Senior managers at the troubled Kenya Tea Development Agency (KTDA) are expected to appear this morning at the Directorate of Criminal Investigations for interrogation. This comes after several farmers sought the help of the DCI to unravel how hundreds of millions of shillings have been used to pay legal firms.
But KTDA through its lawyer has told off DCI boss George Kinoti over the summons, saying he has no jurisdiction to investigate the agency’s officials. “Our client only answers to its shareholders and no other person,” lawyer James Ochieng Oduol told Mr Kinoti in his reply.
Over the weekend, Mr Kinoti sent summons to the KTDA officials led by Chief Executive Officer Lerionka Tiampati, asking them to report to the DCI headquarters today at 9am to assist the detectives who are “investigating a case of conspiracy to defraud…which I have reasons to believe that you (have) information which can assist me in my investigations.”
Mr Kinoti has asked the KTDA officials to also submit an audit of its lawsuits and documents relating to its retained lawyers as farmers continue to put pressure on the company over poor pay and insider trading.
It is not clear whether Mr Kinoti will also summon the KTDA directors too, who have been using their private companies to trade with the agency as suppliers.
Also summoned together with Mr Tiampati is the KTDA Company Secretary, Dr John Omanga, Head of Procurement Brown Kanampiu, Head of Finance Simeon Rugut and Lincoln Munyao, the head of audit.
Although Mr Kinoti said failure to comply with the summons constitute an offence liable to prosecution, the KTDA seems to be digging for a fight and has asked Mr Kinoti to either withdraw the summons or they will seek legal redress.
“As a private company, our client’s matters relating to its legal affairs, inclusive of law suits and lawyers retained in those law suits, remains a private company affair,” Mr Oduol told Mr Kinoti.
The KTDA lawyer says t the DCI “has no jurisdiction whatsoever or at all, to seek that our client does account to your goodselves on its legal affairs, including disclosure of its lawyers and related documents.”
Last week, Agriculture Cabinet Secretary Peter Munya told a parliamentary committee that KTDA is a public company. He described the organisation as a “militant opponent” of regulations together with East African Tea Trade Association, the company that runs tea auction.
“KTDA is a public company in at least three senses: It is owned by Kenya’s 650,000 small-holder farmers through their tea factory companies; It was a government parastatal that was handed over to farmers as part of liberalisation of the tea sector. It has custody of a large pool of public assets paid for by tax-payers from which it continues to make profits for which it has paid no value. In this sense, it is a trustee of public property,” the CS told the National Assembly Committee on Delegated Legislation.
During the session, KTDA surprised observers after it hired four law firms to represent its various subsidiaries. These were Ngatia & Associates representing the tea factories managed by KTDA Management Services, G&A Advocates representing KTDA Holdings and Management Services, Millimo Muthomi and Company Advocates representing KTDA Holdings and Iseme Kamau & Maema representing KTDA Power Company Ltd.
Public participation
KTDA told the committee that it was opposed to the regulations proposed by Mr Munya after President Kenyatta ordered for the streamlining of the tea sector – since there was no public participation and they would disturb the running of the sector.
Another opponent to the Munya reforms was East African Tea Trade Association (EATTA) – which runs the tea auction platform in Mombasa. EATTA told the committee that the new regulations do not add value and if implemented will make Kenyan tea un-marketable across the globe. But in his reply on EATTA’s position, Mr Munya posed: “They are an auction manager. Why are they against tea being sold in their auction? If you open a shop and you don’t want many customers, there must be something wrong with you.”
Growth measures
EATTA members have previously been accused of corrupting the tea auction system and running a non-transparent platform, which had allowed brokers to thrive at the expense of the farmers.
Mr Mwangi Kibichio, who appeared for EATTA, termed the new regulations as unnecessarily restrictive, not alive to the reality on the ground and ambiguous; hence might be prone to abuse by authorities.
“The regulations are largely silent on development and growth measures, relegate reduction of taxation and regulation burden and concentrate on marketing and trade rules where governmental roles and levying aspects are magnified,” Mr Kibichio said.
While the tea agency has accused Mr Munya of publishing the regulations without consultations, he told the committee last week that he received presentations from the company.
“KTDA should be an agent of farmers, but it has engineered a role reversal in which KTDA-HL and its associated companies have become the principal and the factory companies, the Agents,” he said.
“The farmers — as principals —have lost their right to recall the agency, and KTDA opposes their right to sell directly at the auction; to recruit their own company secretary and to manage their elections according to their own Articles of Association which specify one man one vote.”
Seven factories
At the heart of the summons are petitions signed by farmers from seven factories, who complained that KTDA had billed the factories tens of millions of shillings for a case filed in 2019 and in which the other litigants spent Sh500,000. In the letter addressed to Mr Kinoti, the farmers had asked him “to demand a forensic audit of all KTDA law suits and their ensuing costs.”
