World Bank to give tea agency Sh1 billion loan

The Kenya Tea Development Agency is set to receive Sh1 billion from the International Finance Corporation (IFC) to construct a warehouse that is expected to save the company millions of shillings every year in lease payments.

KTDA is the marketing agency for an estimated 562,000 small scale tea farmers, and has been hailed for its positive contribution to economic growth by helping farmers access international markets more efficiently.

The IFC, the World Bank’s private lending arm, is proposing to lend KTDA $12 million (Sh1 billion), half the amount the company needs for construction of a new warehouse that will see it reduce outsourcing costs for tea storage.

“KTDA is constructing a new state-of-the-art 200,000 square feet warehouse complex to replace 50 per cent of its current warehousing space, which is leased from third parties,” says a disclosure note by IFC on the proposed loan.

The planned warehouse is to be located in Malindi, Lamu County.

“The Project will be implemented and located in Section V Mainland North, situated west of Mombasa Municipality (Miritini), Mombasa, Kenya,” says the disclosure note.

IFC, which is the World Bank’s private lending arm, says that the site was chosen due to good access to major transport routes.

Increased outreach to farmers and increased export of tea are additional results expected from the Sh1 billion proposed loan the disclosure note adds.

KTDA is owned by 54 tea companies, each of which own between one and two per cent of the agency and have amongst them 65 tea factories.

The IFC note says that by the end of 2011 the company represented 562,000 small scale farmers and the company makes money by warehousing, tea sales to export and domestic markets, and other services provided to the 65 factories.

Data from the Tea Board of Kenya shows that small-scale farmers accounted for 56 per cent or 224.9 million kilogrammes of the 399 million kilogrammes exported in 2011.

Tea production was lower by five per cent due to poor weather in the first half of the year.