4 October 2008

Kenya: Tea Board Gets Teeth to Act On Problems Facing Industry

Nairobi — The government has given the Tea Board of Kenya, the industry regulator, sweeping powers in its quest to revive the once vibrant but now troubled industry.

A day after President Kibaki directed that problems bedevilling the cash crop be resolved, Agriculture Minister William Ruto on Friday published regulations that give the board total control over the industry from the farm to the tea cup.

The Tea (Licensing, Regulation and Trade) Regulations 2008, which are part of the reforms intended for the industry, give the TBK powers to license and regulate tea growers, manufactures, packers, buyers, exporters, importers and warehousemen.

"The regulations provide a framework that we will use to enhance efficiency and competitiveness of the sector both in the domestic and international market," Mr Ruto said when launching them at a Nairobi hotel.

Opening the Nairobi International Trade Fair on Thursday, President Kibaki called on the ministry to liaise with the Kenya Tea Development Agency in resolving the problems facing the sector.

Already some farmers in parts of Central Province had started uprooting the cash crop in favour of other profitable ventures.

It is worth noting that the regulations are part of the recommendations of the Tea Industry Task Force, which presented its report to Mr Ruto's predecessor, Kipruto Arap Kirwa, in August 2007.

Among other things, the report recommended the expansion of the board's functions and mandate to include the oversight function so that it can vet industry players to ensure compliance with its regulations.

The regulations aim at putting the board on a par with other market regulators such as the Central Bank of Kenya and the Retirement Benefits Authority.

Under the new regime, licenses for manufacturers, packers, buyers, exporters, importers and warehousemen will be renewable annually subject to meeting a set of conditions.

The regulations give the market regulator powers to cancel, suspend or vary any of the licenses after consultations with the minister in case of failure to meet the set terms.

For instance, manufactures, packers, buyers, exporters and importers are required to furnish the board with their monthly and annual returns.

Recover cess

Manufacturers will also be required to submit their monthly cess to the board not later than the 14th of each month. A delay will attract interest based on bank rates.

However, in case of a delay of beyond 21 days, the regulations empower TBK to go to court to recover the outstanding cess and interest as civil debt.

In response to farmers' complaints over low earnings for their crops, the regulations propose a continuous audit of the rules governing the weekly Mombasa Tea Auction and will be approved by the board annually.

This, according to Mr Ruto, will enable putting a price discovery mechanism in place to ensure that growers get a fair return on their investment.

The new rules seek to encourage other agencies to join in the management of factories with KTDA as a way of spurring competition in the industry.

But to challenge the near monopoly status enjoyed by KTDA that currently has 57 factories under its wing, the new entrants must prove they have the requisite capacity and sound financial base to be entrusted with the task of running the multi-million shillling investments on behalf of farmers.

Even then, the Dagoretti-corner based regulator will go through the agreements between the agencies and the factories to be managed to ensure they are balanced, friendly and accountable.

"It is possible that managing agents will take advantage of the factories and draft agreements that are skewed in their favour," the minister said while marking the third National Tea Drinking Day.

Anyone who imports tea into Kenya for blending must re-export it within six months and keep proof of such re-export for TBK's inspectors. Such imports must have a certificate of origin, the Kenya Quality Tea Standards and all the sanitary and phytosanitary requirements, says the rules.

To boost the board's capacity to effectively regulate the industry, it will open regional offices to take its services closer to the farmers for faster complaints resolution.

Release revenue

To cap a week in which the board was on the spot over the tea uprooting saga, Mr Ruto announced that Treasury has agreed to begin releasing all the tax revenue collected from locally consumed tea.

The tax is estimated at between Sh250 million and Sh300 million annually, and the TBK will spend the funds to market tea among domestic consumers who currently account for a mere 5 per cent or 16.5 million kilogrammes of the total production.

The tea industry, which has been a major foreign exchange earner, saw its export earnings increase to Sh38 billion between January and August this year compared to Sh30 billion reported over the same period last year.

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