Will fresh blood at helm of KTDA turn the tide for tea farmers?

After losing twice in the elections, Chege Kirundi was third-time lucky when he finally won the Kenya Tea Development Agency (KTDA) chairmanship in January this year.

The post is highly influential but also has a lot of attention. And aside from the about 700,000 smallholder farmers who own KTDA through their 54 tea factories, the agency’s elections are closely monitored by the government as well as the rest of the tea sector players.

Kirundi’s win would be contested in court by Enos Njeru, who had just lost the elections and succeeded in blocking him from assuming office.  However, Kirundi was reinstated on February 24, with the court saying Njeru’s application lacked merit.

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Sudan is also a route to other African markets, according to TBK, including Chad. “This is a very serious crisis,” he said. “We had a lot of containers that were loaded towards Sudan. We have a lot of tea in the high seas heading to Sudan. We have a lot of tea in warehouses earmarked for the country.”

Beyond Sudan, there are more challenges on the horizon for Kenyan tea. These include climate change that is reducing yields and quality of tea, ageing tea farmers, declining acreage under tea owing to land subdivision and farmers ditching tea for high yielding real estate sector. KTDA and its 680,000 farmers contribute about 60 per cent of locally produced tea.

The smallholder farmers are perhaps more exposed to these risks. They have little capacity to adapt to climate change, they mostly farm on family land that almost always has to be subdivided every generation.

And then there are the high octane boardroom differences that at times spill into wars at KTDA as well as the government that has also been accused of meddling with the affairs of the agency. 

Kirundi and his team are working on a plan that tries to address these challenges and position KTDA as a future-ready entity.

For now, he is confident the leadership is reading from the same script and the wars will take a back burner. He also implies cordial relations with the government, noting that “we cannot manage without government assistance”.

Possible resistance

He has rolled up his sleeves and is settling down for the job. He said he is looking at giving more value to farmers, to an extent seeing himself as having an outsider’s view of KTDA and now wants to change it from within.

He is also bracing for possible resistance to some of the proposals he will be making, likely to cause jitters.

He refers to the organisation he envisions as KTDA 3.0, splitting the agency’s history into pre-2000 and post-2000, before and after its liberalisation. “Since 2000, KTDA has been on a growth path but now needs to reinvent itself to overcome the challenges it faces,” he said, noting that some of the challenges are existential but also adding that it needs to increase farmers’ earnings.

“The farmer wants only two things – an increase in revenue and a reduction of cost. He wants to be respected and his dignity restored. That’s what I think we should guide this organisation towards.”

KTDA, he said, would unveil a new plan in July that charts the way forward for the company, which will detail its plans to enable farmers to adapt to vagaries of climate change, increase value addition and grow markets, particularly in Africa. One of the issues he said would be in the new plan is a bid to increase earnings for farmers and reduce input costs by increasing the share of earnings from KTDA subsidiaries that are paid to farmers.

The earnings from the subsidiaries have been hotly contested in the past, with queries on how much of this goes to the farmer and how the balance is spent. 

Kirundi said he would be pushing for more of the subsidiaries’ profits to be paid to the farmers. KTDA owns eight subsidiaries that have ventured into different areas, including tea packaging, power production, insurance brokerage and micro-lending.

Power companies

The subsidiaries include Ketepa, Chai Trading Company, Majani Insurance Brokers, and Tea Machinery and Engineering (Temec) and KTDA Power Company. The power company owns several regional power companies that produce electricity for consumption by factories but some have excess capacity that they sell to Kenya Power.

KTDA says the treatment of the profits from the subsidiaries follows a policy “where 30 per cent is remitted to the government as taxes, 30 per cent paid as dividends and 40 per cent retained by the subsidiaries to facilitate business expansion”.  In 2024, the subsidiaries paid Sh1.043 billion as dividends to the 54 tea factories, which are the corporate shareholders of KTDA.

Kirundi contends that while the subsidiaries need to retain some of the profits for business expansion, 40 per cent is a bit on the high side. “I am a farmer and I know that the production cost is too high. I also realise that the level of production is below the potential. My thinking is that the farmer should be compensated for his loss of production cost by the investment he has made in his subsidiaries. 

