Economy

Court suspends new tea levy

tea

Workers pick tea at a farm in Kericho. FILE PHOTO | NMG

The High Court Monday temporarily suspended a new levy on tea sales, pending the determination of a case filed by 15 tea companies.

Justice Anthony Mrima also suspended sections of the Tea Act, which compels processors and manufacturers of tea to offer their produce for auction, save for orthodox and specialty teas. The law, which came into effect on January 11, says all teas should be offered at the tea auction floor.

The multi-nationals under the Kenya Tea Growers Association(KTGA) argued in their petition that Sections 36, 48, and 53 of the Tea Act, were unconstitutional.

The companies including James Finlay, Kapchorua Tea Plc Ltd, Kipkebe Ltd, Nandi Tea Estates, Williamson Tea Plc and Sotik Highlands Tea estates Ltd, said the sections will impact tea producers and the industry as a whole, if implemented.

The companies said the Tea Act 2020 was enacted despite filing a petition to the Senate and the National Assembly, seeking amendment of some provisions of the tea Bill.

“It would be noted that a thriving commercial plantation sector is key to the health of the tea sector and that measures to ensure a properly regulated and managed smallholder sector can be effectively achieved while maintaining direct sales provisions for the commercial private plantation sector,” the association said adding that the section ought to have been restricted to the smallholder-owned tea factories only with an exception made in respect of large scale private plantation companies which also grow patented teas.



KTGA argues that the said sections would have a negative effect on other tea players, particularly large scale plantations, which have existing contracts for direct sales with overseas buyers.

“These bespoke teas normally fetch a higher premium overseas. The implementation of section 36 will result in the petitioners’ members being unable to fulfill their contractual obligations and this will result in breach of contract with tea buyers,” the petition states.

The large scale tea companies said its direct contracts are with specific buyers for specific quantities and qualities for between this year and 2023. The companies said many of the direct contracts are in respect of bespoke and customized categories of teas, which are not sold through auction and which have been certified by Certifying bodies such as Rainforest, Fairtrade and Ethical Tea Partnerships.

They said loses arising from loss of direct or forward contracts will have detrimental effect on the economy.

Justice Mrima directed the association to serve the court documents to the Attorney General, Agriculture Cabinet Secretary Peter Munya and Agriculture, Fisheries and Food Authority ahead of the hearing on February 22.