Concerns about the financial health of KTDA-managed factories have deepened after a fresh audit revealed how years of unchecked borrowing pushed the facilities into a massive Sh26 billion debt.
The Tea Board of Kenya found that many of the loans were taken without proper approval, with some factories overstating the value of their assets to qualify for bigger amounts.
The audit shows that by June 2025 factories in the Rift Valley and Western Kenya were carrying most of the debt.
Out of the Sh26.06 billion in loans, those in the West of the Rift owed Sh21.61 billion while factories in the East of the Rift owed Sh4.45 billion.
TBK says the borrowing practices ignored financial guidelines and created serious risks for farmers who depend on the factories.
One of the major issues raised is the inter-factory lending system. KTDA allowed factories to loan each other more than Sh10.36 billion, yet there was no policy to guide how these loans should be issued or repaid.
TBK says many factories are already struggling with cash flow and cannot repay the loans within the expected one year.
Last month KTDA ended the long running inter-factory loan programme and shifted factories to commercial bank borrowing, noting that West of the Rift factories had borrowed heavily from those in the East.
KTDA manages seventy one factories across the country while TBK oversees the tea sector on behalf of the government.
The audit also examined Sh12.8 billion in commodity loans that were meant to be backed by closing stock. TBK discovered that these stocks were overvalued, especially for factories in the West of the Rift, and that KTDA had no clear record of which factories benefited.
It also found cases where factories borrowed money for projects but spent it on unrelated items. Others borrowed beyond board approved limits or overstated equipment prices.
TBK further noted that the government still owes KTDA Sh4.67 billion in fertiliser subsidy refunds from 2021 to 2023. The regulator now wants KTDA to provide updated loan balances and warns against borrowing to pay tea bonuses.
It recommends a forensic audit of all loans taken since July 2021 and physical verification of assets bought through the loans.
Farmers in the West of the Rift continue to face lower earnings due to weaker tea prices at the Mombasa auction, while their counterparts in the East of the Rift are experiencing smaller declines.
The gap in earnings remains wide, putting even more pressure on already strained factory finances.
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