The Kenya Tea Sector Lobby which represents over 6,000 small scale farmers across the country has been advocating for reforms in the sector for a while now mainly related to the Kenya Tea Development Agency (KTDA) which is owned by 54 Corporate Tea Companies and which so far has had sole oversight of the sector. Complaints so far have been made on delayed payments to farmers, collusion by brokers, mismanagement of funds and poor corporate governance by KTDA.
In December 2019, CS Peter Munya was directed to oversee changes in the sector and address these issues. The CS issued draft regulations on 14 April 2020 but on 1st May, 2020, the lobby proposed further changes as follows:
- Management fees be brought down in line with global standards of 1% as opposed to the 2.5% currently being charged by KTDA.
- The maximum fees chargeable by brokers should be capped at the global benchmark rate of 0.25%, as opposed to the current 1.25% being charged by brokers.
- That the government through the Finance Act, 2020, scrap lot charge, and VAT on tea bought for local consumption. This will allow the farmer to have enhanced earnings while making the sector attractive for the development of a cottage tea manufacturing and packing industry.
- The proposed regulations provide for funds from the sale of tea being transmitted to the factory within 14 days of purchase. The lobby proposes that the regulation specify penalties that would arise if the payment is made later than 14 days prescribed in the Act, to ensure prompt payment of farmers.
- To remove any undue control of tea factories by the management agent (KTDA), the lobby further proposes that the role of making investment decisions for the factory should also be exempted from any management agent agreement to ensure that grower funds are fully controlled by the factory directors. KTDA should further be required to sell off all its non-tea-marketing related subsidiaries and properties and subsequently distribute those funds to the factories.
- There appears to be little involvement of the County Governments in the sector save for licensing of tea nurseries under regulation considering that agriculture is a devolved function as per schedule 4 of the Constitution. They propose that the county governments’ involvement in the implementation of these regulations be mainstreamed.
- To secure farmers’ incomes, the lobby proposes that within a year of operationalization of these regulations, the Cabinet Secretary shall issue guidelines on the development of a framework for a sustainable Minimum Guaranteed Return (MGR) for tea farmers. This price stabilization program they say should be drawn up along global best practices and ensure it does not create loopholes to enrich the tea cartels.
- Lastly, for a transparent transition into the new regulations, it is incumbent on the Government to appoint an accredited international audit firm to carry out a forensic audit on KTDA Holdings, its subsidiaries, and all its 68 factories since the year 2000. This will assist in bringing closure to accusations of malpractice and set the tone for the lawful implementation of the Regulations and the prudent custody of public resources.
Final Draft Crops (Tea Industry) Regulations , 2020