Explainer: What Kenya’s new tea levy means for farmers, exporters and the industry

The government has moved to reintroduce a tea levy nearly a decade after it was scrapped, arguing that the measure will provide a sustainable source of funding for research, market development, infrastructure and farmer protection in one of Kenya’s most important export sectors.

According to information released by the Ministry of Agriculture and Livestock Development and the Tea Board of Kenya (TBK), the Tea (Levy) Regulations, 2026 came into effect on May 1, 2026, after being gazetted on April 1.

The regulations are made under Section 53 of the Tea Act, 2020 and effectively restore a levy that existed in a different form until 2016.

At the heart of the debate is a simple question: who will pay?

The government says the levy will not be charged directly to tea farmers. Instead, exporters will pay 0.8 per cent of the auction value of tea exports, or the customs value in the case of direct sales.

Tea importers, meanwhile, will pay a levy equivalent to 100 per cent of the value of imported made tea. The government describes the import charge as a protective measure designed to shield Kenyan tea producers from low-cost imports that could depress local prices and damage the reputation of Kenyan tea.

The ministry insists that farmers, factories, domestic traders, aggregators and value-added tea businesses will not be directly subjected to the levy.

It argues that the prices paid to farmers for green leaf are determined by factory earnings and are therefore separate from the export levy itself.

The reintroduction of the levy follows concerns that emerged after the previous ad valorem levy was abolished in 2016.

According to the government, the removal of the levy left institutions such as the Tea Board of Kenya (TBK) and the Tea Research Institute without a predictable funding stream, leading to reduced capacity in research, quality surveillance, market promotion and sector development.

The new levy is being presented as an industry-funded mechanism rather than a conventional tax.

The government maintain that all funds collected will remain within the tea sector and will not be transferred to the National Treasury for unrelated expenditure.

The State says the funds will be held in a ring-fenced Tea Fund established under the Tea Act.

Under the proposed distribution formula, half of all revenue collected will be directed toward farmer income support and price stabilisation. The remaining funds will be split among research and development, regulatory activities and infrastructure projects.

Twenty per cent will go to the Tea Research Institute for scientific research and innovation, while 15 per cent will support regulatory functions undertaken by the Tea Board of Kenya. Another 15 per cent will be allocated to county governments for tea-related infrastructure development.

The government estimates the levy could generate approximately Ksh.1.42 billion annually. Based on official projections, around Ksh.710 million would be channelled into the farmer price stabilisation fund, Ksh.284 million into research activities, and about Ksh.213 million each into Tea Board operations and county infrastructure projects.

A major selling point of the regulations is the proposed price stabilisation fund, which the ministry says is intended to cushion tea farmers against the volatility of international commodity markets.

The ministry argues that farmers have lacked such protection since the earlier levy was abolished. Under the proposed framework, the fund would provide financial support when international tea prices decline sharply, supplement farmer earnings during difficult periods and help cushion growers against climate-related shocks such as droughts and floods.

The government also rejects claims that the levy will make Kenyan tea less competitive globally. According to the ministry, the export levy of 0.8 per cent represents only a small fraction of export value and is lower than levies imposed in some competing tea-producing countries.

It contends that the sector’s competitiveness challenges stem less from taxation and more from insufficient investment in value addition, marketing and market development.

Another concern raised by industry players has been the potential impact on value-added tea businesses. The government says the regulations deliberately exempt several categories of tea products from the levy to encourage local processing and innovation.

Tea packed in retail-ready packages of 10 kilograms or less, tea extracts and tea aroma products will not attract the levy. Tea processed within Export Processing Zones and Special Economic Zones for local consumption will also be exempt.

The ministry argues that the exemptions are designed to encourage value addition and help Kenya move away from exporting largely bulk tea.

In addition, part of the levy revenue earmarked for research and regulation is expected to support innovations in packaging, processing technologies and specialty tea products.

The Tea Board also says some of its funding allocation will support common-user packaging facilities and export warehouses aimed at reducing logistics costs for processors.

Questions have also emerged over accountability and the possibility of mismanagement, particularly because concerns over governance contributed to the abolition of the previous levy.

The government says the new framework contains stronger safeguards than those that existed a decade ago. It points to the establishment of a dedicated Tea Fund, the application of Public Finance Management rules, mandatory quarterly and annual reporting requirements, digital monitoring through the Tea Board’s Integrated Management Information System, and stakeholder representation within governance structures.

The ministry further argues that county governments receiving infrastructure allocations will be required to account for expenditure and consult tea stakeholders when identifying projects to fund.

Another criticism has centred on whether tea stakeholders were adequately consulted before the regulations were introduced.

Government documents indicate that stakeholder engagement took place between December 2024 and March 2025, with 11 consultation forums held across 20 counties.

The ministry says farmers, factories, exporters, brokers, county governments, research institutions and trade associations participated in the process and that stakeholder views were incorporated into the final regulations before gazettement.

The levy collection process itself will be largely digital. Exporters and importers will submit declarations through the Tea Board’s Integrated Management Information System, upload supporting documents electronically and obtain clearance once payment has been confirmed. The system is intended to reduce paperwork and streamline compliance.

Despite the government’s assurances, debate over the levy is unlikely to end soon. Supporters view it as a necessary investment in the future of Kenya’s tea industry, particularly at a time when farmers face fluctuating global prices, climate pressures and intense competition from other producing countries.

Critics, however, remain concerned that any additional cost imposed on exporters could eventually be passed down the value chain, potentially affecting tea prices and sector competitiveness.

The government however insists that the levy is not being presented as a new tax on farmers, but as a mechanism to fund research, regulation, infrastructure and income protection within the tea industry itself.