Kenya Tea Development Agency raises concerns on proposed industry policy reforms

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KENYA – The Kenya Tea Development Agency (KTDA) has aired it’s views on the proposed policy regulatory and administrative framework recently issued by the Ministry of Aagriculture, aimed reenergize the ailing tea sector in the country and loosen KTDA’s stranglehold in the sector citing some of the rules are unconstitutional.

Agriculture Cabinet Secretary, Peter Munya released the draft Tea Industry Regulations 2020 last week and gave stakeholders 14 days within which to present their views.

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According to Peter Munya, the regulatory reforms are critical in curtailing the crisis in the tea sector and will see the total overhaul of the corporation to ensure that farmers get the value of their toil.

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.

The CS noted that these loops makes the sector 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 KTDA and its subsidiaries on the value chain.

Proposed reforms

In the new reforms the government has proposed that tea farmers who market their produce through the KTDA will be paid 50 percent of the delivery monthly with the rest paid as bonus annually.

Previously farmers were being paid by KTDA factories 14 to 16 shillings per kilo monthly with the bulk of the money paid as bonus in October.

All tea buyers 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.

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.

To reduce conflict of interest, a single broker will only represent 15 factories at the tea auction.

KTDA’s stand

The KTDA, in a brief that will be presented to the ministry, dismisses some the regulations terming them “unconstitutional” and “punitive”.

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According to the agency, the Agriculture and Food Authority (AFA) has also been given too much power that will result to bureaucratic tendencies thus stifling growth of the sector.

Rule 10 (7) of the constitution requires a factory to have 250 hectares of planted tea before renewal of their licenses, which KTDA says will pose challenges for factories to acquire such land.

“This regulation implies that farmers must give up land to the factory. This is unconstitutional since it interferes with individual’s right to own property,” the agency says.

According to regulation 10 (12), a tea manufacturer should build a factory within three years of issuance of a licence, failure to which the permit will lapse.

“This means farmers will not have adequate time to accumulate the required equity to build satellite factories and the spirit and intention of this regulation is therefore punitive in nature,” says KTDA.

Mr Paul Ringera, a director at Githongo Tea Factory, said some of the rules were good but cautioned that some would work against the sector. “We are not opposed to the regulations but the ministry should exercise caution so that farmers are not disadvantaged,” he said.

Other proposed reforms include that, individual tea factories will also be allowed to sell their produce at the tea auction, outlawing direct sale overseas.

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

The reform also calls for automation of the auction process in the next two months to promote accountability.

The government will further procure services of individuals with experience on the best tea practices as it seeks to further streamline the tea value chain.

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