Commodities

KTDA, multinationals get 2-month window to end direct tea sales

tea

Workers harvest tea using a plucking machine in Kericho. PHOTO | TONNY OMONDI

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Summary

  • The Ministry of Agriculture has given multinational companies and the Kenya Tea Development Agency (KTDA) a two-month window to close direct sales of tea amid a court case that has temporarily stopped the implementation of the new Tea Act.
  • The ban on direct tea sale, brought about by the enactment of the Tea Act that requires all teas to be sold exclusively through the auction, will see the players miss out on lucrative overseas market.
  • The firms said they are at a loss over how to deal with forward contracts signed with overseas buyers should the court fail to stop Section 36 of the Act that has imposed the ban.

The Ministry of Agriculture has given multinational companies and the Kenya Tea Development Agency (KTDA) a two-month window to close direct sales of tea amid a court case that has temporarily stopped the implementation of the new Tea Act.

The ban on direct tea sale, brought about by the enactment of the Tea Act that requires all teas to be sold exclusively through the auction, will see the players miss out on lucrative overseas market.

The firms said they are at a loss over how to deal with forward contracts signed with overseas buyers should the court fail to stop Section 36 of the Act that has imposed the ban.

KTDA managing director in charge of management services Alfred Njagi said they had already complied with the directive and informed their buyers of the new regulatory requirement.

“Some of our factories that have been selling tea directly obviously will have to lose out following the ban of direct sales. However, that is the law and we have to comply with it,” said Mr Njagi.

Mr Apollo Kiarii, chief executive officer of Kenya Tea Growers said their lawyers were looking at the implication of termination of the contracts before their due time even as they seek to stop part of the regulations.

“We are contemplating on what to do with the current contracts because if we cancel them, it will attract a financial penalty as it will amount to breach of our terms of engagement with our buyers,” said Mr Kiarii.

Most tea firms had signed forward contracts in November and were to run for up to two years. The contracts stipulate among other things, the price that the tea will be sold at throughout the term of the contract and the quantities to be supplied.

Fifteen large-scale tea growers under the Kenya Tea Growers Association challenged sections of the enacted law, saying they are discriminatory and will cause them losses.

In a petition filed under a certificate of urgency, the multi-nationals argue that Sections 36, 48, and 53 of the law, were enacted in a manner inconsistent with the Constitution.