Murang’a County tea factories earn Ksh 12.3b from sales

Written By: Claire Wanja
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The leaders wondered what happened to the insurance taken by KTDA to cushion farmers in case of calamities.
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Tea factories in Murang’a County have earned a total of 12.3 billion shillings from tea sales for the year ended June 2019.

This performance has been realized at a time when most of tea producing countries have registered increased production while importing markets have experienced political and economic challenges. Global tea production stands at 5.8 billion kilos while demand is at 5.6 billion kilos resulting in a 200 million kilos surplus.

During the year, the factories in Murang’a County processed 181 million kgs of green leaf into 43.85 million kilos of made black tea which was sold at an average price of US$ 2.59 compared to US$3.14 realized the previous year, representing an 18% drop.

Pakistan, Egypt, UK and UAE and Sudan remain Kenya’s key export destinations for the black CTC tea type processed in Kenya.  These countries have had significant currency devaluation due to political/economic challenges with Sudan, Pakistan and Egypt and UK registering 70%, 50%, 20 and 20%respectively.

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Tea being a commodity traded in US Dollars, the currency devaluation reduces the purchasing power of the consuming population. Resumption of economic sanctions by the United States of America on Iran cut off a substantial market for our teas.

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Due to the above factors, tea factory companies in Murang’a County earned Ksh12.33 billion compared to Sh14.49 billion earned in 2018, representing 17.5 percent drop. Out of the Ksh 8.6 billion revenue, farmers have already received Sh2.74 billion, as initial payment, and the remaining Sh5.89 billion will be paid to the farmers at the end of this month.

Last and this year, Murang’a County earned highest revenues of all the 16 tea growing counties.

“During the 2016/17and 2017/2018 financial years, the current Murang’a tea leadership, elected by the farmers, oversaw these high earnings. In fact, factories in Murang’a County earned the highest compared to others, we urge the political fraternity and other interested parties not to politicize tea business but understand the dynamics driving the sector” said Erustus Gakuya, Zone two Board Member, .

“We are aware that there were some people purporting to be farmers and representing farmers in Murang’a, but we are the elected leaders and appeal to our farmers not to be misled by such people who are not working for the interests of the farmers,” he added

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Challenges 

Tea factories in Murang’a County are addressing the challenges facing the industry such as high costs of energy. To reduce energy costs, factories are investing in small hydropower stations (SHPs) to deliver affordable and reliable power supply to factories.

In Murang’a County, Metumi SHP which is set to be commissioned will provide 5.6 MW which will reduce the cost of power by the factories.

To cushion farmers against fluctuating tea prices, factories in Murang’a are diversifying into the manufacture of orthodox tea in a move to reduce reliance on Black CTC tea.

The strategy is aimed at diversifying markets for tea farmers. Kiru is the pioneer tea factory to roll out the manufacture of orthodox tea and other factories are scheduled to produce the tea.

The main markets for orthodox teas are Russia, Germany, USA, Dubai, Taiwan, Turkey, Iran, The Czech Republic, Kazakhstan and Canada.

Kenya is the leading exporter of black CTC teas in the world accounting for about 23 percent of the global exports with KTDA accounting for about 13 percent.

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Tea factory companies directorship  

Meanwhile, 209 smallholder tea farmers have been cleared to vie for directorship positions in tea factories managed by the Kenya Tea Development Agency (KTDA) Management Services (MS) across the country.

The elections, which will be held in 109 electoral areas, are scheduled to take place in November this year in line with the Tea Factory Companies’ Articles of Association and Company Law.

The 209 were settled upon following a rigorous process where interested applicants were vetted through a laid-down criterion which includes an inbuilt appeal and dispute resolution mechanism.

54 Tea Factory Companies, which are managed by KTDA MS, had on the 30th of September this year submitted applications for pre-qualification for candidature to participate in nomination/election of directors for their respective Tea Factory Companies.

Elections in these Tea Factory Companies take place every year on a rotational basis; with a third of all factory directors are up for re-election this year.

The annual elections enable smallholder tea farmers, who are the shareholders of the Tea Factory Companies, to elect representatives to the factory boards to oversee the prudent management of factories.

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