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Munya moves to break cartels at the Mombasa tea auction

Desmond

Jan. 07, 2021

The Ministry of Agriculture has given the tea sector a month to get ready to start selling all local produce at the Mombasa auction as it starts implementing the Tea Act, 2020.
The Act that was enacted last month requires all Kenyan tea meant for export, except for speciality teas, to be sold at the auction to improve transparency and boost earnings for farmers.
Agriculture Cabinet Secretary Peter Munya said the ministry would next week publish draft regulations on payments in the tea industry, which will give a date when all tea produced in the country will be required to be sold through the auction.
Review contracts
At the same time the CS yesterday unveiled two separate sets of draft regulations on election of tea factory directors and the Tea Board of Kenya (TBK) for public participation.
These are expected to pave way for new directors by March 17, as well as install TBK as the regulator.
Mr Munya said the one-month window would give traders who currently have contracts for selling tea directly to foreign buyers time to review the agreements, noting that the new Act had avoided such deals.
This will also scuttle plans by various counties to secure buyers directly for tea grown in their localities, excluding orthodox or speciality teas.
“Once we set the date, all the tea will be sold at the auction. I have told the regulator to write to the stakeholders, giving them a one-month notice to be ready, especially the tea auction organiser in Mombasa,” Munya said.
The Agriculture and Food Authority (AFA) currently regulates the sector, but is set to be replaced by TBK – reintroduced by the Tea Act 2020.
“After a month, the regulator will go down there (to Mombasa) to inspect their readiness to auctioning all the tea grown in Kenya for export,” said Munya.
“AFA will also inspect that the trading platform it complies with the requirement of the Tea Act. We want to make sure that they have a proper and technically sound electronic platform.”
A section of the tea industry players had rejected the proposal to sell all Kenyan tea through the auction, noting that this would deny producers access to direct sales that bring high-value buyers.
They said the buyers might move to other countries in the region, such as Rwanda, whose tea has been giving competition to Kenya in the recent past on account of higher quality.
This and other proposals were contained in the Tea Regulations of 2020, which were suspended by the High Court as it heard and determined a case lodged by tea sector players.
The CS, however, said the case had been overtaken by events with coming into place of the new law.
He added that sale of all tea through the auction would lead to higher prices as direct sales are usually used by unscrupulous players to depress prices at the auction.
“The only issue we have is farmers earning very little. What has been operating are cartels controlling the prices and causing artificial price depression,” said Munya, adding that the industry did not have a choice considering the law now bans direct sales.
“Some of the players are saying they do not have capacity. I do not know what they have been doing as the issue of electronic trading platform was passed a long time ago. The Mombasa tea auction organisers have been moving the goal post all along.”
He said nothing would stop the government from licensing other tea trading platforms.
“If they are not ready within a month, we will ask other players who would want to trade tea to come forward and be licensed to start trading tea… we can have multiple tea auctions,” the CS said.
“We will not accept any excuse such as that the tea is too much for the auction to handle. We have never had an issue of tea going to waste, tea produced in Kenya has always been sold.”
The draft Tea Board (Election) Regulations, 2021, set out how the board members of the regulatory body will be selected.
Smallholder farmers will be represented by two directors from the western tea producing region and another two from the eastern region.
There will also be a representative of large-scale producers and tea traders as well as government representatives.
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