Smallholder factories to pay tea farmers higher amounts earlier

Kenya Tea Development Agency (KTDA) factories are set to release second payments four months earlier than usual even as some grapple with cash flow hiccups.

The 69 factories are currently in the middle of an annual ritual to declare second payment rates with boards of at least four having already approved better rates than last year's.

All the other factory boards are to meet before the end of the month and payments will be in farmers' accounts by July 10 in line with reforms that require the prompt release of funds to the growers.

Factory directors said while some factories especially in the East of the Rift Valley tea growing region will manage the payments easily, the situation could be more complicated in the West of the Rift Valley.

"We are currently selling May stocks for our factory which means we shall have to estimate and borrow funds to pay for the June deliveries," a director of a factory in Kiambu said.

"But some factories in the West are currently selling January stocks which means they will have to estimate the earnings and borrow to pay for five months' stocks still held at the Mombasa godowns." 

Another director of a factory in Nyeri county said they were also selling May stocks which is almost the same level for factories in the East and justified any necessary borrowing as a reality of the business environment.

"What I can assure you is that no director in office currently is prepared to go against the spirit of the reforms spearheaded by the Ministry of Agriculture."

He also said that borrowing was being restricted to individual factories rather than the agency.

Separately, KTDA's Nyeri board member Kamau Ngatia said the payment rates to be released towards the end of this month will be better, compared to the amounts farmers received last year.

Ngatia attributed the improved payment rates to, among others, the introduction of the reserve price at the tea auction in Mombasa and outlawing of direct sales overseas (DSO).

“It is true that KTDA factory directors will be meeting with tea farmers between June 28 and June 30 to announce the payment rates based on the production of each of the 69 factories affiliated to the agency,” Ngatia said.

KTDA-managed factories, he said, are facing challenges such as high costs of energy and labour which continue to eat on farmers' pay but was optimistic payment rates will be impressive this time around.

"Quality of tea by individual factories, prices at the auction and how the factories have managed their operations also helped to determine rates," he said.

“Restricting sales to the Auction and introduction of a Reserve Price has ensured the farmer will get value for their produce.”

The board member representing Chinga, Iria-ini,  Gathuthi, Gitugi and Ragati factories however said there is a marked decline in production volumes which he attributed to changing weather patterns and inadequate rainfall around Mt Kenya region.

He said that with the exception of Chinga factory, all the other four factories had recorded a sharp decline in production based on the deliveries.

For instance, he said last year Chinga produced 18.6 million kilogrammes of tea while Iria-ini produced 14.9 million kilogrammes, Gathuthi had 15.3 million kilogrammes, Gitugi got 14.4 million kilogrammes and Ragati delivered 17.3 million kilogrammes.

"The last four months of a dry spell which swept these regions have seen tea production decline considerably," he said.