Tea sector bosses face lifestyle audit as MPs move to restore sanity

Farmers pick tea. MPs claim that some tea factories were paying farmers lower bonuses. [File, Standard] The National Assembly now wants the Tea Board of Kenya (TBK) to conduct a lifestyle audit on the directors, clerks and other influential persons in tea factories, following complaints of exploitation, low pricing and theft of the crop grown by small-holder farmers. The National Assembly's Committee on Agriculture led by Tigania West MP Dr John Mutunga made the recommendations following an inquiry into the pricing of tea in Kenya as a result of complaints raised by MPs from factories in the West of the Rift Valley (WoR). This comes as a task force instituted to establish the cause of the disparity in the tea prices recommended a reduction of the production costs, among other radical interventions. The Tea Pricing Inquiry Committee also recommended an independent audit on adherence and compliance with the law on the licensing of factories by the TBK. The 132-page report faults the tea factories for not replacing dilapidated and inefficient machines to ensure better performance, reduce costs, and increase efficiency. It said several factories are riddled by severe cash flow constraints, leading to an inability to pay a standing loan of Sh10.3 billion as of June 30, within a stipulated one year. The MPs alleged that tea factories from their region were paying farmers lower bonuses compared to those from the East of the Rift Valley (EoR). Similarly, farmers from the WoR held protests and some uprooted their tea plantations, citing low tea prices and bonuses, with the issue of tea pricing being a subject of debate in the National Assembly, hence the decision by the Committee to look into it. "There should be an independent audit on the level of adherence and compliance to legislation on the licensing of factories by TBK, auditing of the hydropower plant projects that are ongoing in the WoR and lifestyle audit of the directors, clerks and other influential persons," the report says. According to the report, board members of some factories were the main beneficiaries of procurement processes, with some managers having worked in the same factory for more than 14 years; thus, familiarity, which impacted their performance. In carrying out the inquiry, the committee reviewed documents, held meetings with stakeholders in the tea sector and conducted field visits to factories in the WoR and EoR to get the views of factory management and farmers on tea pricing. Processing factories They also conducted field visits to the Tea Research Institute (TRI), Mombasa Tea Auction, TBK Quality Analysis and Tea Testing Laboratory and Chai Trading Company Ltd and the Kenya Tea Development Agency (KTDA) warehouse. The committee found that the quality of tea delivered to the auction by factories in the West of the Rift Valley is lower than that from EoR due to several issues, including tea hawking, licensing of more independent tea processors in the region, thus providing a market for teas rejected by KTDA and the multiplicity of cultivators. The committee heard that there are 19 KTDA shareholding tea processing factories in the WoR and 35 in the EoR that own KTDA Holdings Ltd, 65 independent tea factories in the WoR and six in the EoR, 15 licensed satellite KTDA factories in the WoR against two in the EoR. "It takes about 12 to 18 hours to deliver green leaf to factories in the WoR, while two hours in the East of the Rift Valley. Cases of falsification of weighing scales at buying centres were reported in the West of the Rift Valley. Some farmers are given fewer kilogrammes than what they have supplied, therefore reducing earnings," the report states. "Different varieties and cultivators of tea in the WoR are processed together despite the fact that they have different fermentation times, which negatively impacts the quality of processed tea." The committee has since urged the Ministry of Agriculture to institute an independent audit on the level of adherence and compliance with legislation of factories by TBK. "Efforts to audit tea factories by TBK should purpose to cover all factories and any malpractice identified and confirmed should be prosecuted accordingly. TBK should ensure that approved agricultural and manufacturing standards are adhered to across the board, enforcement processes are developed, shared and applied," the committee said. TBK told the committee that the price realised at the auction is determined by the global market supply-demand situation, quality of the tea produced by each factory, which is dependent on various factors, including quality of green leaf (agronomical practices and plucking), post-harvest handling manufacturing practices at the tea factory. Similarly, TBK said the price of tea is influenced by historical buyers' preferences for specific teas from specific tea factories and quality consistency within a specific tea factory. "Traditional tea markets such as Pakistan and Egypt, which take 35 per cent and 15 per cent of Kenyan tea respectively, have had higher preferences for teas from the EoR (30 per cent of national production) compared to the WoR (70 per cent of national production)," TBK explained. TBK explained that the drop in prices of tea was due to challenges in key export markets such as Pakistan, Egypt, Sudan, and Iran, which collectively account for about 70 per cent of Kenya's tea export by quantity. TBK also told the committee that WoR smallholder factories had the lowest prices at an average of $1.78 (Sh231) per kilo of made tea, attributed to lower quality compared to what the market discerns. According to TBK, the payment model used by smallholder tea factories to pay for green leaf supplied by farmers is structured into a monthly payment (initial payment) and the second payment, popularly referred to as the tea bonus. Tea auction The initial payment is an advance payment against farmers' green leaf deliveries for the month, as proceeds from the sale of tea have not yet been realised at the time. "In this regard, tea farmers are paid on a monthly basis an initial amount ranging between Sh23 and Sh25 as determined by the Board of their respective tea factories. The second payment (tea bonus) is the balance of the total sales minus the cost of production (including the monthly payment). However, the second payment is dependent on three factors, namely price realised at the tea auction, the exchange rate to the USD, and cost of production," the board told the committee. Last week, Agriculture Cabinet Secretary Mutahi Kagwe said the government is reforming the tea sector, as part of stabilising prices, improving quality, doubling tea farmers' earnings and making it sustainable. He explained that the government has initiated various programmes to improve the livelihoods of smallholder tea farmers, which aim at improving the average payments to the smallholder tea farmers from Sh50.18 per kilogramme of green leaf in 2022 to Sh100 by 2027. Kagwe said the quality of tea is mainly determined by the quality of green leaf, with the Ministry and other relevant industry players now developing guidelines on the quality of green leaf plucked and delivered for processing by tea farmers to the factories. "A multi-agency committee comprising the Ministry of Agriculture, TBK, Tea Research Foundation, Tea Factories and Traders have finalised developing a draft guideline on the quality of green leaf to be adopted by tea factories in Kenya," he said. He made the remarks when he appeared before the National Assembly plenary. "The guideline prescribes the minimum standard on green leaf quality to be processed by all tea factories, and once implemented, it will bridge the quality and price differences between the west and east tea blocs. TBK, in collaboration with the counties, is currently sensitising tea farmers and factories on green leaf quality standards," he explained. The CS also explained that tea farmers are paid through a two-tier payment model comprising a monthly initial payment and an annual second payment (bonus). Farmers currently receive between Sh23 and Sh25 per kilogramme as an initial payment, while the bonus depends on auction prices, exchange rates and cost of production. During the 2024/25 financial year, average auction prices dropped to $2.41 (Sh313) per kilogramme from $2.54 (Sh330), owing to forex shortages in Pakistan and Egypt, conflict in Sudan, and market access challenges in Iran, which collectively account for about 70 per cent of Kenya's tea exports.

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