KTDA seeks consultant to drive its restructuring as sector reforms pick up

Kenya Tea Development Agency (KTDA) Holding Limited is seeking services of a management consultant to guide the intended restructuring of its subsidiaries.

The agency which is currently implementing new reforms, has opted to restructure its affiliate companies following reduction of fees to 1.5 per cent of the net value of tea sold every year it earns from the small-scale farmers.

“Soon we will formally engage a consultant who will advise us on the best re-organisation model of our subsidiaries. The new thinking will help us to remain afloat in the business,” KTDA chief executive Wilson Muthaura (pictured) told Business Hub in an interview in his office.  “The bids to seek the services of the consultant will be out soon,” he added. 

Farmers agency

Over and above 71 affiliated tea factories, the agency runs  KTDA Management Services, KTDA Power, Ketepa, Chai Trading, Majani Insurance Brokers, Tea Machinery and Engineering Company and KTDA Foundation.  

To sustain its operations, the KTDA which is the largest farmers agency in the country, has been earning management fees to the tune of 2.5 per cent of net value of tea sold per year translating to between Sh1.5 billion and Sh2 billion. 

The reduction in management fees demands that KTDA Holding Ltd board be innovative in order to meet its financial obligations.  But following the gazettement of the Tea Regulations 2021 by the former regime, the fees were reduced to 1.5 per cent. 

Since 1999 when the organisation changed to agency from an authority it has been operating under a management agreement with farmers paying a 2.5 per cent.

 “In order to sustain our operations based on the new fees and other incomes we have to adopt a sound business approach that takes cognizance of the new business dynamics and maintains our share in the market,” added Muthaura.

Further, the agency will also be required to rationalise workforce especially those seconded in all the 71 tea factories.In the new dispensation, the agency will operate under a new five-year management agreement where farmers will pay management fees of 1.5 per cent of net value of tea sold per year KTDA MS). 

So far 95 per cent of the 71 affiliated tea factories have signed the management agreement with factories in Murang’a and Nyeri counties still negotiating over the same.

The KTDA MS is a break-even company set up to improve services to farmers at a lower cost leveraging economies of scale.

More than 95 per cent of the tea factories have signed the management agreement.  Compared to other management agents licensed by Tea board of Kenya (TBK), KTDA is the only one charging less than two per cent of management fees.