Its delicate leaves are one of the pillars of Kenya’s economy. The country is the world’s leading exporter of tea and the third largest producer, after China and India. Directly or indirectly, the sector supports nearly 10% of the population. Today, however, its existence is threatened. “If nothing is done, 70% of Kenyan tea production could evaporate by 2050 due to rising global temperatures,” warns Lerionka Tiampati, CEO of the country’s largest producer, the Kenya Tea Development Agency (KTDA). “The consequences would be massive.”
The challenge is to find ways to produce the precious leaves that are more sustainable and environmentally sound. The KTDA has heard this message loud and clear. With support from our subsidiary devoted to the private sector Proparco and from AFD via its green finance label SUNREF, the company brought online eight autonomous mini-hydraulic power plants between 2014 and 2018 to supply green electricity. And that’s not all.
With financial and technical assistance from AFD, under its green finance label SUNREF, the local Kenyan bank, Co-operative Bank, is supporting the green finance market and able to mobilize against climate change.
The financial institution provided KTDA with $10.8 million in financing to invest in renewable energy, thereby reducing its energy costs while improving and securing its energy supply. Through this partnership, KTDA is also participating in the development of a low-carbon economy.
In addition to these funds, the Co-operative Bank and KTDA received technical support to assess the feasibility of the project, select the most suitable technologies, and confirm the impact of the facilities.
Less Greenhouse Gas
Facilities of this type are above all essential factors in the fight against global warming. These mini-plants, with a total capacity of 16 MW, supply energy to more than a third of KTDA’s plants. This helps reduce their greenhouse gas emissions. As a further benefit, they also require no water damming. This preserves sediment transport, limiting risks related to accumulating heavy metals, bank erosion, or changes to the beds of waterways.
Greener, More Profitable Production Helps Everyone
The project offers even more advantages. The electricity produced by the plants is more affordable, increasing KTDA’s profitability.“Energy represents 35% of our production costs,” says Tiampati.“Opening the new plants has allowed us to develop our own energy sources and reduce our costs.”In addition to the tens of jobs created by launching the plants, the savings they generate should help boost the income of 350,000 farmers.
The facilities will also benefit other residents of the country: connected to the national electrical grid, they should be able to generate enough surplus power during the rainy season to meet the needs of thousands of families. They will also support electrification in the rural regions of Kirinyaga, Meru, Settet, and Nyakwana.
KTDA has benefited from the partnership with AFD Group and its SUNREF label in many areas, such as financing, and the speed and terms of access to loans. Once the projects are completed, we expect a decrease of approximately 50% in the electricity costs at our plants as well as improved quality and reliability for our electricity supply.
A Virtuous Partnership
Financed by Proparco via a $15 million loan, this project offers fresh proof of the positive dialog between KTDA and AFD Group. Over the past 20 years, Kenyan society has benefited from four Proparco loans. In 2001 and 2004, two rounds of financing supported the construction of four new production plants.
A fourth loan awarded in 2018 will help KTDA develop its production of “orthodox tea,” a high quality tea whose leaves are kept whole. This will allow farmers to diversify their sources of income, mitigate the impact of price volatility, and improve the living conditions of nearly 50,000 people. Kenyan society continues to steep in the benefits of the tea industry.
KTDA is the largest cooperative of tea planters in Kenya. It represents 600,000 small farmers who collectively own 128,000 ha of plantations. It supports producers and intervenes at every step of the value chain, from production and processing to logistics and marketing. It manages 60% of the country’s tea production.