What the future hold for thousands of coffee farmers

Two months ago, Parliament made a decision that coffee farmers hoped would herald a new era in the management of the coffee sub-sector, with growers seeing an end to decades of exploitation by brokers at the Nairobi Coffee Exchange (NCE).

Coming after constant declarations by Deputy President Rigathi Gachagua that the days of cartels in the tea, milk and coffee sectors were numbered, the decision was monumental. Finally, there was light at the end of the tunnel for thousands of small-scale farmers across the country who depend on the crop.

The National Assembly Delegated Legislation Committee, in a report adopted by the House, annulled in its entirety the Crops (Coffee) (General) (Amendment) Regulations, 2022, which were published in June last year by then-Agriculture Cabinet Secretary Peter Munya.

The regulations proposed amendments to various provisions of the principal regulations that sought to provide guidelines for issuance of licences, obligation of licence holders and service providers, recognition and protection of coffee growers’ rights and collection and maintenance of data related to coffee to ensure improvement of standards.

The Coffee Exchange Regulations, 2020, and Crops Coffee General Regulations, 2019, also gave the Capital Markets Authority (CMA) the mandate of supervising the NCE.

However, Mr Munya opposed them and amended the regulations through Legal Notice 104 to extend agent marketing licences from July 1, 2021, to June 30, 2022.

These are the amendments that Parliament nullified, saying the ministry ignored views of stakeholders and failed to adequately conduct public participation.

“When the CMA directed NCE to admit us into the trading floor, we were excited that finally, coffee farming would benefit our farmers who started sprucing up their bushes in anticipation for a windfall,” said Mr Zablon Mbaabu, the Meru Coffee Millers Union (MCMU) chairman.

Among other famers’ organisations allowed to trade at the NCE are Kipkelion Brokerage Company Ltd, Murang’a County Coffee Dealers Company, Mt Elgon Coffee Marketing Agency Ltd and United Eastern Kenya Coffee Marketing Company Ltd.

“But barely two months later, we have been hit. Cartels are fighting back and it’s not going to be a walk in the park for those trying to kick them out of the coffee trading,” Mr Mbaabu added.

On Sunday, Mr Gachagua announced he will convene a four-day stakeholder conference in Meru County on the implementation of coffee reforms starting June 6.

The conference will bring together representatives of farmers from coffee-growing counties, governors and lawmakers, Cabinet secretaries for Trade, Agriculture, Cooperatives and members of the Coffee Exchange and Coffee Directorate, among other relevant agencies.

“The purpose is to agree on what needs to be done and the MPs and senators will take it from there and come up with regulations and legislations to cushion farmers from middlemen,” he said.

But farmers’ unions claimed they have not been consulted over the planned forum, with Mr Ephantas Majau, from the National Coffee Cooperative Union (Naccu) which brings together coffee unions across the country, saying they were not in the know.

“Unless we are brought in at the tail end of the preparations, we are not aware of the forum. We have not been asked to submit our views but if we are consulted, we have everything ready because our interest is to see the sector streamlined for the benefit of the farmer,” Mr Majau, who is also the Meru Central Coffee Union (MCCU) chairman told Nation in a phone interview.

Mr Josephat Kwiriga, the executive officer at Mikumbune Coffee Cooperative Society in Imenti South, said coffee societies have over the years been sidelined from reform forums, adding that it was the high time their views were considered.

“We feel left out yet societies are the units that interact with the farmer at the grassroots level. Nobody has ever cared to talk to us and find out what challenges we go through,” Mr Kwiriga said.

Questions have also been raised over a new outfit at the DP’s office that is charged with steering the reforms, sidelining the Coffee Sub-Sector Reforms Implementation Standing Committee (CSRISC).

Political goodwill

“What we are seeing at the moment is just politics. The biggest challenge is that there has never been political goodwill and we hope this time round leaders will be committed to reforms,” Mr Mbaabu said.

Farmers have also expressed concerns over the content of the Coffee Bill, 2020 which is at the Senate, saying some of its provisions were not “friendly” to the sector and they want their views incorporated before it is passed.

Mr James Ireri, a farmer in Embu said to curb misuse of funds that the coffee subsector receives from the government or other donors, periodic forensic audit should be done.

“The Sh3 billion revolving cherry fund, Sh7 billion Coffee Development Fund and Sh1 billion subsidised farm input kitties have never been audited and we don’t know how these funds were utilised and the government should carry out a proper audit of these funds if we are to move forward. The law should also strengthen the coffee co-operative societies as they produce over 60 per cent of the coffee grown in Kenya,” Mr Ireri said.

He said the Direct Settlement System (DSS) should be expedited because it will promote transparency in all the transactions at the coffee exchange.

The Meru forum comes hot on the heels of reports that farmers’ earnings dropped by over 50 per cent in May, dampening their spirits at a time there was hope that the sector was coming out of the doldrums.

The payout rate released by factories across the coffee growing counties are between Sh50 and Sh90 per kilogramme on average, a drop of up to 50 per cent, compared with prices over the past three years.

At the Nairobi Coffee Exchange (NCE), farmers received about Sh547.6 ($4) per kilogram of clean coffee compared to Sh933.6 ($8) paid last year for the same quantity (exchange rate was 116.7). This is despite the depreciation of the Kenya shilling, which it was expected would have been an advantage for coffee prices at the auction.

Farmers say streamlining of the NCE and lifting the lid on the secrecy surrounding operations at the market will bring about better prices for the farmer.

When farmers’ societies were allowed to trade at the NCE, they expressed optimism that the move was in the right direction.

“Initially we were trading through brokers and we could not tell when prices were genuinely poor. There is also price discovery, which enables us to be versed with the various prices for different grades,” said Mr Festus Bett, the CEO at Kipkelion Brokerage Company Ltd.

“We have been doing the farming and leaving somebody else to do the selling. With this arrangement, we will now have feedback from buyers on why our product is not selling, which will play a key role in the improvement of quality because we will communicate this to our farmers,” he added.

He said the market had been dominated by a few players who controlled the entire chain by milling, bidding, marketing and buying the commodity, which was open to price manipulation.

“The law that allowed us to make direct sales abroad and barred us from trading on the floor of our coffee exchange in our own country was a mockery. We don't expect the prices to shoot at the onset but once the market stabilizes, we will get better deals. The situation where a few individuals controlled prices will be a thing of the past and we view this as empowering the farmer,” Mr Bett said.

MCMU chief executive officer Duncan Kiambia said coffee societies will benefit from reduction in commissions paid to marketing agents since they will pass the benefit to societies by charging them lower commission, which will benefit the farmer.

“We have also embarked on capacity building for societies that are trading at the NCE for the first time with the view to ensuring that farmers get the value of trading directly at the coffee exchange,” he said.

However, according to Mr Charles Mutwiri, an estate farmer in Meru, selling of coffee at the NCE might not have a huge impact on the farmer. He said other initiatives should be put in place to cushion growers from global price shocks.

“Being allowed to sell coffee at the auction is one step. The government should now go ahead and set minimum guaranteed price so that when we go there we know that the top grade AA beans will fetch not less than USD 300 (Sh38,000) for the 50kg bag,” Mr Mutwiri said.