Our attention has been drawn to statements and publications in the media about Kenya Tea Development Agency Holdings’ (KTDA) investment in subsidiaries and their overall benefit to smallholder tea farmers. For the benefit of our stakeholders, a clarification on the same is offered as follows.
Smallholder tea was introduced into Kenya at independence in 1964. Then, the number of tea growers was 19,775 and in 2020, almost six decades later, the number has grown to over 600,000. This cash crop has survived the times.
Management of the smallholder tea sector from independence was initially under what was known as Special Crops Development Authority, which was succeeded by KTDA Authority, until 2000 when smallholder farmers, with stakeholders from tea growing areas lobbied for the management of the sector to be managed and run by the tea farmers themselves.
Today, this sector is fully owned and run by the tea farmer under the KTDA Group. All records referred to in the media publications indicate that the shareholders of smallholder tea factory companies are owned by the tea farmers themselves and that the tea factories own KTDA Holdings, which in turn owns the eight subsidiary companies.
The KTDA model of ownership is similar to other farmer-owned organizations globally, in the Netherlands, which have invested in entities in the value chain, for the benefit of direct and indirect shareholders.
With our model, KTDA Group pays dividends to its shareholders – KTDA Holdings – and down the pipeline to the tea factory companies and to their registered farmers. This is in line with the Company Law. A number of the KTDA Holdings’ subsidiary companies had either been established by the Authority, or envisaged by the Government through the Sessional Paper No. 2 of 1999.
KTDA Holdings has in the 2018/2019 financial year, declared a dividend of Kshs. 683 million to its 54 Tea Factory company shareholders. This dividend payout is derived from KTDA Holdings’ investment in its subsidiary companies. In the year 2017/2018 dividend to KTDA Holdings’ shareholders was Kshs. 691 million. These distributed dividends are reflected in the respective books of accounts of the 54 Tea Factory Companies, based on their shares in KTDA. Holdings and are tabled before the tea farmer/shareholder of that factory at their AGM’s.
The treatment of the profits from the subsidiaries follows a policy where 30% is remitted to the government as taxes, 30% paid as dividends and 40% retained by the subsidiaries to facilitate business expansion. In the last seven years KTDA Holdings has paid its shareholders (54 tea factory companies) a cumulative dividend of Kshs. 3.7 billion, and with a similar amount paid as taxes to the government, going by the aforementioned policy.
All this information is in the public domain.
Following recommendations in the Sessional Paper 2 of 1999 titled ‘The Liberalization and Restructuring of the Tea Industry – Reforms in the Tea Board and Privatization of the Kenya Tea Development Authority’ , KTDA Holdings has invested in eight (8) businesses (subsidiaries) along the chain to enhance value for smallholder tea farmers.
The subsidiaries are; KTDA Management Services that deals with management of the tea factory companies in line with the recommendations made by the Tea Industry Taskforce of 2007; KTDA Power which is involved in power generation aimed at reducing the cost of energy for factories; Greenland Fedha which facilitates easy access to credit for farmers; KETEPA, which is KTDA’s value addition arm that blends and packages tea for local consumption and export; Chai Trading Company Limited whose mandate is warehousing, blending, clearing and forwarding, value addition, export and general tea trading; Majani Insurance Brokers which was established to provide insurance brokerage services for tea factories and KTDA Group companies; Tea Machinery & Engineering Company Ltd – established to provide a modern workshop for fabrication and assembly of tea machinery for tea factories, and KTDA Foundation which focuses on corporate social investments.
As stated and demonstrated, KTDA Holdings and its subsidiary companies are indirectly owned by the individual smallholder tea farmer, through their investment in the tea factory companies. Based on the different sectors and regulatory regimes, the various subsidiary companies are governed by different regulatory institutions of the country. In the interest of transparency and in keeping with our policy of maintaining an open-communication policy with our stakeholders, this statement offers clarity on these issues.
Lastly, KTDA Group states that they have welcomed and recommended an entire industry review as we enter the 2020 decade, noting that there have been industry reviews in the beginning decades of 2000 and 2010.
KTDA CORPORATE COMMUNICATIONS