Tea farmers across the country are staring at one of the lowest bonuses to have ever been paid in recent years.
According to Kenya Tea Development Agency chairman David Ichoho, only Sh20 billion will be available for distribution as a second payment to over 600,000 farmers who deliver their produce to 69 factories managed by KTDA.
Factories directors are expected to meet next week to figure out how to share the money earned by farmers as an end of the year pay popularly known as bonus.
“The payment rate margin will be the same or slightly lower than what farmers received last year as bonus. However ,we are optimistic that next years pay will be more following the introduction of reserve price in July this year,” the chairman said.
Sales volumes also played an important role in determining bonuses, with almost three quarters of all the tea being sold through the Mombasa auction and only a quarter through direct sales.
Quality of tea by individual factories, prices at the auction and how the factories have managed their operations, the chairman noted, also help determine bonuses.
“Last year the government came up with a recommendation that all the tea has to be sold through the auction and has since introduced a reserve price,” Ichoho explained.
He said farmers will only be able to benefit from the reserve prices during the final pay for the year 2021.
“For instance, if the cost of processing green tea leaves is higher due to cost of power or ongoing projects, then the amount payable as final pay is bound to go down,” Ichoho observed.
KTDA managed factories are facing challenges such as high costs of energy and labour.The depressed earnings were further hit by an increase in monthly or first payments to farmers which has increased within the year to Sh20 from Sh16 as the sub-sector underwent a forceful reform pushed by the government
In 2019/20 out of the Sh69.77 billion revenue, farmers received Sh46.45 billion being the sum total of Sh17.69 billion in initial monthly payment and Sh28.76 billion as second and final payment.
The payout represented an average return of 67 per cent of the total tea revenue, with farmers receiving an average of Sh41.27 per kilo of green leaf delivered.
Last week, Agriculture Cabinet Secretary Peter Munya said payments to small scale farmers has dropped from Sh58.76 in 2016 /17 to Sh36.64 in 2019/2020.
“In order to reverse this, the ministry has been spearheading various policy, regulatory and administrative reforms to enable farmers earn a reasonable living,” the CS explained.
The sub-sector generates over Sh130 billion in exports annually and support over six million Kenyans directly and indirectly.
Kenya is the leading exporter of black CTC teas in the world accounting for about 24 per cent of the global export.