The world over, Kenyan tea has won acclaim for consistent high quality, distinctively rich flavour and delightful aroma. At the heart of it all is the Kenya Tea Development Agency Ltd (KTDA) — working with over 500,000 small-scale tea farmers to produce quality teas for its customers and create wealth for its shareholders.
The world over, Kenyan tea has won acclaim for consistent high quality, distinctively rich flavour and delightful aroma. At the heart of it all is the Kenya Tea Development Agency Ltd (KTDA) — working with over 500,000 small-scale tea farmers to produce quality teas for its customers and create wealth for its shareholders.
The history of KTDA is as rich as the tea it produces. It dates back to 1957, when the first small-holder tea factory was set up at the foothills of Mt. Kenya in Ragati, Nyeri county. The factory was managed through a management agreement with multinational tea companies.
On June 30, 2000 KTDA (the Authority) was transformed into a private company, KTDA (the Agency) Ltd and registered under the Companies Act. The year 2010 saw the re-structuring of the Agency, leading to the establishment of KTDA Holdings Limited and KTDA Management Services (MS) Limited, a subsidiary of KTDA Holdings Limited. KTDA (MS) currently manages 65 tea processing factories spread in all tea growing regions across Kenya.
The agency works with tea factories to manage costs, enhance efficiency in farm and production processes and invest prudently in order to secure the farmers’ financial future. This is demonstrated by the fact that all KTDA-managed factories have been ISO: 9001:2008 certified for efficient management systems while more than 90% of the factories have attained the more comprehensive ISO 22000:2005 for Food Safety Management System. The 562,000 small-scale tea farmers are individual shareholders of the factory companies, which in turn are corporate shareholders of KTDA Ltd.
Currently one of the biggest, most influential and well managed companies in Kenya, KTDA has continued to post historic increases in farmers’ earnings. It recently reached an unprecedented KSh38.2 billion for the 2009/2010 financial year, up from KSh25.4 billion posted the previous year. For the first time in the history of tea growing in Kenya, farmers earned an average of KSh43.02 per kilo of green leaf delivered, making them among the highest paid smallscale tea farmers in the world.
In order to keep pace with the ever changing business environment and maintain market leadership, KTDA has established a research and development department that is focused on initiatives for cost reduction such as process automation, alternative energy and resource efficiency and enhancement of product value, quality and safety.
To enhance efficiency in tea processing, reduce operational costs and to further improve the quality of made teas, all KTDAmanaged factories have installed a technology known as Continuous Fermentation Unit (CFU). Another technology, Electronic Weighing Solution (EWS), has been introduced in all KTDA managed factories. The technology has revolutionised the way tea is collected, weighed and transported to the factories. It saves on time and human resources by having accurate data captured once at source. It also makes automated reconciliation between weights of green leaf delivered to the factory and weights of the leaf at the buying centre possible.
As a responsible corporate citizen, KTDA set up the KTDA Foundation on April 17, 2010. The Foundation is a non-profit entity that will raise funds for investment in education, health, the environment, water and sanitation as well as infrastructure improvement and undertake grower education. This should lead to job creation and poverty alleviation among communities where KTDA operates.
SUBSIDIARY COMPANIES
As part of its business and product diversification strategy, KTDA has over time set up the following subsidiaries:
KTDA Management Services (KTDA MS) KTDA MS manages the 65 tea processing factories through management agreements with the respective Factory Companies.
Chai Trading Company Limited (CTCL) CTCL’s core mandate is warehousing, blending, trading and export. It is now one of the top 10 buyers at the weekly Mombasa Tea Auction and is a member of the East African Tea Trade Association (EATTA).
Kenya Tea Packers(KETEPA): KETEPA’s core business is tea blending, packaging and distribution of made tea for local and overseas markets. KETEPA, a household name in Kenya, was formed 33 years ago (1977) and is majority owned by KTDA. KETEPA is the biggest tea blending, packing and marketing company in Kenya today.
Majani Insurance Brokers (MIB) MIB is involved in insurance brokerage services. It is a leader in microinsurance and has launched innovative low-premium products with its underwriters for the benefit of its retail customers. The company has grown from its humble beginnings into a financially strong brokerage with business spread across all classes of insurance, including Life and General Business.
Greenland Fedha Limited (GFL) GFL core business is provision of affordable credit to farmers. It began its operations in September 2009 as a non-deposit-taking microfinance company. Its mandate is to provide affordable financing, initially to small scale tea farmers, and to increase access to financial services among the lower income and rural households in Kenya’s tea growing areas.
KTDA Power Company The newest whollyowned subsidiary of KTDA Holdings, having been incorporated in January 2010, it invests in the energy sector and manages small hydro-power projects owned by Factory Companies). The pilot Imenti Mini-hydro Power Plant, a project of Imenti Tea Factory in Meru, was completed in December 2009. The hydro plant is capable of generating 1MW of electricity, out of which the factory consumes about 0.5 MW and the surplus sold to the national grid under a power purchase agreement with the national distributor, Kenya Power and Lighting Company (KPLC). Plans to develop 12 other mini-hydro power plants across the tea growing regions are underway. They are expected to generate a total of 22 MW when complete.
