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Smallholder tea factories sign improved contracts with KTDA

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By Victor MUJIDU

More than eighty percent (80%) of smallholder tea factories across the country have signed new management agreements with the Kenya Tea Development Agency Management Services Limited (KTDA-MS), affirming their confidence in the organization’s proven track record by entrusting it to manage their affairs.

All smallholder tea factories located in the West of the Rift Valley, as well as those in Embu, Meru, and Kiambu counties, have signed new agreements with KTDA-MS, committing to continue using the organization to manage their affairs for at least the next five years.

The signing of new management agreements between KTDA-MS and factories is part of the ongoing reforms in the tea sub-sector as contained in the Tea Act of 2020, and subsequent subsidiary legislation, which call for enhanced management agreements for factories in favour of the smallholder tea farmers.

The reviewed management agreements are a shift from the current arrangement which are expected to remedy the relationship between the parties and improve the management of tea factories for the benefit of tea farmers once implemented.

Among key changes in the reviewed management agreements include:

  1. Reduction of management fees factories pay management agents from the current 2.5% to 1.5% of net sales value of the tea sold per year.
  2. Introduction of key performance indicators to monitor the performance of the management agency on a continuous basis.
  3. Reduction of the term of the agreement from the current 10 years to 5 years which is expected to enhance accountability of the management agency.
  4. Clear demarcation spelling out the role of the management agency and the board to improve their services to tea factories and farmers.

Speaking following the conclusion of management agreement negotiations between Kiambu County tea factories and KTDA-MS in Ruiru on Thursday, May 18, 2023, KTDA Holdings Chairman, David Muni Ichoho said:

“We are pleased with the progress made by a vast majority of our factories in signing the new management agreements with KTDA-MS as part of the ongoing reforms in the tea sub-sector.

As a board, we remain committed to the implementation of all reforms geared towards improving the performance of tea factories and the increasing returns to tea growers.

“The decision by the factories to enter into new agreements with KTDA-MS is confirmation of their confidence in the organization to continue delivering quality services and value for money for smallholder tea farmers in the country.”

“Aware of the substantial impact the reduction in management fees will have on the business, fundamental changes in both the structure of KTDA MS Ltd as well as in mode of service delivery will have to be implemented by adoption of mechanization and automation.”

The reviewed management agreements with KTDA MS Ltd will be submitted to the Tea Board of Kenya for review and approval before implementation.

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