By Sharon Atieno
Following a presidential directive in 2019 to oversee radical policy and structural reforms in the tea sector due to an outcry from tea farmers, new regulations have been published by the Ministry of Agriculture.
The Crops (Tea Industry) Regulations, 2020 notes that sale of tea to the export market is exclusively through an electronic auction process, and that all tea buyers shall further pay in full for all teas they win at the auction before they take custody and lift the tea for export, removing instances of collusion between Kenya Tea Development Association (KTDA) and farmers through credit sales, with some being written off as bad debts.
With regards to delayed payments by KTDA which resorted to some tea farmers losing kshs. 4.6 billion placed as interest-earning deposits in banks which were put under receivership, the regulations will also seek to operationalize a stabilization fund to cushion farmers from price volatility.
The tea sector will be supported to find more ways to improve the value addition of Kenyan tea, overhaul marketing structures, open up new export markets and boost local consumption of Kenyan tea.
Further, a registered tea broker shall offer brokerage services to a maximum of fifteen (15) factories, removing collusion between brokers and directors, leading to market monopolization and farmers’ tea would fetch lower prices at the auction.
To effect the overdue leadership overhaul in the sector, management agency agreement between KTDA and respective factories shall be for a tenure not exceeding 5 years, and he remuneration paid for such management service will be capped at 2% of the value of tea sold per year. Each factory shall either recruit an in-house company secretary or outsource the service, reducing the interference by KTDA in the running of individual factories.
The funds from the sale of tea at the auction shall be remitted directly to the respective factory accounts within 14 days from the auction date. Moreover, factories shall be required to deposit at least 50% of the funds to farmers’ accounts within thirty (30) days from receipt of proceeds, with the balance being paid as bonus within the same financial year.
These regulations will help close loopholes that East Africa Tea Trade Association (EATTA) has failed to implement for years, exposing the Kenyan tea industry to exploitation by cartels, to the costly loss of farmers, said the Kenya Tea Sector Lobby.
To assure farmers of the income, the regulations will also seek to operationalize a stabilization fund to cushion farmers from price volatility. The tea sector will be supported to find more ways to improve the value addition of Kenyan tea, overhaul marketing structures, open up new export markets and boost local consumption of Kenyan tea.