Money Markets
A worker at a tea estate in Nandi Hills. FILE
By GERALD ANDAE
In Summary
- The decision to pay the mini-bonus was reached two weeks ago after industry players met President Uhuru Kenyatta who directed the Treasury to look into value added tax (VAT) and import duty levied on tea, which he said was hindering the growth of the sector.
Some tea factories could be forced to borrow to
finance a mini-bonus that the Kenya Tea Development Agency (KTDA)
promised would be paid to growers from the end of this month.
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The mini-bonus is projected to be about 40 per cent less
than what was paid last year, with some factory directors saying the
companies would find it difficult to break even.
“We had not planned for this because in March KTDA
had announced that it would not pay the mini-bonus to farmers as a
result of the volatile tea prices that has seen some of our factories
struggle financially,” said some KTDA officials who spoke to the
Business Daily on condition of anonymity.
They said the affected factories would have to borrow the funds from financial institutions in order to meet the payments.
Farmers were last year paid a mini-bonus of Sh1.95
billion from 545 million kilogrammes that were delivered, according to
KTDA. The pay out is usually done in April. In Region One and Region
Four, factories affiliated to KTDA will pay farmers Sh3 as opposed to
Sh5 that was paid to growers last year.
“We have settled on Sh3, which we will be paying
farmers at the end of this month. Obviously this will be lower than what
we paid them last year,” said Nathan Kirera, regional manager for
Region One which covers 11 factories in Nyeri and parts of Kiambu.
The mini-bonus, said Mr Kirera, would be based on
the number of kilogrammes of green leaf delivered to the factories in
the six months to December last year.
However, some factories in western Kenya are yet to decide whether to pay the mini-bonus because of financial implications.
“We are in discussion with our board and other
stakeholders on the amount to be paid, if at all. The decision to pay
the mini-bonus is yet to be reached,” said Peter Munialo, the factory
unit manager for Mudete.
The decision to pay the mini-bonus was reached two
weeks ago after industry players met President Uhuru Kenyatta who
directed the Treasury to look into value added tax (VAT) and import duty
levied on tea, which he said was hindering the growth of the sector.
“Tea is one of our chief foreign exchange earners
and we have to ensure that our farmers are comfortable and continue
producing,” the President said.
Tea packers and exporters pay 16 per cent VAT for
tea bought outside the auction yet that bought during the Tuesday fair
is zero rated. The packers also want the import duty on value added teas
increased from 25 per cent to 100 per cent.
Two weeks ago, tea prices dropped to a six-year low
of $2 (Sh174) per kilogramme at the auction in Mombasa, representing a
13 per cent drop from the $2.30 (Sh200) during the corresponding auction
last year due to oversupply of the commodity.
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