The Senate has recommended investigating the management of the tea industry following a government report accusing major players of manipulating prices at the Mombasa Tea Auction.
The senators join a number of tea-growing counties that are demanding a greater say in the processing and marketing of their tea at the weekly open market.
The Competition Authority of Kenya has also hired audit firm Deloitte Consulting to look into competitiveness in the tea sector value chain.
This comes as several county governments revealed plans to directly market their teas without engaging KTDA after a report implicted the agency in price manipulation and collusion to defraud smallholder farmers.
“We will seek a brokerage licence to ensure better marketing of our tea. We are determined about it,” said Murang’a Governor Mwangi wa Iria when he revealed the county plans to enter the tea brokerage business at the auction.
Kericho County leaders are also understood to be discussing plans to directly market their tea as well as setting up county-based processors.
“We will prioritise tea marketing. We will organise ourselves under co-operatives to sell tea directly. We are also thinking of tea cottage industries to add value to our tea,” said an aide to the governor who did not wish to be named.
Senators say operations at the Mombasa Tea Auction are riddled with underhand deals and should be investigated to salvage the multi-billion sector, which is the country’s top export earner.
The Senate Committee on Agriculture, Livestock and Fisheries chaired by Meru Senator Kiraitu Murungi last Wednesday asked the government to look into operations at the market to detect possible underhand deals.
Mr Murungi says he suspects such deals were being carried out by big- hots for their own gain at the expense of mainly small-scale tea farmers who produce the bulk of the volumes at the auction.
“The government must investigate operations at the auction, with a view to enhancing transparency and addressing genuine concerns of alleged malpractices, and to discourage dumping of low-quality tea in the market,” he said.
He said the investigtion should also focus on irregular imports of low-quality tea for blending purposes, a move that causes an artificial glut, driving down the prices that tea farmers get for their crop.
Meanwhile, the Competition Authority of Kenya has joined the debate.
“We are in the final stages of an inquiry into the tea sector aimed at appreciating the chain, and thereof informing policy interventions. Based on the findings, we will, if necessary, employ our enforcement mandate,” Director-General Wang’ombe Kariuki said.
“The tea sector is among our priority areas. We are investigating any anti-competitive behaviour and claims about the existence of cartels, and cases of price manipulation at the Mombasa auction,” Mr Kariuki said.
The investigation will be the third and follows the Tea Task Force Report of May 2014 which accuses major players in the industry of colluding to fix prices, thus hurting small farmers.
YET TO BE PAID
Farmers in tea-growing regions west of the Rift Valley who are still pushing to be paid an interim bonus according to a presidential directive on June 11, through the Kenya Union of Small Scale Tea Owners (Kusstoa), have said they would boycott the market if they are not paid after counterparts from around the foot of the Mount Kenya region received payments of between Sh3 and Sh5 per kilo.
The Tea Industry Status Report (May 2014) said key players, among them KTDA, were colluding to deny smallscale farmers their rightful earnings from the auction. It said prices for the top two grades, Best Broken Pekoe Ones and the Best Brighter Pekoe Fanning Ones (the latter) account for 60 per cent of sales volumes and are largely produced by small farmers, had declined by about 40 per cent in the past year.
The report further says that post-auction sales, which are the withdrawals from the main auction on Tuesdays, were rampant, an indication of an unresponsive auction. In the report, the role of the regulator, the Tea Board of Kenya also came under scrutiny.
“Prices at the auction are at their lowest because some multinational companies are taking advantage of the situation. The Tea Board of Kenya is not doing enough to help farmers,” said an industry expert who did not wish to be named.
The Tea Act requires prompt payments within 14 days after tea sales. While the regulator reviews licensing across the chain on yearly basis, KTDA’s management contracting with factories are on a 10-year rolling basis.
There are currently 11 brokers at the Mombasa auction, an exclusive group with its own guide book that spells out rules and regulations governing the sale that is conducted weekly on Mondays and Tuesdays.
Brokers submit samples of tea prior to the auction, before buyers/exporters bid against each other at the sale. For this, they charge 0.5 per cent on the value of tea sales.