Comply or face the music – Munya warns on tea regulations

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The Kenya Tea Development Authority (KTDA) has until 31st March 2021 to comply with the new Tea regulations according to new implementation timelines released by Agriculture CS Peter Peter Munya. According to the new tea regulations, Directors will not act in a position of directorship at or have a commercial relationship at a tea factory limited company that they intend to offer management services to. This means KTDA managed factories will have to conduct elections to replace factory directors who also double up as KTDA Directors.

The CS has warned those who will not have complied of dire consequences. “As we set out to implement the new regulations, I wish to affirm that the timelines which I have just outlined will be strictly adhered to. We expect co-operation and compliance by stakeholders. Those who don’t comply risk attracting penalties which will include having their licenses suspended or revoked. The more egregious cases will attract charges and prosecution under the Crops Act,” says Munya.

KTDA has been fighting the new regulations in court saying they are unconstitutional. They went to court recently to oppose a committee that the CS had appointed to guide on the implementation of tea reforms in the country. It argued that there is no law empowering Munya to form such a committee adding that some of the members appointed to the committee had openly declared bias against KTDA. The High court in Nairobi issued orders on 10th July stopping the implementation of a gazette notice issued by the CS that sought to form a National Steering Committee on the implementation of tea reforms in Kenya.

The CS says that the Crops (Tea Industry) Regulations, 2020 came into force on the 22nd May 2020 having gone through all the necessary processes, including stakeholder consultations and public participation. He added that the Ministry of Agriculture, Livestock, Fisheries and Co-operatives has since given all Tea-Sector players two months to familiarize themselves with the new regulatory requirements and to create their own internal implementation capacity.

Munya says the new timelines are to enable tea Management Agents to reconstitute their Boards where necessary to comply with this requirement, allow for time to align current management agreements between the management agents and the factories to the regulations, allow for time to align current management agreements between the management agents and the factories to the regulations among others.

“The roadmap for implementation and the schedule of compliance requirements is ready and will start today. I expect implementation to be fully executed by 31st March 2021 as set out in the timelines clearly set out in the Crops (Tea Industry) Regulations, 2020. Particular attention should be paid to the provisions allowing the renegotiation and amendment of the current agreements, especially agreements relating to management agents and factories,” says the CS.

Going by the timelines, KTDA should be having new Directors By 28th February 2021. The Company Secretary is expected to issue a notice of elections for the Board of directors of the management agent with the release of the election guidelines, rules and candidate requirements expected to happen by the end of this month. The elections are expected to happen by 30th November 2020. KTDA is also expected to stop offering Company Secretary Services to tea factories by 1st November this year. The regulations stipulate that Company secretarial services shall be excluded from services offered to smallholder tea factories limited companies by the management agent. The companies are to recruit their own in-house Company Secretaries or outsource the service.

The CS also says the Mombasa Tea Auction will play a pivotal role in driving forward the reforms saying the Agriculture Ministry views the Auction as the principal vehicle for market entry and for price discovery in the tea industry. “We must ensure that the Auction is ready to play this role effectively and efficiently. To ensure that this is the case, I am today directing Agriculture and Food Authority (AFA) to immediately undertake a technical inspection of the newly installed E-Auction system to ensure that the auction is operating consistently with best practices for commodity trading,” says Munya.

The Smallholder tea factory limited companies that shall exist after the reforms take effect are expected to hold elections for directors of factories by 30th November this year. They are also expected to pay tea growers at least 50% of the payment due for green leaf delivered every month within thirty (30) days of receipt of the proceeds of the sale of tea by 1st November this year. Payment of the balance due to the tea grower is made within the financial or calendar year as shall be agreed with the tea growers.

A management agent agreement between a smallholder tea factory limited company and the management agent like KTDA shall be for a period not exceeding five (5) years. The smallholder tea factory limited companies will also not bear Staff costs for personnel seconded to them by the management agent directly with the costs expected to be borne by the management agent.

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