TEA PARTY

KTDA to pay farmers after review of its 69 factories accounts

Tea prices has been declining in four main markets which account for 70 per cent of product's exports.

In Summary

•Farmers under Kenya Tea Development Agency will soon receive their payments after the review of KTDA-managed factories' financial books to be finalised this month.

•The expected performance of the factory companies will come on the backdrop of a drastic drop in tea prices at the Mombasa Tea Auction from an average of $2.71 (Sh281.51) per kilogram in 2017/18 financial year to $2.14/kg (Sh222.30) in the 2018/19 financial year, representing a 21 per cent drop.

Farmers supplying Kiptagich factory with green tea protest with placards asking Gideon Moo to pay their dues on Thursday./AMOS KERICH
Farmers supplying Kiptagich factory with green tea protest with placards asking Gideon Moo to pay their dues on Thursday./AMOS KERICH

Tea farmers served by public factories will receive payments once their agency concludes reviewing the books of accounts of the 69 outlets it manages.

The Kenya Tea Development Authority said it is currently holding meetings with directors to review and approve the  annual accounts for the 2018/19 financial year.

“The meetings to determine the second payments begun on September 9 and will run until September 26. They will be followed by a formal declaration of the second payments once the process is complete,” KTDA said.

 

The payments are likely to be affected by the drastic drop in tea prices at the Mombasa Tea Auction from an average of $2.71 (Sh281.51) per kilogram in 2017/18 financial year to $2.14/kg (Sh222.30) in the 2018/19 financial year, representing a 21 per cent drop.

Globally, tea prices at other two key auction centres of Colombo, Sri Lanka and Kolkata, India declined by 22 per cent and 12 per cent respectively.

KTDA has attributed the drop in Kenya's main forex exchange earner to overproduction globally.

According to Kenya National Bureau of Statistics three month tea export earnings to March 2019 declined to Sh31.37 billion from Sh40.09 billion in a similar period in 2018.

The balance of payments report attributed the drop in earnings to decline in exports to Pakistan from Sh18.61 billion to Sh13.05 billion over the period.

KTDA also pointed to the high inflation and depreciation of up to 50 per cent of the Pakistani currency impacting the prices.

“Pakistan is a key market for Kenyan teas accounting for up to 35 per cent of Kenyan exports. Other key export destinations such as Egypt have seen high inflation and currency devaluations making import of tea expensive,” said KTDA.

Sudan has lately faced political upheavals, coupled with the loss of oil revenue to South Sudan.

The United Kingdom, a long-standing export destination for Kenya has seen its consumption decline over time while its currency has sharply depreciated in the face of uncertainty over Brexit.

Tea exports to Iran have also recently been affected by increased US sanctions on Iran.

As a result, a number of quoted tea companies in Kenya registered losses during the year that ended in June.

During the financial year, unmatched global consumption to high production led surplus of unsold stocks of tea of 196 million kgs, exerting downward pressure on prices.

The last similar drop in tea prices at the Mombasa Auction was in 2014 but the market recovered quickly to perform well for the next four years, KTDA said.

"Since then, tea prices at the auction have been steadily up leading to increased investments in the area under tea. This also led to the building of new private factories to process this increased production," KTDA added. 

KTDA has also ventured into the production of orthodox teas gaining global popularity and fetching better prices.

This, it said will mitigate over reliance on black teas as well and the four main markets which account for 70 per cent of  exports.

About 11 KTDA-managed factories are currently producing orthodox teas.

In the 2018-19 financial year, the factories produced about 2.2 million kgs of black orthodox tea.

At full capacity, the factories can produce six million kgs of orthodox teas.

Some factories developed small hydropower stations, reducing ballooning energy costs.