The Kenya Tea Development Agency has dismissed allegations circulating on social media that tea factories under its management are facing financial difficulties, with some reportedly on the verge of being auctioned due to debt.
In a statement, KTDA assured the 650,000 smallholder tea farmers that all its 71 factories are financially stable and continue to meet their obligations to farmers and other stakeholders on time. The agency has also termed the financial distress claims as misleading and a deliberate attempt to undermine the confidence of players in the small-holder tea sector.
“We urge all stakeholders to disregard misinformation intended to undermine confidence in the sector and reverse gains made by smallholder tea farmers. Treat such statements with the contempt they deserve,” reads the statement.
The agency clarified that any borrowing by factories is limited to short-term financing facilities, which are only taken up for the purposes of bridging cash-flow gaps between payment of farmers for Greenleaf deliveries and the eventual sale of the processed tea. KTDA noted that while farmers are paid almost immediately upon delivering Greenleaf, tea sales take several months, especially during periods of high stock levels.
“This mismatch can occasionally necessitate short term financing to ensure uninterrupted payment to farmers. Such borrowing is not routine but arises under specific market conditions including temporary tea gluts,” says the statement.
KTDA, however, assured farmers that all loans are sanctioned by the factory board and must be supported by auditable valuations. Further, the agency emphasized that all borrowing is fully secured against properly valued tea stocks, approved by factory boards and is promptly settled once tea is sold.
“All loans, whether short-term or for development, are sanctioned by the board factory, elected by farmers to represent their interests, adhere to prudent financial management practices and are supported by proper auditable valuations,” says the statement.
The agency also dismissed claims that deductions have ever been made from farmers’ earnings for the establishment of a Tea Stabilisation Fund. According to KTDA, while the concept of stabilisation fund was discussed as a possible mechanism to support farmers’ second payment (commonly known as bonus) during periods of depressed returns, the agency never implemented it.
“No monies were deducted from farmers’ payment, nor were funds from any other source allocated to such a scheme. Claims suggesting otherwise are inaccurate and misleading and misrepresent both the intent and the actions of the agency,” says the statement.
On the ongoing tea sub-sector reforms, the agency confirmed that it had already submitted proposals for amendments to the Tea Amendment Bill. The recommendations it noted are aimed at safeguarding farmers’ interests.
By Wangari Mwangi
