What you need to know:
- KTDA boss says the current board is working with the Ministry of Agriculture and the Tea Board of Kenya to implement the Tea Act.
- The board has also launched a forensic audit for all KTDA managed factories and subsidiaries to establish if funds have been lost.
This week, David Ichoho, the Kenya Tea Development Agency (KTDA) chairman answers your questions.
Some years back, tea farmers used to literally smile all the way to the bank. However, the same farmers are currently a desolate lot courtesy of acts of commission or omission by KTDA. Sir, what is your take on these observations? Has KTDA become the weakest link in the efficient marketing of the farmers’ tea? What is being done to reverse the problems at your institution? Komen Moris, Eldoret
Whereas it may seem to be true, the fact of the matter is that tea is still the crop that delivers the highest return to the farmer in the regions where it is grown. Nationally, tea is the leading foreign exchange earner. However, like any other business that has internal and external challenges, there are some weak links and that is what my current board and the new Tea Act is seeking to address.
Key among them is the price discovery process, conflict of interest, capital investments and cost management. To address price discrepancies, we introduced a minimum reserve price in July and the price went up by 64 per cent. Before this, tea was selling at an average of Sh190 per kilogramme of made tea, this past week, KTDA tea traded at an average of Sh296 at the Mombasa auction. My board and the management team are addressing all the other issues progressively.
One of the big fights between KTDA and the government was whether the affairs of the authority can be directed by the government. KTDA has said it is not a government agency, while the government has attempted to have a say in its affairs so as to protect farmers. What is the correct position on this matter? Does your board currently have any working arrangements with the government? Seth Agalla, Nairobi
KTDA, which was hitherto a government parastatal, was privatised through Sessional Paper No. 2 of 1999 and the objective was to streamline the organisation’s operations to ensure it delivers more returns to the smallholder tea farmers.
Any company that has more than 50 shareholders is largely a public company and therefore must focus on issues that are of public interest. This was not largely achieved, so the government was forced to intervene through the Tea Act, which was enacted in 2020.
Sadly, the previous board and selected stakeholders challenged the Act and, painfully for the smallholders, a huge amount of their money was being used to hire lawyers to challenge the reforms.
The current board is working with the Ministry of Agriculture and the Tea Board of Kenya to implement the Tea Act, especially those sections that have not been legally challenged.
The manufacturing cost of every kilogramme of made tea includes monthly green leaf payment. Why are farmers deducted the green leaf payment for the second time during the time of bonus pay-out yet it is also included in the manufacturing cost? Albert Muthomi Nyaga, Embu
Monthly green leaf pay is an advance the farmers are paid whether their tea is sold or not to enable them continue with their business as made tea is being marketed. All costs are not factored in during the monthly pay, but this happens during the final payment hence no double costs. Cost management is our key focus to enable us to get the maximum return for our farmers.
In Zone 6 factories (including Mungania, Rukuriri and Kathangariri), tea farmers were deducted money to start a power generation project. Eleven years down the line, the project has never started. The hundreds of millions of money contributed by poor farmers has been squandered, with no effort to answer questions by the farmers concerning that project. What actions is the current management under your stewardship taking to ensure that either the farmers get back their money or the project is actualised? Albert Muthomi Nyaga, Embu
To increase earnings for the farmers, cost management is key and mini hydropower stations were envisaged to reduce energy costs, which constitute about 30 per cent of the production cost of tea. The board has launched a forensic audit for all KTDA managed factories and subsidiaries and if the findings indicate any money was lost, the due recovery process will be instituted.
What are the difficulties encountered in ensuring that the returns to the small-scale farmer are as fair as possible? Githuku Mungai, Nairobi
Every business has its challenges and the tea business is not an exception. The reasons why farmers agitated for change was because there were structural weaknesses that inhibited the growth of the sector and reduced farmers’ earnings. Some of these included governance structures that denied farmers an opportunity to have representation at the decision-making table. We had a scenario where a majority of past leaders had served for more than 15 years. With the new electoral process of one-man-one vote, we have seen an injection of fresh leadership skills in most of the boards.
Other areas that we are looking at are cost management and relevance of projects that were implemented and which are not likely to deliver earnings for the farmers. We are conducting a forensic audit to address these gaps. There was also an issue of price discovery and this is being addressed through intervention at the auction where we have already instituted a minimum reserve price.
What are you doing as the KTDA chair to clean the rot happening in some factories in R6, where some directors make false mileage claims? Andrew Nyarango
There are procedures in place which guide compensation of the factory directors and no payment that is not in compliance with the stipulated guidance is made. If such happens, the on-going forensic audit will flag it and action will be taken.
Can the Greenland Fedha consider lowering the loan interest rate for farmers? Joe Gachoka
Lowering the cost of credit is one the pillars of empowering farmers. This is in the pipeline and we are looking at eight per cent up from 21 per cent for our tea farmers. This will be a game-changer and will eradicate poverty among farmers.
Sir, tea farmers in Mt Kenya are being paid (the second payment) at rates of between Sh12 and Sh17 per kilo yet your new board in the new reforms promised a payment of Sh50 per kilo. What could have happened? Shadrack Mwaura, Mwihoko
The Tea Act clearly stipulates that the farmers be paid 50 per cent of the proceeds from the tea sales and not Sh50 as touted in some areas. The Act has been challenged in court and the litigation process will determine the way forward.
Important to note is that the farmers in the Mt Kenya region received Sh5 increment in their monthly payment, which impacted the final payment. The final global rate for tea payment this year is similar to last year and indeed what salvaged the situation is the foreign exchange since we sold the tea at an average of $109 compared to $104 in the previous year.
The bonus rates for Mt Kenya region ranged from Sh17 to Sh30. We are committed to higher rates next year for all farmers.
Cotu secretary-general Francis Atwoli, who also doubles as the secretary-general of Kenya Plantation Workers Union, was vehemently opposed to the introduction of tea picking machines by multinational companies, especially in Kericho and Nandi counties. How was this matter resolved? What is your board’s position regarding the introduction of the machines? Dan Murugu, Nakuru Town
Plucking costs have steadily increased and to address this, we are testing machine plucking to reduce the cost of plucking without compromising our quality. In some regions, it costs Sh12 to pluck a kilogramme of green tea, which is untenable. This has a huge impact on the production costs. We hope this machine plucking intervention will enhance returns to farmers.
Sir, do you have any arrangements to pay farmers before the 10th of every month as opposed to the current trend? Maritim Joseph, Kericho
We are working on our payment cycle and are looking to pay the farmers before the 10th of each month. Currently, we pay our farmers by the 25th of every month without fail which is better than what most companies do. We assure farmers of timely disbursement of money every month.
Most of tea factories managed by KTDA sell poor quality PF1 tea leaves at factory doors to farmers at about Sh480 per kilogramme which is double what KTDA sells at the auction. Is this fair? Why can’t KTDA subsidise these prices to their farmers and maximize on local consumption because almost every homestead in Kenya takes tea in the morning? Albert Muthomi Nyaga, Embu
The teas sold at the factory door sales are the same teas sold at the auction. Key to note is that the teas sold at the factory attract VAT and other related costs like packaging whereas the tea sold at the auction attract no such costs. Previously, all teas were taken to the auction but I am happy to note that farmers can buy teas from the factory door sales and the price compared to other retail prices are very competitive and quality is not comparable. We will work with the Tea Board and Ketepa which is a packaging company to increase local consumption.
Next week:We will publish the responses to your questions sent to Water, Sanitation and Irrigation Cabinet Secretary Sicily Kariuki last month.