The Kenya Tea Development Agency (KTDA) has raised the red flag over unregulated registration of small-scale factories, saying it could impact negatively on the industry.
The agency said existing gaps in law regarding licensing of small-scale factories had contributed to thriving tea hawking affecting operations of most of the 65 affiliated factories.
Under the Agriculture and Food Authority (AFA) tea regulations, to qualify for a licence to start a new black CTC tea factory or orthodox tea, one must show they have at least 250 hectares under tea.
The agency argues that AFA has been considering licensing cottages for people with at least 20 hectares, operating on the low-volume, high-value principle.
KTDA operations director Alfred Njagi said that, should the provisions not be followed, the tea industry would follow in the steps of other poorly regulated sectors in the country.
Section 19 of the Crops Act 2013 stipulates that a factory shall not buy green leaf from any person other than the grower appearing in its register, while Section 14 of the same Act bars farmers from selling their tea to any party other than the factory they are registered in.
“These guidelines are meant to guard against unhealthy competition for green leaf which has a detrimental effect on the business and farmers’ income,” said Mr Njagi.
From 2014 up to September last year, 33 private factories were licensed by the Tea Directorate, with a capacity of producing 154 million kilos of tea in various counties.
“Most of these have been licensed as cottage factories dealing with specialty teas but almost all of them have installed black CTC tea processing lines which contravenes their licences,” noted Mr Njagi.
Murang’a, Nyeri and Kirinyaga have in the past been affected by tea hawking, which saw KTDA lose up to Sh680 million to the trade and Sh200 million kilos diverted to other processors countrywide.
KTDA said licensing of new tea factories without an identifiable source of green leaf has exacerbated tea hawking.
While the agency was paying farmers Sh15 per kilo of green leaf per month, private processors were paying between Sh20 and Sh22. The majority of farmers were selling their produce to Meru’s Njeru Industries Ltd that produces orthodox teas.
Low production of specialty teas in the country, that stands at three per cent, prompted the buying of tea from farmers outside Meru to meet operating costs.
According to Njeru Industries Ltd managing director Paul Njeru, the rules on tea hawking are not anchored in law but were illegally introduced to create a negative perception of the private tea processing business practice that is an alternative green leaf market for farmers.
“There is nowhere the word ‘hawking’ features in the Crops Act 2013 and if anyone wants to introduce new laws, the same should go through Parliament before they are implemented,” Mr Njeru said in a telephone interview.
Mr Njagi said that when too many factories are registered in the same area beyond the area’s capacity to supply green leaf, it encourages tea hawking, which severely affects quality and farmers’ income.
In June last year, KTDA affiliated farmers earned an average of Sh52.83 per kilo of green leaf delivered to factories while those owned by private processors offered between Sh23.45 and Sh45.20.
Meanwhile, Njeru Industry Ltd has renewed calls to change rules on tea hawking, terming them discriminatory and unconstitutional.
The company, which packages orthodox teas under the brand name Kappa Chai, said the rules were meant to stifle competition and “criminalise” investment.
Mr Njeru said the Crops Act 2013 is clear on how farmers are expected to deliver their green leaf and the current regulations were created to deny private processors the right to raw material.
“Every smallholder grower, for purposes of accessing economies of scale, shall have the freedom to register with the tea factory to which the person delivers green leaf, by supplying such particulars as the Authority, by regulations, prescribe,” says section 14 (b) of the Act.
He maintained that the authorities should prioritise reforms that promote competitiveness and encourage growers to expand their tea farms so that investors can set up more manufacturing units.