The Kenya Tea Development Agency (KTDA) has raised concerns on some provisions of the new Tea Act 2020.
This is even as KTDA acknowledged that the new law opened a new chapter for the development of the tea sub-sector and proved beneficial to the smallholder tea farmer.
“However, like most novelties, it contains provisions that offer conflicting indications, and whose impact will vary depending on the role played across the tea value chain,” cautioned Alfred Njagi, Kenya Tea Development Agency (KTDA) Management Services, Managing Director in a statement.
The Act aims to improve the management of the 69 tea factories owned by small-holder farmers in 21 counties. The factory units are run as autonomous companies but managed by the farmers-owned KTDA.
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KTDA Management Services is one of the subsidiaries of KTDA which will be impacted by some of the provisions in the law. The Bill slashes the remuneration of management agent fees to 1.5 per cent of net sales value of tea sold per year from the current 2.5 per cent - meaning that managing agents will have to reconsider their existing arrangements with tea factories.
KTDA might also not be able to perform its current scope of activities. “Invariably, management agents will have to review the scope of services offered to factories for the chargeable fees and let factories seek the balance independently from the market without the hitherto benefits of economies of scale,” said Njagi.
The Bill proposes staff cost for the personnel seconded by management agent to be borne by management agent. This might prove unsustainable owing to the high costs involved.
Mr Njagi noted that the creation of the price stabilisation fund was noble though would have to be relooked into as it could erode farmers’ earnings.
"In its current format, the fund would be funded using a tea levy which is equivalent to one per cent of all teas exported. In the long run, this will end up eroding farmers’ income as the cost is passed down to the same farmers. A similar levy was scrapped in 2016 due to the same concerns,” he said.
On the benefits, he said the revival of the Tea Board would help Kenya unlock more markets for its tea, meaning more earnings for farmers.
He noted that tea hawking would be now dealt owing to the requirement that tea growers be registered with the tea factory to which they deliver.
"The provision demanding that tea growers must be registered with the tea factory to which they deliver green leaf is important in that it will deal with the issues of tea hawking that has, oftentimes, denied smallholder tea farmers the full benefit of their crop,” he stated.
Njagi explained that the Tea Research Foundation would also play a key role in ensuring enrichment of Kenya’ tea, its competitive and diversification of tea products.