The board and management of KTDA Management Services Limited (KTDA MS Ltd) have commenced negotiations to review management agreements for smallholder tea factories.
KTDA MS Ltd. a wholly-owned subsidiary of KTDA Holdings Limited, which provides management services to tea factories, has started discussions to review the management agreements for the smallholder tea factories.
Tea factory directors from KTDA regions five and six, which include factories in Kericho, Nandi, Bomet, Kisii, and Nyamira counties, held negotiation meetings with KTDA MS Ltd in Nakuru on Tuesday, 18th and 19th April 2023, to finalize the long process of reviewing the management agreement in line with the Tea Act, 2020, and the reforms being undertaken in the tea sub-sector.
Directors from KTDA region seven, comprising factories in Trans-Nzoia and Vihiga counties, undertook the same exercise with KTDA MS Ltd in Nakuru on Thursday.
The management agreement has been reviewed to improve the management of tea factories and to remedy the relationship between the parties for the benefit of tea farmers.
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Key changes in the reviewed management agreement include the reduction of management fees from the current 2.5 per cent to 1.5 per cent.
The introduction of key performance indicators to monitor the performance of the management agency on a continuous basis.
The term of the agreement has also been reduced from the current 10 years to 5 years, which is expected to enhance accountability of the management agency.
Additionally, a clear demarcation spelling out the role of the management agency and the board has been established to improve their services to tea factories and farmers.
Solomon Maina, the newly appointed chairman of KTDA MS, led the team from KTDA MS and noted that the agency has vast experience in managing the smallholder tea sector, having managed the sector for over 50 years.
He further added that the impact of reduced management fees is substantial and would require fundamental changes in both the structure of KTDA MS Ltd and the mode of service delivery by adopting mechanization and automation.
The meetings were graced by the industry regulator, the Tea Board of Kenya (TBK), which was represented by its Chairman, Kiarie Mburu, the Acting CEO, Peris Mudida, and other senior managers at TBK.
Kiarie implored the parties to work together towards improving the livelihoods of over 650,000 tea farmers and many other Kenyans who depend on tea.
Kiarie further noted that tea has been identified as one of the key value chains for agricultural transformation under the government’s Bottom-up Economic Transformation Agenda (BETA) to improves the livelihoods of Kenyans and increase food security therefore underscoring the importance of the subsector.
At the end of the three days forum, all KTDA managed factories in the west of the Rift Valley signed off the reviewed management agreements with KTDA MS Ltd. The agreements will be submitted to TBK for review and approval before implementation.
KTDA Holdings board Chairman, David Ichoho, reiterated that his board and his team are committed to the implementation of all reforms geared towards improving the performance of tea factories and increasing returns to tea growers.
He underscored the role the agency has played in enabling small-holder tea factories to enjoy economies of scale through aggregation, which is the hallmark of cost reduction in the KTDA group.
He noted that this model is what has enabled the smallholder tea subsector in Kenya to thrive while other subsectors are struggling.
Ichoho further added that KTDA has adopted internationally recognized operational and financial standards.
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