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How British multinationals fashioned KTDA to fail tea farmers

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By JOHN KAMAU
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“There is a body here called the Kenya Tea Development Authority and this is the agent of the suckers,” — Martin Shikuku, Assistant Minister, Home Affairs, 1974.

When Assistant Minister Martin Shikuku described KTDA as the “agent of suckers”, he was wondering why the ministry of Agriculture had allowed British multinationals, led by Brooke Bond Liebig, to keep on marketing Kenyan tea and why KTDA (now Kenya Tea Development Agency) was not working for the interest of farmers.

“If you look at the salaries of those boys, our fellow Africans, the agents of the suckers, you will be surprised. If you look at the cess which is levied on the small scale tea farmers to feed these few individuals, you will be surprised. This cess is meant to exploit the small-scale tea farmers and feed a few individuals,” argued Mr Shikuku on the floor of the House.

Archival records indicate that KTDA was fashioned by the British multinationals to their own advantage. From 1930s, Brooke Bond Liebig had controlled the marketing of the tea produce from Kenya — and only agreed to participate in shaping and supporting the local smallholder industry on condition that Africans were banned from processing sun-dried tea at home and that it commanded the low-end market segment.

That is what led to the passing of the KTDA (Sun-Dried Tea) Order (L.N.163/1964) and which was in essence to support Brooke Bond’s position.

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Before the Swynnerton Plan of 1954, Africans grew tea illegally and processed it at home. By then the Kenyan tea from the multinationals commanded prices 16 per cent below the London auction. The untold story of the tea industry is that multinationals pushed for the smallholder growers to only pick two leaves and a bud — which is the logo of KTDA — and to use this quality pick to blend with their poor quality tea.

After that, and by 1971, the Kenyan tea started commanding respect at the London auction where they commanded prices 4 per cent above other produce.

Records show that the reason that Brooke Bond seconded its engineer to help install the first smallholder tea factory at Ragati in Central Kenya was to fashion it to suit their own marketing schemes.

“Brooke Bond had been reluctant to assist this scheme, fearing that the development of smallholder tea might affect its own dominant position. Soon, Brooke Bond realised that it could fashion the smallholder tea scheme to its own advantage,” wrote Prof Nicola Swainson while studying the effect of capitalism in Kenya.

First, the three major tea companies in Kenya — Brooke Bond, George Williamson and James Finlay — insisted that smallholder leaf should be of higher standard than the estates, and that is why even today, KTDA insists on two leaves and a bud — while the estates pluck using machines and with little enforcement of this rule.

“This meant that Brooke Bond was able to purchase the high quality smallholder tea and blend it with its own lower-quality tea,” observed Prof Swainson in his book, The Development of Corporate Capitalism in Kenya.

It is clear that after smallholders were allowed to plant tea just before independence, they were thrown into a colonial agrarian regime where their produce was marketed by large estates, or later other appointed agents. The entry of local agents did not help either.

Smallholder tea production became a fast and large investment that involved the Commonwealth Development Corporation (CDC), and later the World Bank. One of the main worries, as Parliament was warned in 1974, was that the government could leave tea farmers with heavy financial burden thanks to “useless projects or for recurrent expenditure”.

With the formation of KTDA, the CDC erected the first 12 factories in Litein, Nyankoba, Kebirigo, Imenti, Ikumbi, Tegat, Chebut, Kianjokoma, Ragati, Chinga, Mataara and Kangaita.

The British CDC, in order to get its money back, was allowed to appoint managing agents and that is how Brooke Bond Liebig and George Williamson — the two largest tea companies in the UK — got entangled in KTDA. Records further show that some of the British tea firms, George Williamson and James Finlay, had also advanced money during the establishment of three factories in Kirinyaga, Kericho and Kisii — and they would deduct their money and interest after selling the smallholder tea.

It was an arrangement that baffled the likes of Shikuku: “They bring you the money to develop the tea to take to them and then sell to you and charge you interest and you are happy.”

CDC had made sure that farmers were not involved in the management of these factories — and that is the origin of the factory management mayhem that was taken over by KTDA after its general manager Charles Karanja petitioned President Jomo Kenyatta.

At the expense of farmers, the factory managers were given hefty salaries, cars, and free housing as KTDA went on a borrowing spree that has never stopped.

“Are we going to have the KTDA borrowing more money after every two years and squandering that money and then making it up through this perpetual cess?” asked Tinderet MP Jean Marie Seroney in Parliament.

From the onset, KTDA was centralised in Nairobi and calls for its decentralisation were thwarted in 1970s.

In place, and for many years, was the Tea Board of Kenya — once a colonial marketing monopoly — which was to sell what the farmer had produced to the international market and then determine how much to pay the farmer.

The Board would then keep the difference of the price paid by the international market and the morsel given to the farmer through the KTDA. The purpose of all the cash crop boards carried over from colonial days was to control over production, processing and marketing. In all these arrangements, the smallholder farmers and growers had little, if any, say on the sale of their produce.

From the very beginning KTDA was not capitalised and had no formal shareholding. But an Act of Parliament empowered KTDA to impose levies on tea growers with the approval of the Minister for Agriculture. And since there was no shareholding, KTDA invested all the surplus of its levies in buildings — and squandered the balance via insecure banks.

