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Government Unveils Reforms in Tea Sector

The  government has proposed new policy regulatory and administrative framework to reenergize the ailing tea sector in the country.

The  Agriculture Cabinet Secretary (CS), Peter  Munya said the regulatory reforms were critical in revitalizing the sorry state in the tea sub sector to ensure that farmers got the value of their toil.

“Government agenda is to look at the current gaps along the value chain and ensure small scale tea farmers enjoy their hard earned sweat and this will require improvement of the governance system and enabling small scale farmers to have more authority on decision making,” said Munya.

He explained that the major problem facing the tea value chain was a dysfunctional and inefficient tea auction system characterized by lack of transparency, accountability and competition and thus prone to manipulation, capture, insider trading and cartelization by value chain players leading to ineffective price discovery, low prices and poor earnings to tea farmers

Moreover, he noted that the tea sector is undermined by the manipulation and predatory behaviour of Kenya Tea Development Authority (KTDA) and its subsidiaries on the value chain.

“A key change is that Government is fast tracking to ensure Kenya Tea Development Authority (KTDA) company secretary does not participate in meetings of respective tea factories management meetings”, the CS said.

KTDA normally operate an agent model whereby it is contracted by 66 tea factories as a management agent and one of the services under the model is that KTDA company secretary sits in board meetings of the respective limited companies and his opinion is highly regarded.

“Company secretary services shall be excluded from the services offered by management service providers”, Munya said, adding that factory Limited Companies will have now to either recruit in- house company secretaries or outsource the service and a director or affiliate of a management service provider shall not serve as a director or have a direct commercial relationship with a factory limited company they serve
KTDA a company which operates as an agent model representing around 66 factories is therefore likely to lose the control it enjoys in the tea sub sector under new regulations if at all they will be passed after the 14 day public views elapses anhd the regulations gazette.

The tea agency has been blamed further for unwarranted delays in making prompt payments to small holder tea growers despite receiving payments from tea brokers within fourteen days from the date of the auction.

Most of the regulations today seek to lessen KTDA grip in the tea subsector and open the market to new management and thus lead to stiff competition against the major tea agency.

Munya added that other stern actions Government will undertake to minimize manipulative tendencies is that it plans to outlaw Direct sale overseas and thus advocate for use of auction process.

“All teas produced in Kenya for the export market in shall within two months after coming into effect of these regulations be sold exclusively through the auction process”, he said .

The CS further said that any other teas that are not sold during a particular auction shall be re-listed for sale during the subsequent auction.

Munya further added that all registered tea auction organisers shall establish an electronic trading platform for tea auction but a tea auction oraniser existing before commencent of the regulations shall establish and migrate tea trading to an electronic trading platform within two months from the commencement date of the regulations;

All tea buyers , he also said shall henceforth submit to the Regulatory Authority –Agriculture Food Authority (AFA) a performance bond in the form of a bank guarantee equivalent to 10 per cent of the estimated value of the tea they intend to buy.

The monies from the sale of tea at the auction, the Munya said said shall be remitted directly to factory limited accounts within 14 days from the auction date and further factory companies shall within 30 days pay tea growers at least 50 percent of payment for green leaf delivered every month, the balance shall be paid within the financial or calender year as agreed with the growers.

The regulations are available immediately on the websites of both the Ministry of Agriculture and Agriculture Food Authority (AFA) who have also provided a hotline for purposes of providing any clarifications.

Tea contributes immensely to the development of this country and is the leading foreign exchange earner contributing about 23 percent of the total foreign exchange earnings.

Last year, Tea industry earned the country Kshs. 117 billion in export earnings and Kshs. 22 billion in local sales.

By  Wangari  Ndirangu

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