“The company has subsidiaries and they do very well going by the profits that they declare. I feel that it is the responsibility of these subsidiaries to remit back the money they have created.

He said because they were created to reduce costs and to increase revenue, they need to bring back some of the funds that they have created to minimise the loss the farmer is making on his production costs.

“The raw material costs need to be supplied to the factories at a lower cost and the price of tea delivered by the farmer needs to be increased. And the capacity to pay the increment should come from the subsidiaries because the farmers have invested their money in the subsidiaries, the money has been multiplied, he must get a return on his investment.”

He said the exact proportion that he will propose to be paid to the farmer is “a discussion to be had at the appropriate time”. “The bottom line is that the farmers have invested in these companies to reduce costs and increase their revenue. And the KTDA was never meant to make profits, from the beginning.

“It was meant to develop the farmer. Developing the farmer means creating wealth or helping to create wealth,” said Kirundi. This, according to Kirundi, is one way to address the challenges that farmers face and which KTDA has been oblivious of, with the firm having failed to live to the expectations of the farmer.

The new KTDA chairman, who is also a lawyer and a director at Kiru Tea Factory in Murang’a, said that he is well-grounded in the tea sector, having been a tea farmer for decades. “For more than 20 years, I have been following the problems that farmers go through. I have always wanted to change this organisation from the inside,” he said.

“From day one, when I came to KTDA, I realised it has a good structure. But I always felt that we were falling short of the farmers’ expectations. To be chairman of this organisation now, I see myself in a place where I can influence change. I want it to be transformative… to change for the betterment of the farmer.”

Kirundi observes that while it has been able to help some farmers grow out of extreme poverty, it has left too many farmers behind who are still living in abject poverty, which is why he has judged KTDA as having failed to meet farmers’ expectations. 

“I feel that the organisation needs to do more because we have not eradicated poverty. We need to reflect now after 60 years. What strategies did not work in the last 60 years? And which worked? Why are our people still poor?

And who is poor now in terms of segmentation? And what can we do? The solution lies again by re-strategising and re-focusing on the farmer. “I’ve come up with a new slogan. Farmers first – and no farmer to be left behind. Because we have left a good number of farmers behind over the years.” He noted that some very small-scale farmers are so poor that they cannot pull themselves up by depending on the sale of their tea. 

“There are farmers who can only be assisted through grants and donations to move from extreme poverty and this is where KTDA’s social investments come in. It might mean that a farmer can be assisted to have a cow that can help him feed his family and produce manure for his tea, it may help by giving the farmer seed money to start a chicken business or a small shop, thereby supplementing his tea business.”

To grow farmer revenues, Kirundi is also looking at increased value addition and opening up Africa as a market.

“The only way to improve the prices of the top line of these companies now is to go into value addition. It is in line with the government,” he said. 

Global markets

Already, the government is demanding that the local tea sector increase the processing of tea locally to increase its value in the global markets and also to grow jobs locally.  The Kenyan Tea Act of 2020 mandates tea buyers or exporters to value-add at least 40 per cent of their annual Kenya tea exports. It expects this to be achieved by 2028.

Kirundi noted that it was critical to increase value addition for small-holder farmers both at the factory and KTDA levels as a way to increase value. “If we sell more blended teas, we could the income. Depending on the levels of value addition, we can even triple the income for the farmer,” he said.

He added that he will go for the middlemen, the lot within the tea value chain that is criticised for taking a good chunk of the earnings while doing little on the production side or assisting the farmer access high-value markets.

“We have to shorten the people in between the production and the consumer… we will need to collapse some of those people between the farm and the cup,” he said. “They are the ones who take the cream at the expense of the farmers.”

He noted that Africa has a huge potential to increase earnings for tea farmers. With better infrastructure, he noted, Kenyan goods can move from through to the West African seaboard and from there exported to other regions like South America.

“If the infrastructure can grow, then the Democratic Republic of Congo becomes a focal point because from there we could export to South America, North America, and Western Europe. So I am hopeful as we move to 2050, we will be able to grow the market in Africa. And I hope the infrastructure towards DR Congo will improve.”