KTDA Management Services Limited (KTDA MS Ltd), a wholly owned subsidiary of KTDA Holdings Limited, has commenced negotiations to review management agreements for smallholder tea factories.
Tea factory directors from KTDA regions five and six, which comprises of factories in Kericho, Nandi, Bomet, Kisii and Nyamira counties, this week held negotiation meetings with KTDA MS Ltd in Nakuru, to finalise the long process of reviewing the management agreement.
This is in line with the Tea Act, 2020 and the reforms being undertaken in the tea sub-sector.
On Thursday, directors from KTDA region seven, comprising of factories in Trans-Nzoia, and Vihiga counties, also participated in the exercise.
The reviewed management agreement is a paradigm shift from the current agreement and after implementation, it is expected to remedy the relationship between the parties and improve the management of tea factories for the benefit of tea farmers.
Among key changes in the reviewed management agreement include reduction of management fee from the current 2.5 per cent to 1.5 per cent of farmers' sale.
This will see KTDA lose more than half a billion in earnings.
The meetings also looked into the introduction of key performance indicators to monitor the performance of the management agency on a continuous basis, and reduction of the term of the agreement from the current 10 years to five years, which is expected to enhance accountability of the management agency.
They also addressed demarcation, spelling out the role of the management agency and the board to improve their services to tea factories and farmers.
The team from KTDA MS was led by its newly appointed chairman, Solomon Maina, who noted that KTDA MS has vast experience in managing the smallholder tea sector having managed the sector for more than 50 years.
Maina further added that, whilst the agency is committed to implementing the new management agreement, the impact of reduced management fee is substantial and would require fundamental changes in both the structure of KTDA MS Ltd, but also in mode of service delivery by adoption of mechanisation and automation.
Speaking during the event, 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 the increasing returns to tea growers.
The KTDA Holdings board chairman underscored the role the agency has played in enabling small-holder tea factories 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 sub-sector in Kenya to thrive.
He said KTDA has adopted internationally recognised operational and financial standards.
The meetings were also graced by the industry regulator, the Tea Board of Kenya (TBK), which was represented by its chairman Kiarie Mburu, acting CEO Peris Mudida and other senior managers at TBK.
Mburu implored the parties to work together towards improving the livelihood of over 650,000 tea farmers and many other Kenyan who depends on tea.
He noted 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 sub-sector.