KENYA – The Kenyan 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 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.
“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.
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.
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.
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.
Buyers of the green leaf will have to deposit a down payment of 10 percent with the balance paid before export of the purchased consignment. In turn factories are required to pay farmers 30 days after receiving the auction proceeds.
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.
To reduce conflict of interest, a single broker will only represent 15 factories at the tea auction.
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.
Most of the regulations 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.