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E R£TURN TO I CT1 y fwQ RESTRICTED|fREPORTS DESK| 1 iLF tCipY
Report No. TO-418a
WITHINONE wEEK
This report was prepared for use within the Bank and its
affiliated organizations.They do not accept responsibility for its
accuracy or completeness. The report maynot be published nor may it
be quoted as representing their views.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL DEVELOPMENT ASSOCIATION
SMALLHOLDER TEA DEVELOPMENT PROJECT
KENYA
July 9, 1964
Department of Technical Operations
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CURRENCY EQUIVALENTS
1 U.S. Dollar = 7. 14 EA Shillings1 EA shilling = lOOcents =
U.S. $0. 14I1 = 20EASh = U.S. $2.8061 Million = U. S. $2. 8
Million
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K E N Y A
STIALIHOIDER TEA DEVELOPMENT PROJECT
TABIE OF CONTENTS
Page No.
SUMIARY .?.Y.. . . . . . . . . . . ... . . . . . . . . . . .
i-ii
I. INTRODUCTION . . . . . . . . . . . ........... . 1
II. BACKGROUND .... . . . . . . . . . . . ..... . . . . 1
III. THE PROJECT . .. . . . . . 3
A. Project Definition . . .. . . . . . . . . . . . . . . . 3B.
Planting Program . . . . . . . . . . . . . . . . . . . 3C. Field
Development . . .. ... . . . . . . . . . . . . . 4D. Factories . .
. . . . . . . . . . . . . . . . . . . . . . 5E. Arrangements for
Processing Smallholders' Leaf . . . . . 5F. Cost Estimates .... . .
. . . . . . . . . . . . . . . 6G. Proposed Financing .. . . . . . .
. . . . . . . . . . . 7H. Proposed Terms of Loans and Disbursements
. . . . . . . . 8I. KTDA's Estimated Operating Results . . . . . .
. . . . . 10
IV. ORGANIZATION -AND MANAGEMENT . . . . . . . . . . .. . . . .
. 10
A. The Organizing Authority ....... .. .. .. .. . 10B. Staffing
. . . . . . . . . . . . . . . . . . . . . . . . 10
V. BENEFITS AND JUSTIFICATION . . . . . . . . . . . . . . . . .
11
VI. CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . .
. 12
ANNEXES
1. Summary of KTDA's Financial Results2. Planting and Factory
Schedules3. Proposed Staffing -f-or Field Sector4. Investment Cost
in-=-F-ield Sector5. Breakdown of Inves>=tmeint Cost of
Field-Sector6. Arrangements for-Setting Up and Operating Factory
Companies7. Loan Requir6ehnts an&Repayment Capacity in Field
Sector8. Proposed Di'ueients and Redemptions of Loans in Field
Sector9. Summary of ted Operating Results in the Field Sector
10. Investment Cost .ahd-Net Revenues in Field and Factory
Sectors
ONE MAP
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SUMMARY
i. The Government of Kenya has applied for an IDA credit to
helpfinance the expansion (second plan) of its tea development
program in theAfrican smallholder areas. Under the first plan,
which is being mainlyfinanced by the Commonwealth Development
Corporation (CDC) and the FederalRepublic of Germany, 8,400 acres
of tea have already been planted by 18,000smallholders and two
factories have been built in addition to existingfactories already
processing smallholders' leaf. To complete the firstplan a further
2,700 acres would be planted and four more factories built.
ii. The project for which IDA financing is requested is the
secondplan under which an additional 14,400 acres would be planted
and 10 morefactories would be built.
iii. The development of smallholder tea cultivation in Kenya is
organ-ized and supervised by the Kenya Tea Development Authority
(KTDA), astatutory body set up in 1960. KTDA establishes and
finances tea nurseriesfor the production of planting material which
is sold to smallholders eitherfor cash or on credit, and it
supervises smallholders' planting and cultiva-tion. It establishes
buying centers for green leaf and provides staff andtransport to
collect, inspect and carry the leaf to the factories. Itarranges
for processing of smallholderst leaf in existing or new tea
fac-tories, and participates in the financing of new tea
factories.
iv. Private commercial tea companies would participate in the
project,as they are already doing under the first plan, by
providing factory manage-ment and tea marketing services, and by
providing funds for KTDA to investin the factory companies.
v. The estimated cost of the field sector of the project is £
13760,000and of the factory sector £ 1,440,000; total £ 3,200,000
(US$8,960,000 equiv-alent). It is proposed that the field sector
would be financed by an IDAcredit of £ 1 million (US$2.8 million),
the balance being provided by CDCloan and KTDA revenues. The
investment costs in the field sector includeexpenditures on seed,
salaries and wages, vehicles and equipment, transportand
miscellaneous items. The largest item is salaries, wages and
otherstaff costs during the development period (i.e. the first four
years ofeach planting), which account for 42 per cent of the costs
of the fieldsector. The additional tea roads that will be needed
for carrying greenleaf to the factories are not part of the project
and will be financedseparately.
vi. Under the arrangements which KTDA would make for the
processingand sale of smallholderst leaf the grower would receive a
first payment of40 cents 1/ per lb of green leaf plus a second
payment depending on factoryprofits. KTDA would recovrer its
operating expenses through a revenue levyof 10 cents per lb of
green leaf; additional capital levies of seven centsper lb would be
payable to enable KTDA to recover with interest its invest-ment in
the field sector of the program. The field sector would be
finan-cially self-liquidating.
1/ The East African Shilling is divided into 100 cents.
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vii. IDA would not contribute finance for the factories. Of the£
1,h40,000 required CDC would provide about half (£ 720,00);
commercialtea firms would provide about one third (£ 480,000)
through KTDA; theremaining £ 240,000 would be provided by a Kenya
Government loan. Fourcommercial firms have already expressed to
KTDA their interest in providingfinance, management and marketing
services.
viii. The KTDA Board comprises representatives of the Department
ofAgriculture, the Kenya Tea Board, CDC and the growers. The
represelntativesof the growers are elected from divisional and
district tea committees.The KTDA head office staff has been largely
recruited -with assistance fromCDC and is well qualified. The staff
for the supervision of tea plantingis employed by the Department of
Agriculture and is made available to KTDA.KTDA reimburses the
Department of Agriculture for the cost of this staff.The staff for
inspection and collection of green leaf is employed directlyby
KTDA.
ix. The project will provide about 15,000 smallholders with a
cashincome, raising them from subsistence economy to a better
standard of living,thus contributing to the political stability of
the country. Since most ofthe tea produce would be exported, the
project's contribution to the foreignexchange earnings of Kenya
would be substantial, averaging about £ 2.3 mil-lion a year at full
production. The project would yield an average annualnet return to
the economy of about 28 per cent over its expected lifetimeof 50
years. With tea roads included in the investment cost, this
netreturn would be reduced to 24 per cent.
xo The project, which is the second stage of a program already
suc-cessfully unde.vay, is sound. The organizing authority is well
staffed andcapable and smallholders are keen to participate, The
project is suitablefor an IDA credit of about £ 1 million (US$2.8
million).