Murang’a-based Gacharage Tea factory had also sent a separate petition after KTDA sent a prepared resolution asking them to approve the appointment of a top-notch Nairobi advocate to oppose the tea regulations in court.
Although the factory told KTDA that it is not opposed to the reforms and has asked the agency to furnish farmers with the expected bill since the amount of money to be paid to the law firm was not indicated, it has now emerged that KTDA listed Gacharage as among the companies that have agreed to hire the top-notch lawyer.
“Previous experiences shows exorbitant charges were incurred when the law firm was contracted to challenge a case…the case cost the farmers a whopping Sh70 million,” said the protest letter from Gacharage and signed by its official, Paul Kagema.
In their Senate petition, KTDA through their advocate Benson Milimo told the committee that CS Munya in publishing the new regulations introduced unnecessary regulatory bureaucracies, a move contrary to section 3 of the Crops Act, 2013. President Uhuru Kenyatta had on January 14 issued directives to clean the tea industry and restore profitability and hope to thousands of farmers.
In particular, President Kenyatta called for reforms in KTDA, tea brokerage, auctioneering and the stakeholders to seal corruption and embezzlement loopholes.
Following the directives, CS Munya published new regulations, which propose that tea farmers who market their produce through KTDA will be paid 50 per cent of the delivery monthly with the rest paid as bonus annually.
Retained earnings
Previously, farmers were being paid by KTDA factories 14 to 16 shillings per kilo monthly, with the bulk of the money, which is the retained earnings, paid in October.
In the new reforms, individual tea factories will also be allowed to sell their produce at the tea auction, outlawing direct sale overseas. The CS further said any teas that are not sold during a particular auction shall be re-listed for sale during the subsequent auction. The reform also calls for automation of the auction process in the next two months to promote accountability.
More so, buyers of the green leaf will have to deposit a down payment of 10 per cent with the balance paid before export of the purchased consignment. In turn, factories are required to pay farmers 30 days after receiving the auction proceeds.
Source: Nation Media
Five senior Kenya Tea Development Agency (KTDA) managers summoned by the Directorate of Criminal Investigations (DCI) yesterday denied any allegations of wrongdoing.
The five, led by chief executive Lerionka Tiampati, were grilled over accusations of misappropriation of funds through questionable payments of lawyers in a series of lawsuits.
In a letter addressed to DCI boss George Kinoti and signed by eight representatives of various tea factories, tea farmers on August 10 laid bare what they felt was reckless plunder of their money by KTDA.
The farmers said the agency, which was created to safeguard their interests and returns, had been frustrating them by defying their recommendations, even challenging some of them in court and billing them tens of millions of shillings to pay lawyers.
In one of the cases, KTDA is accused of going to court to challenge farmers’ decision to reinstate the one-man-one-vote system. Instead, KTDA wanted owners of big tracts of land to have more votes. KTDA’s wishes prevailed.
“The farmers spent approximately Sh500,000 on the entire suit while KTDA billed factories a cumulative of Sh200 million for this case,” reads the letter.
The KTDA officials were ordered by the DCI to produce minutes from previous board meetings to prove that the payments they made in the lawsuits were authorised.
Source: Standard Media
Directorate of Criminal Investigations headquarters along Kiambu Road
The Directorate of Criminal Investigations (DCI) has issued a summon letter addressed to four top officials at the Kenya Tea Development Agency (KTDA) Holdings.
In a letter seen by Kenyans.co.ke, the four were identified as CEO Lerionka Tiampati, Head of Legal Dr John K. Omanga, Head of Procurement Brown M. Kanampiu and the Head of Finance Simeon Rugut.
According to the letter, DCI informed the four that he was compiling a case on conspiracy to commit fraud.
"I have reasons to believe that you, Lerionka, are connected to the offence or have information, which can assist me in my investigations," reads an excerpt from one of the letters.
Lerionka Tiampati KTDA Holdings CEO at his office.
They were directed to present themselves at the DCI headquarters along Kiambu Road on Monday, August 24, for questioning.
Lerionka has been in charge of the private holding company owned by over 600,000 smallholder tea farmers for over a decade.
In October 2019, he was in the news for the wrong reasons when he brushed off protests by farmers over what they deemed as unacceptable bonuses.
The CEO went as far as asking them to uproot their tea plants if they so wished, drawing alot of angry reactions from his employers.
"We have no say over what farmers want to do with their tea bushes. They are overall owners of the plants," he told the press.
Statistics indicate that more than 60% of tea dollars are deducted from the farmer’s produce to run factories, warehouses and other overhead costs.
