Final Tea Regulations released in Kenya

The final tea regulations have been announced by Peter Munya the Cabinet Secretary, Ministry Of Agriculture, Livestock, Fisheries & Cooperatives. The final regulations are the result of the draft tea regulations announced on 16^th April this year and stakeholders asked to submit their recommendations.

“In line with the provisions of Section 40 of the Crops Act, 2013 and drawing from the Presidential Directives issued on 14^th January 2020 on necessary reforms in the tea value chain; having undertaken an in-depth analysis of the systemic problems facing the tea value chain and plausible regulatory remedies for these problems; and having further  considered the invaluable and extremely enriching submissions made by various stakeholders to the draft tea regulations announced on 16^th April 2020 and, I now wish to announce to the country and more particularly to the tea industry stakeholders including farmers that we now have a set of robust and progressive tea regulations that will steer the tea industry well into the future,” says Munya.

The CS says submissions were received from stakeholders that include individual tea farmers, Smallholder Tea Associations, Kenya Association of Manufacturers (KAM), Kenya Tea Development Agency (KTDA), The East African Tea Trade Association (EATT), The Kenya Private Sector Alliance (KEPSA), the Academia and Interested Private Citizens among others.

The CS says the regulations have particularly sought to rebalance power and influence wielded by various value chain players, reduce unnecessary cost burdens imposed on vulnerable tea farmers; and guarantee better and decent returns on tea farmers’ labour.

Munya says the regulations are for effecting changes in the industry immediately as the Ministry embarks on a long term overhaul of the industry. “These regulations, including policy and legislative proposals together with the others I announced earlier will be pursued and implemented through appropriate policy, legislative and administrative actions as communicated to the public then on 16^th April 2020,” he adds.

These are the key highlights of the final Tea Regulations

• All teas processed and manufactured in Kenya for the export market with the exception of orthodox and purple teas shall, within two (2) months from the date of commencement of these regulations, be offered for sale exclusively at the auction floor. Consequently, sale of tea by private treaty is outlawed;
• Any tea not sold at the auction shall be relisted for sale during the subsequent auction;
• All buyers at the auction shall prior to the auction submit to the authority a performance bond equivalent to 10% of the estimated value of the tea or teas they intend to buy at the auction in the form of a bank guarantee from a licensed commercial bank within the meaning of the Banking Act of Kenya;
• The value of tea referred to above shall be based on a three (3) month weighted average value of tea or teas as bid and won at the auction over a three-month period preceding the auction;
• Buyers who fail or refuse to pay in full and collect the teas they have bid and won at the auction shall forfeit the 10% performance bond
•  All monies accruing forfeited by buyers in the form of performance bonds for failing to pay in full and collect teas they have bid and won at the auction shall be given to the tea sellers
• A tea buyer shall pay in full (100%) the value of tea they have won at auction before collecting and/or taking custody of the tea or teas;
• All tea factory limited companies shall register and enlist with the authority and the auction organizer to participate in the tea auction directly.
• Management agency service providers or other service providers shall not register and/or enlist at the auction on behalf of tea factory limited companies;
• The fees for a management agency service provider for smallholder tea factory limited companies shall be a maximum of 1.5% of the gross value of teas sold at the auction;
• The management agent agreement between a smallholder tea factory limited company and the management agent shall be for a period of 5 years
• The Company Secretary Service shall be excluded from the services offered by a management agent for a smallholder tea factory limited company;
• A director or affiliate of a management service agency service provider shall not serve as a director or have any direct commercial relationship with the smallholder tea factory limited company they offer the management agency service;
• A registered tea broker shall offer tea brokerage services to a maximum of fifteen (15) tea factory limited companies. However, brokers that are already registered and in operation before the commencement date of these regulations shall continue to offer their services under the existing arrangement until their current annual registration is due for renewal by the authority;
• The total fees for tea brokers at the auction shall be 0.75% of the gross value of tea sold at the auction with the tea factory limited companies/farmers paying 0.2% and tea buyers paying 0.55% of this amount respectively;
• Tea brokers, buyers and the auction organizer shall ensure that the proceeds from sale of tea are remitted to the tea factory limited companies accounts within 14 days from the date of the Auction less the agreed commissions for brokers;
• Small tea factory limited Companies shall within thirty (30) days of receipt of the proceeds of the sale of tea pay tea farmers at least 50% of the payment due for green tea delivered every month
• Directors for smallholder tea factory limited companies shall be elected through a democratic process and serve for a term of three (3) years renewable once
• Election of directors for smallholder tea factory limited companies shall ensure compliance with one-third gender rule during election and membership of the directors
• Tea buyers/exporters licensed before the coming into effect of these regulations shall value add at least 40% of their annual tea exports in 8years subject to meeting an annual target of at least 5% in tea value addition for export; while buyers licensed after commencement of these regulations shall add value to at least 10% of their total tea exports annually;