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K E N Y A
SMALIHOLDER TEA DEVELOPMENT PROJECT
I. INTRODUCTION
1. The Government of Kenya has applied for an IDA credit to
helpfinance the expansion of its program for the development of tea
productionby African smallholders. This appraisal report is based
on findings of afield mission which visited Kenya in September 1963
and on discussions inJanuary-February ].964, with representatives
of the Kenya Tea Authority(KTDA), the Kenya Government and the
Commonwealth Development Corporation(CDC).
II. BACKGROUND
2. Tea production has become one of the most important
agriculturalindustries in Kenya during recent years, now ranking
writh sisal as secondearner of export income (coffee is first). In
1963, over 54,QQO acres werein tea, with about 85 per cent in large
estates owned and managed by privatecompanies. These companies are
experienced in tea growing and are wellestablished in Kenya. They
have close working relations with other teagrowing areas and have
gained recognition for Kenya in the world tea markets.The tea
industry as a whole employs about nine per cent of the Kenya
laborforce, and its output of 40 million pounds per year accounts
for about 2-1/2per cent of world tea production.
3. In the future more emphasis will be given to expanding tea
growingin the African smallholder areas since in many places it is
the only practi-cal cash crop that will enable the subsistence
farmers to achieve a betterstandard of living. Experience has
already shown that tea growing by small-holders is feasible in
Kenya. The Kenya Department of Agriculture hasestimated that there
are some 800,000 acres having soils and climate suitablefor tea in
the African smallholder areas, but the average smallholder willhave
only a fraction of his land in tea, with the balance used for
foodcrops and cattle.
4. The smallholder tea planting program was started in the late
fiftieswith a target of 11,100 acres for the first plan. Planting
has now been com-pleted on 8,h00 acres and the remaining 2,700
acres are expected to beplanted by 1966/67. The original goal was
one acre of tea per farm, whichwould have limited participation to
11,100 smallholders. However, the pro-gram has proved so popular
that 18,0CO farmers have taken part already,necessitating a wider
distribution of available planting material, and anaverage planting
so far of only 047 acres per farm. It is intended to limitthe
number of growers admitted each year to the program and to increase
theaverage size of planting to at least 0.75 acres per farm.
Participants inthe tea program are selected by Growers' District
Tea Committees and by the
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Specialist Tea Officer with approval by the Department of
Agriculture. Thecriteria for selection include experience in
farming, a satisfactory landtitle and creditiworthiness. The
smalllolders occupy their own land whichhas been consolidated in a
land reform program under the Swynnerton Plan.In the main tea
growing area farms range in size from four to eight acres.In less
densely populated areas farms may be as large as 40 to 50
acres.Food crops are usually grown on two to three acres with the
balance of theland used for grazing.
5. The development of smallholder tea cultivation in Kenya is
organ-ized and supervised by the Kenya Tea Development Authority
(KTDA). TheAuthority is a corporate body which was first
established in 1960 as theSpecial Crops Development Authority
(SCDA). XTDA establishes and financestea nurseries for the
production of planting material to be sold to thesmallholders
either for cash or on credit; and it supervises the
smallholdersplanting and cultivation. It establishes buying centers
for green leaf andprovides staff and transport to collect, inspect
and carry the leaf to thetea factories. It arranges for processing
of smallholders' leaf in existingtea factories and participates in
the financing of new tea factories. Furnsneeded to finance the
field development for the first plan have been providedby loans
from CDC, the Federal Republic of Germany and to a small extent
bythe Kenya Government itself. KTDAls balance sheet at June 30,
1963, and itsfinancial results for the past three years are
summarized in Annex 1.
6. In 1957, the Government built a small tea factory at Ragati
inNyeri District to process smallholdersf green leaf; this factory
was trans-ferred to KTDA in 1960. By arrangement with KTDA, eight
private factorieswholly owned by commercial tea companies and one
nucleus estate factoryfinanced by CDC, Eastern Produce (Africa)
Ltd. and the Meru African DistrictCouncil are also processing leaf
from smallholder areas. To process theincreasing quantities of leaf
that smallholders will produce on the 11,100acres under the first
plan two new factories have recently been completedat Chinga in
Nyeri District and Mataara in Kiambu District. A separatecompany
has been formed for each factory, two thirds of the finance
beingprovided by CDC and one third by KTDA, using funds borrowed
from two pri,vatecommercial tea companies for the purpose; these
private tea companies 1/ areresponsible for managing the factories
and marketing the tea. Four more newfactories are to be built for
the first plan and negotiations for three ofthem are already
underway between IKTDA, CDC and private companies. Thelocations of
the KTDA factories of the first plan are shown on the
attachedmap.
/ Messrs. R.E. Smith (the local subsidiary of Arbuthnot Latham
& Compaty,Ltd.) and Dalgety & New Zealand Loan Company. The
first compaqy actsas managing agent for both factories and the
second as broker.
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III. THE PROJECT
A. Project Definition
7. The project is the expansion of the tea development program
inthe African smallholder areas of Kenya and is identified as the
second plan.It will provide production and processing facilities
for 14,h00 acres oftea, increasing the smallholder tea cultivation
to a total of 25,500 acres.About 15,000 smallholders will
participate in this project, including somegrowers already
participating in the first plan.
8. In the field sector of the project KTDA's responsibilities
wouldinclude the following:
1) financing and establishment of nurseries and sale ofplanting
material to smallholders;
2) supervision of smallholder tea cultivation in the fieldand
the training of smallholders through a staff ofinstructors;
3) operation of buying centers, including collection,
inspec-tion, purchase and transport of green leaf to the
factories;and
4) organizing and supervising these activities through a
smallcentral staff.
9. Ten new factories would be built in addition to the six new
fac-tories of the first plan, Each factory would process the tea
from 1,200 to1,500 acres and would produce 1.2 to 1.5 million lb
made tea per year.
10. The construction or improvement of the roads which will be
neededby the time the green leaf has to be transported to the
factories is notincluded in the project. The Government has drawn
up a tentative scheduleof road requirements with an estimated cost
of £ 640,000 and has applied toIDA for financial assistance.
Arrangements have been made for consultantsto review this road
program and it is expected that it will be appraisedlater in 1964
for possible IDA financing. The Government would in any
eventundertake to construct and maintain the roads needed to enable
KTDA to col-lect green leaf from growers producing tea under the
project and to deliversuch leaf to the factories.
