(Nairobi) – A proposed law could leave tea farmers vulnerable to price fluctuations, as it aims to alter how the sector is funded and managed.
A new bill, the Tea (Amendment) Bill 2023, introduced in Parliament this week, is set to reallocate the revenue from tea taxes, potentially reducing the financial support available for tea farmers facing declining global prices. If passed, the bill will direct 60% of the revenue from the tea levy to the Tea Board of Kenya (TBK), while the remaining 40% would go to the Tea Research Foundation.
The 1% tax on tea exports, established by the Tea Act of 2020, was initially introduced to provide financial stability for the tea sector, especially in times of price volatility. However, the tax has yet to be enforced, as several tea companies have filed legal challenges against it, arguing that it is unconstitutional. The case is still ongoing in court.
Currently, the Tea Board heavily depends on government funding, and the tax revenue was expected to bolster the board’s capacity to stabilize tea prices and support farmers. According to the proposed amendment, the funds collected from the tax would be split, with 60% allocated to TBK to finance its operations and the remaining 40% directed to the Tea Research Foundation.
In contrast, the existing Tea Act required 50% of the revenue collected by TBK to be used for supporting farmers and enhancing tea prices. Another 15% was earmarked for TBK’s operational costs, 20% for tea research, and the remaining 15% for infrastructure development within the tea sector.
The bill, introduced by Bomet Senator Hillary Sigei and Konoin Member of Parliament Brighton Yegon, reflects a significant shift in funding priorities. In 2023, Kenya’s tea exports were valued at KSh 180.57 billion, up from KSh 138.09 billion in 2022. Had the tea tax been enforced during this period, the Tea Board would have collected approximately KSh 1.8 billion from the tea exports.
However, if the bill is passed, it would give the Tea Board the authority to decide how much of the collected revenue will be allocated to farmers. This change removes the funding assurance that tea farmers had under the Tea Act, particularly through the Tea Fund, which was designed to protect them from price fluctuations.
The proposed changes in the bill also mean that the stability fund, which was meant to safeguard farmers from price shocks, would no longer be guaranteed by a dedicated tea fund. Instead, funds would be provided through the national budget, subject to approval by the National Assembly.
| Key Aspects | Details |
|---|---|
| Proposed Bill | Tea (Amendment) Bill 2023 |
| Allocation of Revenue | 60% to Tea Board of Kenya (TBK), 40% to Tea Research Foundation |
| Tea Tax Rate | 1% tax on tea exports |
| Revenue from Exports (2023) | KSh 180.57 billion |
| Potential Tea Board Tax Collection | KSh 1.8 billion |
| Changes in Funding | Funds for farmers no longer guaranteed through a tea fund, to be funded via the national budget |
| Sponsors of Bill | Bomet Senator Hillary Sigei, Konoin MP Brighton Yegon |