Tea farmers have challenged the recently passed Tea Act.
The Kenya Tea Growers Association filed an urgent petition at the High Court challenging Sections 36, 48 and 53 of the Tea Act 2020 on grounds that they were illegally inserted by Parliament without considering the plight of tea farmers.
Through lawyer Fred Ojiambo, the association wants the three sections declared unconstitutional, illegal, null and void, and that they be expunged from the Act.
The farmers claim the said provisions will increase taxes and drive them out of business.
“The provisions introduce additional tea levies, which are higher and are likely to drive the privately owned tea estates out of business. The sections were unlawfully inserted in the final draft passed by the National Assembly and ratified by the Senate without public participation,” said Ojiambo.
The new law was enacted to provide regulation, development and promotion of the tea industry, with Section 36 stating that all tea processed and manufactured in Kenya for the export market shall be exclusively offered for sale through tea auction.
Section 48 of the Act also provides that all tea buyers and exporters shall value add at least 40 per cent of their annual exports, while Section 53 establishes a tea levy in which the Ministry of Agriculture has been given the authority to levy additional taxes on tea exports.
The Act was passed by the Senate on December 21, last year after considering amendments proposed by the National Assembly. President Uhuru Kenyatta assented to the Bill on December 23 and it became operational from January 11.
But the associations argued that implementation of the three sections was discriminatory against large-scale private companies engaged in tea farming, given that other cash crops do not attract such levies.
“The associations have contracts with foreign companies to export tea and implementing the three sections will mean that they will not be able to fulfill their contractual obligations with the investors and occasion loss to the economy,” said Ojiambo.
He submitted that by channelling all Kenyan tea sales through auction, the Act violates provisions on fair competition, which prohibits restrictive trade practices.
According to Ojiambo, the tea growers associations are the biggest employers in the agricultural sector and making them lose their income through the restrictive trade practices and additional levies will force them to cut on their employment and render people jobless.
He said the introduction of the 40 per cent value addition to tea sales contravenes the principle of freedom of contract, which dictates that trading parties are free to enter into binding contracts on their own terms without outside interference.
“The value additions will result in increased prices of Kenyan tea and consequently lower the competitive advantage the country has had in regional and international tea markets. It will also result in higher tea productions and drive the companies out of business,” said Ojiambo.
He argued that the provisions are not compatible with principles of good governance since they were not subjected to public participation to ascertain their implications on the tea growing and production sector.
The associations are seeking an order suspending implementation of Sections 36, 48 and 53 and a declaration that they violate provisions on fair trade practices.