B. Planting Program
11. The area of tea to be planted would be 14,400 acres and the
plant-ing program would be spread over seven years beginning in
1963/64 and ending1969/70. The planting schedule, which takes
account of the number of
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supervisory staff and the amount of good quality planting
material that isexpected to be available is shown in detail in
Annex 2.
C. Field Development
Nurseries
12. The planting material would be produced in nurseries, some
ofwhich are already established for the first plan. One nursery
acre producesplanting material for about 25 acres of tea. About
3,000 to 3,500 seedlingsare required for planting one acre of tea.
The seedlings are retained inthe nursery for approximately two
years and then are sold to the growers for30 cents each. The grower
may pay the whole amount in cash or he may receivecredit from KTDA.
For the first 3,000 seedlings planted he may elect toreceive credit
of 6, 12 or 18 cents per seedling, the minimum cash paymentper
seedling being 12 cents. Thereafter for all other planting and
forreplanting growers are required to pay the full 30 cents per
seedling incash. KTDA's estimates of receipts from sales of
seedlings assume maximumuse of credit.
Field Supervision
13. For both plans of the tea program, the supervisory staff
wouldinclude one Tea Officer for each of the 11 districts and four
Senior TeaOfficers. It is proposed to increase the existing staff
of instructors asthe second plan progresses. The junior staff for
the first plan has com-prised one agricultural instructor for eachl
400 acres planted and one assis-tant agricultural instructor for
each 200 growers. As more tea is plantedsome will be on farms
already growing tea, and there would be a greaterdegree of
instruction from established tea growers to new ones. With
increas-ing concentration of plantings each instructor will be able
to look aftermore growers. After completion of the planting program
in 1969/70, the needfor field supervision would be substantially
reduced. In future greater useis to be made of the Kagochi Training
School at Nyeri in training farmersand instructors. The proposed
staff for field supervision is shown in Annex 3.
Inspection and Collection
14. Additional buying centers and the necessary staff of leaf
officers,leaf inspectors, car and lorry drivers, and clerks would
be added as theproduction of green leaf increases. This staff,
which would be working onboth the first and second plans is
expected to increase from 201 in 1963/64to 588 in 1973/74.
15. - Equipment to be provided for inspection and collection
will includetrucks, landrovers and telecommunications instruments.
Trucks, the princi-pal item, used on both first and second plans
would increase from 18 to 89.Servicing and repair of all equipment
would be provided by private workshops.
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Yields and Prices
16. Yields of 4,500 lb of green leaf per acre are expected from
mature(six-year) tea, equivalent to 1,000 lb of made tea.
Production should nor-mally start in the third year at about 200 lb
of made tea per acre, increas-ing to 400 lb in the fourth year, 800
lb in the fifth year and 1,000 lb inthe sixth year and thereafter.
Actual yields of tea from small holdingsdelivered to factories
averaged 88 per cent of these estimates in 1961/62and 83 per cent
in 1962/63. Most of the shortfall was due to the manufac-turing of
sun-dried tea by the growers and to substandard cultural
practices.It is expected that the manufacturing of sun-dried tea
will be substantiallyreduced by the opening of new factories and by
establishing more buyingcenters. The cultural practices have
already been improved by better train-ing of field staff and
growers. Examination of production records of commer-cial tea
estates adjacent to the smallholder areas indicates that
estateyields are in many cases considerably above 1,000 lb of made
tea per acre.This, however, is sometimes due to coarse plucking
which results in lowerquality. HTDA insists on fine plucking, which
gives lmier quantities buthigher quality.
17. The tea produced has been of high quality and has brought
goodprices. The price for Ragati tea on the Nairobi market averaged
Sh 3097per lb in 1960/61, Sh 3.71 in 1961/62 and was over Sh 4 in
1962/63. Priceprojections for the project have been based on a
price of Sh 3.75 per lb ofmade tea, after checking against
long-term price projections for the worldtea market made by the
Bank's economic staff. According to these projec-tions little
change is expected for medium and higher quality teas such aswill
be produced under the project. The Government would not place
cesses,taxes or other imposts on KTDA tea.
D. Factories
18. The ten additional factories required under the second plan
wouldbe located in the main tea areas (see map) and each factory
would usuallybe built in two stages. The first stage would be for a
capacity of 800,000to 900,000 lb and the second stage for an
additional 400,000 to 600,000 lbof made tea per year. The factories
would be planned so as to come intooperation as soon as there is a
supply of green leaf big enough for economicoperation (Annex 2).
Before that time the leaf would be processed in exist-ing
factories. The new factories would use the CTC/Rotovane process
whichis being used successfully in modern tea factories in Kenya in
preferenceto older methods. Tea processed by CTC/Rotovane has also
brought higherprices on the Nairobi market.
E. Arrangements for Processing Smallholders' Leaf
19. In addition to being responsible for setting up and
staffingbuying centers, and for collection, inspection and
transport of green leafto t.he factories, KTDA is responsible for
making agreements with the factolies
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for the processing of the smallholdersI leaf. The existing
agreements,which it is proposed should also be the pattern for the
second plan, providefor a fixed payment to the grower of 40 cents
per lb of green leaf plus asecond payment depending on factory
profits. In 1962/63 all factories madesecond payments; for more
than two thirds of smallholders' production underthe KTDA program
the second payment was 16 cents per lb. As under the firstplan,
KTDA would recover its operating expenses through a revenue levy
of10 cents per lb on all smallholder leaf purchased; in addition,
to enableKTDA to recover with interest its investment in the field
sector of theprogram, a capital levy of seven cents per lb would be
payable. Accountswould be kept for each grower and the capital levy
would cease when hisindividual assessment (based on delivery of a
certain amount of green leaffor every tea bush planted) had been
repaid.
F. Cost Estimates
20. The estimated investment cost of the project (second plan of
teaprogram), including field sector and factories is £ 3.2 million
(US$8.96million). The estimates which are based on experience in
the first planplus a 15 per cent contingency allowance are
summarized below:
Foreign ExchangeInvestment Component
Cost £t000 Equiv. %£ OOO
Nurseries 570 325 57Field supervision 325 90 28Inspection &
collection of leaf 225 135 60Head Office 315 140 4515%
contingencies 205 100 48Interest during development 120 60 50
Total Field Sector 1,760 850 9
Factories 1,250 940 7515% contingencies 190 140 75
Total Factories 1.,440 1,080 75
Grand Total 3,200 1,930 60
US$tooo Equivalent 8,960 5,400
In calculating the investment costs of the field sector (Annex
4) all expen-ditures for nurseries and distribution of planting
material are regarded asinvestment costs. Field supervision,
inspection and collection, and headoffice expenses are regarded as
investment costs only during the developmentperiod, after which
they are regarded as operating expenses. Interest at
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6.5 per cent has been included during the first four years of
developmentin which interest would not be covered by levies on
green leaf production.The development period for each planting
includes two vears with no produc-tion and twro years with low
production (para 16)o Since the planting programextends over seven
years (Annex 2) the development period for the projectwould be 11
years.
