Legislative Summary: The Tea Act 2020

The Tea Act, 2020 (hereinafter the “Act”) was assented to on 23rd December 2020 and came into commencement on the 11th of January 2021.

The Act has re-established the Tea Board of Kenya which will, among other duties monitor and license agencies involved in the buying and selling of tea.

Object and Purpose of the Act
The Act:
 Establishes the Tea Board of Kenya to develop, promote and regulate the development of the tea industry.
 Promotes accountability in the tea sector by promptly paying tea farmers and by giving them more power in the running of the tea factories.

Establishment and Management of The Tea Board of Kenya
The Act establishes the Tea Board of Kenya (The “Board”) which shall be a body corporate with perpetual succession and a common seal capable, in its corporate name, of suing and being sued.

The Board shall be domiciled in Nairobi, however, for its own efficacy, it may establish other branches countrywide.

The Board shall be managed by a Board of Directors. The Board of Directors shall consist of:
 A Chairperson appointed by the President;
 The Principal Secretaries for Trade, Agriculture, and Treasury;
 One person from the East or West tea blocks nominated by the Council of Governors;
 Four persons elected by tea farmers from the East and West tea blocks;
 A Chief Executive officer who shall be an ex officio member and;
 Two persons elected by the large scale tea growers and tea traders respectively.

The Board may employ such officers, agents, or staff, as are necessary for the proper discharge of the functions of the Board under this Act, upon such terms and conditions of service as the Board may determine.

In addition to this, the Board shall also appoint a corporation secretary on such terms and conditions as the Salaries and Remuneration
Commission advises.

The Board members shall hold office for a term of three years which is renewable once.

The Board may establish committees, as may be necessary for the performance of the Board’s functions and the exercise of the Board’s powers under this Act.

The Board has the responsibility to keep proper books and records of accounts of the income, expenditure, and assets of the Board and to submit to the Auditor General the accounts of the Board.

Functions of the Board
The functions of the Board include:
 develop, promote, and regulate the development of the tea industry and regulate the sale, import and exports of tea.
 co-ordinate the activities of individuals and organizations within the tea industry.
 facilitate equitable access to the resources, facilities, and benefits of the tea industry by all interested parties.
 register tea factories, small scale tea growers, medium scale tea growers, large scale tea growers, warehouse operators, tea packers, tea buyers, exporters, importers, tea brokers, management agents, tea auction organizers, commercial tea nurseries, commercial green leaf transporters and license manufacturers.
 facilitate marketing and distribution of tea through gathering and dissemination of market information and monitoring of the local and global supply demand situation.
 prescribe the maximum period and minimum amount for payment of green leaf.
 promote demand and consumption of tea locally and internationally.
 advise both the national and county government on levies, fees and import or export
duties on tea.

On the issue of taxation, the Act clarifies that fees imposed by a county government shall not be prejudicial to national economic policies, economic activities across county boundaries or national mobility of goods, services, capital or labour. To this end, the Act has empowered the Cabinet Secretary to put in place mechanisms to harmonize fees and charges on tea across counties.

One of the main functions of the Board is licensing. The Act has placed a few conditions on the granting of the license. These conditions include the professional and moral suitability of the applicant or its managers, the financial condition and history of the applicant, the integrity of its management, the efficacy of its capital structure and the public interest served by granting of the license.

Tea Value Addition
The Act states that within eight years of the commencement of the Act, all tea buyers or exporters must value add at least forty per cent of their annual Kenya tea exports.

The Tea Auction process 
The Act provides that all teas processed and manufactured in Kenya for the export market except for orthodox and specialty teas shall be offered for sale exclusively at the tea auction floor. To participate in the auction, all tea factories shall register with the Board and the auction organizer directly.

The Act further states that the auction organizer shall establish an electronic trading platform for the auction of tea that will be usable and accessible to all players in the value chain.

To take full custody of the tea, a buyer must pay in full the value of the tea bids that they won. Further, tea brokers, buyers and the auction organizers shall ensure that the proceeds from the sale of tea are remitted to the tea factories accounts within fourteen days from the date of the auction.

The Act states that tea factories must pay tea growers, within thirty days, fifty percent of the payment due for green leaf delivered every month and the balance due to the tea grower within three months from the end of the financial year.

Establishment of Tea Levy and Tea Fund
Tea Levy
The Act has empowered the Cabinet Secretary to impose a levy on tea exports and imports to be known as the tea levy. The levy shall be imposed by the Board at a rate of one percent of the auction value for teas sold through the auction. The levy on tea imports shall be charged at a rate of one hundred percent of the value of the imported teas.

The levy shall be divided as follows:
 fifty percent shall be applied by the Board for income or price stabilization for tea growers;
 fifteen percent shall be applied by the Board in the furtherance or exercise of any function or power of the Board;
 twenty percent shall be remitted directly to the Tea Research Foundation;
 fifteen percent shall be applied for infrastructure development in the tea subsector on a pro-rata basis.

Tea Fund
The Act establishes the Tea Fund to be managed by the Board. The fund shall consist of:
 monies appropriated by the National Assembly.
 monies from the tea levy.
 monies from a source approved by the Board.
 grants and donations made to the Board.

The Board shall apply the monies deposited into the fund to income or price stabilization and for research and development.

Establishment of The Tea Research Foundation
The Act establishes the Tea Research Foundation (the ‘‘Foundation’’). The Foundation is a body corporate with perpetual succession and a common seal capable, in its corporate name, of suing and being sued.

The functions of the Foundation are to:
 promote, co-ordinate and regulate research in tea and tea diseases; and
 expedite equitable access to research information, resources and technology and promote the application of research findings and technology in the development of tea.

To carry out these functions, the Foundation shall:
 formulate policy and make policy recommendations to the Cabinet Secretary on tea research.
 prioritise areas for, and co-ordinate, tea research in Kenya in line with the national policy on tea.
 determine and advise the Government on the resource requirements for tea research in Kenya both at the national and county level.
 regulate, monitor, and ensure that all tea research undertaken by other institutions or persons undertaking tea research is consistent with the national priorities specified in the relevant policy documents.

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For any further information or clarification on this review, please contact Kenya Association of Manufacturers
at info@kam.co.ke.

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