Smallholder tea factories in Kirinyaga County have resolved to retain the current status of factory management agreements with KTDA Management Services (KTDA MS) until critical issues in the Tea Act 2020 are addressed.
In a meeting with the board of KTDA MS, factory directors drawn from the county noted that there are contested clauses in the Tea Act which, if adopted, will not benefit the farmers.
The directors observed with concern the provision to levy farmers a further 1% on net sales value of the tea sold, as provided in Section 53 (1) (2) of the Tea Act, will have a negative impact on farmers’ income.
They proposed the matter be relooked in line with Government’s bottom-up economic approach which empowers the low-income-earning wananchi; and appealed to the Government to find alternative funding for its agencies instead of adding the burden to farmers.
Further, the directors urged for a review of, among others, provisions on governance and direct sales, as contained in the Tea Act.
Speaking at the meeting, Mr John Mithamo Wasusana – KTDA board member for the zone who led the team, noted that KTDA MS is a subsidiary wholly owned by farmers which pays dividends to the factories adding that if 1% of their sales goes to other parties, farmers will not benefit from the arrangement and may be subjected to unnecessary procedural management of their money.
He further noted farmers engaged in other crops do not pay such levies.
KTDA national chairman, David Muni Ichoho who was also present in the meeting as an observer said that, last year, KTDA Holdings paid farmers KES 585 million in dividends being money which was generated by KTDA subsidiaries, key among them KTDA management services.
The tea factory directors from Kirinyaga however tasked a select team from the region to relook at the current management agreement in a week’s time (seven working days) with attendant changes to the agreement being approved as an addendum and forwarded to KTDA MS for further engagement otherwise status quo remains.
The reviewed management agreement is a paradigm shift from the current agreement and after implementation it is expected to remedy the relationship between the parties and improve the management of tea factories for the benefit of tea farmers.
At least 40 Factories have so far reached agreements with KTDA MS among and key changes in the reviewed management agreement include:
1. Reduction of management fee from the current 2.5% to 1.5%.
2. Introduction of key performance indicators to monitor the performance of the
management agency on a continuous basis.
3. Reduction of the term of the agreement from the current 10 years to 5 years which
is expected to enhance accountability of the management agency.
4. Clear demarcation spelling out the role of the management agency and the board
to improve their services to tea factories and farmers.
While appreciating the decision by Kirinyaga factories the newly appointed KTDA MS chairman, Solomon Maina noted that KTDA MS has vast experience in managing the smallholder tea sector having managed the sector for more than 50 years.
Mr. Maina further added that, whilst the agency is committed to implementing the new management agreement, the impact of reduced management fee is substantial and would require fundamental changes in both the structure of KTDA MS and will affect service delivery to the farmers.
The reviewed management agreements with KTDA MS Ltd which will be submitted to TBK for review and approval before implementation.
Negotiation meetings have been held with all factories in West of Rift and in Kirinyaga and Embu counties for Factories in East of Rift. The remaining meetings are scheduled to happen this month.