KTDA factories sink into US$200.46M debt as regulator uncovers widespread borrowing irregularities
Audit reveals major financial mismanagement in KTDA-run factories, exposing unapproved loans, inflated assets, and severe cash flow gaps.
KENYA – Factories operated by the Kenya Tea Development Agency (KTDA) are facing a combined KSh26.06 billion (US$200.46) debt burden following years of irregular borrowing, according to a detailed audit released by the Tea Board of Kenya (TBK).
The regulator uncovered multiple financial breaches, ranging from unapproved loans and arbitrary inter-factory lending to overvalued assets used to secure higher financing.
The audit, ordered by the Ministry of Agriculture, examined the financial sustainability of KTDA-managed factories and assessed how loans were obtained, utilised, and recorded. TBK revealed that many loan transactions lacked the mandatory board approvals, with loan arrangements instead initiated and sanctioned at KTDA’s head office.
By June 2025, factories West of the Rift (WoR) accounted for Kes 21.61 billion (US$167.14M) of the total debt, while East of the Rift (EoR) factories owed Kes 4.45 billion (US$34.42M).
TBK highlighted that the long-running inter-factory lending programme, amounting to Kes10.36 billion (US$, had no policy framework guiding its administration, resulting in arbitrary loan issuance and repayment challenges.
Several factories were found to be struggling with cash flow constraints, hindering their ability to repay inter-factory loans within the specified one-year timeframe.
Following mounting concerns, KTDA recently discontinued the inter-factory lending scheme and encouraged factories to source financing directly from commercial banks.
Commodity loans and asset valuation concerns
The Board also scrutinised Kes 12.8 billion (US$93.5M) in commodity loans, finding that the funds were channelled toward operational costs, contrary to earlier claims that the loans financed the October 2024 bonus payments.
TBK added that KTDA did not provide clarity on the specific factories that benefited from the loans, which were borrowed against projected revenues from July 2024.
Additionally, the audit revealed that closing stock values used to secure these loans had been overstated, particularly among WoR factories.
TBK further flagged instances where factories borrowed funds for projects but diverted the money to unrelated expenditures.
Irregular asset-based financing
The regulator found significant discrepancies in Kes 2.59 billion (US$20M) borrowed through asset-based financing, including inflated equipment prices and borrowing amounts that exceeded board-approved limits.
Factories such as Kambaa and Sanganyi received equipment that was priced far higher than similar units supplied to other facilities, raising concerns over value for money.
TBK noted that several factories lacked board resolutions approving loans intended for bonus payments, casting doubt on whether the requests originated from factory boards or were decisions made centrally at KTDA headquarters.
Outstanding fertiliser subsidy
On fertiliser financing, TBK reported that the government owes KTDA Kes 4.67 billion (US$36.1M) in subsidy refunds for fertiliser imported between July 2021 and June 2023.
The regulator has now requested updated details on the current loan balances across all KTDA-managed factories.
TBK warned against the recurring practice of borrowing to fund end-of-year bonus payments, stating that such payments must reflect actual factory performance and available funds rather than inflated stock valuations or borrowed capital.
Recommendations for reform
To restore confidence among the 700,000 smallholder farmers served by the 71 KTDA-managed factories, TBK has recommended a forensic audit of all loans borrowed since July 2021. This probe would verify the legitimacy and utilisation of loans acquired on behalf of the factories.
The regulator also urged KTDA to introduce an immediate retention policy to stabilise cash flows and to conduct physical verification of all assets procured through borrowed funds. This would ensure proper utilisation of loan proceeds and accountability in asset acquisition.
TBK emphasized that the proposed reforms are necessary to strengthen oversight, enhance financial discipline, and safeguard the long-term sustainability of the smallholder tea sector.
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