KTDA remains the single-largest smallholder aggregator in the world, carrying the hopes of many tea farmers across Kenya. Indeed, many other tea producers in the country and across Eastern Africa take their cue from the Kenya Tea Development Agency.
The just-concluded KTDA-managed factories directors’ elections, therefore, have huge implications as they define the future direction at KTDA and influence the tea industry at large.
Last week, sections of the media reported Williamson Tea calling for the destruction of huge stocks of unsold tea held by KTDA to save the industry from being choked by excess supplies, which has hurt prices in the market. Any corporate decisions under the KTDA boards, at the factory or Holdings level, have critical implications for the industry as a whole.
The 71 factories today, which grew from the initial 54 smallholder factory companies, own KTDA Holdings PLC that owns eight other subsidiary companies, including KTDA MS, which manage the factories on behalf of farmers via management agency agreements.
These factories account for almost 60 per cent of total national tea production and about five per cent of entire worldwide production. They collectively command a turnover in excess of Sh100 billion per year.
This is the weight on the shoulders of the just-elected directors at the KTDA factory companies. The factories are organised into 12 electoral zones, with each electing a board member to sit on the KTDA Holdings and the subsidiaries’ boards.
The incoming directors, who form the governance arm at KTDA, have a heavy leadership responsibility in regard to a wide range of matters – planning and strategy, financial and material resources, staffing, compliance and accountability.
All these against a backdrop of a myriad of challenges ranging from huge stocks of unsold teas, stagnated and dropping prices, escalating cost of doing business, cashflow hiccups, service delivery complaints by farmers, governance grievances and overall business sustainability.
The directors have the enormous responsibility of effectively fulfilling their mandate, including prudent and accountable application of financial and other assets at KTDA. There still remain huge grievances on the management of financial resources and physical assets between KTDA Holdings, subsidiaries and their management, all the way to the factory boards and their management.
The new directors must push for the value of their businesses at the local and global levels. It remains unacceptable that smaller global producers who can only boast a fraction of what Kenya, led by KTDA, controls in volumes turn many times in value terms better to their shareholders.
For the longest time, KTDA used to define quality in tea globally, but not anymore. For example, according to the respected ITC Bulletin of Statistics 2023, Kenya only commanded a kilogramme unit price of $2.6 (Sh331) (KTDA $2.7 [Sh343]), which compared poorly to Japan’s $26.5 (Sh3,370), Taiwan’s $12.4 (Sh1,577), China’s $5.5 (Sh699), Sri Lanka’s $5 (Sh636) and India’s $3.6 (Sh458).
The directors must demonstrate their calling in growing profitability and building long-term shareholder value; getting a deep understanding of their customers’ expectations and delivering on the same; making the company’s business easy to do in terms of systems and processes that are world class; as well as ensuring their various companies are managed by the best available talents to deliver on the vision.
They must redefine the organisation away from the past convoluted political-like approaches to deeply intentioned corporate and commercial persuasions. Part of the commitment must be on delivering better prices. Towards this there must be deliberate efforts in improving the quality of teas as price follows quality.
This must be followed with concerted marketing efforts leveraging technology in the manner tea quality is determined and traded by exploring more scientific objective systems and processes that open the market further to not only higher value markets but also more players for bigger competition.
Improvement in governance systems would be critical in driving the envisioned business value. I am convinced that the ongoing Gen Z scrutiny in the country will be at play even in the smallholder tea subsector.
Given the role the parent ministry and the regulator have played in ensuring the directors' elections were successfully conducted, I pray that the momentum is maintained in ensuring a more effective, compliant and accountable institution.