Tea factories have threatened to invite bids from other licensed management agencies after a stalemate with the Kenya Tea Development Agency Management Services.
Zone Four tea companies comprising Chinga, Iriaini, Gitugi, Gathuthi and Ragati cited the failure by KTDA MS to agree on the amended management agreement terms.
According to their company secretary Patrick Ngunjiri, the standoff between the four factories and the agency is informed by among other things, control of tea factories, management fees and involvement of directors in the purchase of factories accessories.
“The existing agreement is oppressive to farmers and does not give farmers an iota of freedom to run their factories in accordance of the Companies Act,” Ngunjiri said.
According to the directors, the management agent should stick to its duty of looking for the market of the tea produced and not engage in the daily operations of the factory.
Another contentious issue that directors want to look at is the payments of tea by brokers. They argue that instead of money being wired to tea factories, it is sent to KTDA MS, who do not disclose many details, including the exchange rates.
“We want tea factories to be informed on the exchange rates so that we can account for every coin. On the issue of purchase of factory equipment and fertiliser, our duty ends at reporting on what is needed and yet we are the representative of farmers,” said Chinga Tea Factory director Watai Gachii.
The directors are also calling for separation of duties between farmers’ representatives and KTDA subsidiary directors.
“When farmers elect their director, he joins other directors to elect a board member. It is then the board member who appoints directors of subsidiary companies such as KTDA MS. We want these directors to be elected by farmers so that they can be answerable to the farmers directly,” said Gachii.
He said some people sit on the board of the holding company (KTDA) and also at its subsidiary (KTDA MS) to enter into contracts with farmers.
However, KTDA chairperson defended the Management Services, saying it has over 60 years of experience and that it is the one that has grown the factories’ infrastructure leading to the construction of 71 factories.
“KTDA MS has requested time to study the reviewed management agreement, which is the purpose of the negotiations. Our work is to observe the activity and ensure that there will be no unfair practice and that all that they will agree will help our farmers,” he said.
He said KTDA MS has led to the creation of new markets. “So far we have an agreement with over 40 tea factories and we have a few remaining in Mt Kenya regions such as Nyeri, Kiambu, Murang’a, and Meru regions.”
Murang’a tea factories have also invited other management agencies in their meetings in bid to compare their offers with KTDA MS in a bid to get the best deal. They are meeting the directors yesterday and today.
Failure by the farmers’ representatives and the KTDA MS to agree on the management agreement has seen the Tea Board of Kenya extend the submission of their agreements to May 16.
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“Where the TBK is desirous that the process of negotiating the reviewed management agreements be concluded soon to pave the way for the implementation. It is also cognisant of the need for the parties to undertake the exercise objectively without undue pressure or interference,” read part of the letter signed by Peris Mudida, TBK Acting Chief Executive Officer.
Other than KTDA MS, other licensed management agencies include Tropical, Eastern Produce Kenya and Williamson Tea.
But the three are known to manage tea estates while smallholder tea factories have their tea managed by KTDA MS, a subsidiary of KTDA Holdings Ltd owned by farmers.
TBK member Charles Kirigwi said factories were within their legal rights to contract private management agencies, adding that the law also allows them to look for their market directly without involving a management agency.
“Section 34 (1) of the Tea Act 2020 deliberately uses the word ‘may’ while allowing a person who intends to manufacture or deal in tea to engage a management agent this therefore means that they can do it on their own,” he said.