IFC lends tea agency Sh1bn for dry port

The International Finance Corporation (IFC) is set to lend $10 million (Sh1 billion) to Kenya Tea Development Agency Holdings (KTDA) to help the agricultural firm upgrade its warehouses and related logistics infrastructure.

The terms of the proposed loan, including interest rate and maturity, was not disclosed.

But IFC said the funding structure is on favourable terms not readily available in Kenya.

The cash will form part of KTDA’s planned total investment of $17.7 million (Sh1.7 billion) in its 6.7 acres of container stacking yard, 0.9 acres of covered warehouses, and auxiliary facilities in Nairobi and Embakasi’s inland container depot (ICD).

The project is adjacent to the ICD owned by Kenya Ports Authority (KPA).

“The total project cost is estimated at $17.7 million. The proposed investment is a loan of up to $10 million to KTDA,” IFC said in its investment disclosures.

“The project develops cargo freight logistics infrastructure in the city of Nairobi, which improves capacity and affordability of services.”

The global financier added that the development will contribute to improving integration of the logistics networks centered around the Port of Mombasa and the new standard gauge railway (SGR) line linking Mombasa to Nairobi, by improving the port’s hinterland footprint and connectivity.

The loan adds to IFC’s previous lending to KTDA which is the largest tea business in East Africa. The agricultural entity emerged from the privatisation of the Kenya Tea Development Authority in 2000.

KTDA serves over 610,000 smallholder tea farmers, who are suppliers as well as shareholders of 54 separate tea companies owning a total of 69 tea factories. Smallholder farmers under the auspices of the group account for over 60 percent of national tea production. Besides providing the loan, IFC says it will provide value added services including non-commercial risk mitigation.

“IFC will also leverage its technical expertise in logistics to provide advice on the group’s business strategy,” the global financier said.

Disclosure of the pending loan comes soon after KTDA announced it had taken another Sh3.5 billion loan from Standard Chartered Bank (Kenya for purchase of 95,000 tonnes of fertiliser to be distributed to tea farmers across the country.

The deal, which is part of KTDA’s fertiliser supply programme, will see over 650,000 growers affiliated to the 69 factories managed by the agency benefit from supply of the commodity through the arrangement.