In whose interest is this revised tea levy?

“It would appear that certain top mandarins in the Ministry of Agriculture and other state agencies are developing and nurturing a highly autocratic and high-handed managerial streak totally at odds with the best interests of the sector and the spirit of the new Constitution.”

With electoral politics and political coalitions currently dominating the local media, other major developments, particularly in the economic or commercial sphere, are going largely unnoticed. Take the tea sector, for example.

According to various insiders within this sector, there are certain policies and procedures being spear-headed and promoted by the Tea Board of Kenya, the sector regulator, and the Ministry of Agriculture which could have a far-reaching but effectively negative impact on this sector, if they are not immediately reviewed and reversed.

These insiders are saying that some of these policies are being enacted and implemented without either sufficient or any consultation whatsoever with all the major stakeholders in the sector.

They are now raising the red flag and warning that, unless this trend is reversed, the Kenyan tea sector could cease to compete globally, leading to major foreign exchange losses and the loss of thousands of jobs within the sector.

Of most immediate concern to these stakeholders is the proposed replacement of the tea cess levy with an ad valorem levy which will effectively raise the taxes local tea farmers pay on their highest quality tea and collect hundreds of millions of shillings more for both the Tea Board and the Kericho-based Kenya Tea Research Foundation.

According to East African Tea Trade Association (EATTA), an industry lobby group whose membership includes both Kenya Tea Development Agency (KTDA) and Kenya Tea Growers Association (KTGA), this policy could be implemented without due consideration for the country’s Vision 2030 objectives and without sufficient consultation within the tea sector as a whole.

Coming in the wake of similar complaints from other stakeholders in the agriculture, livestock and fisheries sectors, these concerns cannot and should not be taken lightly.

Taxing quality

It would appear that certain top mandarins in the Ministry of Agriculture and other state agencies are developing and nurturing a highly autocratic and high-handed managerial streak totally at odds with the best interests of the sector and spirit of the new Constitution.

Other sources within the tea sector say that, over the last two years, the Tea Board and the Ministry of Agriculture have either failed totally to consult other stakeholders in the sector over major policy changes or done so in a perfunctory and unsatisfactory manner.

Major policies have been formulated with little or no input from the tea sector itself and merely presented as faits-accompli at the end of the process. But even in those cases where superficial efforts have been made to accommodate the views of the stakeholders, both the Ministry of Agriculture and the Tea Board have appeared singularly unreceptive to the ideas presented by the stakeholders.

According to the Tea (Amendment) Bill which has already been presented to Parliament, it “seeks to amend the Act to provide for a value-based financing system from a volume-based model... by removing the manufacture cess as a source of funds and introducing an ad valorem levy on all tea to be charged at the point of export.”

And therein lies the major point of contention between the Tea Board and Ministry of Agriculture on the one hand and most of the other stakeholders on the other.

First, why should the levy or tax be changed from one based on volume to one based on the value of the tea sold? If you base the levy on the value of the tea sold, then you inadvertently penalise those who produce the highest quality tea which is in great demand around the world.

If you penalise them, you reduce their incentive to produce, thereby effectively reducing the aggregate volumes of the best teas produced in the country every year.

Second, if you change the levy base from volume to value, then you end up collecting hundreds of millions of shillings more which are then ultimately handed over to the Tea Board and Tea Research Foundation.

According to projections available from EATTA, if the proposed ad valorem levy comes into effect, the annual income of the Tea Board of Kenya will rise from about Sh200 million to about Sh607 million, while that of the Tea Research Foundation will increase from about Sh140 million a year to about Sh438 million.

Trade union opposition

What could these institutions possibly have done to justify such large increases in their annual incomes? Is there some hidden agenda here known only to the top officials of the Tea Board and Ministry of Agriculture?

Tea is not just another Kenyan crop. Last year it earned over Sh100 billion, making it the country’s largest foreign exchange earner and accounting for about 22 per cent of all Kenya’s foreign exchange earnings.

As the tea sector struggles to rationalise its production costs, including introducing tea-picking machines despite trade union opposition, it is vital that both the Ministry of Agriculture and Tea Board of Kenya help it achieve its core objectives.

If, instead, these organs continue introducing retrogressive and questionable policies without consultations, they must quickly be called to account. 

The writer is a lecturer and consultant in Nairobi. [email protected]