KTDA clarifies loan status, dismisses claims of mismanagement

 

The Kenya Tea Development Agency (KTDA) has moved to reassure stakeholders that it is on track with settling its loan portfolio and dismissed claims of financial mismanagement raised by the Tea Board of Kenya (TBK).

In a statement on Friday, the agency said all commodity loans flagged by the regulator were fully cleared by September 2025, while long-term inter-factory borrowings remain under structured repayment plans and within approved policy limits.

KTDA was responding to a TBK audit presented to Parliament, which alleged that KTDA-managed factories owe more than Sh26 billion in loans reportedly issued without proper oversight.

The agency said it has not officially received the audit report but is ready to address any issues once it is formally shared.

According to KTDA, the commodity loans in question were short-term facilities taken as bridging finance during periods of high tea stocks, and have since been settled.

“The commodity loan was a one-year facility that was fully paid by September 2025,” the agency noted, adding that inter-factory borrowing and asset-based project financing are being serviced and gradually reduced.

TBK had claimed that some factory managers exceeded their borrowing mandates. However, KTDA insisted all loans undergo proper approval processes.

“All borrowings are approved through board resolutions. We provided these resolutions to TBK during the audit,” KTDA said, emphasising that factory managers do not hold borrowing powers, which are reserved for boards of directors.

KTDA also cited external policy disruptions as a key contributor to its financial strain. The Tea Act 2020 introduced a government-set reserve price of $2.43 per kilo of made tea at the Mombasa auction and banned direct overseas sales—measures the agency says disrupted cash flow.

When the reserve price was later lifted, auction prices plunged to below $1.50, worsening the situation, it said.

“Stocks' valuation was based on reserve prices set for respective factories,” it explained, rejecting TBK’s claims that tea stocks were inflated to secure loans.

The KTDA management further denied claims of flooding the market with poor-quality tea, attributing the move to policy changes that undermined sales channels and strained quality outcomes. 

The interventions, intended to protect farmers’ earnings, according to the agency, instead reduced weekly auction absorption rates from around 85 per cent to less than 10 per cent, according to sector data, leaving huge stocks of unsold tea languishing on the market. 

KTDA noted that tea stocks ballooned to Sh104 million kilogrammes, taking long to clear and deteriorating in quality over time despite originally meeting top industry standards at the point of manufacture.

On the other hand, the agency raised concerns over a pending Sh4.67 billion fertiliser subsidy refund owed by the government since 2022. This, it said, has squeezed factory finances—particularly in West of Rift (WoR) factories already struggling with lower quality-linked auction prices and rising cases of tea hawking.

On TBK’s allegation that some factories misused project loans, KTDA attributed the irregularities to delayed loan disbursements rather than wrongdoing.

"For example, Kebirigo requested a loan in 2021, but the funds were delayed. The factory initiated the project using its own revenues, and once the loan was received, it reimbursed those funds. There was no diversion,” the agency clarified.

KTDA stressed that project oversight is carried out directly by factory boards, not centrally from Nairobi.

Responding to concerns that borrowings were used to boost farmer bonuses, the agency stated that second payments to farmers are based solely on actual performance, not inflated profits. It added that while KTDA has a retention policy for surplus earnings, low tea prices have made it difficult to build these reserves.

KTDA attributed the depressed prices to depreciating foreign exchange rates, large carryover stocks, and market instability in key tea-buying regions.

Reiterating its commitment to transparency, the agency said it remains open to scrutiny.

“KTDA has nothing to hide and continues to operate in the best interest of its member farmers,” the statement concluded.