Agriculture Cabinet Secretary Peter Munya has warned Kenya Tea Development Agency (KTDA) and the Mombasa auction that their days of monopoly and frustrating tea farmers are numbered. According to Munya, the tea sector is undermined by the manipulation and predatory behavior of KTDA and its subsidiaries on the value chain. He was speaking as he announced the new drastic regulations meant to reform the sector in line with President Uhuru Kenyatta directive.
“All teas produced in Kenya for the export market shall within two (2) months after coming into effect of these regulations be sold exclusively through the auction process. Henceforth, sale by private treat commonly known as Direct Sales Overseas is outlawed” He said. Further to this, teas that are not sold during a particular auction shall be re-listed for sale during the subsequent auction;
According to Munya, KTDA has for long been abusing its dominance at the expense of small holder tea farmers. He accused KTDA that supply over 60% of the tea traded at the auction for consistently using its market power, dominance and influence to undermine the auction, curtail price discovery and exploit the vulnerabilities of small holder tea growers.
The proposed regulatory changes are also geared towards guaranteeing a long term growth and stability of the sector. Another proposal seeks to compel tea buyers to pay in full for all teas they win at the auction before they take custody and lift the tea for export.
“All buyers will henceforth submit to the regulatory authority a performance bond in the form of a bank guarantee equivalent to 10% of the estimated value of the tea they intend to buy to underwrite commercial risks associated with buyers who fail and/or refuse to pay in full for the tea bids they win at the auction”
In a measure to ensure that money gets into the pockets of tea farmers, tea revenue from the sale of tea at the auction shall be remitted directly to Factory Limited Accounts within fourteen (14) days from the auction date.
To break the ring of tea cartels, the new regulations seeks to limit a registered tea broker to provide brokerage services to a maximum of 15 factories limited companies, for a tenure of five year, renewable.
Tea Contributes immensely to socio-economic development of the country. It is the leading foreign exchange earner contributing about 23% of the total foreign exchange earnings. Tea sector also supports the livelihood of over 5 million Kenyans. In the year 2019, the tea industry earned the country Kshs.117 Billion in export earnings and Kshs.22 Billion in local sales. On the supply side, the domestic sales value also increased from ksh.15 billion in 2018 to Kshs.18Billion in 2019.