What you need to know:
- Divisions between KTDA and its factories have begun emerging.
- The factory told KTDA that it is not opposed to the reforms.
Another opponent of the reforms is East African Tea Trade Association – which runs the auction platform in Mombasa.
The Directorate of Criminal Investigations (DCI) has vowed to look into claims of fund misappropriation at the Kenya Tea Development Agency (KTDA).
The decision comes as KTDA continues with a drive to have the new tea regulations gazetted by Agriculture, Livestock, Fisheries and Cooperatives Cabinet Secretary Peter Munya set aside.
The agency has urged the Senate to reject the guidelines, saying if implemented, earnings from tea would significantly reduce.
Divisions between KTDA and its factories have begun emerging.
DCI head George Kinoti has received a petition from farmers allied to seven factories seeking his help in unravelling how much KTDA has been using in court cases without authority of the independent companies.
“I will hunt these lawyers with the pain of suffering farmers. This is similar to what brought down Mumias Sugar Company and left farmers in abject poverty,” Mr Kinoti told the Nation.
In a virtual meeting with the Senate Committee on Agriculture and the delegated legislations, KTDA accused Mr Munya of publishing the regulations without consulting anyone. In April, the CS asked stakeholders to send written memorandums from the public since gatherings had been banned.
Farmers have told the DCI to look into the circumstances under which KTDA billed the factories tens of millions of shillings for a case filed in 2019 when other litigants spent Sh500,000.
“Some people have turned farmers into cash cows,” Mr Kinoti said. In their letter, the farmers had asked the DCI boss “to demand a forensic audit of KTDA lawsuits and their ensuing costs”.
The Nation also established that Gacharage Tea factory in Muranga wrote to KTDA after the agency sent a prepared resolution asking it to approve the appointment of a city advocate in a case opposing the new regulations.
The factory told KTDA that it is not opposed to the reforms.
It also asked the agency to furnish farmers with the expected bill since the amount to be paid to the law firm was not indicated. “Experiences show exorbitant charges were incurred when the firm was contracted to challenge a case… the case cost farmers Sh70 million,” the letter from Gacharage, signed by its official Paul Kagema, said.
In the petition on Thursday, KTDA through its advocate, Benson Milimo, told the Senate committee that in publishing the rules, Mr Munya introduced unnecessary regulatory bureaucracies, contrary to the 2013 Crops Act.
The lawyer told the panel chaired by Embu Senator Njeru Ndwiga that the CS’s decision to allow individual factories to sell their produce at the auction is a violation of the Act, which vests the authority of value addition and marketing on the Agriculture and Food Authority (AFA).
“Despite the provision of the Crops Act, 2013, the Cabinet Secretary has purported to assign himself this function and instead compel AFA to undertake its statutory duty. Mr Munya has removed these functions and imposed them on private persons such as tea buyers and exporters,” Mr Milimo said.
The agency added that regulation 36 (4), which requires a limited factory to build its green leaf collection centre at least 250 meters away from the collection or buying centre of another factory is a violation of Section 3 of the Crops Act. He said the section provides that regulations made should not create unnecessary and additional expenses on the industry players.
“This increased cost is in violation of Section 3 of the Act, which discouraged such endeavours. Indeed, there can be no justification in the government being dictating who constructs a business facility for citizens,” Mr Milimo told the committee.
Another opponent of the reforms is East African Tea Trade Association (EATTA) – which runs the auction platform in Mombasa.
EATTA told told the Senate team that the new regulations do not add value and that if implemented, would make Kenyan tea unmarketable across the globe.
Accused of corrupting
EATTA members have in the past been accused of corrupting the auction system and running a non-transparent platform which allowed brokers to thrive at the expense of farmers. EATTA representative, Mwangi Kibichio, said the regulations are unnecessarily restrictive, not alive to the reality on the ground and ambiguous.
He added that the guidelines are prone to abuse by authorities. “The regulations are largely silent on development and growth measures, relegate reduction of taxation and regulation burden and concentrate on marketing and trade rules where government roles and levying aspects are magnified,” Mr Kibichio told the lawmakers.
He added that the new guidelines do not address challenges bedeviling the tea industry such as high input cost borne by farmers, lack of competitiveness in the international market due to inadequate value addition, market distortion by middlemen and uncoordinated government agencies.
The stakeholders told the committee that the regulations should be withdrawn or subjected to radical amendments. President Uhuru Kenyatta on January 14 issued directives to clean the industry and restore profitability and hope to hundreds of thousands of local farmers. In particular, Mr Kenyatta called for reforms in KTDA, brokerage and auctioneering.
The President told stakeholders to seal corruption and embezzlement loopholes. Following the directives, Mr Munya published the regulations. They say farmers who market their produce through KTDA will be paid 50 per cent of the delivery monthly, with the rest given as bonus annually.
Farmers used to be paid by the factories Sh14 to Sh16 per kilo monthly, with the bulk of the money being paid in October.
In the new reforms, individual tea factories will also be allowed to sell their produce at the tea auction, outlawing direct sale overseas. The CS further said that any tea that is not sold during a particular auction shall be re-listed for sale during the subsequent auction.
The reforms also call for automation of the auction process in the next two months to promote accountability.
More so, buyers of the green leaf will have to deposit a down payment of 10 per cent with the balance paid before export of the purchased consignment. In turn, factories are required to pay farmers 30 days after receiving the auction proceeds.
All tea buyers, he also said shall henceforth submit to the Regulatory Authority –Agriculture Food Authority (AFA) a performance bond in the form of a bank guarantee equivalent to 10 per cent of the estimated value of the tea, they intend to buy.
To reduce conflict of interest, a single broker will only represent 15 factories at the tea auction.
The committee is currently looking regulations before presenting a report to the house on whether to adopt the new regulations or reject them.