Wood Family Trust invests £7.5m in Rwandan tea factories

Wood Family Trust invests £7.5m in Rwandan tea factories

News (International)

The Wood Family Trust (WFT) invested £7.5m in two Rwandan tea factories alongside Lord David Sainsbury’s Gatsby Foundation in December last year, its 2012 Annual Report revealed last month.

The two trusts established a jointly owned Scottish charitable company, Rwanda Tea Investments (RTI) which purchased the majority shares of two tea factories; Mulundi (55%) and Shagasha (60%) from the government of Rwanda during its privatisation of the industry.

The crop is already Rwanda’s second most significant export earner, and is a vital source of income for more than 30,000 smallholders and 60,000 households across 11 of the 30 districts in the country.

Smallholders produce more than 65% of tea in the country, which has an estimated population of almost 12m and a gross national income (GNI) per capita of $570 according to the World Bank.

The aim of the investment is to increase the incomes of the 12,000 smallholder tea farmers who are minority shareholders in the factories before transferring full ownership to them at no consideration once they meet business and governance targets and seven years have elapsed.

Before this handover the Kenya Tea Development Agency will act as operational manager of both factories. It will train Rwandans to assume overall factory management in the future and report to each factory’s board. Annual free cash-flow will be distributed to farmers as additional payments and to WFT and Gatsby to recover their investment over time.

RTI will provide board-level expertise, with Sir Ian Wood acting as chairman. He said; “This represents an innovative philanthropic intervention which, if successful and further developed, could transform the viability of smallholder tea farmers in Rwanda and pave the way for more smallholder farmers owning their factories across the region.”

He continued; “Experience in East Africa indicates that where the smallholder farmers own their own factories, they receive approximately 70% of the made tea price against only 25-30% if they simply sell their product to an estate owned factory.”

WTF and Gatsby also run two ongoing projects in East Africa: Chai (Tea for the Development of Tanzania) and Imbarutso (Win Win for Rwandan Tea). Each will commit more than £5.6m over six years (separately from the latest investment) with the aim of more than doubling the net income of 60,000 smallholder tea farmers across both countries.

In Tanzania the trusts’ programme has helped increase smallholder tea farmer income by 70% and increased made tea yields per hectare by 22%. But this is just over half the yield per hectare in Kenya.

Rwanda currently produces around 7% of Kenya’s annual output of made tea, 24,000 metric tonnes, but its produce is regarded as among the highest quality in the world.

Innovative investment and momentum behind the sector could be crucial to increasing production and improving the earnings of smallholders as the government privatises existing and green-field sites.

WFT’s theme of ‘making markets work for the poor in Sub Saharan Africa’ promises a lot in a country ranked 166 out of 187 in the 2011 Human Development Index.

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