NAIROBI, Kenya, Sept 23 – Kenyan tea farmers are due to receive the highest pay in nine years with a hefty bonus of Sh24.66 per kilo of green leaf supplied to the Kenya Tea Development Agency (KTDA) until June 2009.
KTDA Managing Director Lerionka Tiampati said about 500,000 small scale farmers will be paid a total of Sh25.4 billion which represents a 29 percent growth in earnings.
“We have already paid Sh7.7 billion in the initial payment at an average rate of Sh10.50 per kg. The bonus (second payment) is coming to Sh24.66 and so if you add the two, you’ll get Sh35.16 per kg. This is money going directly to the farmers’ pockets from the Sh36.9 billion we earned from tea,” he explained.
At a press briefing on Wednesday, the MD attributed this to the reduced production due to the ongoing drought and the favourable exchange rate which pushed prices at the auction.
Production has declined by 30 percent due to the persistent drought leading to high demand that has pushed up the prices. On the other hand, the prices have gone up from Sh186.4 ($2.50) per kg of processed tea to Sh261.1 ($3.50).
An average of 4kgs of green leaf makes 1kg of made tea.
Mr Tiampati said although the anticipated El Nino rains might see production go up this might not significantly affect the tea prices.
“Globally, there is a deficit of tea to the tune of 110 million kilos which has been caused by the drought in East Africa, Sri Lanka, India and elsewhere. So in the next one year, prices might come down slightly because before you build up stocks, it might take a lot of time,” he added.
KTDA also credited the high earnings to the initiatives that had been undertaken by factories to cut costs and improve efficiency.
The factories which have been faced with challenges such as high energy, labour and input costs have devised ways to enable them to remain competitive. This includes the use of firewood to mitigate high fuel costs and the setting up of mini-hydros to generate energy.
They have also embarked on automation to reduce the cost of labour and improve efficiency in the plants while Continuous Fermentation Units have also been installed.
“We are encouraging our farmers to lease or buy and develop wood fuel plantation so that they can rely on their own plantation for fuel requirement. This is happening and up to 10 percent of the requirements are already in place and we will continue with that initiative,” he vowed.
At the same time, Mr Tiampati revealed that they are in the process of setting up a subsidiary that will effectively manage the mini hydros.
“Energy is a different ball game from tea production and therefore you can’t say that you’ll use the expertise in tea to develop energy. We will set up a business that is stuffed with the right skills to drive forward that business,” he said.
The energy projects cost between of Sh150 million and Sh200 million to set up where farmers contributing equity while the banks also chip in.
Meanwhile, the MD has defended KTDA against claims that their recent move to set up a Microfinance firm, Greenland Fedha Limited earlier this month to provide financial services to its members will ‘kill’ 52 Savings and Credit Co-operatives Societies (Saccos) in the rural areas.
“Some of the directors in the tea factories are also directors in those Saccos so how can we kill them? There are over 40 banks and over 30,000 Saccos, so how is a small Sacco going to kill them?” he posed.
The Kenya Union of Savings and Credit Co-operatives (KUSCO) has asked the government to deregister Greenland Fedha arguing that since they were not taking any deposits, they would force farmers into their firm which would hurt their smaller members’ operations.
Mr Tiampati however said they would conduct their business responsibly and diligently and as such the small Saccos need not feel threatened.