MUDIBO: Tea auction works just fine 64 years on

Friday May 1 2020

Edward Mudibo, Managing Director, East Africa

Edward Mudibo, Managing Director, East Africa Tea Trade Association (EATTA).  FILE PHOTO | NMG 

NJIRAINI MUCHIRA
By NJIRAINI MUCHIRA
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The East Africa Tea Trade Association (EATTA) Managing Director Edward Mudibo speaks on the newly published tea industry regulations and their impacts on the Mombasa auction.

How has the Covid-19 pandemic affected the tea industry?

The global pandemic has affected members of the tea value chain including the tea producers, warehousemen, brokers, exporters and packers.

Although the tea value chain is classified under critical and essential service providers, the sector has witnessed challenges in the factory processes, transportation of tea from within and outside Kenya, warehousing of tea and the adherence to social distancing and other health concerns during the auction administration.

How important are the new tea industry regulations and how are they going to impact the industry?

EATTA has argued for and has engaged with the Ministry of Agriculture on the need to review the tea regulations. This is because the sector has operated within regulations since the enactment of the Crops Act, 2013 after the Tea Act was abolished.

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The published regulations have numerous gaps that will curtail the smooth operations of the tea sector. There is a need for the government to take into account views of the tea stakeholders before finalising the regulations.

Does EATTA support the new regulations?

EATTA supports the need for new regulations but due process should be followed.

Whereas there are some positive aspects in the draft tea regulations there are, however, far too many shortcomings that needs to be addressed.

Ideally, the regulations should dwell on matters to do with tea husbandry and leave out trade issues that can be best addressed under the Ministry of Trade.

How will the proposal for buyers to submit a performance bond and paying in full the value of the tea bids they have won affect the competitiveness of Kenyan tea?

For a tea buyer this means the cost of trading with Kenyan teas will be disproportionally higher than trading in other non-Kenyan teas.

The tea trade presently has inbuilt safeguards to protect the release of teas before payments and disciplinary procedure for any delayed and/or non-payment of bidded teas.

This is an attempt to fix what is not broken with added costs to doing business.

The regulation should adopt existing controls. Buyers may view the Kenya auction centres’ costs of doing business as unfriendly and will most likely seek to buy their teas from alternative auction centres.

Should the government be determining the trading rules considering EATTA is a private entity?

The government should be limited to setting sound policies and ensure appropriate legislation. Ideally, the government should keep out of business but provide a conducive environment.

The EATTA trading rules and regulations are what have ensured that the auction system has been self-sustaining and self-regulating over the years.

EATTA has been accused of running a dysfunctional and inefficient tea auction system characterised by lack of transparency, accountability and competition. Comment.

Contrary to the assertion, the EATTA tea auction system has been in operation for 64 years. There has been a transparent, accountable and competitive system. This can be verified by government agencies that have previously provided oversight on the operations like the Competition Authority of Kenya and the Tea Directorate.

When does EATTA intend to go live with an electronic auction system?

The process of automation is in the final stages with members being sensitised to log in and purchase tea using the platform.

The Covid-19 pandemic has further made the need for auction automation to be more urgent in terms of operationalisation. It is anticipated that full operationalisation shall take place within one month.

What value do countries that use EATTA get and how critical is the auction system in ensuring farmers get the best possible price for their crop?

About 32 per cent of the tea exported to the world passes through Mombasa. Being dollar-denominated, the centre is convenient for the international tea buyers and it is the only multi-origin auction centre handling variety of tea from 10 producer countries.

Tea exporters have access to the port thereby allowing efficient delivery to overseas customers while payment for tea is made by the tea buyers within nine days.

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