Article by Wachilonga Namasaka
Tea has long been at the heartbeat of Kenya’s agriculture landscape. Visitors in Kenya are more likely to be welcomed by a steaming cup of tea as a gesture of hospitality found in homes and offices alike. Recognizing this significance of tea in the country, Executive order No. 3 of 2021 on Agricultural reforms: Revitalization of the tea sub-sector highlighted that Kenya has been for the longest time the leading exporter of black tea accounting for nearly 20% of the global exports. Additionally it stated that tea is Kenya’s third largest foreign exchange and it provides a livelihood of over 620,000 smallholder farmers and supports over six million people.
Despite this significant contribution of tea to the country’s economic growth, the order recognized that the smallholder tea farmers have not been able to realize their profits in full due to various governance challenges in Kenya Tea Development Agency (KTDA) subsidiaries. Furthermore, the executive order noted that Kenya’s tea pricing process lacks transparency and inclusivity compared to other countries. A directive was thus given to the Tea Board of Kenya alongside other stakeholders to develop tea subsector (corporate governance guidelines/regulations on directorship) to majorly setup limits for directors involved in the Tea value chain.
Despite this directive, there appears to be a challenge in the actualization of general corporate governance guidelines that can help solve the problems that currently face the tea sector. To achieve this, TBK can learn from how other sectors such as the Capital Markets Authority (CMA) and Institute of Certified Secretaries (ICS) came up with their corporate governance guidelines in their specific sectors.
The CMA has established corporate governance code for Issuance of Securities to the public where it calls for governance standards that exceed the minimum requirements set in the Companies Act. Similarly, ICS emphasizes capacity building of different organizations such as ESG frameworks to ensure adherence to sound corporate governance practices. By collaborating with these sectors, TBK can also develop effective corporate governance guidelines that will support profitability for both small and large-scale tea farmers.
The guidelines can also mandate the boards of smallholder tea factories to undergo an annual governance audit to evaluate whether the company is in compliance with robust sound practices. Such an audit can be conducted by an accredited governance audit institution and a report offered to TBK. TBK can then proceed to evaluate the levels of compliance and know how it can promote best practices and standards in various operations in the tea sector in line with section 5 the Tea Act no.3 of 2020.
In a significant step toward transparency, the IEBC held elections for smallholder tea factories across the country in June 2024. The newly elected leaders now have an opportunity to advocate for the implementation of a comprehensive governance code tailored to the tea sector. Such guidelines would embody the principles of Article 10(2) of the Constitution which promotes national values like good governance, integrity, transparency, and accountability.
Article was originally published in the Business Daily
