KTDA chairman Peter Tirus Kanyago celebrates with Chinga Tea factory farmers in Othaya, Nyeri. His board is on the spot over KTDA subsidiaries. PHOTO/COURTESY
By ABDULHAKIM SHERMAN
Tea farmers are not being paid any dividends from Kenya Tea Development Agency (KTDA) subsidiaries contrary to the law a new report has revealed.
The Tea Industry Status Report prepared by the Tea Board of Kenya says while KTDA has used farmers resources to establish seven subsidiary companies, farmers are not being paid any dividends by the seven companies.
“The same stakeholders are spending a lot of money on the press to divert attention from the real issues affecting tea farmers by citing the ad-valorem levy which runs the research agenda in the tea industry,” the study notes.
The KTDA affiliate companies include KTDA Holdings Ltd owned by tea factories which belong to farmers, KTDA Management Services Ltd, which oversees tea cultivation, payments, processing and trading and Chai Trading Company Ltd that undertakes tea trading and warehousing.
Others are Majani Insurance Brokers, involved in insurance and tea warehousing, Kenya Tea Packers Ltd, that undertakes tea blending, packaging and marketing, Greenland Fedha, that offers microfinance services, KTDA Power Company Ltd, involved in energy investment and power generation and KTDA Foundation that does corporate social responsibility initiatives.
“KTDA have used farmers’ resources to develop the subsidiary businesses which are currently seven in number. Therefore ideally all the proceeds from those companies should pay dividends annually to the farmers,” the report notes.
The study adds that the accruing benefits from the KTDA subsidiaries are not fully felt at the farm level.
Agriculture CS Mwangi Kiunjuri has been warned by President Uhuru Kenyatta that he risks the sack if he is not going to address problems facing farmers in the country. PHOTO/COURTESY
“The earnings to the farmer are based on the hummer price at the Mombasa tea auction and not much is flowing into the farmers’ pockets as income from these (KTDA) businesses,” it adds.
The report adds that the KTDA subsidiaries are conducting businesses that are overlapping hence becoming unnecessary cost to the farmer and eating into the profit margins that they are supposed to earn.
“There has not been a demonstration to the farmers on the cost benefit analysis of these subsidiaries. If this was done, it would help farmers to decide whether to cut down on some of the subsidiaries that may not be of benefit to them,” the report notes.
The study adds that the business accruing from KTDA subsidiaries should cushion the farmer yet KTDA insists farmers need support from the government.
“In view of what the subsidiaries can earn if run on competitive business model should contribute to a kitty that can sustain growth of the tea industry without necessarily mobilizing resources from government or any other source,” it adds.
The report warns that many frustrated farmers are now considering abandoning tea for other crops because of poor earnings.
Workers picking tea in Kericho. Tea farmers say they are not receiving bonus from KTDA subsidiaries. PHOTO/COURTESY
“Just like in coffee where farmers are abandoning coffee for real estate and other enterprises like planting trees, tea is also bound to go the same way,” it warns.
The report adds that the Tea Board of Kenya whose mandate is regulation has continued to receive complaints from farmers that their resources have to be managed and accounted for effectively.
“The question is whether KTDA can be made to be accountable to them. This scenario is quite challenging since KTDA operates on the companies Act, where farmers’ interests are conducted on a representation model,” the report adds.
Gem MP Elisha Odhiambo has taken a Bill to Parliament aimed at reforming the tea sector including re-establishing the defunct KTDA parastatal as a tea industry regulator. PHOTO/FILE
The report observes that the majority of tea farmers feel that KTDA is no longer an agent but a principal because they have always appeared in newspapers indicating that they will not pay farmers bonus.
“Their money lies with KTDA in the banks until end of the year when this payment is made. The reaction from farmers is that be it first, second or third payments, none of these payments have qualified as bonus,” it adds.
The report says the reason why farmers believe they are not being paid bonus is because bonus is extra earnings from a business or interest earned that is shared with stakeholders on a pro-rata basis.
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