Farmers want govt to scrap ad valorem tax on country's tea exports

What you need to know:

  • Kenya Tea Development Agency (KTDA) chairman Peter Kanyago said the one per cent ad valorem tax makes Kenya’s tea more expensive than those from Uganda, Burundi, Rwanda, Tanzania and Malawi.
  • Mr Kanyago said the government’s explanation was that the subsidy was never factored in this year’s budget adding that the government could still reconsider it.

Small-scale tea farmers want the government to scrap a levy that makes local produce more expensive at the Mombasa Tea Auction.

Kenya Tea Development Agency (KTDA) chairman Peter Kanyago said the one per cent ad valorem tax makes Kenya’s tea more expensive than those from Uganda, Burundi, Rwanda, Tanzania and Malawi.

“The government should support farmers by scrapping the one per cent ad valorem tax charged on Kenyan teas at the auction to provide a fair playing ground for all teas from the Eastern Africa Region,” he said in speech read by a KTDA director Jefitha Karua during celebration to mark 50 years of Kangaita factory in Kirinyaga.

The farmers also want the government to reinstate fertiliser subsidy introduced last year.

Mr Kanyago said the government’s explanation was that the subsidy was never factored in this year’s budget adding that the government could still reconsider it.

Last year, the tea industry earned the country Sh125.25 billion in foreign exchange with the small-scale sub-sector contributing 60 per cent of the amount.

“The government should bring down the cost of farm inputs just as we the KTDA is trying to bring down the cost of processing,” Mr Karua said.

Kangaita is the first factory to venture into the processing of black, green, white, purple and orthodox teas which are said to have a higher demand globally.

The agency says production of specialty teas would make the country’s tea more marketable and shield farmers from fluctuations of global prices.

The general manager for operations Mr Alfred Njagi said production and revenue of Kangaita factory have grown significantly over the past five years since it ventured into value addition.

“The factory’s income has grown by 25 per cent which demonstrates that farmers have continued to improve the quality of green leaf they supply to the factory,” Mr Njagi said.

In the 2014/2015 financial year, the factory paid a total of Sh806 million to tea farmers up from Sh704 million paid the previous year. Farmers earned Sh30.65 per kilo of green leaf as second payment compared to Sh23 earned the previous year.

Production volumes also increased by 21 per cent from 15 million kilogrammes of processed tea in 2010 to 19 million in 2015, making it one of the largest KTDA-managed factories.

Kangaita factory was commissioned in 1966 by independent Kenya’s first minister for Agriculture Bruce MacKenzie and then minister for Economic planning Tom Mboya.

It has 6,500 farmers with a combined acreage of 1,077 hectares of tea.