21. A breakdown of field sector costs into seed, salaries,
vehiclesand equipment, transport costs (fuel, spare parts, etc.)
and miscellaneouscosts is showsn in Annex 5. The largest item is
salaries, wages and otherstaff costs which account for 42 per cent
of the costs of the field sector.
22. The private on-farm investments, as well as the additional
costsof tea roads (para 10), have not been included in the cost
estimates. Theon-farm works would consist mainly of land
preparation and cultivation duringthe development period. This
would be done by the fanners with family laborunder the general
guidance and supervision of the KMDAo
23. The actual costs of the two factories which have recently
beencompleted under the first plan have been used as a basis for
estimating thecost of the ten factories to be constructed for the
second plan between1965/66 and 1972/73. The average cost per
factory is estimated at £ lh,OC0,including a 15 per cent
contingency allowance.
G, Proposed Financing
24. The £ 1,760,000 investment cost for the field sector of the
projectwould be financed by an IDA credit of £ 1 million, the
balance being providedby CDC loan and KTDA revenues. IDA would not
contribute finance for the fac-tories.
25. CDC has agreed to finance about 50 per cent (£ 720,000) of
theinvestment required for the 10 factories needed for the project
providedthat ccnmmercial interests and the Kenya Government finance
the balance. Itis expected that, as in the first plan, commercial
firms would provide loansto KTDA amounting to one third of the
factory costs (£ 480,000) which ITDAwould invest in the new factory
companies, part in equity and part in loancapital. The remaining £
240,000 would be met by Kenya Government loans.Four commercial
firms have already expressed to ITDA in writing their inter-est in
providing finance, management and marketing services for
factoriesunder the second plan. They would not, however, make a
firm commitmentuntil nearer the time when the factories are
required. The Kenya Governmentwould undertake in any event to
provide or cause to be provided the process-ing facilities required
for the project.
26. As in the first plan a separate company would be formed for
eachfactory; tea growers would be encouraged to buy shares and
would be repre-sented on its board. Further details of the proposed
arrangements forfinancing individual factory companies and for
eventual transfer of owner-ship to growers are in Annex 6.
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27. In accordance with the foregoing proposals, financing for
thefield and factory sectors of the project would be provided as
follows:
T o t a 1S o u r c e Field Sector Factory Sector £z000 %
. * . *in £'000. . . .
IDA Credit 1,000 -- 1,000 31CDC Loan 245 720 965 30Commercial
Company Loans
(through KTDA) -- 480 480 15Kenya Government Loan -- 240 240
8
Total Loans 1,245 1,440 2,685 84
KTDA Revenues 515 -- 515 16
Total 1,760 1,140 3,200 100
H. Proposed Terms of Loans and Disbursements
28. After discussion with CDC and KTDA, it has been proposed
that fordisbursement purposes the tea program should be divided
into two phases withJuly 1, 1964 as the dividing point. Up to that
date CDC, in addition to itscontributions to the first plan, would
finance costs incurred for the secondplan, including costs for
which the Kenya Government has already made advances(Annex 1,
Footnote 5). At the end of the first phase (June 30, 1964),
thetotal accumulated borrowings for the field sector of the two
plans would beabout £ 960,000 (Annex 7), of which £ 700,000 would
have been drawn from theCDC loan of £ 900,000; the balance would
have come from the German and KenyaGovernment loans both of which
would be fully disbursed by that date (Annex 1).
29. The terms of repayment of the £ 700,000 (which would be
withdrawnfrom the CDC loan by July 1, 1964) would be changed from
20 years, including10 years of grace for each drawing as at present
to 15 years, including 10years of grace. A repayment schedule
reflecting these changes is in Annex 7.
30. The new loans required for the second phase of field
development(after July 1, 1964) would be £ 1,200,000, being the
maximum of accumulatedborrowings for the second phase in 1969/70 as
shown in Annex 7. These loanswould be divided, £ 1,000,000 IDa and
£ 200,000 1/ CDC, bringing the totalof CDC loans to £ 900,000.
1/ The difference between this figure of £ 200,000 and the £
245,000 inparagraph 27 is shown in the following table:
CDC Loans First Plan Second Plan Total* . . . . . . . . i. n £
to 0 0 . . . . . . . .
First Phase 465 235 700Second Phase ].90 10 200
Total 90( 3T' S °
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31. It is proposed that the IDA credit of £ 1 million (US$2.8
million)to assist development of the field sector should be made to
the Kenya Govern-ment on normal IDA terms. The Government would
re-lend the proceeds of theIDA credit to KTDA.
32. Terms on which the Government would re-lend to KTDA the
proceedsof the IDA credit would take account of the balance between
KTDAts costsand revenues in the second phase of the tea program as
indicated in Annex 7.Cash deficits would accrue during the first
six years of the second phase
(1964/65-1969/70) after which surplus revenues should be
sufficient to repaythe accumulated borrowings within the following
seven years. However, inorder to provide a margin for setbacks or
delays, it is proposed that repay-ment terms for the Government
(IDA) and CDC loans to ETDA for the secondphase should be 16 years,
including eight years of grace. A provisionalschedule of drawings
and redemptions is shown in Annex 8, The proceeds ofthe IDA credit
would be re-lent to KTDA by the Kenya Government at an inter-est
rate of 5-1/2 per cent.
33. The CDC loan of £ 200,000 would be disbursed during the
first twoyears of the second phase (at the rate of £ 40,000 a
quarter starting July 1,1964) covering the remaining loan
requirements of the first plan; the Govern-ment (IDA) loan would be
disbursed over a period of six years (196h/65-1969/70) and would be
limited to expenditures in the field sector of theproject incurred
after July 1, 1964.
34. IDA would make no disbursements until CDC had disbursed its
fullcontribution to the first phase of field development (estimated
£ 700,000up to June 30, 1964). IDA's disbursements would be made
against statementsof expenditures on the field sector of the
project. Disbursements wouldnever be greater than the amount
necessary to cover KTDA's cash deficit,i.e. the amount by which
expenditures, both recurrent and investment, ofKTDA on all its
operations in the field sector exceed its revenues. Toensure that
the withdrawal of the IDA credit would be spread over the mainpart
of the development period the withdrawals would be limited to
amountsnot in excess of 10 per cent above the disbursement schedule
for the IDAcredit shown in Annex 8. In the event that KTDA's
deficits should exceedIDAts disbursements the Government wjould
make available necessary funds tocover the shortfall.
