KISERO: Returning KTDA to parastatal status would eventually kill it - Daily Nation
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Returning KTDA to parastatal status would eventually kill it

Wednesday August 8 2018

Kenya Tea Development Agency

Tea picking. Njeru Industries Limited in Meru has opposed the rules that govern hawking of tea, saying they are meant to stifle competition and “criminalise” private investment. PHOTO | FILE | NATION MEDIA GROUP 

By JAINDI KISERO
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I recently came across a draft Bill by a group of parliamentarians who want the Kenya Tea Development Agency returned to its former parastatal status.

Whether it will be presented to parliament remains to be seen. What is clear, however, is that this development is part of sub-terrenean moves by powerful individuals with vested interests in the tea sector.

The smallholder tea farmer is not their calculations. Which is why I want to appeal to President Uhuru Kenyatta to take a keener interest in the goings-on and trends in the tea sector.

The President should come out strongly to protect smallholder tea farming from the whims of these self-absorbed elites, who have no long-term vision for this strategic sector.

We need to probe the proliferation of the so-called cottage factory licences and what their advent means for the survival of the small-scale tea farmer.

FARMING MODELS

Injecting competition in the sector is not bad. But when dealing with contract farming models and systems, dogmatic insistence that it is good in all situations can only spawn disruption and death of an industry.

Just look at the sugar belt and see the mess around keeping zones for factories and what poaching by millers has done to the fortunes of the small holder sugarcane farmer.

The Ministry of Agriculture must be explain why it has been arbitrarily issuing cottage factory licences while ignoring that the entities are directly linked to the upsurge in the incidence of tea hawking.

Why did we abandon the old rule that anybody seeking a factory licence first proves that they have the wherewithal to develop their nucleus estates? Why are we, in the name of cottage factories, opening up the tea sector, including to money launderers­­­?

The KTDA factory system as it exists is a result of painstaking thinking and planning by its founders. Their aim was to construct a vertically integrated entity capable of enjoying very wide economies of scale.

FIXED COSTS

Indeed, the main novelty of it all was the bringing of all tea factories under one roof to allow more efficient management of fixed costs. The founders aimed at an entity with a balance sheet large enough to support long-term capital expenditure projects for all tea factories.

In pursuit of this model, KTDA has expanded into insurance, banking, electricity generation, tea packaging and marketing. If it ain’t broke, why fix it?

Indeed, the suggestion to return KTDA into a parastatal is blatantly retrogressive. Before KTDA became a limited liability company in 2000, daily interference into the affairs of this farmers’ body by State agents was gross.

I remember the perennial probe committees and task forces which the State would routinely appoint to look into its affairs of the company. Tellingly, their launch would coincide with when KTDA was about to float big tenders, especially when it was in the middle of evaluating tenders for the supply of fertilisers, paper bags, boilers or vehicles.

TOP OFFICERS

It was clear that KTDA had been captured by the powerful and was more or less an arena for well-connected suppliers and contractors to test their influence with top officers.

When they failed to influence the government to get KTDA to cancel contracts, they would either instigate tea boycotts or the removal of the managing director.

Why would anybody want to take KTDA back to the past?

When KTDA ceased to be a parastatal, there was a sigh of relief among some of us who had been following the goings-on in the sector keenly. We welcomed the change of status to a private company with its own shareholders and electing its directors at an annual general meeting.

Indeed, the State owns shares neither in the Nairobi-based agency itself nor in the factory companies.

We all hoped that this strategic economic institution would, at last, be insulated from well-connected contractors and their allies in government.

SENATE

Clearly, what we hoped for has not happened.

There are two task forces that are concurrently probing the affairs of KTDA, both at the National Assembly and the Senate. Methinks that the government, including Parliament, should keep its hands off KTDA and restrict itself to regulation of the sector.

The purpose of regulation must always be to promote growth and order. The tea cottage factory idea was not bad at all but was badly implemented. Giving farmers access to multiple tea factories can only be good if it does not lead to anarchy and disorder.

The right of an agri-business company such as KTDA to the crop it has financed and supported through a contracted farmer must be respected. That is how you control hawking of tea leaves.

The smallholder tea farmer needs the support of a well-managed and professionally run entity. Returning KTDA to parastatal status would be an anachronistic move.