The Kenya Tea Development Agency (KTDA) has claimed that its Sh26 billion borrowing spree was triggered by a pile-up of unsold stocks due to a ban on direct tea sales by its factories and introduction of reserve prices.
The agency said it borrowed billions of shillings to pay tea farmers for their supplies after stock-ups of unsold products surged to 104 million kilogrammes last year, tripling foregone revenues for growers in three years.
In a statement on Tuesday, KTDA said about half of the loans were borrowed to pay farmers who had supplied the unsold tea.
“The commodity loan (Sh12.8 billion) was borrowed as a bridging finance on the background of high tea stocks of 104 million Kgs, compared to 37 million kgs in 2021. The high stocks build-up was due to the ban on direct sale operations, the introduction of reserve prices, and geopolitics in our key market,” KTDA said.
It said its guidelines allow it to use commodity loans to cover expenses such as paying off farmers for leaf supplies and working capital. KTDA said it paid off the Sh12.8 billion loan by the end of September 2025, but facilities procured for other uses continue to be serviced.
An audit by the Tea Board of Kenya said that other than the Sh12.8 billion commodity loan, KTDA factories had loaned one another Sh10.36 billion, had asset-based financing valued at Sh2.6 billion, and Sh300 million in project loans.
The audit faulted KTDA management for sanctioning inter-factory loans at the headquarters and over-valuing assets to get bigger loans, while factory managements took loans not approved or beyond the limits approved by the respective boards.
KTDA disputed the claims but admitted that its factories, mainly those in Western and Rift Valley regions, have been operating in a cash crunch.
“Cashflow challenges for factories arose due to huge stocks build, low prices, and unfavourable exchange rate after the shilling strengthened against the US Dollar,” KTDA said.
The agency has defended its policy of borrowing stating that its model requires that it pays them after they have delivered produce, even if the stocks haven’t been sold.
“The farmer can’t wait for five months for the tea to be sold to pay them. That is why bridging commodity funding is important,” it said.