These subsidiary companies are investments on behalf of the shareholders. Dividends declared from profits made by these subsidiaries are eventually paid to farmers through their respective Factory Companies.
Producing quality tea is our Focus, says Group CEO
KTDA Group CEO Lerionka Tiampati irrevocably states that a key plank of KTDA’s commitment is the effective management services to the smallholder tea sub-sector in the production, processing and marketing of high quality teas. “Our objective is to meet and exceed our customers’ expectations in providing high quality products and associated services.”
Tiampati attributes KTDA’s success to the more than 560,000 small scale tea farmers, who are also the shareholders of the factories to which they deliver tea. “We shall endeavour to continually maintain and improve efficient and effective Quality Management Systems meeting both the regulatory and international requirements.”
KTDA has been at the centre of efforts to uplift the livelihoods of the smallholder tea farmers. The phenomenal success is a demonstration that local people have the capacity to change the face of their communities. Kenya is the leading exporter of black CTC (curl, tear and cut) teas, with small scale tea farmers, through KTDA, accounting for more than 60 per cent of Kenya’s tea exports and 13 per cent of global exports. During the 2010 calendar year, tea reclaimed its position as the top foreign exchange earner for Kenya, ahead of tourism and horticulture.
“We export 95 per cent of our teas and our success is pegged on putting great emphasis on production of the best quality tea, Mr Tiampati says, adding that quality control is paramount and a self-checking mechanism has been installed at every stage of manufacturing to ensure production of the best quality teas.
So what are the unique elements that make Kenyan tea popular and much-sought-after around the world? The answer lies in the good agricultural practices, all-year round warm climatic conditions, volcanic soils and sufficient rainfall which allows for plucking all year round.
It is against this backdrop that KTDA has established pride of place among the principal international markets for Kenyan tea. “Our key markets at the moment are Pakistan, Egypt, the United Kingdom, Afghanistan, Yemen and Sudan, among others,” he says. KTDA is now expanding its markets to United Arab Emirates, Russia and Iran.
As far as Vision 2030 is concerned, Mr. Tiampati states that KTDA is focusing a lot more on improving productivity per unit. It is also focussing on product and market diversification as well as venturing into value addition to increase earnings for farmers. “We are also leveraging ICT to enhance efficiency and effectiveness of our operations and adopting a modern governance structure,” he says. KTDA has truly transformed the livelihood of thousands of small-scale tea farmers and continued to stir development in the rural areas of Kenya. “The tea industry has served this country well, the challenge now is how it can be sustained into the future,” observes Tiampati.
Innovation is the key to Sustainability, says KTDA Chairman
The Kenya Tea Development Agency has over the years encouraged farmers to carefully pluck the best teas, two leaves and a bud, to produce the world’s best CTC teas; something the Group Chairman Stephen M’Imanyara lauds as the mark of distinction that gives KTDA teas a global appeal. “The required quality is achieved by maintaining a “fine plucking” standard of two leaves and a bud.” he says. Findings of research conducted by the Tea Research Foundation of Kenya (TRFK) have shown that concentration of chemical compounds that contribute to tea quality are highest in the young shoots and decline in the older fibrous leaf and stalk.
The Chairman says that the tea industry remains the leading foreign exchange earner for Kenya and contributes up to 4 per cent of the GDP. Small-scale farmers contribute more than 60 per cent of that success. The industry does not only provide livelihoods for a significant percentage of the population (estimates place this at 4 million people) across the value chain, but also plays an invaluable role in stabilising our economy. The KTDA structure has also enabled farmers to access critical inputs such as fertiliser, at affordable prices due to economies of scale. The farmers then get to pay for the inputs in easy instalments over a period of time without significantly affecting their monthly earnings. “To ensure that our farmers remain in business amidst the many challenges and threats, we have to keep innovating, particularly on technology, value addition and new tea varieties.”
The Chairman enthuses that KTDA makes an invaluable contribution to rural industrialisation and the overall economy of Kenya. Factories, he says, are major industrial installations providing employment and livelihood to millions of people across the value chain.” As a result, in many parts of the country, tea remains the most profitable cash crop and therefore the contribution of this industry to rural economies cannot be underestimated. Over the years farmers have accumulated assets worth over KSh38 billion. In a bid to scale up this figure, Mr M’Imanyara says KTDA continues to enhance efficiency and productivity along the value chain and also diversify its business to safeguard the future for the farmers. To do this effectively, he continues, farmers who are also the shareholders of their factories are encouraged to retain some money every year for purposes of future investment.
Looking forward, the KTDA Chairman observes that in order to remain ahead of the pack, they have to keep investing in research and new technology. “We are working to fully automate all our factories to make them efficient and reduce costs. We are also working with the Tea Research Foundation to develop new tea varieties that are high yielding in light of decreasing land sizes. Furthermore, we are exploring new markets to avoid overreliance on the traditional markets. Some of these markets largely consume green and orthodox teas, hence the need to diversify our products from the traditional black CTC teas.”