Tea reforms need not have run into legal hurdles

Tea farmer

A Tea farmer joins others in a demonstration along Ngong Road in Nairobi on December 17, 2020 to push for the Tea Bill to be passed by the Senate.

Photo credit: Evans Habil  | Nation Media Group

What you need to know:

  • The tea sector value chain provides employment to hundreds of thousands of people.
  • It is also true that there has been a fair amount of controversy in the past over the manner in which the tea sector has been managed.

That the courts have decided to suspend implementation of sections of the recently enacted Tea Act 2020 is hardly surprising. What is surprising is the expectation that parties feeling aggrieved by clauses in the Act would take the changes tamely.

The big tea firms were the first to go to court and Justice Anthony Mrima allowed their request to suspend implementation of Sections 36, 48 and 53 of the Act until the petition filed by Kenya Tea Growers Association is heard and determined.

The law was enacted to provide regulation, development and promotion of the tea industry, with Section 36 stating that all tea processed and manufactured in Kenya for the export market shall be exclusively offered for sale through the tea auction.

Driven by self-interest

Section 48 requires all tea buyers and exporters to value -add at least 40 per cent of their annual exports while Section 53 establishes a tea levy to be determined by the Ministry of Agriculture.

Following the initial ruling, the High Court suspended sections 5(1) (e) and (i), 21 (2), 22, 25, 33, 34, as well as others in a decision that effectively halts the implementation of the Act until the cases are heard and determined.

This unfortunate reality has been precipitated by the refusal of parties driven by self-interest to bulldoze a motion that, though well-intentioned, has the capacity to be divisive.

No one disputes the fact that tea is a hugely important cash crop, fetching close to 23 per cent of foreign exchange in 2019, an equivalent of Sh113.6 billion, according to data from the Kenya National Bureau of Statistics. Local sales generated another Sh22 billion. The tea sector value chain provides employment to hundreds of thousands of people, justifying the interest that the government, the leaders and people have in the sector.

It is also true that there has been a fair amount of controversy in the past over the manner in which the tea sector has been managed, with the Kenya Tea Development Agency (KTDA) accused of not being transparent with the amount of earnings that the crop fetches and dissatisfaction with the amounts that finally end up in the pockets of farmers. The organisation has been seen as top-heavy, profligate and inefficient.

The Tea Act 2020 was intended to cure some of these grievances and indeed it does. But controversies that dogged the process leading up to the signing off of the Act suggested that consensus had not been reached on critical issues and the court was always going to be an option.

Among the reforms that have generally received widespread support are the proposals to revive the Tea Board of Kenya and the Tea Research Foundation that were merged with all other crop directorates under the Crops Act 2013.

The merger left the tea sector (and indeed most of other crops) rudderless with no agency to regulate and promote its development. The revival of the Board will seal this gap by providing a policy and regulatory oversight.

The Tea Research Foundation will, among other duties, continuously generate knowledge and help farmers improve the tea varieties, quality and yield from their farms. This is a crucial function.

Poorly researched

However, some of the proposals have been criticised as hurried, poorly researched and with potential to harm rather than improve the operations in the tea sector.

One of these is the law that introduces the stabilisation fund, which is intended to guarantee farmers a minimum return.

This law will not always work in favour of the farmers because there will be years, for example 2019, when KTDA will declare a higher payout to the farmers than will have been ring-fenced by the Fund.

Another proposal that has been criticised as being malicious is the requirement that the management fees paid by tea factories to KTDA Holdings be reduced from 2.5 per cent of total earnings to 1.5 per cent.

This proposal fails to appreciate the value the subsidiaries add by reducing costs because of the leverage on the economies of scale.

There are other clauses that have been seen as unlawful and unconstitutional and it is now up to the court to arbitrate. In the meantime, the positives that could have flowed out of the reforms remain elusive for a while longer.

The writer is a former Editor-in-Chief of Nation Media Group and is now consulting. [email protected], @tmshindi