Zeddy Sambu
The Kenya Tea Development Agency plans to set up a tea processing machinery factory as it pursues a diversification strategy.The firm, which is owned by nearly 500,000 small-scale farmers, has approached several engineering firms to partner it in the project.
The KTDA board plans to meet this week to finalise details of the venture into heavy manufacturing .
The agency says funding would be factored into its upcoming 2007/2008 budget, and requests for further funds would be tabled later at the Annual General Meeting.
KTDA’s move into manufacturing comes as market forces such as a stronger shilling, poor weather and a glut of tea in international markets saw falling production and earnings last year.
The agency’s managing director, Mr Lerionka Tiampati told Business Daily that the engineering firms—JF McCloy, Marshall Fowler, Warren Enterprises, Paper Packs and East African Foundry Works have been engaged in the talks and one would soon will soon be shortlisted after a financial and technical evaluation is completed.
The KTDA boss says the company, which has been out of State hands since 2000 must look at various options to cushion itself from unpredictable markets.
The firm’s estimates show sales revenues have plummeted by more than Sh1 billion as the shilling continued to gain ground against major currencies, especially the US dollar.
In 2006, a kilogramme of tea sold for $2 but now fetches 17 per cent less, at $1.70.“We are a major player in the industry .
We should be able to supply ourselves and have stake in the supply process,” Mr Tiampati said.Since going private, the company has expanded its asset base to reach Sh7.9 billion and has a total turnover of around Sh27 billion.
Though some industry players are critical of the move away from strictly promoting and selling tea, KTDA maintains that its board, on which sit 12 farmers’ representatives, is unanimous about the venture set for the coming year.
The announcement comes as mixed patterns prevailed in this week’s world tea auctions. Production had dwindled from April at only 0.82 per cent over the similar period in 2006, when the country was going through a severe drought.
KTDA, which manages 54 factories , competes with 39 other factories owned by tea multinationals and other private producers.
Over the years, small holder production has maintained a constant 90,000 hectares under tea, while estate farming adds up to half of that acreage.
Small scale farmers account for more than 66 per cent of total tea exports, which largely go to Pakistan, the UK, Egypt and Afghanistan. But over the last five years, some of the biggest world importers of tea, such as the US, UK and Germany have been buying less.
Van Rees, a tea industry consultancy, says on its website that the Mombasa Tea Auction saw declining prices, countering a sharp rise in the past two weeks, and noted drier east African weather was keeping production lower.
While areas east of the Rift Valley have seen sporadic showers, and the western regions have had some rain, weather has been mostly dry and the crop slightly down.
The report found global demand for Kenyan tea remained “patchy” with buyers showing more caution.
The lower demand saw sales in Mombasa of 145,354 kg of local tea varieties, though off-grades gained especially with importers Pakistan, Egypt and the UK.Analysts say the export duties, which were increased by one per cent in the latest Budget, have taken some wind out of Kenyans’ sails.
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