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S E S S I O N A L P A P E R 
r No. 6 of 1971 
,Q 
THE KENYA TEA DEVELOPMENT AUTHORITY 
( Tea Factory Companies) 
KTDA/PROC/11. 
Ministry of Agriculture. 
23rd July, 1971. 
_J 
SESSIONAL PAPER NO. 6 OF 1971 
Government guarantee of moneys lent and subscribed 
J.. 
to four tea factory companies established by the 
Kenya Tea Development Authority. 
THE GUARANTEE ( LOANS ) ACT, CAP. 461 
In accordance with the provisions of the Guarantee 
(Loans) Act, the following information is laid before 
the National Assembly relating to the Government's pro-
posed guaranteeing of moneys lent and subscribed to the 
Tegat Tea Factory Company Limited, the Kebirigo Tea Fac-
tory Company Limited, the Imenti Tea Factory Company Lim-
ited and the Ikumbi Tea Factory Company Limited, by the 
Commonwealth Development Corporation, James Finlay and 
Company Limited, Eastern Produce (Holdings) Limited and 
Brooke Bond Liebig of Kenya Limited. 
The Kenya Tea Development Authority came into being in 
1964 as a successor to the former Special Crops Develop-
ment Authority - this latter body having been established 
in 1960. The K.T.D.A. was established for the purpose of 
promoting, financing and controlling the development of tea 
to be grown by small-holders. The Orde r setting up the 
Authority, provides, as one of its funct ions, tha t K.T.D.l. 
will II establish, acquire and operate processing f3.ctories, 
to enter into agreement for the establishment of factories, 
and to promote and subscribe fo r s ha r es in any Compa ny in-
corporated in Kenya for the purpose of processing or marke-
ting tea"• In pursuance of this objective tr,e K.T.D.A. 
has to-da t e established six tea processing factories, in 
Kisii, Kericho, Kiambu, Kirinyaga and Nyeri Districts of the 
Republic a nd the funds used for financing the es t ablishment 
of these f actories have been gua r ~nteed by Government. 
... .. 
From its inception, the Authority, with loans from the 
Commonwealth Development Corporation, the World Bank and other 
lenders, has expanded tea growing by small-holders from a small 
acreage of 8,400 in 1962/63 to 48,000 acres in 1970. In 1970 . 
the value of tea exports was £12,704,544 making it the second 
largest export earner after coffee. Production of tea by small-
holders has increased from 1.4 million lbs in 1963/64 to slightly 
over 16 million lbs in 1969/70, and this increase is expected 
to gain momentum in future as a result of expanded and accele-
rated planting programmes now being undertaken. 
When the Authority came into being in 1964, only about 
18,300 small-holders were growing tea in the country, and during 
its first year of operation produced an income of £147,923. 
To date, the number of small-holders growing tea under the Auth-
ority, has increased to 54 1 500 growers, who produced made tea 
to earn them £1,713,200 last year. 
The Authority is now establishing four additional factories 
in Kericho, Kisii, Murang'a and Meru Districts for the processing 
of small-holder grown tea. 
In respect of each of the tea factories, a company has been 
formed to build, own and operate the factory by means of finance 
in the form of equity capital and loan~. The equity capital is in 
the form of " founders II shares and ;, Growers II shares, the founders 1 
shares being taken by K.T.D.A. and the loan lenders, and the Growers' 
shares to be allotted to growers in terms of the Articles of Asso-
ciation of each Company, which undertakes to pay dividends of at 
least 8% on its issued share capital. Much of the greater portion 
of the finance comes from the loans now to be made to each factory 
company, which are to be secured by first debenture charges on the 
company's assets and all of :whicht.:carry interest at 81/t,f per centum 
per annum and are repayable to over seventeen or eighteen years 
by (unequal) half-yearly instalments starting in 1973-74 and 
finishing in 1990-1992. 
The financing agreements for each tea factory company pro-
vide th~t upon the loan lenders becoming entitled to appoint a re-
ceiver under the debenture security ( that is, upon the tea fac-
tory making default under the debenture), the Government will, 
if so required by the lender, purchase the lender's debenture 
and shares at par value together with any interest and dividends 
,,. " J • 
respectively accrued or in arrear. 
The respective tea factory companies and lenders, and the 
amounts of the lenders' shares and loans, are as follows:-
1. Tegat Tea Factory Limited, Kericho District. 
Loan Shares 
Lenders: C.D.C. sterling £116,667 K. Shs. 50,oooJ-
James Finlay & Co. Ltd II £116,667 " 5/-
Estimated factory cost K. Shs. 4,100,000/-
2. Kcbirigo Tea Factory Limited, Kisii District. 
Loan Shares 
Lenders: C.D.C. sterling £116,667 
K • S hs • 50 , 000/  - ' 
James Finlay & Co. Ltd n £116,667 K. Shs. 5/-
Estimated factory cost K. Shs. 4,100,000/-
3. Imenti Tea Factory Limited, at Knthera in Meru District. 
Shares 
Lenders: C.D.C. sterling £155,555 K. Shs. 50,000/- :'" 
Eastern Produce (Holdings) II £77,778 nil 
Estimated factory cost K. Shs. 4,312,000/-
4. Ikumbi Tea Factory Limited, at Kigumo in Murang'a District. 
~ Shares 
Lenders: c.n.c. s terling £115,500 K. Shs. 50,000/-
Brooke Bond Liebig Kenya 
Ltd. K.Shs.1,980,000 II 5/-
Estimated factory cost K. Shs. 4,310,000/-
Each factory company has an authorised capital of K.Shs. 200,000/-
divided into 20,000 shares of Shs. 5/- ea ch; K.T.D.A's shareholding in 
each case approxima t ely equals th~t of the a bove l enders, the ba l ance 
of the shares being avail.able for issue to growers . 
The total contingent liability of the Government under all of 
the above t ea factory lean and share guarantees is the equivalent of