“The managing people at the top are getting free cars, good salaries … they are squeezing the small man with deductions … and the only answer to this problem is to do away with the KTDA,” said Mr Kinyanjui as early as 1974, worried that the body’s management had gone rogue.

With the formation of KTDA, as an agent of the farmer, the smallholders were supposed to have representation at the Tea Board of Kenya with KTDA as their representative.

But as it turned out, KTDA put figureheads at the Tea Board and a culture of sleaze was allowed to permeate the entire sector. The regulator and KTDA were now working together where the dominant actor no longer raised its voice on behalf of the farmer.

Most of the directors of KTDA used their dalliance with the Tea Board to become brokers and they turned hunters rather than wardens of farmers’ produce. Nobody, therefore, seemed accountable to the farmers as the chances of making millions of shillings as brokers overshadowed everything else.

With these interested parties at the helm of KTDA, the policies that were formulated and the regulatory requirements were done to protect KTDA, Tea Board and the brokers from the farmers. As a result, the regulator was manipulated — or agreed to be manipulated by KTDA honchos and today — even as appointed agents — KTDA barons have managed to control farmers’ factories, tea farms, assets and all their finances through Management Agreements drawn by themselves instead of the farmers.

Critics have often argued that KTDA has over the years become a rogue agent and it now manages the farmers through a convoluted directors electoral system — in which KTDA, though only an agent — has turned around to dictate eligibility and also suitability of those who should contest elections.

In 2016, in an affidavit filed at the High Court, the KTDA Group Company Secretary Ken Omanga said his office was “the proper and competent office/person to preside over and/or determine all matters relating to, touching on and or incidental to election of the directors of the companies.”

As appointed managing agents KTDA should, as a rule, send the proceeds of the sales to the farmers’ accounts within 14 days of receipt. But instead, it hoards part of these proceeds for about 12 months and dupes farmers that they are receiving “bonus”.

According to the Management Agreement signed by the various factories, all sales proceeds should be paid promptly. But KTDA still violates the clause, gets away with it — and for all tea factories; after all it control the entire management structure.

With such management in place, the body is able to impose fees and levies on farmer’s income; procure fertiliser and services for smallholder tea factories without consulting the various boards.

The worst is that the factories are unable to walk out of the management agreements.

At the factory level, KTDA created two categories of shareholding which favours those in Category A against those in category B. Pundits say that this has over the years denied tea factories quality leadership.

Even though factories are registered companies with shareholders, KTDA has made sure that they are not run as such and do not mobilise shareholder equity to improve them.

While a Sessional Paper was tabled in Parliament to stop the government from controlling the tea industry, it has given barons a chance to milk the farmers with no one watching.

Tea sector has over the years been the subject of oppressive colonial laws — and when the Sessional Paper was laid, it did not indicate how farmers’ fortunes will improve.

“The maximisation of returns by the farmer does not feature anywhere among the objectives to be achieved by the tea industry,” said Mr Murungi, then.

“It is the peasant farmers who spend cold nights in bandas waiting for tea lorries during the rainy season. They are the ones who have made Kenya the leading exporter of tea in the world … our farmers are doing so because they are driven by profit motive.”

The arrangement that followed was unjust to the farmer. Tea Board was issuing licence to any farmer who wanted to plant tea and controlled the production. KTDA on the other hand had the monopoly of selling tea and when the tea was sold it never went to the farmer but to a KTDA account.

“The (Kanu) government survives on this. The Central bank calls KTDA every day to find out how many dollars have come in,” Kiraitu Murungi, then an MP and now Meru Governor, once claimed in Parliament.

More so, it has become a house of scandals and arrogance.

Sometime in March 2006, KTDA exported processed tea valued at Sh650 million to a company without any opening letters of credit or receiving cash. It was one of the ways the body gambles with Kenya’s tea as an agency.

Then something went awry — and it was kept as a secret. One of the buyers, the Swiss-based Lohit International, which had taken tea worth Sh245 million, refused to pay and the highest single-loser was Gatunguru Tea Factory in Mathioya which had lost tea worth Sh12 million.

It was only after the matter was raised in Parliament that the issue became public. The government admitted that this was an error on the part of KTDA but nobody was prosecuted for that offence.

What was never revealed was that this tea was not sold at the Mombasa auction, where it is traditionally traded, but directly to some buyers.

It was simply transferred to the ship — and as Alfred Sambu told Parliament “it was theft. They just transferred it to those people.”

What went wrong: “KTDA was operating very well before the legal notice that was issued by the Minister in 1999. That legal notice left KTDA to operate the way it wants. There is no direct government control. I must admit that many things are going wrong, this being one of them,” said Mr Muiruri in 2007. By then, he was an assistant minister for Agriculture.

Today, Mr Muiruri still maintains that stand.

It has been public knowledge that the push to have the government out of the tea sector created a new monster: Kenya Tea Development Agency which left the multibillion shilling industry at the hands of a few directors who are neither answerable to the government nor to the farmers.

When the smallholder factory directors become members of the Board of the Agency — appointed as managing agent, then farmers’ representation is diluted.





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