Linturi Says Government will offer tax incentives for tea value addition

The Government is in the process of rolling out incentives across the tea sub-sector to enhance value-addition initiatives aimed at unlocking the potential of Kenya’s tea across global markets.

Announcing the Kenya Tea Development Agency’s (KTDA) annual directors’ conference in Nairobi today, Agriculture and Livestock Development Cabinet Secretary, Mithika Linturi, said his ministry through the Tea Board of Kenya, has developed a concept note to incentivize tea value addition by offering tax and other incentives necessary to make local value addition more attractive.

The CS said the concept note had received the approval of the National Treasury, paving way for the roll-out of the incentives to open-up more tea-value addition initiates across the sub-sector.

The move will bolster the Government’s decision to remove VAT on tea purchased from factories or tea auction centres for value addition and subsequent export during this year’s budget to improve cash flows for tea exporters involved in local value addition.

“In line with the recent Government directives on tea value addition and production diversification, my Ministry through the Tea Board of Kenya has developed a concept note to incentivize tea value addition. The concept note, which has been approved by the National Treasury, proposes the establishment of a scheme aimed at unlocking the potential of Kenya tea by providing both tax and other incentives 5 necessary to make local value addition more attractive,” said CS Linturi.

The incentive scheme is also aimed at incentivizing factories to diversify their production into speciality teas to enhance earnings for tea farmers as speciality teas earn higher prices, on average, at the auction.

“The Scheme will also entail the promotion of a Kenya tea brand and enhancement of orthodox tea manufacturing for smallholder tea factories. Once the envisaged incentives are made available, I urge KTDA managed tea factories to leverage on the incentives to upscale their manufacture of orthodox teas and value addition at factory level instead of continuing to do bulk tea sales,” added CS Linturi.

The Cabinet Secretary added that the Government is committed to support KTDA tea factories unlock additional markets for the specialty teas by enhancing promotional activities and urged KTDA to harness trade opportunities presented by the African Continental Free Trade Area (AfCFTA).

“I further urge the smallholder tea factories to take advantage of the existing global market opportunities for Orthodox teas, which is currently not saturated compared to CTC market in order to enhance earnings to the smallholder tea farmers. The Government through Tea Board of Kenya will not only grant KTDA managed factories, the licences to manufacture orthodox teas but will also enhance its promotional activities to unlock market access,” he said.

“I urge KTDA to continue harnessing the opportunities presented by the AfCFTA currently under the guided initiative with ECOWAS where there are fifteen member countries with whom they can enjoy preferential negotiated tariffs,” he added.

Speaking at the same event, KTDA Holdings Limited Chairperson, Enos Njeru, said the organization is diversifying its operations to achieve cost effectiveness whilst enhancing returns for the smallholder tea farmers.

“The global industry landscape is evolving, and we must change with the times we are living in. As such, we must embrace technology and integrate it with our operations to achieve cost-effectiveness. We are investing in state-of-the-art equipment that will not only diversify our operations and increase our returns but also save through energy efficiency and reduced maintenance costs,” he said.

Commenting on the same, KTDA Holdings CEO, Wilson Muthaura, said the diversification agenda will help KTDA factories reduce their reliance on traditional black teas for the more lucrative specialty teas.

“Moving forward, what is the lay of the land and what are our strategies going into the future? The move to orthodox and specialty teas is going ahead at a good pace and we are looking to have more output of these teas from our factories. This allows us to diversify our markets and ease the reliance on black CTC,” he said.

So far, 11 KTDA tea factories are producing orthodox teas. These are: Itumbe, Kimunye, Michimikuru, Kangaita, Imenti, Kiru, Thumaita, Gitugi, Kagwe, and Chinga. The recently commissioned Matunwa Tea Factory is a purely orthodox tea processing facility, while an additional two factories- Tebesonik and Chelal- are in the process of installing orthodox lines.

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