President William Ruto has issued a directive to the Kenya Tea Development Agency (KTDA) to slash its management fee, reigniting a contentious debate in the wake of an ongoing legal dispute.
Addressing stakeholders in Nairobi on Tuesday, President Ruto emphasised the necessity of reducing the management fee from its current 2.5 percent to 1.5 percent, aligning with prior proposals set forth during the tea reforms under the previous administration.
However, this proposal faced a setback following legal opposition, halting its implementation by the courts.
"KTDA cannot continue to charge farmers a management fee of 2.5 percent and I direct that it be reduced to 1.5 percent," said President Ruto during a meeting with officials of KTDA at State House Nairobi.
President Ruto further offered a commitment to monitoring progress, scheduling a follow-up meeting in three months to assess the resolution of pertinent issues raised by tea industry leaders, including chairpersons from various KTDA factories.
The Tea Act also mandated a reduction in brokerage fees from 0.5 percent to 0.2 percent, a provision similarly thwarted by legal intervention.
Proponents of the fee reductions argue that such measures could yield substantial benefits for smallholder farmers, potentially amounting to over Ksh1 billion in annual savings and consequently augmenting farmers' earnings.
The government, despite facing legal challenges, had previously indicated intentions to proceed with the fee adjustments, outlining plans to allocate the withheld funds into a reserve account pending court rulings.
"The funds will be set aside in a reserve account awaiting determination of the court case challenging the provisions of the Tea Act on brokerage and management agent fees," remarked Peter Munya, the former Agriculture Minister, in November 2021.
However, apprehensions linger over the potential ramifications of the management fee reduction on KTDA's operational capacity, as the agency heavily relies on fee proceeds for sustaining daily operations.
The government's persistent efforts to regulate brokerage fees have encountered recurring obstacles, with the 2021 initiative marking the second attempt in addressing the matter.