For the period in question (2018), Kenya sold 474,861,590 kilos worth Ksh140 billion, at the average price of Ksh296 per kilo.
However, bonuses came in at less than half of what farmers received in the previous year, with the average bonus recorded as Ksh15 per kilo.
KTDA recently opened an office at the Dubai Tea Trading Centre (DTTC), which was geared towards acting as an intermediary between production and consumption.
Smallholder farmers have always maintained that they are stuck as they have no one else to sell their produce to.
A detailed feature by NTV in October 2019, claimed that smallholder tea farmers receive only 16% of the consumer price paid in Europe and other importers, while 84% is shared by traders, brokers, marketers and other boardroom members.
Source: Kenyans.co.ke
KTDA entities that farmers own but which don’t earn them a single cent
KTDA CEO Lerionka Tiampati (right) and Vice Chairman Philip Ngetich during a press conference on October 3, 2019. PHOTO | FILE | NATION MEDIA GROUP
Summary
By the time of its privatisation in 2000, KTDA was holding over Sh1.4 billion belonging to 45 factory companies.
While Parliament was told that this was realised from “savings on income” the reality was that this was money deducted by the KTDA barons from farmers
The money was not held in shares but in cash. The DCI should start from here and find out where this money went.
The last time I wrote on the Kenya Tea Development Agency (KTDA), its lawyer threatened to sue me for “defaming” the organisation, which was once the bedrock of Kenya’s tea industry.
CONFLICT OF INTEREST
Last week, President Uhuru Kenyatta asked detectives to investigate the workings of this behemoth — which was turned from a government body to a private entity in a scandalous arrangement that left smallholder tea farmers at the mercy of a few directors stationed at the headquarters.
They are also to investigate the serious conflict of interest involving board members.
When detectives from the Directorate of Criminal Investigation start looking into the agency’s affairs, they will find out that it is a rogue body. They will find that conflict of interest reigns here as private companies in which directors have direct interests are awarded tenders to supply weighing machines and bags, to renovate factories and repair boilers and trade with the entity, which on paper, is owned by farmers.
But the worst part is that money from these subsidiary entities that were built using farmers’ money do not earn them any dividend, which explains why tea factory directors are never told how many shares their factory holds in KTDA and what income should go to their growers. At best, these directors don’t know the workings of KTDA or at worst, and for those who know, they are compromised.
NEVER REFLECTED
I have in many months spoken to factory directors who do not know whether these assets belong to KTDA or to the farmers — President Kenyatta would have done well to call for a commission of inquiry.
We know that KTDA, on behalf of smallholder growers, owns warehouses, commercial buildings in Nairobi and Mombasa, estates in Nairobi, beach houses in Mombasa, the sprawling 600-acre tea farm in Kangaita, an engineering company in Industrial Area, a microfinance institution known as Green Fedha, Majani Insurance and many others whose profits are never reflected in the shareholders’ annual pay.
When some of the projects were mooted, farmers were told that they would save a lot of money.
If these institutions were built using smallholders’ money, why do tea farmers never get a penny out of them? Who are these shadowy beneficiaries who have been gaining from these companies whose directorship is similar to that of KTDA Holdings? These are the questions President Kenyatta seemed to be asking when he ordered the DCI to dip its nose into KTDA matters.
ACCUMULATED SURPLUS
Recently, I was looking at KTDA archives to find out if indeed these assets it claims to own were built using farmers’ money. The first file I picked up — minutes of the board — had part of the evidence I wanted.
We can now authoritatively tell farmers that they directly contributed money for the setting up of these facilities from which they don’t get any dividend.
For instance, in 1980, their money was used to build three beach houses in Nyali, Mombasa, on LR 209/600/6 and 209/602/7 during the chairmanship of Charles Koinange. I have no idea how many more beach plots are owned by KTDA but if we dig into their archives, we might get the full story.
In those days they had something known as a green leaf price reserve, which was to be a price stabilisation mechanism but which was used to deposit money deducted from farmers’ pay every year.
The second payment, which farmers call a bonus, is actually accumulated surplus deposited in banks and held by KTDA in fixed accounts or in dollars, and this is the cash available to the board and management to play around with.
STORAGE CHARGES
Let me tell you the story of the Mombasa-based KTDA warehouse, because I now have first-hand evidence from archival papers.
Built on a 10-acre plot, the land on which it sits was acquired when Eliud Mahihu was the Provincial Commissioner, and built when he was the Tea Board of Kenya chairman. The acquisition of the land followed advice from then general manager Charles Karanja, who told the board that “containerisation of tea would in future become the more popular mode of transportation in the world”. This is captured in Min 52/80(6) of 1980. He then proposed that it would be important to build a warehouse in Mombasa, besides the containerisation depot in Nairobi’s Industrial Area, where KTDA had a plot.
