Kenya Establishes New Tea Regulations to Cut Unscrupulous Traders, Support Farmers.

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By Rootooba Contributor, 28 May 2020

Tea farmers in the country will be the biggest beneficiaries of tea regulations that have been set by the Government. 

The Agriculture, Livestock, Fisheries and Cooperatives Cabinet Secretary Peter Munya has announced the final tea regulations 2020 following a public consultation process.

The CS speaking at Kilimo house said the government has set a robust and progressive tea regulation that will steer the tea industry well into the future.

“Farmers have for a long time suffered under the hands of cartels and therefore the regulations will re-balance power and influence wielded by value chain players”, he said.

The problem of diminished earnings for farmers has been attributed to inefficiencies in the tea value chain such as low tea prices, delayed payments, low initial payments or bonus and fluctuating net earnings to farmers.

The governance challenges are also embedded in the tea value chain including but not limited to conflicts of interest in the operations of Kenya Tea Development Authority (KTDA) and its subsidiaries and the auction process. He added. 

“There has been lack of transparency in the management of KTDA subsidiaries and non-declaration of dividends to farmers,” ‘‘The problem of exploitation of tea farmers by persons who are not tea growers are also a big problem’’ the CS noted 

The key highlights of the regulations will be a reduction of unnecessary cost burdens imposed on vulnerable tea farmers as they will significantly improve productivity and efficiency in the tea value chain, create transparency and accountability among value chain actors including auction organizers, improve the competitiveness of tea exports in the international market and generate more earnings to the country and farmers from tea exports.

 “All teas processed and manufactured in Kenya for the export market except orthodox and purple tea shall within 2 months from the date of commencement of the regulations be offered for sale exclusively at the auction floor,” the CS said.

He therefore noted that the sale of tea by private treaty is thus outlawed and any tea not sold at the auction shall be relisted for sale during the subsequent auction.

All buyers at the auction, the CS added shall before the auction submit to the authority a performance bond equivalent to 10 percent of the estimated value of the tea or teas they intend to buy at the auction in the form of a bank guarantee from a licensed commercial bank.

The regulations have also incorporated reduction of brokerage fee from 1.50 percent of the value of tea sold to 0.75 percent with the farmers paying 0.2 percent and buyers paying 0.55 percent respectively.

There has been reduction of the number of directors for smallholder tea factory limited companies to three (3) as well as reduction of the directors servicing smallholder tea factory limited companies to two terms of three years each.

Munya further said   that the regulations will outlaw persons who are not tea growers, commonly known as “soko-huru”or “mukohoro” from engaging in the business of buying and selling green leaf to tea factory limited companies.

“For any exporter to ship tea from the country they must have put in 40 percent value addition to their tea and this will be in a duration of 8 years for buyers who have been in operation and five years for new buyers coming into the market “, Munya said adding that failure to this observance will lead to the exporters losing their licenses.

The regulations have also reduced the management agency fees for smallholder tea factories from 2.5 percent to 1.5 percent of the value of tea sold as well as removal of the requirement for registration of commercial green leaf transporters.

The regulations have been forwarded to the Attorney General office for legal scrubbing after which they will be published by the CS and forwarded to parliament for discussion and final approval. 

Munya further stated that in the next one week he would appoint a taskforce to spearhead implementations of the regulations.

During the consultation process, the CS mentioned that the tea stakeholders made progressive submissions that had greatly enriched the tea regulations touching on diverse aspects such as inculcating the constitutional granted One-Third Gender rule in the election of directors for tea factories to improve participation of women and also outlawing persons who are not tea farmers from trading in green leaf to curtail tea theft and poaching.

The regulations have come about after President Uhuru earlier on in January 2020 issued a raft of directives on the management of the tea value chain to improve operational efficiencies of various actors and guarantee better earnings for the tea farmers.

The President had stated that unless broad policy, administrative and regulatory reforms targeted at operational efficiency improvements in the entire value chain are undertaken, the performance of this sector will remain underwhelming with adverse cascading impact on the macro economy and tea farmers.

 Specifically, the President called for reforms in the roles played by Kenya Tea Development Agency (KTDA), Tea Brokers, Tea Buyers and the entire Tea Auction System to guarantee tea farmers fair and decent earnings for their labour.

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