Kenya’s tropical climate and volcanic red soil make it an ideal place to cultivate tea. That’s why, for over a century, tea has been a major cash crop and the leading foreign exchange earner for the country.
Investments in new technology can’t make Kenyan tea any tastier, but they can help boost production and farmers’ earnings—and these are the goals of a recent IFC and GASFP investment to finance small hydropower plants along rivers close to growing areas.
Cutting the cost of power will result in significant savings for tea factories, increasing financial benefits to 350,000 smallholder tea farmers—while also reducing the industry’s carbon footprint.
The project is being developed by KTDA Power Company Limited, a wholly owned subsidiary of long-term IFC client Kenya Tea Development Agency Holding Limited (KTDA). KTDA produces 60 percent of Kenya’s tea and provides income for over 560,000 small farmers who are also shareholders.
The project involves a $55 million loan arranged by IFC in partnership with GAFSP, PROPARCO, and The Netherlands Development Finance Company FMO. The syndicated loan will impact development at a significant scale. Since energy represents about 30 percent of factory production costs, lower processing costs will make KTDA more competitive, and increase tea prices paid to farmers (as these are linked to processing costs). The excess profit will also go to the farmers as dividends.
Now, IFC is supporting the design, construction, operation, and maintenance of seven run-of-the-river small hydropower plants with a total installed capacity of 16 megawatts at various locations in Kenya. The plants will provide captive power generation for the factories of Kenya Tea, and any energy excess will be sold to state-owned Kenya Power and Lighting Company.
The hydropower plants will create more than 2,000 jobs during construction, which is expected to take two to three years. Once the plants are completed, they will add around 60 jobs to the local communities. In addition, the plants will remove over 50,000 tons of carbon from the atmosphere through reduced consumption of diesel and biomass for energy generation.
Kenya’s community of tea farmers is firmly behind the small hydropower plants; the farmers are shareholders in the company. Those involved believe it is the first initiative in the world in which a farmer-owned institution is undertaking a renewable energy project at this scale.
Upon completion, the project will demonstrate that such ventures among indigenous power project companies are feasible—possibly stimulating new investments in the area and deepening the renewable-energy market in Kenya. It also demonstrates our evolving, long-term commitment to KTDA, investing for more than five decades in an industry that benefits the people of Kenya and builds capacity and expertise among its citizens and business owners.
Global Agriculture and Food Security Program is a global effort that pools donor resources to fund programs focused on increasing agricultural productivity as a way to reduce poverty and increase food and nutrition security.
International Finance Corporation, a member of the World Bank Group, is the largest global development institution focused exclusively on leveraging the power of the private sector to tackle the world’s most pressing development challenges.
Thanks to Neil Palmer of CIAT whose beautiful photographs helped us tell this story.
Credits:
Created with images by Sustainable sanitation - "Location is within tea producing area of Githunguri" and Neil Palmer of CIAT