Report: How KTDA is double-charging farmers through its subsidiaries


Agriculture CS Mwangi Kiunjuri is under pressure to deal with cartels exploiting tea farmers. PHOTO/COURTESY


Tea farmers are being double-charged by the Kenya Tea Development Agency (KTD) for different services rendered to them by the agency’s subsidiaries, a report compiled by the Tea Board of Kenya reveals.

The Tea Industry Status Report shows that tea farmers are being double-charged through warehousing, brokerage, marketing, value addition and management fees.

The report says that Chai Trading Company Ltd a KTDA subsidiary that provides warehousing services charges tea farmers warehousing fees ‘yet technically the farmers own the warehouses’.

The report reveals that Chai Trading Company Ltd charges farmers 0.5 percent of total value of tea sold by farmers as brokerage fees, yet KTDA Holdings Ltd charges them 2.5 percent total value of tea sold for all management activities including marketing which is a KTDA mandate.

“KTDA has a fully fledged marketing department. Apart from conflict of interest, this is double charging the farmer for services that could have been conducted by one entity. The broker Chai Trading Company Ltd is also paid 0.75 percent from the buyer and 0.5 percent from the producer of the same tea sold making a total of 1.25 percent,” the report notes.

Related story: Day of reckoning for KTDA directors’ as court set November 15Th as hearing date for contempt of court case

Tea farmers from across the country want President Uhuru Kenyatta to sack Cabinet Secretary for Agriculture Mwangi Kiunjuri, over the mismanagement of the sector by KTDA.

Tea pickers at work in Kericho. PHOTO/COURTESY

The tea farmers from Mt Kenya Region, Rift Valley Nyanza and Western regions say Mr Kiunjuri has failed to live up to their expectations of addressing problems facing the tea sector and want him sacked and replaced by an agriculture technocrat.

Related story: Sack CS Agriculture: Tea farmers tell President Uhuru Kenyatta

In the recent past, President Kenyatta has expressed his reservations at the way the Agriculture CS is handling the agriculture docket.

During the Mashujaa Day celebrations in Kakamega County, President Kenyatta reiterated his warning to the Agriculture CS that unless he dealt with cartels exploiting sugar farmers in western and the country at large he risked being prosecuted as well.

And during the Nairobi Agriculture Show of Kenya the president warned the CS that he risked being sacked if he did not address the problems facing maize farmers in Rift Valley after more than Sh 2.5billion set aside to pay them was misappropriated.

The report explains that in a scenario where a broker gets more from the buyer than what comes from the producer, there is a likelihood of the same working against the farmer.

KTDA chairman Peter Tirus Kanyago. He is on the spot over massive irregularities at KTDA. PHOTO/COURTESY

The study indicates that while another KTDA subsidiary Kenya Tea Packers Ltd exports tea that fetch better prices, the formula of paying dividends to the farmer is not clear to them.

“Also KETEPA is losing grip in the local, regional and international markets due to poorly blended teas, especially with those of other origin that of poor quality,” it adds.

The report shows that while KTDA manages two factories in Rwanda, the proceeds from this consultancy does not accrue to the Kenyan farmer.

“This is also a conflict of interest since KTDA is assisting the Rwanda tea to complete with Kenyan tea. There should be evaluation of the benefit of this venture in respect to Kenyan economy and income to the farmer,” it adds.

Related story: KTDA to face investigations over allegations of monopolistic tendencies

The report says that an assessment of the management fees KTDA charges farmers shows it is very high and there need for the same to be reviewed.

Gem MP Elisha Odhiambo who has taken a Bill in Parliament aimed at reforming the tea sector. PHOTO/FILE

“As per the management agreement between factory companies and KTDA, the agency charge a management fee of 2.5 percent of net proceeds this has turned to be very high in relationship to the services offered by the agency,” it notes.

Related story: Revealed: How KTDA is fleecing tea farmers billions through deceptive schemes

Report says that there should be a revision of the management agent fee downwards while other management agencies service providers can be allowed in so as to create favourable competition in this service provision.

It says that it is not justifiable for KTDA to charge agency fees at 2.5 percent of the total tea proceeds from the smallholder tea sub-sector when the factories are meeting much of the expenditure.

The report also cites the issue of conflict of interest among KTDA directors saying some of them are shareholders of some of the tea marketing companies.

“They are involved in the importation of cheap teas that is used to blend with cheaply bought quality farmers tea. Therefore their decisions as directors favour their companies and fleeces the farmer,” it notes.

Related story: Radical changes proposed for the tea industry by President Kenyatta’s task force

The report also accuses KTDA of skewed representation noting that the agency has not established processing facilities in some areas uniformally hence reducing membership representation and decision making.

“Board members are drawn from processing facilities, therefore, less facilities, hence less members. The voting power is skewed given the number of KTDA factories. This has made the agency operations revert to principal representation for the farmer which is the reverse of what the services were to be,” it notes.

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