The Authority, as it was then, was told by the Karanja management that the containerisation depot would create savings through the use of railway transport and reduce stuffing and storage charges, damage and contamination of tea as well as freight and insurance premiums.
DEDUCT MONEY
It was recorded that the Regional Controller of CDC Mr C.J. Stephenson asked the board to seek the services of a consultant to turn that idea into reality.
During a subsequent 3pm meeting held on February 22, 1985, and chaired by Mr Koinange, five members of a special committee of the KTDA board convened to decide where to get the money to build the container depot and a new KTDA headquarters. They unanimously resolved to deduct the money from tea farmers. No one asked the farmers and there are no records that the different companies under the umbrella of KTDA had been informed.
The particular resolution reads: “That the cost of the implementation of the development projects proposed on the authority’s said plot at the Industrial Area be financed through a retention of a sum equivalent to the cost of the proposed development from the Second Payment Surplus Funds accumulated at the end of this financial year.”
CASH COW
There was also abuse of power during the President Daniel Moi regime, and one case in point where farmers’ money was put into a project that they don’t own is the modern-day Nyayo Tea Zone.
Records at KTDA indicate that the management — even without the authority of the board — incurred expenditure to kick-start the Government Forest Tea Zone, as Nyayo Tea Zone was known then. Through a roadside directive, KTDA had been ordered, nay tasked, by President Moi to establish nurseries in which tea seedlings would be grown. The government did not put in any money to start that project, leaving it to the farmers.
KTDA had also been asked to build a factory and market the tea within the Nyayo Tea Zone belt. By then, the Nyayo Tea Zone parastatal had not been formed, and this shows how tea farmers have over the years become everyone’s cash cow.
On this one, and given the political notoriety of those days, the board decided to only express its hopelessness: “The management informed the Board that the government had failed to release (Sh15.8 million) the cost of establishing these first year nurseries.
FUND NURSERIES
Instead, the Board learnt, the permanent Secretary, Ministry of Agriculture and Livestock Development had asked the KTDA to fund the cost of establishing the nurseries … The management had argued against the proposal on grounds that the project was a Government project, and therefore should be fully funded by the Government …”
But finally, the board gave out all the 100,000 tea seedlings that had been grown at its Kangaita Tea Nursery and took another Sh100,000 to President Moi to finance the President’s Forest Fund. That is how farmer’s seedlings were used for the Nyayo Tea Zone.
When you look at some of the audited accounts of KTDA in the 1980s, you will see that money was generated from various sources, including Kagochi Training School and Kagochi Farm. These days, I am not sure many tea farmers know how much these entities fetch.
Something else found in the 1980s minutes was that farmers were subsidising local consumption of tea. Why the government and the Tea Board had allowed this to happen is not clear — and it is captured in an internal memo dated July 1984 for the Board.
TEA BARONS
While there were complaints that Kenya Tea Packers (Ketepa) was not earning KTDA any money, it was kept rolling and continued to be the main outfit through which farmers’ money was misappropriated.
The bad manners of yesteryears were inherited by the agency after the government decided to walk away from the task of safeguarding farmers’ interests in KTDA, thanks to a push by MPs from tea-growing areas. The problem with that hurried exit is that nobody knew what role the new agency was to play. So it changed its name and inherited the mischief of the authority.
By the time of its privatisation in 2000, KTDA was holding over Sh1.4 billion belonging to 45 factory companies. While Parliament was told that this was realised from “savings on income” the reality was that this was money deducted by the KTDA barons from farmers — since KTDA was not a profit-making organisation but a farmers’ service organisation. The money was not held in shares but in cash.
WHERE IS MONEY
Then minister Chris Obure told Parliament that the money was part of the “assets” inherited by the new agency and that its board of directors would meet and decide its distribution.
“I expect the distribution will be in form of shares to be allocated to the 45 tea factory companies,” said the minister.
The DCI should start from here and find out where this money went. There was an evaluation of KTDA assets carried out by Ernst & Young, and it would be important to check this out.
We should have listened to Prof Peter Anyang’ Nyong'o when he stated thus: “In privatising, it is important that the government realises that it must perfect itself as a regulatory agency. One of the crises in the tea industry is that the government does not know what to do with KTDA. Should it be a regulatory agency laying ground rules for the privatised tea sector, or should it continue to be an intervening agency in the economic running of these factories?”
NEAR COLLAPSE
Because we did not answer that question, we are now running to save an industry on the verge of collapse. But somehow, the farmers are still alive and the bushes are still there.
The question remains: Where does the money from KTDA subsidiaries vanish to?
jkamau@ke.nationmedia.com @johnkamau
Source: Nation Media
