Inside new plans to rescue coffee sector, make growing it profitable

Poor prices, financial indiscipline among cooperative society officials and climate change have been the main factors behind reduced productivity and profits in the coffee sector. And for a majority of farmers, the thrill of growing coffee is gone.

The tribulations in the sector began in the 90s when the industry suffered a decline in performance and coffee prices dipped, prompting farmers to start agitating for changes in their respective factories.

The government intervened by introducing initiatives to liberalise the sector. Key among the changes was the introduction of direct sales, otherwise known as the “second window”, where farmers could sell their beans directly to overseas buyers.

Earning better returns

As a result, a few factories have managed to sell their produce directly to buyers, raising their earnings to the highest level last season. But the same reformists who pushed for changes in the coffee sector back then have told Nation that performance is worse than it used to be.

“Coffee farmers are still entrenched in poverty. There is not much that has been done to make coffee a profitable venture. Only a few have succeeded,” said former Nyeri Town MP Wanyiri Kihoro.

Mr Kihoro was one of the lawmakers who agitated for giant coffee cooperatives in Nyeri to be split, arguing that they prevented farmers from earning better returns from their crop. Farmers, he said, languished in poverty, sometimes going for months without being paid, while the managers of their cooperative societies embezzled their money.

He added that farmers were unable to access international markets in plans orchestrated by cartels.

“We wanted a rehabilitation of the coffee sector and increased income for the farmers,” he said.

“The problem was predominantly administrative. People with no knowledge of matters of coffee were made agents and that’s how the farmers started losing.”

The decline in coffee production was linked to farmers losing interest in the crop because they received only 30 percent of sales proceeds while the bulk of the money went to middlemen disguised as marketers.

It is also noted that with the introduction of the “second window”as a selling option, the three categories of licences — milling, marketing and dealers — were misused.

Unscrupulous individuals acquired all the three permits, with farmers losing control of their commodity and coffee prices plummeting.

Coffee prices in the world market continued to fall, causing confusion in most cooperative societies, as the world market was the main consumer of the crop.

As a result, giant coffee cooperatives in Mukurwe-ini, Tetu and Mathira in Nyeri started splitting up due to financial problems and their inability to support the financial needs of their members.

Some 28 factories had merged to form Tetu Coffee Growers Cooperative Society, which later split into smaller units, while Mathira Growers Cooperative Society broke up into 13 units.

Because of the financial dip that followed, farmers were forced to sell their produce at farm gate prices, with buyers offering a pittance for a kilogramme of coffee.

“A lot of factors can be attributed to the fall in prices and volumes produced. But top among them was the control of the sector through regulations that exposed farmers to corrupt officials both at the cooperative level and at the Coffee Board of Kenya,” Mr Kihoro said.

Marketing agents

He added that the long marketing chain ate into farmers’ earnings as their coffee proceeds would be subjected to deductions by middlemen, the cooperative society, marketing agents, the coffee auction and the international market.

“The amalgamation of cooperative societies created a haven for top officials to fleece the farmers,” he said, adding that the officials had political protection and wanted to make sure the breaking up of societies into autonomous units failed.

Then came violence from enraged farmers who had grown weary of cooperative society managers who had over-borrowed from financial institutions without involving them, further pushing them to a cycle of debt.

A huge chunk of the loans, farmers said, went into the personal pockets of the managers, fanning anger and resentment towards the officials.

At one point, the Tetu Coffee Growers Cooperative Society, a pro-split group, took over the 28 factories and raised red flags atop the gates, symbolising danger.

Trenches were dug to prevent vehicles from moving in or out of the factories. Because harvesting was neglected, coffee beans were destroyed on farms and the hostile takeover of the factories by groups agitating for autonomy led to violence. One person was killed in Tetu and scores injured as a factory was razed.

Mr Karoki Wanjohi, the chairman of Thiriku Coffee Society, which was part of the Tetu giant cooperative, said the break-up was influenced by managers who were out of touch with farmers’ concerns.

“They were misusing money and amassing wealth. The revenue was increasing but nothing was going to the farmer’s pocket,” he said.

Thiriku factory is among a dozen that are run autonomously, having split from the giant cooperative. Farmers who are members of these factories were among the highest-paid in last season’s crop.

Mr Wanjohi said that, when the giant cooperatives existed, their bargaining power was high and they would receive farm inputs promptly and cheaply from manufacturers as opposed to purchasing at the higher market price.

“But there was a lot of duplication and it was expensive,” he said.

He noted that the agitation to split giant cooperatives was politically instigated and encouraged violence. People invaded farms belonging to those opposed to their stand and destroyed coffee bushes and damaged property to intimidate them.

Cartels

“The coffee sector is now on very shaky ground. Production has declined and it will take something almost miraculous to make coffee lucrative again,” said Mr Wanjohi, adding that maintaining the quality of coffee is the main challenge.

Meanwhile, the Ministry of Agriculture has proposed revival of the Coffee Board of Kenya in a bill that seeks to bring radical changes in the coffee sector by freeing farmers from the grip of cartels, starting at the factories.

In the Coffee Bill, 2020, the coffee board will register and regulate the operations of millers, marketing agents, buyers, roasters, packers, management agents and warehousemen.

The board will consist of a chairperson appointed by the President, three members representing cooperative societies where coffee is grown, two members representing coffee estates and two members representing coffee traders.

It will also participate in formulating policies in the coffee sector, and licensing millers, marketing agents, buyers, roasters, warehousemen and importers of value-added coffee.

The board will also undertake capacity building, technology transfer and technical assistance to counties on matters relating to coffee and provide advisory services related to coffee production, promotion, quality enhancement and compliance with standards and regulations.

It will impose a levy or levies on growers, importers and buyers as provided in the Act.

[email protected]