost farmers' bonuses.

The Agency however says that the valuation was pegged on the reserve price as teas could not be valued below the government-mandated minimum price.

"The teas were not overvalued. Valuation of tea was based on reserve price introduced by Ministry of Agriculture in July 2021," KTDA stated.

On concerns about borrower-funded farmer bonuses, KTDA insisted that second payments to farmers are tied to actual performance and not artificial profit inflations.

The agency also noted that it has a retention policy in place for surplus earnings, driven by performance and farmers' interests. The low tea prices and farmer's earnings have however made it difficult to actualize the retentions.

The low tea prices have been driven by adverse foreign exchange rates, huge carryover stocks from previous years and challenges and instabilities in some of the key tea markets.

The KTDA management reiterated that the organisation remains open to scrutiny, saying it has nothing to hide and operates transparently in the interest of its member farmers.