35. KTDA's accounts and balance sheets would be audited
semiannuallyby accountants approved by IDA.
36. KTDA would be required to provide regular reports to IDA
showingprogress in all operations, especially in planting and
staffing and wouldconsult IDA and CDC promptly in the case of
deviations of more than 10 percent in the planting program. Any
further borrowings would be subject toapproval by IDA and CDC as
long as CDC and the Government loans to KTDA areoutstanding. KTDA
would also consult with IDA and CDC on the appropriationof any
surpluses arising from the combined plans.
-
- 10 -
I. KTDA's Estimated Operating Results
37. A summary of projected operating results in the field sector
forthe combined first and second plans is shown in Annex 9. By
recovery ofall operating and investment costs, including interest
through revenue andcapital levies as described in paragraph 19, the
field sector would befinancially selfliquidating.
IV. ORGANIZATION AND MANAGEMENT
A. The Organizing Authority
38. Under the new constitution of KTDA the Board would consist
of thePermanent Secretary of the Department of Agriculture, the
Director of Agri-culture, the Chairman of the Kenya Tea Board and a
representative of CDC;three members appointed by the Minister of
Agriculture, including the Chair-man of the Board; the general
manager of KTDA and representatives of thegrowers, currently one
from each of five regions, with provision for anadditional
representative for each region with more than 4,000 acres of tea(at
completion of the project it is expected that there would be seven
repre-sentatives of growers). Representatives of the growers would
be elected fromthe divisional and district tea committees through
the regional tea boards.These grower committees are important in
that they provide a channel throughwhich growers can express their
views and voice their grievances, The loanagreement between CDC and
KTDA for the first plan provided that for theperiod of the loan one
member of the Board shall at all times be a personto be nominated
by CDC. A similar provision has now been included in thenew
constitution of KTDA and will apply to any further borrowing from
CDC.CDC expects to be able to provide any necessary replacements
for I{TDA headoffice staff. The Government would consult IDA about
any proposed changesin the appointmnent to the KTDA Board of the
Chairman and the two other mein-bers whose appointment is at the
discretion of the Minister of Agriculture.
39. KTDA has power to provide that no person shall establish a
teanursery, garden or plantation or sell leaf to anyone else
without permissionof KTDA. In addition, KTDA has established
standards for tea cultural prac-tices, including disease
control.
B, Staffing
hO. The staff for field supervision of the tea program (para 13)
isemployed by the Department of Agriculture and is made available
to KTDA ona reimbursable basis. All but one oZ the present tea
officers are European.The policy of the Department of Agriculture
and KTDA, however, is to makeadditional appointments of Africans to
the tea officer posts as soon as prac-ticab'e. The problem is not
so much howi long the Euiropean officers willstay, but hof soon
suitable African officer replacements can be found.KTDA envisages
the recruitment of African tea officers by further temporary
-
- 11 -
transfer from the Department of Agriculture and by the
recruitment fromagricultural colleges and tea estates. The Kenya
Government would providethe field staff of all grades required for
the project together writh thenecessary staff housing.
4i. The staff for inspection and collection (para 14) is
employeddirectly by KTDA and consists only of Africans. As lim:ited
training isneeded, the staffing problems can be reasonably met.
42. The head office staff has been largely recruited from
abroadthrough the assistance of CDC., and is well qualified. The
first generalmanager recently retired and was succeeded by a former
Senior DistrictCommissioner wiho has excellent working
relationships with the Africangroups. The present assistant general
manager is seconded by CDC and willbe available until the end of
1964, after which CDC has a qualified replace-ment for him. The
chief accountant is a qualified accountant from CDC.The chief
technical officer of the Authority w-ho is in charge of all
fieldsupervision, leaf inspection and collection, is employed
directly by KTDA.At present one member of the head office staff is
an African and steps arebeing taken to train others. IDA would be
consulted about appointments toKTDAts senior management
positions.
V. BENEFITS AND JUSTIFICATION
43. The project has social as well as economic benefits. It
willprovide a great number of smallholders with a cash income,
raising themfrom subsistence economy to a better standard of
living. Tea is a high-yielding cash crop which is grown at high
altitudes on land unsuitable formost other crops. Its development,
therefore, may help to ease pressure onthe best land at lower
elevations and contribute to the political stabilityof the
country.
44. Assuming yields of 4h500 lb green leaf (1,000 lb of made
tea) peracre and a gross payment to the grower of 40 cents per lb
green leaf (Sh 1.8per lb made tea) the net return to the grower,
after deduction of revenueand capital levies totaling 17 cents per
lb green leaf, would be £ 52 peracre per annum. When a smallholder
has paid off his capital levy his returnwould increase to £ 68 per
acre. Assuming market conditions remain favorableand second
payments can be made to the growers the net returns would be
higher.With a second payment of 16 cents per lb of green leaf
(which was made fortwo thirds of the smallholder tea production in
1962/63), the net returnwould be £ 88 per acre, while capital
levies are being paid off, and £ 104per acre thereafter.
45. For the purpose of economic appraisal on-farm costs are
negligiblesince the operation and maintenance of tea gardens
require mainly hand laborthat can be provided by the growerts
family at no additional cost. The useof fertilizers and plant
protection materials is not necessary for the timebeing.
-
- 12 -
46. Tea graring would scarcely reduce the production of other
crops.Most of the tea can be grown on bush and grassland which is
suitable onlyfor extensive grazing. Therefore, no opportunity costs
for land use havebeen included in the economic evaluation of the
project.
47. On the basis of the yield and price assumptions given in
paragraphs16 and 17, the gross value of production of the completed
scheme (in 1975/76)would amount to £ 2.7 million per year (Annex
10). As most of the totalproduction would be exported the projectts
contribution to the foreignexchange earnings of Kenya would be
substantial. Deducting the foreignexchange component of the
production costs and debt services the net increasein foreign
exchange earnings would average about £ 2.0 million per year
duringthe repayment period and £ 2.3 million per year
thereafter.
48. The total investment cost of the project, incurred over an
11-yeardevelopment period, as summarized for the field and factory
sector in Annex10 amounts to approximately £ 3.2 million (US$90O
million). The estimatedoperating expenditures and gross and net
revenues are also summarized inAnnex 10. On the basis of these
estimates and taking full account of thedevelopment period in
discounting, the project would yield an average annualnet return to
the econoniy of about 28 per cent over its expected lifetimeof 50
years. Plans for the construction and improvement of tea roads
havenot yet been appraised by IDA (para 10), but if the cost of
these roads atGovernmentts estimate of £ 640,000 should be charged
to the tea project anddistributed over two years (1064/65 and
1965/66) the average annual netreturn would be reduced to 24 per
cent. It should be noted that the teagrowers would repay the total
field development costs, including the costof some services
normally provided at Government expense.
