Tea factories audit kicks off on price fall slump

Tea factory managers have been ordered to submit records of payments to farmers over the past two years as the government kicked off a financial audit of the industry amid rising concerns about diminishing earnings by growers.

The Tea Directorate said all factories must surrender their financial records before February 7, which would help pinpoint the cause of the steep decline in take-home pay for farmers.

“In the recent past, the tea industry has been experiencing some challenges, which include diminished returns to tea farmers. The directorate is in the process of collecting data on payments made to growers.

The authority therefore requests you to provide information with regards to monthly and final payment paid to growers for 2018 and 2019,” Anthony Muriithi, head of the Tea Directorate, said in a letter seen by the Business Daily.

His directive comes barely two weeks after President Uhuru Kenyatta issued far-reaching orders to overhaul the giant Kenya Tea Development Agency (KTDA) in the wake of low returns to farmers. KTDA currently manages 69 tea factories, which process and sell tea on behalf of the 612,000 small-holder growers affiliated to it.

Besides submitting the payment records, the regulator has also directed all factories to update the lists of their farmers and submit the same before February 14. The move is aimed at rooting out cartels that have been buying tea from farmers and selling it to factories, purporting it has come from their own farms.

“There has been exploitation of farmers by middlemen who purchase teas from farmers on cash-on-delivery basis and then sell their tea to factories as their own,” Mr Muriithi said.

The regulator directed tea factory managers to deregister all growers with false or unverified personal data.

“Growers who are registered but are not actively delivering green leaf should also be deregistered. The list of deregistered growers should be submitted to the directorate by December 14,” Mr Muriithi said.

In addition, tea factories will also be required to file their annual statistical returns with the directorate. Export earnings from tea decreased by Sh23 billion from Sh140 billion recorded in 2018 to Sh117 billion last year. The lower earnings were attributed to low auction prices.

Agriculture Secretary Peter Munya said on Monday that reforms in the tea sector had started and that they would not relent until they clean up the sector. “We are conducting these reforms that were announced by the President and we are stopping at nothing until we get rid of cartels who have subjected farmers to lower earnings,” he said.

According to him, the full year earnings, which declined by 16 percent, are an indicator that all is not well in the sector and reforms have to be put in place to correct the mess.

Small-scale tea earnings dropped by 22 percent in the financial year ended June 2019, marking the lowest returns for the growers in the last six years.

Farmers affiliated to KTDA earned Sh69.7 billion in the review period compared with Sh85.7 billion in 2018. KTDA attributed the decline to low international prices during the review period due to a glut in the market and increased cost of production.