CHANGE FOR SMALL FARMERS

Tea lobby pushes for sector reforms, improved earnings

Group calls for change in management of tea factories to benefit farmers

In Summary

•The  lobby has proposed that management fees be brought down in line with global standards of one per cent as opposed to the 2.5 percent currently charged by KTDA.

•Proposes that the government through the Finance Act, 2020 should scrap lot charge and VAT on tea bought for local consumption.

Farmers picking tea in Kangaita village
REFORMS: Farmers picking tea in Kangaita village
Image: FILE

The Kenya Tea Sector Lobby Group wants minimal interference with tea factories' management in its latest push for reforms.

The lobby demands a number of tax measures, timely payment of farmers and upholding of international standards in running of tea factories in the country.

“For the Kenya tea sector to be globally competitive, we must match the global standard in the management of tea,” the lobby says.

 

In its submissions to Agriculture CS Peter Munya, to be included in the draft Crop (Tea Industry) Regulations 2020, the lobby proposes that management fees be brought down in line with global standards of one per cent as opposed to the 2.5 per cent currently charged by KTDA.

Further, the maximum fees chargeable by brokers should be capped at the global benchmark rate of 0.25 per cent as opposed to the current 1.25 per cent charged by brokers.

Lobby chairman Irungu Nyakera proposes that the government through the Finance Act, 2020 should scrap lot charge and VAT on tea bought for local consumption.

“This will allow the farmer to have enhanced earnings while making the sector attractive for the development of a cottage tea manufacturing and packaging industry,” Nyakera notes.

The proposed regulation provides for funds from the sale of tea being transmitted to the factory within 14 days of purchase.

“We propose that the regulation specify penalties that would arise if the payment is made later than 14 days prescribed in the Act to ensure prompt payment of farmers,” the lobby says.

To remove any undue control of tea factories by the management agent (KTDA), the lobby proposes that the role of making investment decisions for the factory should be exempted from any management agent agreement.

 
 

This will ensure that grower funds are fully controlled by the factory directors.

KTDA should be required to sell off all its non-tea marketing related subsidiaries and properties and subsequently distribute those funds to the factories.

Considering that agriculture is a devolved function , Kenya Tea Sector Lobby is concerned that there appears to be little involvement of county governments in the sector save for licensing of tea nurseries.

“We propose that the county governments' involvement in the implementation of these regulations be mainstreamed,” Nyakera said in a statement on Thursday.

To secure farmers' incomes the lobby proposes that, within a year of operationalization of the regulations, the Cabinet Secretary shall issue guidelines on the development of a framework for a sustainable minimum guaranteed return (MGR) for tea farmers.

This price stabilisation programme should be drawn up along global best practices and ensure it does not create loopholes to enrich the tea cartels, Nyakera says.

The government should also appoint an accredited international audit firm to carry out a forensic audit on KTDA Holdings, its subsidiaries and all its 68 factories.

This will assist in bringing closure to accusations of malpractice and set the tone for the lawful implementation of the regulations and the prudent custody of public resources,” Nyakera says.

Edited by Henry Makori