Kenya’s tea factories are sitting on Sh26.06 billion in debt built up while financing farmer bonuses, and a government audit says the borrowing broke basic financial rules along the way. The Tea Board of Kenya (TBK) review found that factories managed by the Kenya Tea Development Agency (KTDA) took loans without board approval, inflated the value of tea stocks used as loan security, and lent money to each other with no policy governing how it should be repaid. For the roughly 600,000 smallholder farmers who supply green leaf to KTDA’s 71 factories, the findings raise a hard question: is the annual “second payment,” the bonus that often covers school fees and farm inputs, built on money the industry has actually earned? It’s a question that’s followed years of tension over bonus size, including protests at South Rift factories over earlier bonus cuts.
What did the Tea Board of Kenya audit actually find?
The Tea Board of Kenya, the industry’s regulator, presented its audit to Parliament’s Departmental Committee on Agriculture and Livestock, and it traced how KTDA-managed factories financed the bonus paid out in October 2024. It found a combined Sh26.06 billion in loans outstanding by the end of June 2025, split unevenly across the country. Factories west of the Rift Valley, in counties like Kericho, Bomet, Nyamira and Kisii, owed Sh21.61 billion. Factories east of the Rift, covering Kiambu, Murang’a, Nyeri, Kirinyaga, Embu and Meru, owed a far smaller Sh4.45 billion.
Here’s how the debt breaks down by type, according to the audit:
- Commodity loans: Sh12.8 billion, taken against unsold tea stock as security
- Inter-factory loans: Sh10.36 billion, factories lending to each other with no written policy
- Asset-based financing: Sh2.59 billion, some of it flagged for over-quoted equipment prices
- Project financing: Sh300.17 million, some of it spent on things other than the projects it was approved for
TBK’s central complaint was less about the borrowing itself and more about the paperwork behind it. Auditors said several factories lacked board resolutions authorising the loans, decisions were instead made at KTDA’s Nairobi headquarters, and the value of closing tea stocks pledged as collateral for the Sh12.8 billion commodity loan was overstated, particularly in West of Rift factories.
Why does KTDA borrow money to pay bonuses at all?
Farmers deliver green leaf every day, but the processed tea can sit unsold for months before a buyer pays for it. By 2024, KTDA said unsold stock had climbed to 104 million kilogrammes, up from 37 million kilogrammes in 2021, a build-up that squeezed cash flow across the network. Rather than make farmers wait for the tea to sell, KTDA has historically borrowed against expected income to pay the bonus on time, then repaid the loan once the stock cleared.
That bridging model works when stock values are accurate and sales follow close behind. TBK’s audit found cases where they weren’t, and where loans meant for one purpose, such as upgrading withering machines at Kebirigo, Ragati and Chinga factories, were spent on unrelated items instead.
What has KTDA said in response?
KTDA has rejected the idea that the debt reflects financial mismanagement, arguing that factories faced genuine cash-flow pressure from unsold stock, weaker global tea prices and a stronger shilling that cut the shilling value of dollar-denominated sales. The agency says the Sh12.8 billion commodity loan was fully cleared by September 2025, though other facilities, including the inter-factory loans, remained outstanding. KTDA has since begun phasing out its decades-old inter-factory lending arrangement in favour of borrowing directly from commercial banks.
Separately, KTDA says the government still owes it Sh4.67 billion as a fertiliser subsidy refund for imports made between July 2021 and June 2023, money that would help ease the cash squeeze if released. The subsidy programme itself, meant to lower input costs for farmers, is something KTDA has previously credited with boosting smallholder output.
Why are West Rift farmers hit harder?
Price trends explain most of the gap. In the nine months to September 2025, tea from West of Rift zones, Kisii, Kericho, Nandi and Nyamira, averaged Sh226.17 per kilogramme at the Mombasa auction, down 16.3 percent from Sh270.11 the previous year. East of Rift tea, from Kiambu, Murang’a, Nyeri, Kirinyaga, Meru and Embu, averaged Sh379.96 per kilogramme, a much smaller two percent drop from Sh387.72. Lower prices mean less revenue to cover factory costs, service debt and fund farmer payments, which is part of why West Rift factories carried three-quarters of the audited debt. Tea isn’t the only export crop feeling price pressure this year; Kenya’s top coffee counties have faced their own swings in global commodity prices.
What does this mean for this year’s tea bonus?
TBK’s clearest recommendation is that future bonuses should be based on what factories actually earned, not on borrowed money and overstated stock values. The board has also called for a forensic audit of KTDA borrowing going back to July 2021, physical verification of assets bought with loan proceeds, and an immediate retention policy to ease cash-flow pressure at factory level. None of that guarantees a lower payout this year, but it does mean factory boards are under closer scrutiny than in previous years as they prepare to declare the second payment, and farmers should expect more conservative figures than the record Sh89.29 billion paid out for the 2023-24 season.
FAQ
What is the tea bonus, and who receives it?
The bonus, officially called the second payment, is the balance KTDA-managed factories pay smallholder farmers once a factory’s full-year earnings are tallied, on top of the monthly payments made for green leaf deliveries throughout the year. It goes to roughly 600,000 smallholder farmers supplying KTDA’s 71 factories across 21 tea-growing counties.
How much debt do KTDA factories actually owe?
Sh26.06 billion as of June 2025, according to the Tea Board of Kenya’s audit, with West of Rift factories responsible for Sh21.61 billion of that total and East of Rift factories owing Sh4.45 billion.
Did KTDA break any laws?
The audit did not allege criminal wrongdoing. It flagged governance failures, including loans issued without board resolutions and overvalued stock used as collateral, and recommended a forensic audit rather than making findings of illegality itself.
Will this year’s bonus be lower because of the debt?
Tea prices, not the debt alone, are the bigger factor in what farmers receive. But TBK’s push for bonuses tied strictly to actual earnings, rather than borrowed funds, suggests factories carrying heavy debt loads have less room to pay out beyond what they’ve genuinely earned this season.
Which counties are most affected?
West of Rift counties, Kericho, Bomet, Nyamira, Kisii, Nandi, Vihiga and Trans Nzoia, carry the bulk of the debt and have also seen steeper price declines than East of Rift counties like Kiambu, Murang’a, Nyeri, Kirinyaga, Embu and Meru.
Also worth a read: Kericho: Walking Through the Tea That’s Probably in Your Cup Right Now — from twende.ke, part of the NGO Summit media network.
By the 254.ke Newsroom
