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KTDA to lose millions under new levy rule

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Agriculture Cabinet Secretary Peter Munya. FILE PHOTO | NMG

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Summary

  • Agriculture Cabinet Secretary Peter Munya said Monday that the agency must abide to the new regulation that will cut its management fee from the current 2.5 percent of the earnings of farmers affiliated to KTDA makes from farmers.
  • Farmers linked to KTDA received Sh69 billion last year, earning the tea agency commissions worth Sh1.72 billion.
  • KTDA directors who have other commercial relationships with the factories have up to February next year to relinquish their positions to avoid conflict of interest in the operations of the tea firms.

The Kenya Tea Development Agency (KTDA) will lose more than half a billion in earnings starting November when the new rule that curbs management fee at 1.5 percent of farmers sales take effect.

Agriculture Cabinet Secretary Peter Munya said Monday that the agency must abide to the new regulation that will cut its management fee from the current 2.5 percent of the earnings of farmers affiliated to KTDA makes from farmers.

Farmers linked to KTDA received Sh69 billion last year, earning the tea agency commissions worth Sh1.72 billion.

At 1.5 percent, the commission would have dropped to Sh1.03 billion, boosting farmers earnings.

“The annual fees for the services rendered shall not exceed 1.5 percent of the net sales value of the tea sold at the auction per year by November 2020,” said Mr Munya.

Mr Munya spoke when he issued implementation timelines on the recently released Tea Regulations (2020) at Kilimo House.

KTDA directors who have other commercial relationships with the factories have up to February next year to relinquish their positions to avoid conflict of interest in the operations of the tea firms.

Mr Munya said this timeline will enable tea management agents to reconstitute their boards where necessary to comply with this requirement.

The KTDA owned factories, which are managed by farmers, will from November 1 get relief as the agency will now be required to meet the salaries of people seconded to the factories as opposed to the current position where each factory meets the cost.

“Staff costs for personnel seconded to the smallholder tea factory limited company by the management agent shall be borne by the management agent and not directly by the respective factory,” said the CS.

The ministry has also banned direct sale of tea to the international market with all beverages required to through the Mombasa auction starting November.

“Offer on all teas processed and manufactured in Kenya for the export market is for sale exclusively at the tea auction floor with the exception of orthodox and purple teas within two months from the commencement date of the regulation,” said Mr Munya.

KTDA through its Chai Trading subsidiary trades in direct tea sales in export market under its commercial wing, but this has now been outlawed in the new regulations. The CS said tea brokers, buyers and the auction organiser will ensure that the proceeds from the sale of tea are remitted to the tea factory limited company accounts within 14 days from the date of the sale, less the agreed commissions for brokers immediately.

He also said that the remuneration paid to a tea broker by factory limited company for services rendered will not exceed 0.2 percent of the gross sales by the dealer.