In the recent past, the Agriculture Ministry has been at loggerheads with the Kenya Tea Development Agency (KTDA) over the implementation of reforms in the tea sector. Last month, KTDA was in court seeking to revoke the gazettement of a steering committee appointed by Cabinet Secretary Peter Munya to oversee the changes in regulations.
The Financial Standard spoke to Dr Charles Mbui, the managing director of Chai Trading Kenya Company Ltd, a wholly-owned subsidiary of KTDA, to discuss this and other issues affecting the tea sector.
Why is the KTDA opposing the proposed reforms by the Agriculture CS?
KTDA is not opposed to reforms in the tea sector. Tea is the only cash crop we have left that gives value to farmers, and after the collapse of industries like pyrethrum and sugar, all stakeholders should be working to ensure this does not happen.
Our concern has been the inadequate stakeholder consultation in the development of the regulations where the formulation of the National Steering Committee and its gazettement was done without involving other stakeholders and the public.
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It is not proper to kick off such a process without the full buy-in of the farmers, who we represent, and that should ideally be the biggest beneficiaries of any reforms in the sector. The support of players like ourselves is, therefore, crucial as we play our facilitative role.
What role does Chai Trading play in the sector, and how is this function executed?
Chai Trading is a wholly-owned subsidiary of Kenya Tea Development Agency (KTDA) Holdings, which, among others, was created following a Sessional Paper No 2 of 1999 that mandated KTDA to invest in the value chain to improve efficiency and profitability for the benefit of the smallholder tea farmers at the time of privatisation.
We offer warehousing, clearing and forwarding services and are also engaged in tea trading, which entails buying producer teas from the auction and aggressively looking for markets globally. Our business operates profitably and the earnings are paid to KTDA (H) Ltd, which pays dividends every year to the farmers through their factory companies. The company pays the necessary taxes to the government and offers employment to many Kenyans.
What is the scale of Chai Trading’s operations and how do you ensure the farmers you represent get the best value from their crop?
Kenya, as you are aware, is the largest tea exporter in the world and Chai Trading is proud to have greatly contributed to opening new markets to achieve this leadership position. Chai Trading is an ethical and fair participant in the tea value chain and welcomes progressive reforms that can improve the farmers’ earnings. Chai Trading is the market leader in warehousing business in the region, operating over 1 million square feet of warehouse space in Mombasa.
In the past there has been concern from farmers in some regions about the level of support they get from trade groups like yourselves, such as the bonus structure and inadequate field support. What is your take on this?
Chai Trading handles imports of machinery and other equipment as well as fertiliser for the smallholder tea farmers. This is achieved cost-effectively due to economies of scale. Chai Trading is a buyer member of East African Tea Trade Association (EATTA), currently ranked amongst the top five tea buyers at the Mombasa Tea Auction.
As a buyer member, Chai Trading is governed by EATTA rules, which regulate, among others, the sale and payment of auction tea purchases. Chai Trading bids and competes for teas at the auction like other buyers and pays for auction purchases within nine working days.
How does Chai Trading ensure farmers get linkages to access to external markets?
Chai Trading has invested in a foreign subsidiary company known as KTDA Dubai Multi Commodity Centre (KTDA DMCC) based in Dubai Tea Trade Centre at Jebel Ali free zone. KTDA DMCC competes amongst other multinational companies from across the globe operating from Jebel Ali free zone in Dubai.