Why Agriculture CS should wind up exploitative KTDA

Monday, May 18th, 2020 00:00 |
Tea farming. Photo/Courtesy

The new tea regulations published by Agriculture Cabinet Secretary Peter Munya represent one of the most far-reaching reform measures ever undertaken in the agricultural sector in Kenya.

The CS has published regulations meant to govern the tea sector, and is seeking public views.

This move is in response to the perennial outrage among farmers about exploitation by tea cartels.

The situation has got so bad in the last two years that farmers have begun abandoning the crop. The coffee sector was destroyed in the same way.

The Munya rules will overhaul the way the sector operates, and break up all the cartels that have captured every aspect of tea production and marketing. 

It will liberalise the tea trade fully to enhance competition and efficiency, and bring down costs. 

Farmers will be able to switch factories as they desire, subject to fulfilling any balance of obligations.

The regulations have liberalised green leaf transportation by opening it to private contractors, and has opened the manufacturing of tea, warehousing and packing, and exporting to new players.

Tea factories shall now have the right to appoint independent management agents, a role now played by Kenya Tea Development Authority  (KTDA), that farmers have long complained is too restrictive and exploitative. The agency period is set at 5 years, and fees capped at two per cent of net sales of tea sold at the auction.

All tea produced must be sold through the auction, banning private sales of tea, while new players have been admitted into the auction system.

Tea factories will now participate in the tea auction directly. Munya said the auction system, which he described as the major problem facing the tea value chain, was “dysfunctional, inefficient, and lacks transparency and competition.”

Critically, the new rules state that the buyer shall pay in full for any tea he purchases, and the money must be remitted to the tea factory accounts within 14 days.

The tea factory must then pay the farmer within 30 days of their tea being sold 50 per cent of their earnings, and the period for paying the balance to be agreed upon with the farmers but within a 12 month period.

KTDA, currently the sole management agent for smallholder factories, determines unilaterally when and what to pay.

Of course, all these new regulations mean the ubiquitous role of KTDA, which has siphoned billions of farmers earnings over the years and remained completely unaccountable, has come to an end.

Munya intends to do a forensic audit of the role it has played over the years in the running of smallholder tea sector, and what impact this has had on farmers earnings.

The study would undertake a historic audit and tracing of deductions of money belonging to smallholder tea growers over the last 10 years, and evaluate management of KTDA.  

This dovetails well with the instructions by President Uhuru Kenyatta to the Directorate of Criminal Investigations (DCI) in January to investigate KTDA and the conflict of interest involving board members. 

Most players would agree that KTDA should just be wound up. The reports from Uhuru’s and Munya’s forensic audits should be just to trace and recover lost billions in cash and assets.

Further, all the assets that KTDA has invested in using farmers’ money and from which they earn nothing should simply be liquidated.

These include warehouses and commercial buildings in Nairobi and Mombasa, beach houses in Mombasa, a 600-acre tea farm, an engineering company, a microfinance company, and an insurance firm, among others. 

The proceeds of all these recoveries should simply be distributed back to farmers, and that chapter closed. Now, that would be a real bonus from KTDA!

Munya should corporatise tea factories. These are companies turning over billions, and should be  made to stand alone as corporate entities governed by the Companies Act.

They should elect their directors, who will appoint managing directors to run them. Power will be back in the hands of the farmer over their factories.

Munya stands on the threshold of history. If he pushes this through to its logical conclusion, he will be remembered as the CS who finally stood up to the cartels in the tea sector and declared: “let my people go!” [email protected]

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