Kenya Tea Development Agency Ltd

KTDA ANNOUNCES HIGHEST PAYMENT EVER FOR TEA FARMERS

Tea farmers earn Kshs 25 Billion for year 2008-2009 Nairobi, Wednesday, September 23, 2009… The Kenya Tea Development Agency (KTDA) has today announced a major increase in farmers’ earnings, reaching an unprecedented Ksh25.4 billion for the 2008-2009 financial year up from Ksh19.7 billion for the previous year, which represents a 28 per cent growth in earnings. In what is a record year for small scale tea farmers, the average rate payable per kg of green leaf delivered to factories increased from a total average of Ksh24.6 in the 2007-2008 financial year to an average of Ksh35.1 during the 2008-2009 year. Of the Ksh25.4 billion total payment, Ksh7.7 billion has already been paid out to farmers as Initial Payment, which is released on a monthly basis over the financial year at a rate of Ksh10.50 per kg of green leaf delivered. The balance – an impressive Ksh17.7 billion - will now be released as Second Payment, commonly referred to as the bonus, will be paid out in October. This represents a major increase over the Ksh11.3 Billion earned the previous year. The bonus (Second Payment) will be paid at an average rate of Ksh24.66 per kg of green leaf, which is the highest rate achieved in recent times, and representing a 74.5 per cent increase over the 2007-2008 average rate of Ksh14.13 per kg of green leaf. Announcing the results, KTDA’s Managing Director, Mr. Lerionka Tiampati, said the record earnings by KTDA’s 500,000 small scale farmers are the rewards of efficient factory processes, improved auction prices caused by high global demand that has been driven by the prolonged drought and favourable exchange rates. As the drought persisted over the year, production fell by as much as 30 per cent, helping to push up prices at the auction. Prices have increased by up to 30 per cent in the last one year, averaging USD2.50 per kg of made tea and reaching a high of over USD3.50 per kg of made tea for some primary grades at recent auctions    While on the one hand the drought brought good tidings to farmers, on the other its severity soon became a cause of great concern as the drastic fall in volumes and persistence of the try spell denied them an opportunity to take full advantage of the improved prices. Mr. Tiampati however pointed out that despite the prolonged drought farmers were enjoying record earnings because the exchange rate had also been favourable to exporters, averaging Ksh76 to the US dollar. “Overall, factories are paying an average 70 per cent of total earnings to the farmers compared to 67 per cent last year,” said Mr. Tiampati. 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, the MD said, noting that the 18 top performing factories out of the 60 managed by KTDA, had managed to attain an average net return to the farmer of 73 per cent. Details of the figures released today show that the average net selling price per kilogram of made tea increased to Ksh185.34 (close to USD2.50 at an average exchange rate of Ksh76 per US dollar) during the financial year 2008/2009, up from Ksh138.68 recorded in the 2007/2008 financial year. Farmers are paid in quantity of green leaf delivered. It takes on average 4 kgs of green leaf to make 1 kg of made tea. A total of 195 million kilogram’s of made tea were sold from 726 million kgs of green leaf delivered to the factories during the financial year 2008/2009, compared with a total of 212 million kilogram’s of made tea sold from 813.6 million kgs of green leaf delivered to the factories during the financial year 2007/2008. This represents an 8 per cent decrease in sales quantity over the last year. The gross sales value for the year under review was Ksh36.9 billion compared to Ksh30.1 billion for the previous year, representing a 22.59 per cent increase. Having achieved an average net income of 70 per cent to the farmer by way of green leaf payments, Mr. Tiampati said KTDA-managed factories are now working towards raising this through a number of innovative measures to further increase efficiency. This means reducing the major factory costs - electricity, fuel, labour and financing costs - to below the current 31 per cent on average. At an individual level, every farmer has to cater for farm costs such as fertilizer and farm labour, among others. Despite these challenges, comparative country figures show that Kenya’s small scale farmers are the highest paid in the world, at Ksh35.16 per kg of green leaf in the year under review, followed by Sri Lanka at an equivalent of Ksh22.79, Nepal at Ksh17.39, India at Ksh15.29 and Vietnam at Ksh11.88. Among other African producers, Rwanda pays its farmers at a rate of Ksh11.26 (equivalent), followed by Uganda at Ksh8.22, Malawi Ksh7.33, Tanzania Ksh7.06 and Burundi Ksh6.04 per kg of green leaf. The MD outlined significant steps KTDA has taken this year to diversify its operations outside tea processing and marketing in order to face the challenges of a constantly changing market and to add value to the returns of tea farmers. In June, it signed a power purchase agreement with the Kenya Power and Lighting Company to enable Imenti Tea Factory, which it manages, to sell surplus power from its   mini-hydro project to the national grid. The agency is also in the process of developing a 17MW power project on Gura River in Nyeri that will directly benefit four tea factory companies. Ten other sites whose feasibility studies were sponsored by the Ministry of Energy are also being considered for development.   To consolidate these efforts and lead the push for alternative energy generation, KTDA has announced the formation of a subsidiary dealing specifically in power generation. The agency has also registered a microfinance firm, Greenland Fedha Ltd (GFL), a non-deposit-taking limited liability company with an initial share capital of Ksh160 million. Farmers have for a long time requested KTDA to provide financial services to them to help curb the high cost of borrowing and the rising cost of farm inputs. The enactment of the Microfinance Act of 2006 provided KTDA an opportunity to respond to the farmers’ request. The profits from these initiatives, if any, will be paid out as dividends to the small scale tea farmers who own KTDA through their factories KTDA has also moved to automate operations at the factories to further reduce costs and improve efficiency in tea processing. Continuous Fermentation Units (CFUs), a revolutionary addition to the tea processing chain, have been installed in virtually all factories across the country. Another technology is the Electronic Weighing Solution designed to assure accuracy of green leaf data captured and curb falsification of weights at the buying centres. It allows for data retrieval and provides reliable backup thereby assuring integrity of green leaf information. The solution is currently fully operational in Nyankoba in Kisii and Gathuthi in Nyeri which were the initial pilot sites for the project. Implementation is currently going on in several other factories across the country. Diversification into green and orthodox teas is also underway. According to Mr Tiampati, this is a major initiative that would see the Agency opening up new markets in the near future. For more information, please contact: KTDA Corporate Affairs Department Tel 3227000, 3227915 Charles Kimathi 0712219229 Fred Gori 0722293146

 

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