VI. CONCLUSIONJS UMD RECOiChENDATIONS
49. The project, which is the second plan of a program already
suc-cessfully underway, is technically and economically sound. The
administrativearrangements for executing the project are
satisfactory and the organizingauthority is well staffed and
capable. Smallholders are keen to enter theproject and it has
already been proven in the first plan of the tea programthat they
are able to grow tea of good quality.
50. The project is suitable for an IDA credit of £ 1.0 million
(US$2.8million) which would be used for financing field
development. This wouldbe equivalent to about 31 per cent of the
total project cost.
July 9, 1964
-
;NNEX 1Page 1
KENYA TE! PROGRAM
Summary of KTDA's Financial Results
A. Summarized Balance Sheet of KTDA at June 30, 1963
A S S E T S
Fixed Assets (£'000)
Buildings, furniture and office equipment 11.1Automotive
equipment 460 0Tea baskets and sundry equipment 7 ,7
Less depreciation 26.0 38.8Current account with Ragati F3ctory
41.3Other investments and loans 2/ 7.3Current assets
23.6Development expenditure 3/ 609,6
720.7
L I A B I L I T I E S
Loan capital / 588.7Unsecured advances 5/ 53.8Green leaf price
reserve 9.6Current liabilities 68.5
720.7
1/ The fiscal year of KTDA is from July 1 to June 30.2/ Includes
loans to two new tea factories at Chinga and Mataara.
/ The development expenditure shown in the balance sheet is the
excess ofexpenses over revenues incurred for the development of
tea.
4/ The loans, of which £ 588.7 thousand had been disbursed at
June 30, 1963were for the first plan. They comprise the
following:
a) A CDC loan made direct to KTDA, The authorized amount is £
900,000of which £ 450,000 was drawn down to June 30, 1963 (and £
700,000 isexpected to have been drawn by June 30, 1964). The
interest ratevaries with the different tranches, being one per cent
above CDClsborrowing rate from the British Treasury. The cost to
KTDA hasaveraged about seven per cent. Each tranche was to be
repaid overten years after ten years of grace, but this is to be
revised torepayment over five years after ten years of grace (see
para 29),except the first installment wh; ch woild be repaid in
four yearsafter 11 years of grace.
-
ANNEX 17age 2
b) A loan from the Federal Republic of Germany to the Kenya
Governmentfor £ 212,000, of which £ 90,250 was drawn down to June
30, 1963;the total of the loan is expected to be drawn by June 30,
19640 Theinterest rate is 4-1/2% to the Government, which re-lends
to KTDA at4_5/8%. Repayments of the loans are to start in 1968 and
continuewith equal annual instanhaents through 1977.
c) Kenya Government loans, totaling £ 48,500 as of June 30,
1963, ofwhich £ 20,000 is repayable in December 1969 and the
balance at therate of £ 2,000 per year from 1963/64 to 1977/78.
5/ The Kenya Government advanced £ 40,000 for the second plan
free of inter-est and this is to be refunded when finance for the
second plan is arranged.The remaining £. 13,800 was advanced by the
former Iand Development andSettlement Board for services and
materials provided by ErDA for teaplantings on settlement schemes.
In addition, the Kenya Government isproviding road improvement and
staff housing up to a total of £ 185,000obtained from a German loan
for which KTDA has no obligation.
B. Summary of KTDA's Financial Results for the Past Three Fiscal
Years(excluding Ragati Tea Factory.
1960/61 1961/62 1962/63...... ... .£000. a. * * ,
Revenues from sale of planting material 29.9 31.3 36.9Revenue
and capital levies 4.7 13.7 26.9
Total Revenues 34.6 45.0 63.8
Operating expenses 133.0 200.2 179.4Depreciation 3.9 9.4
11.2Interest charges 3.6 25.8 37.3
Total Expenditures 140.5 235.4 227.9
Not Expenditure:
For year 105.9 190.4 164.1At time of takeover 1h9.2
275.1
Cumulative 255.1 445.5 609.6
The cumulative net expenditure of £ 609.6 thousand is the
development expend-iture as of June 30, 1963 in KTDA's balance
sheet.
-
ANNEX 2
KENY'A TEB PROGPAM
Planting and Factory Schedules
A. Proposed planting schedule
First SecondPlan Plan Total
… - - - - - - - - -acres
Up to 1963 8.,430 - 8,4301963/64 1,460 895 2,3551964/65 590
2,035 2,6251965/66 325 2,825 3,1501966/67 295 3,085 3,3801967/68 -
3,085 3,o851968/69 2,125 2,1251969/70 - 350 350
Total 11,100 14,400 25,500
B. The ten new factories reouired under the second plan would
beplanned so as to come into operation as I OllOws:
Opening Number ofYear Districts served Factories
1966/67 Fort Hall, Nyeri (third), Nandi 31967/68 Kiambu
(second), Kisii (second) 21968/69 Embu, Kericho (second), North
Nyanza 31970/71 Kiambu (third) 11971/72 Kisii (third) 1
TOTAL 10
-
ANNEX 3
KENYA TEA PROGRAM
Proposed staffing for field sector
Senior AssistantTea Tea Agricultural Agricultural
Year Officers Officers Instructors Instructors Total
1963/64 2 11 27 91 131
1Y64/65 4 11 27 91 133
1965/66 4 11 28 91 134
1966/67 4 11 33 91 139
1967/68 4 11 38 100 153
1968/69 4 11 42 108 165
1969/70 4 11 43 108 166
1970/71 &thereafter 4 11 32 65 112
(tf it should be decided to continue sinallholder tea
development into athird plan, staff requiiements would probably
remain steady at the1969/70 level instead of declining,)
-
ANNEX 4
KENYA TEA PRCGRAM(Second Plan)
Investment Cost in Field Sector, By Years, 1963-1974
Year N4urseries Super- inspection & Head 15 Percent Interest
Totalvision Collection Office Contingen-
cies
~~~~. . . . . . . .f, C .. . . .* v* * * * * * - * * £1000 ..
.........
Up to 1963 74.2 - - - - - 74.2
1963/64 90.4 5.6 - 34.1 19.5 9.7 159.3
1964/65 112.2 22.6 - 40.3 26.3 21.7 223.0
1965/66 120.0 33.0 - 37.6 28.6 36.8 255.9
1966/67 100.7 43.5 3.9 40.5 28.3 53.4 270.5
1967/68 51.1 54.2 12e9 39.1 23.6 - 180.9
1968/69 16.1 59.3 30.4 38.5 21.6 - 165.9
1969/70 2.5 47.7 46.8 34.2 19.7 - 150,9
1970/71 0.1 29.0 57.8 26.4 17.0 - 130.3
1971/72 - 19.5 47.5 16.8 12.6 - 96.3
1972/73 - 9.3 23.5 7.4 6.0 - 46.3
1973/74 - 1.0 3.1 0.9 0.8 - 5.8
TOTAL 567.4 324.6 226.0 315.7 203.9 121.6 17593
j/ Interest at six and a half per cent on accumulated investment
costs duringthe time in which interest payments are not covered by
levies on greenleaf production.
