Radical changes proposed in new Bill to reform the tea sector

Gem MP Elisha Odhiambo who has sponsored the Kenya Tea Development Authority Bill 2018. PHOTO/FACEBOOK
By ABDULHAKIM SHERMAN
newsdesk@reporter.co.ek
The Kenya Tea Development Authority (KTDA) is likely to revert to its old status as an industry regulator if a new Bill aimed at reforming the tea sector and give farmers more say in decision making is approved by Parliament.
The Kenya Tea Development Authority Bill 2018 that has been prepared by Gem MP Elisha Odhiambo  that details a raft of measures that include reviewing levies charged on players along the value chain has been taken to Parliament.
The Bill aims to create a new framework to ensure inclusive growth and development of the tea industry and enhance good governance in the sector.
The Bill aims to restore the defunct KTDA a parastatal that was replaced by Kenya Tea Development Agency a private company owned by more than 560,000 tea farmers who are also shareholders of KTDA processing factories.
It aims to achieve farmers net return to operational cost ration target of 75:25 through the production of best quality tea and march production to demand.
The MP also want the Ad Valorem Levy reduced from one percent to 0.75 percent in line with Section 10 of the Crop Act which provides that funds from commodities fund may be used to provide affordable credit and advances to farmers for farm improvements, inputs and operations.

In an industry where brokers make more money than farmers, the Bill also wants a review of the brokerage charges and enhance regulation of tea brokers from time to time through review of brokerage fees, removal of the lot charges from exported tea and the regulation of tea brokerage services by the Agriculture, Fisheries and Food Authority (AFFA).

It wants the Authority to expand and develop new markets for tea through a review of the tea value chain to maximise value for tea farmers.

Workers picking tea on a plantation in Kericho. PHOTO/COURTESY
It also aims to promote value addition in the tea sector through establishment of common user blending and packaging facility, adaption and implementation of value addition policy and promotion of cottage tea manufacturing.
The Bill aims to establish a two-tier Kenya Tea Council at the County and national governments level as a forum for the tea industry and be used to promote tea markets and exports.
It envisages the establishment of the National Stakeholders Tea Growers Association (NSTGA) to articulate issues of concern and common interest of tea stakeholders at the County and national government levels.
It calls for the review of governance in small holder tea subsector to ensure directors and employees of management agents and Authority are not directors of tea companies or factories they manage.

The Bill wants the development of a fertilizer subsidy for tea farmers through sustainable mechanisms and strengthening of the tea development and tea research institutions like the Tea Board of Kenya and Tea Research Foundation of Kenya.

It also wants a review of the management and operations of the tea industry institutions in particular governance, fees and levies, management and operations at the small holder industry subsector.
Findings and Recommendations of the Taskforce Report on Tea Industry

A purple tea plantation in Nandi County. PHOTO/COURTESY
The new Bill comes after the release of the Taskforce Report on Tea Industry that was appointed by President Uhuru Kenyatta in 2016 to look into how to improve tea farmers’ earnings.
The taskforce that was chaired by, Mr Kagiri Kamatu, came with radical proposals that could have changed the way the highest export-earning industry operates.

Among the taskforce proposals was the restructuring of the Kenya Tea Development Agency (KTDA) and review of its contracts with farmers; reduction of levies and the establishment of a regulator for the industry, years after a similar body was scrapped. 

The task force’s report also recommended the review of governance of the small-scale tea subsector, particularly in terms of employees of KTDA (MS) and directors of KTDA Holdings being board members of tea factories which are independent.
The report recommended a study of its model with a view to addressing grievances of the farmers and other stakeholders.
The thorny issues raised was lack of competitive bidding in the appointment of management agents for over 60 tea factories owned by about 600,000 small-scale farmers across the country.
The KTDA charges 2.5 per cent as management fee, which the stakeholders say is too high and want it reduced to one per cent.

Recently, the Gem MP questioned Agriculture Cabinet Secretary, Mr Mwangi Kiunjuri, on the status of the implementation of the taskforce report and specifically measures the ministry had taken to eliminate middlemen who have been main beneficiaries of the proceeds from the tea sector.


Gem MP Elisha Odhiambo. PHOTO/COURTESY
Mr Kiunjuri said the Tea Industry Taskforce Report of 2016 was being implemented and an oversight committee comprising of key industry stakeholders meets every three months to review the implementation progress.
The CS said as recommended by the taskforce, the Government has encouraged tea factories to improve on operational efficiency and pay growers at least 75 percent of the auction price.
Mr Kiunjuri added that for the tea traders the Government has composed a committee to propose modalities of setting up of a common user blending and packaging facility in Mombasa to support the SMEs in value addition and provide necessary incentives.
Findings of the FAO Kenya Tea Value Chain Technical Assistance Mission report

A report of the Kenya Tea Value Chain Technical Assistance Mission undertaken by the secretariat of Food and Agriculture Organisation of the United Nations (FAO) says tea growers received US$0.47 per kilogramme of green leaf, while retailers received US$ 5.56 per kilogramme of loose tea and US$ 11.22 per kg for tea bags.

The FAO report says a major problem in the KTDA supply chain in leaf hawking, which is undermining targeted throughputs at various tea factories.
The report adds automated records of KTDA members indicate a drop in green leaf deliveries for some growers.
“For instance, six million kilogrammes or 30 percent of expected green leaf throughput at the Kiambaa tea factory is lost to hawkers every year,” the report says.

Workers in the tea industry are agitating for better working conditions. PHOTO/ALAMY
The Mombasa tea auction has also been infiltrated by “briefcase buyers.” These are buyers who approach producers directly to buy their tea, bypassing the auction system.

“Similar to green leaf hawkers, these buyers offer immediate cash for lots, but at lower prices. An estimated 40 percent of tea production, 25 percent of which are KTDA teas, are sold in this manner and does not reach the auction,” it adds.

The FAO report calls for the restructuring of the value chain, including the auction to make it more efficient, transparent and fair, formation of an independent marketing agency of KTDA to more effectively market Kenyan tea and the process shorten the value chain ensure competitive and rapid positioning of Kenyan tea worldwide.
It adds that improving market transparency would go along way to removing suggestions of collusion, particularly among brokers and buyers and it suggests that this function be taken up by the Tea Research Institute by expanding its mandate to include economic and market research.

The FAO report adds that the price gap between the auction and retail is so large it strongly supports the establishment of a marketing agency for KTDA teas to fully realise the potential and the bargaining position of a company that controls more than 60 percent of total tea produced in Kenya.

The report says overall, the KTDA estimates that at least 100 million kilogrammes of green leaf are lost to hawking each year. This is equivalent to 23.5 million kilogrammes, or 10 percent, of made tea produced by KTDA in 2014/2015.

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