Market News

KTDA Revenues Rise To 24 Billion Shillings On Reforms

BY Jane Muia · December 30, 2022 02:12 pm

KEY POINTS

The price stabilization framework has worked well in shielding tea growers from price fluctuations that have for a long time led to unsustainability in the industry. In this financial year, farmers’ earnings hit 62 billion shillings, a 42 percent rise from 44.15 billion fetched last year.

Kenya Tea Development Agency (KTDA) revenues hit 23.76 billion shillings in this financial year boosted by reforms instituted in 2021. This represents a 3.5 percent increase compared to the 22.96 billion shillings achieved last year.

The ministry of agriculture initiated some reforms to ensure increased production as well as ensuring farmers benefit from their hard work. Some of the reforms creating the current balance in the sector include the setting of the reserve price which has facilitated the initial green leaf monthly payments to the smallholder tea grower from 17 shillings to between 20 and 21 shillings per kilogram.

The earnings surged despite low green-leaf production as a result of the worst drought in 40 years. Revenues from factories also grew 9 percent to hit 1.97 billion shillings compared to 1.8 billion shillings earned in the corresponding year.

The price of green leaf per kilogram also increased from 34.71 shillings to 50.18. A kilogram of tea from KTDA-managed factories fetched an average of 340.55 shillings (USD2.76) compared to 268.9 shillings (USD2.18) achieved last year, highlighting the importance of the government-backed minimum reserve price in boosting farmers’ earnings.

To mitigate against declining earnings by the smallholder tea growers, the government in July last year set a minimum reserve price of $2.43 (299 shillings) per kilogram at the Mombasa tea auction. KTDA chairman David Ichoho hailed the reserve price mechanism saying it influenced the overall performance of KTDA companies.

“This price influenced the overall performance of KTDA subsidiary companies as well as the second payments made to farmers at the end of the financial year,” he said.

Farmers received their second payment otherwise known as a bonus in July after the close of the financial year compared to previously when they would get their payments in October.

“We have also increased the monthly payment for our farmers to ensure that they can meet their financial obligations. Every farmer is now receiving their pay on day five of subsequent months as opposed to day 20 every month,” said Ichoho.

To reduce the ever-high cost of production of tea, the government has made certain provisions such as the supply of subsidized fertilizer. The Ministry of Agriculture through the Tea Board of Kenya has also finalized the guidelines meant to direct the use of mechanical tea harvesting to save on the high labor cost.

KTDA has also initiated efforts to improve operational efficiencies. These include investment in small hydropower stations for cheaper power supply, diversification to orthodox teas to reduce reliance on Black crush, tear, curl (CTC) teas, and training of farmers on income diversification and management.