-
ANNEX 5
IENYA TEA PROGRAM(Second Plan)
Breakdowrn of Investment Cost of Field Sector
InspectionField & Head Per
Nurseries Supervision Collection Office Total Cent…£0 00 - - - -
- - - - - - - -
Seed 142 - - 142 1'
Salaries,Wages, etc. 142 2C6 81 175 6o0 L2
Vehicles &Equipment 46 16 72 16 150 10
Transport Costs 113 49 63 15 240 172/
Miscellaneous 124 54 10 110 298 21
Total 567 325 226 316 1,434 10C
3/Contingencies 204
Interest during Development 122
TOTAL 1,760
j Includes fuel, spare parts, etc.
2 Includes nursery materials (other than seed', buying
centers,staff housing, etc.
3/ 15 per cent on costs after 1963 (Annex 4).
-
ANNEX 6Page 1
IENY-A TEA PROGRAM
Arrangements for Setting Up and Operating Factory Companies
1. It is intended that, as under the first plan, a separate
companywould be formed for each tea factory. For each company,
finance would beprovided by CDC, KTDA and Kenya Government on the
following lines:
Equity LoanSource of Fund Capital Capital Total
.. i n £. . . * . *
C D C 20,500 51,500 72,000K T D A 20500 27,500 h8,oooKenya
Government -- 24,000 24,000
Total 41,000 103,000 144,000
2. For its investments in the factory companies KTDA would use
loansfrom private commercial tea companies. Loans made by
commercial tea com-panies to KTDA would, if the same pattern is
followed as for the first plan,be at eight per cent interest with
repayment in equal annual installmentsover 13 years after a
five-year grace period. Loans to the factory compan-ies by CDC and
KTDA would be on the same terms,
3. Dividends on issued shares would be paid out of profits with
theobjective that shareholders should receive over a period of 18
years a returnaveraging eight per cent a year; the balance of
profits would be availablefor appropriations to a price reserve
fund and for a second payment togrowers. Growers would be
encouraged to buy shares in each company, butthese would be limited
to a maximum of £ 39,000 so long as the company hadloans
outstanding. Such shares would be issued progressively in
additionto the initial issued share capital of £ 41,000, bringing
the total author-ized and issued share capital to £ 80,000. Once
the loans had been redeemed(i.e. after 18 years, or by prior
redemption) growers would be able to buyKTDA and CDC shareholdings
until they held the whole of the equity capital.-
1/ It seems likely, however, that by the recent introduction of
corporationtax the eauity holding by CDC and KTDA would be limited
to a nominal£ 1,000 and the balance of £ 40,000 would be held in
income notes evenlydivided between the two parties. The income
notes would be convertibleinto equity so that when the growers have
taken up the balance of £. 39s000in shares and when the loans have
been repaid these notes could be con-verted intosquity for growers
to purchase.
-
ANNEX 6Page 2
4. The estimated operating results of a typical factory during
thefirst four years of operation are shown below.
1966/67 1967/68 1968/69 1969/70. . . . . . . . i n £. . * . . .
.
Quantity of Production(lb made tea) 400h,000 800,000 1,000,000
1,200,000
Gross Value of Production 75,000 150,000 187,500 225,0CO
Cost of Production
Purchase of green leaf 36,000 72,000 90,000 108,000Processing
& selling costs 19,600 34,4oo 37,500 38,b00Depreciation _4,000
6,400 6,500 6,600
Total Costs 59,600 112,800 134,000 153,000
Net Income (before interest) 15,400 37,200 53,500 72,000
5. As in the first plan arrangements for management would be
coveredfor each factory company in a management agreement between
the company andthe commercial firm that undertakes the managing
agency. The same or anothercommercial firm would be responsible for
marketing of tea. Most of the teaat present is sold at the tea
auctions in Nairobi, the remnainder being soldin London.
-
ANNEX 7
KENYA 'TEA PROGRAM(Combined First and Second Plans)
Loan Requirements and Repayment Capacity in Field SectorBy
Years, 1963-1979
- - - - - - - - - - - - - -First Phase Loan Redemptions- - - - -
- - - - - - - - -Accumulated
Deficit Kenya German Deficit BorrowingsY e a r (Surpluss)!/
Gov.A/ Gov.3/ CDC _/ (Surplus)5/ (Surplus)
. .. . .. . . . . i n £ ' 0 0 0 . . a . . a . . . .
First Phase First Phaseup to 1963 __ __ __ __-- 648.11963/64
310.5 2.0 __ __ 312.5 960o6
Second Phase Second Phase1964/65 375.8 2.0 -- -- 377.8
377.81965/66 289.3 2.0 -- -- 291.3 669.11966/67 252.5 2.0 -- --
254,5 923.61967/68 127.7 2.0 21.2 -- 150.9 1,074351968/69 65.3 2.0
21.2 -- 88.5 11163.O1969/70 ( 6.8) 22.0 21.2 -_ 36.4 1,199.41970/71
( 87.1) 2.0 21,2 _- ( 63.9) 1,135.e1971/72 (194.1) 2.0 21.2 80.0 (
90.9) l,044,61972/73 (283.4) 2.0 21.2 100.0 (160.2) 884.41973/74
(349,4) 2.0 21.2 150.0 (176.2) 708.21974/75 (408.2) 2.0 21.2 150.0
(235.0) 473.21975/76 (432.1) 2.0 21.2 100.0 (308.9) 164.31976/77
(400.0) 2.0 21.2 70.0 (306.8) ( 142.5)1977/78 (360.0) 0.5 - 50o.o
(309.5) ( 452.0)1978/79 (320.0) -- (320,0) ( 772,0)1979/80 (300.0)
-- -- (3000o) (1,072.0)
Total Loan Redemptions 48.5 212.0 700.0
i/ Difference between revenues and cash expenditures including
15%1 contingenciesbefore loan redemptions.
j £ 2,000 per year for redeeming initial advance made to former
Tea MarketingBoards and assumed by KTDA. In addition a loan of £
20,000 for the first planwill have to be repaid in 1969/70 (Annex
1).
3/ Loan of £ 212,000 (Annex 1).7/ Loans of £ 700,000 drawxn
before June 30, 19614 (Annex 1).
