Commodities

Governors fight direct tea sales ban in new rules

tea

A worker picking tea. FILE PHOTO | NMG

geraldandae

Summary

  • County governors have opposed the ban on direct sale of tea as provided for by the Tea Regulations (2020), saying the Mombasa auction as is currently constituted is prone to manipulation and price fixing.
  • The Council of Governors (CoG) argued that farmers stand to lose out if the ban on direct sales is implemented, as this window fetches five percent more in earnings when compared with the auction trading.

County governors have opposed the ban on direct sale of tea as provided for by the Tea Regulations (2020), saying the Mombasa auction as is currently constituted is prone to manipulation and price fixing.

The Council of Governors (CoG) argued that farmers stand to lose out if the ban on direct sales is implemented, as this window fetches five percent more in earnings when compared with the auction trading.

The move, which comes as a setback to Agriculture Cabinet Secretary Peter Munya, is a boost to Kenya Tea Development Agency (KTDA). The agency has opposed the directive and even moved to court to challenge implementation of the new rules.

“The tea auction as presently constituted is prone to manipulation, price fixing by cartels and this is not an efficient method of selling tea, hence the regulations cannot prescribe it as the only method of selling tea,” said chair of Agriculture Committee, CoG Muthomi Njuki.

Mr Njuki said tea marketing through direct sales should be encouraged provided that the registered for the buyer is higher than the auction sales.

KTDA through its Chai Trading subsidiary trades in direct tea sales in the export market under its commercial wing, but the new regulations, if implemented, outlaws that process.

The Ministry of Agriculture, through the new regulations, had banned direct sale of tea to the international market with all beverages required to go through the Mombasa auction starting next month.

The only tea that the regulations exempted from the auction is the specialty variety, whose volumes are still low and cannot sustain an independent trading.

On the opaqueness in sales at the auction, the Ministry of Agriculture and CoG agree that there is lack of transparency in trading.

Kilimo House argued that farmers do not know the price per unit on the tea that is sold in the direct market and that it does not reflect in their second payment at the end of the year.

The CoG has threatened to move to court to challenge these regulations if the ministry will not engage all the stakeholders in fresh consultation and stop some of the clauses that are not in the interest of the farmers.