KTDA Debt Surges to Sh26bn Due to Fiscal Missteps
Financial Mismanagement and Debt Crisis in KTDA-Managed Tea Factories
An audit conducted by the Tea Board of Kenya (TBK) has exposed serious financial mismanagement within factories operated by the Kenya Tea Development Agency (KTDA), leading to a staggering Sh26.06 billion debt burden. The findings reveal that these factories have been engaging in practices that violate established financial guidelines, including unauthorized inter-factory loans and overvaluation of assets to secure larger loans.
The audit, initiated following a directive from the Ministry of Agriculture, aimed to evaluate the financial sustainability of KTDA-managed factories and address ongoing challenges in the tea sector. According to TBK, the audit uncovered multiple irregularities, such as the lack of board resolutions approving lending or borrowing between factories. These transactions were reportedly handled at the KTDA headquarters, bypassing proper oversight.
Inter-Factory Loans and Their Impact
One of the most concerning findings is the practice of inter-factory loans, where KTDA factories have loaned each other approximately Sh10.36 billion. This lack of clear policy guidelines on inter-factory financing has resulted in arbitrary issuance and repayment of loans. Several factories are now facing cash flow constraints, making it difficult for them to repay these loans within the stipulated one-year period.
The audit also revealed that some factories borrowed more than the limits approved by their respective boards. Additionally, there were instances of over-quoting equipment prices, with certain factories paying significantly more for similar equipment compared to others. For example, factories like Kambaa and Sanganyi received equipment that was far more expensive than units supplied to other factories.
Misuse of Loan Funds
Another major issue identified in the audit is the misuse of loan funds. Some factories borrowed money under the guise of financing projects but used the proceeds for unrelated purposes. For instance, Kebirigo, Ragati, and Chinga factories borrowed Sh300.17 million for project financing, which was intended for capital-intensive uses such as expansion and machinery acquisition. However, they spent the money on other items instead.
The audit also found that the Sh12.8 billion in commodity loans was used to finance operations rather than for paying bonuses as previously reported. Furthermore, the closing stocks used as collateral for these loans were overvalued, particularly in the Western Block (WoR) factories. This overvaluation raises concerns about the accuracy of financial reporting and the potential for inflated performance metrics.
Government Subsidy Refund and Future Recommendations
In addition to the loan issues, the audit highlighted that the government owes KTDA Sh4.67 billion as a subsidy refund for fertilizer imports between July 2021 and June 2023. TBK has urged KTDA to provide detailed information on the latest loan balances by its factories and warned against using borrowed funds to pay tea bonuses at the end of the year.
To ensure transparency and accountability, TBK has recommended a forensic audit of all loans taken by KTDA on behalf of its factories since July 2021. This audit would help restore confidence among tea farmers regarding the integrity of the loans. Additionally, TBK has called for the immediate implementation of a retention policy to address cash flow challenges and physical verification of assets acquired through loans to ensure proper utilization of funds.
Regional Disparities in Tea Production
The financial challenges faced by KTDA-managed factories are compounded by declining earnings for tea farmers, especially in the Western Block (WoR). Data from the regional auction showed that tea grown in WoR fetched an average of Sh226.17 per kilo over nine months to September 2025, a drop of 16.26% compared to the previous year. In contrast, tea from the Eastern Block (EoR) saw a smaller decline, with prices falling by 2% to Sh379.96 per kilo.
The main tea-growing zones in WoR include Kisii, Kericho, Nandi, and Nyamira, while EoR areas consist of Kiambu, Murang’a, Nyeri, Kirinyaga, Meru, and Embu. These regional disparities highlight the need for targeted interventions to support farmers and improve the overall financial health of the tea sector.
Conclusion
The findings of the TBK audit underscore the urgent need for improved financial governance and oversight within KTDA. Addressing these issues will be critical in restoring trust among stakeholders and ensuring the long-term sustainability of the tea industry in Kenya.
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