5/ Deficits after July 1, 1964 are loan requirements for
financing the secondphase of the tea program; and surpluses are
available for repayment of theseloans.
-
ANNEX 8
PIOYA TEA PROGRAM(Second Phase)
Proposed Disbursements and Redemptions of Loans in Field
SectorBy Years, 1964-1980
1/ Deficit Loan Disbursements Loan Redemptions Deficit
Y e a r (Surplus) C D C I D A Total C D C I D A Total (Surplus)
Cumulative. . . . . . . . . . . . . . . . . . . . .i n £ to O 0. .
. . . . . . . . . . . . . . . . . . .
1964/65 377.8 160.0 220.0 380.0 -- ( 2.2) ( 2.2)1965/66 291.3
40.0 254.0 294.0 __ __ __ ( 2.7) ( 4.9)1966/67 254,.5 - 252.0 252.0
-- -- -- 2.5 ( 2.4)1967/68 150.9 __ 150.0 150.0 __ __ __ 0.9 (
1.5)1968/69 88.5 -- 88.o 88.o - 0.5 1.0)1969/70 36.4 __ 36.0 36.0
-- -- -- 0.4 ( 0.6)1970/71 ( 63.9) __ -- __ __ __ __ ( 63.9) (
64.5)1971/72 ( 90.9) __ __ __ __ __ __ ( 90.9) ( 155.4)1972/73
(160.2) __ __ __ 7.0 35.o 42.0 (118.2) ( 273.6)1973/74 (176.2) __
__ __ 15.0 75.0 90.0 ( 86.2) ( 359.8)1974/75 (235.0) __ __ __ 22.0
110.0 132.0 (103.0) ( 462.8)1975/76 (308.9) -- -- -- 27.0 135.0
162.0 (146.9) ( 609.7)1976/77 (306.8) __ __ __ 30.0 150.0 180.0
(126.8) ( 736.5)1977/78 (309.5) __ 33.0 165.0 198.0 (111.5) (
848.0)1978/79 (320.0) __ __ __ 33.0 165.0 198.0 (122.0) (
970.0)1979/80 (300.0) __-- -- 33.0 165.0 198.0 (102.0)
(1,072.0)
Total 200.0 1,000.0 1,200.0 200.0 1,000.0 1,200.0
1/ After redemption of loans for first phase, see Annex 7.
2/ After all loan redemptions.
-
AtNN 9
KENYA TEA PI-i rAM (FIRST AND SECOND PLN)
Summary of KTDATs Estimated Operating Results in the Field
Sector
Net OperatingOperating Expenses Expenditure
Year Revenues incl. Depreciation Interest (Revenue) Cumulative-
- - - - - - - - - - - - - - - - L Too -0 - - - - - - - - - - - - -
- - - - -
1963/64 133.5 349.9 51C3 267.7 877.21964/65 185.9 434.7 73.3
322.1 1,199.31965/66 260.4 446.1 914.6 280.3 1.479.61966/67 352.1
448.6 112.0 208.5 1,688.11967/68 438.3 416.9 124,2 102.8
1,790.91968/69 514.4 401.6 130J4 17.6 1,808.51969/70 583.7 419.8
13203 (31.6) 1,776.91970/71 686.4 433.1 129.3 (124.0)
1,652.91971/72 800.4 465.8 120.4 (214.2) 1,438.71972/73 892.4 489.4
105.2 (297.8) 1,140.91973/74 951.1 509.3 85*0 (356.8) 784.11974/75
972.7 509.5 60.8 (40214) 381.73975/76 97504 509.3 33.9 (432.2)
(5005)
1/ Includes £ 609,600 at the end of 1962/63.
In the foregoing projection it is shown that the annual net
operating expen-ditures would accumulate as in the past three
fiscal years and would reacha maximum of £ 1,808,500 at the end of
1968/69. Starting -with 1969/70, thefirst year in which a net
revenue is indicated, annual net revenues are appliedto reduce the
development expenditure which would disappear in fiscal year1975/76
at the end of which a small earned surplus of £ 50,500 should
appearon the books of KTDA. Thereafter revenues and expenses would
be kept, more orless, in balance by the scheduled exDiration of
capital levies and, ifnecessary, by adjustment of the revenue
levies. The interest payable by KTDAto the private tea companies
which would provide all the capital funds thatKTDA would re-invest
in the factories would be offset by dividends and intereston KTDA?s
shares and loans in the factory companies.
-
ANNEX 10
KENYA TEA PPDGRAMt(Second Plan)
Investment Cost and Net Revenues in Field and Factory SectorsBy
Years, 1963-1°76
3/Operating Expenditures Net
Investnenr Gross Field Factory RevenuepY e a r Cost 1 Revenues
Sector Sector Total (Loss)4/
. . . . . . . . . . . . i n £ 10 0 0 . . . . .. . . . . . .
Up to 1963 74.2 __ __ __ __ __1963/64 149.6 __ __1964/65
201.31965/66 491.7 -- __ __ __ __1966/67 398.8 33.5 -- 58.8 58.8
(25.3)1967/68 612.2 14304 -4 142.4 142.4 1,01968/69 271.7 392.7
11.1 240.1 251.2 141.51969/70 h00.5 800.7 39.9 293.4 333.3
h67.41970/71 221.2 12320.5 86.8 324.1 410.9 909e61971/72 1h9.2
1l853s2 150.7 361.2 511.9 10341.31972/73 99.2 2,293.0 225.9 379.1
605.0 1,688.o1973/74 5.8 2,581.1 282.4 383.1 665.5 l,915261°74/75 -
2,686,8 284.1 384.0 668.1 22018.71975/76 &thereafter -- 2,700.0
287.6 384ho 671.6 2,028.4
1/ Combined field and factory sector, totaling £ 3,075,000
(excluding interest).The investment cost, including interest during
development is £ 3,200,000.
2/ Equivalent to gross value of production.
3/ Not including interest and depreciation.
4/ Before interest and depreciation.
-
KENYA
SMALLHOLDER TEA GROWING AREAS
Mt.Elgon,v (
+ kITALE Morcal|
O R E T $ lELORE
5[SFlNaro __
. , 2) q ,tR~~~~~ ~ NRO BI ,
KTDA Tea Areas M G D _W-Vk
Its.~~~~~~~~~~~~~~~~~~~~~~~M
\~\\% Settlement Tea Areas
/ Tea Factories - First KTDA Plan
() Tea Factories - Second KTDA PlanN
Roads r R
-- i-- KTDA4T Railways Areas agdi
0 40 80 120 MILES )KENYA l ./ "'O" )KENYA
NAIF RBI0
Mombaso
by mop
OCTOBER 1963 IBRD-1266
