Are new tea regulations good for industry?

If I was to sit down over a cup of tea with Agriculture Secretary Peter Munya, I would tell him this: Thank you for the tea regulations. The industry has operated without regulations for over seven years and the publication of these regulations is a breath of fresh air for all industry stakeholders.

However, the following must be noted. You don’t need to fix what is not broken. I have had the benefit of discussing and critiquing the regulations with various players in the industry, and the sentiments are mixed.

Almost everyone who has broached the subject since the publication of the regulations on April 17 has acknowledged as much.

It is agreed that farmers feel that they have suffered at the hands of some industry players. If I’m to be blunt, the regulations are aimed at addressing various iniquities suffered at the hands of the Kenya Tea Development Agency (KTDA).

Although KTDA’s contribution to national tea production is 60 percent, the regulations contain proposals with extensive impact on the entire industry. Should the 40 percent suffer at the KTDA guillotine? Why revamp the operations of the entire industry when the voices of farmers in unison are blaming the management and governance of KTDA for their woes?

It is agreed that regulations for the industry are urgently needed, whichever door they come through. Many of the proposals in the regulations, since they are aimed at resolving the internal affairs of one player, are likely to cause more problems than the solutions they present.

Banning all direct sales of tea for instance. This cures few, and generates more challenges. Only 15 percent of Kenyan tea undergoes direct sales. Global tea prices on which auction prices depend fluctuate often and unpredictably with catastrophic results.

Due to private sales, some players with pre-order direct sale teas were able to stay afloat when the auction prices stayed at an eight-year low for most of 2019.

Often, some of the direct sales, because of the specific requirements by the buyers, fetch higher prices than the auction sales. Would we want the entire industry to lose this advantage? Hypothetically, are we admitting that the auction is ineffective and then subjecting everyone to its perceived inefficiency?

Even players who have historically secured the interests of farmers with consistent high payments are set to suffer disruption of their operations and the uncertainly of auction price fluctuations in the advent of these regulations.

There needs to be value addition on Kenyan tea so as to secure better prices, create employment and increase consumption locally and globally.

However, it appears overly ambitious to suddenly require 40 percent value addition by all buyers/exporters. The regulations compel enterprises with already established businesses to set up new ventures for value addition within two years.

In Sri Lanka where government support has immensely contributed to increased value addition, the process was gradual. In our case, there is no imminent incentive, but merely a legislative directive to be enacted in the space of 14 days putting pressure on business enterprises at a time when no one even knows if enterprises will survive the Covid-19 pandemic.

The cost of setting up such a venture is substantial. And the producers will then subject their tea to the auction price where they stand no chance of negotiating.

Wouldn’t regulation of the auction price be a more plausible solution to the perceived low returns to farmers?

Other seemingly harmless proposals in the regulations, which ought to be reconsidered if the industry is not to suffer the fate of coffee, include the following: Promoting anti-competition practices by stipulating fees to be charged by a management agent and limiting the number of brokers; stipulating terms for a private agreement between private parties contrary to the principle of privity of contract.

Is the government going to be a party to these contracts?

More importantly, the industry needs a policy and an overarching legislation. If we continue to encourage production without growing markets, we will suffer hard labour without reward.

The industry needs effective regulation. Restore the Tea Board or at least, appoint a substantive head of the Tea Directorate, empower the staff and monitor licensing of factories to limit hawking.

Lindah Oluoch, legal and advocacy manager, Kenya Tea Growers Association