STiR coffee and tea magazine

STiR coffee and tea 23 above everything else and unfortunately, growers and especially smallholder farmers have no control over these two nodes," the Directorate observes. "Smallholder farmers often are victims of underhand deals between these cartels and Cooperative society management who cut deals on the cost of services in these two areas for personal gains which makes the actual cost of processing and marketing vary very widely and difficult to determine," says the govern- ment agency. The new regulations proposed have all licensed coffee mill- er-marketers charge up to 1% of the value of the coffee sold as marketing fees while the milling losses allowable under this clause may be capped at 19% of parchment coffee milled. Elsewhere, the payments to factories or cooperative societ- ies from the direct settlement system for operations and main- tenance maybe 5% of the value of coffee sold net of the milling, warehousing and marketing costs while the interest rate on bor- rowing by a coffee factory against growers' assets held in trust by the growers' coffee factories and coffee Cooperative societ- ies such as assets, land, machinery, equipment, shall be capped at 5% annually. If the implementation of regulations is finally given the greenlight by the courts, the average cost of milling one tonne of parchment in some of coffee millers that is now at KES5,765 will be capped at KES4,000 hence making a saving KES1,765 for every tonne of parchment. "This represents a saving of about 31% on average on milling tariffs and which goes back to the growers, thereby increasing their returns," the Directorate says. Some coffee millers such as Kipkelion, Great Rift Valley, NGK Gusii, and Kahawa Bora charge even higher milling tar- iffs per a tonne hence the saving from the capping of charges at US$34.24/tonne translates into greater saving for growers. Kipkelion, Great Rift Valley Mill, and NGK charge KES7,410 per tonne while Gusii and Kahawa Bora charge KES6,270 for every tonne milled. But with the new regulations, coffee grow- ers are likely to save between 46% and 36% on milling tariffs "which would significantly change the returns growers receive." Implementation of the new regulations, the Directorate says, "will no doubt transform the coffee industry in Kenya with clear benefits that outweigh the resultant costs of the implementa- tion of these amendment regulations to the benefit of all coffee stakeholders and particularly the coffee growers." "Importantly, the regulations are supporting the efforts to revitalize the coffee industry to its former status as a key crop contributing to the livelihoods of millions of Kenyans and leading in the foreign exchange earning industry in the country," it adds. However, the Council of Governors, currently chaired by Embu Governor Martin Wambor argues that the regulations should be put on hold because there was no public participation in their formulation, which is against the constitution. "The national government's role in the Constitution is strict- ly limited to policy while implementation of these policies and other agricultural functions are a preserve of the county gov- ernments," said Peter Wanyama, the lawyer for the Council of Governors. The National Coffee Federation of Kenya on the other hand claims the new regulations contain up to 80% amendments to the original recommendations by the 2016 taskforce on the cof- fee industry by President Kenyatta. Kenya's Agriculture Minister Peter Munya. "We hereby term these amendments unprocedural and that they have no support from coffee farmers, county govern- ments or coffee sector players and thus should not be allowed until a consensus is reached," the Federation's chairman Francis Ngone told media in Nairobi in early March, 2022. "These amendments are a complete about-turn to recom- mendations by National Task Force on Coffee Sub-sector re- forms which was appointed by Uhuru [Kenyatta] and we want know if the president has changed his mind about wanting to offer coffee farmers a long lasting solution by backtracking on the progressive reforms delivered by His Task Force," Ngone was quoted saying. Meanwhile, the head of the Coffee Directorate Greenville Kiplimo told the media the legal hurdles, "will definitely delay the reforms that we have been pushing for in the sector." Despite the hiccups in the drive towards a new regulato- ry framework for Kenya's coffee industry, the sector recently posted increase in export earnings of KES18.73 billion in 2013/2014, KES21.61 billion in 2018/2019 and KES27.07 bil- lion in 2020/2021, an increase of more than 33% between 2014 and 2021. During the 2021/2022 crop year, coffee prices improved remarkably with the Nairobi Coffee Auction registering an av- erage of US$374.40 per a 60kg bag as of March 31, 2022, an increase of 11.1% from the previous year's price performance of US$337.30 for every 60kg bag. On average, prices for every 60kg bag of Kenyan coffee has been on the increase from US$184.60 in 2018/2019 to US$ 337.30 in 2020/2021 which translates to an 83% improvement in coffee prices according to the Coffee Directorate. The volumes of coffees traded at the Nairobi Coffee Ex- change has almost doubled with an increase of 46.51% from 291,810 to 427,545 60kg bags for the October 2021 to March 2022 according to the Directorate. But as the US Department of Agriculture (USDA) said in early March 2022 the takeover of the Nairobi Coffee Exchange (NCE) by the Capital Market Authority "is on hold due to legal complications, bringing uncertainty and potentially disrupting the management of NCE auctions." For now, the legal challenges seem to have disrupted refor- mation of Kenya's coffee industry with uncertainty on what im- pact the delayed implementation of a new regulatory framework would have on the country's ambitious agenda for production, processing and marketing of the commodity once referred to as 'Kenya's black gold'.

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