STiR coffee and tea magazine

22 STiR coffee and tea / Issue 3, 2022 (June / July) By Shem Oirere G overnment-driven coffee industry reforms initiated in Kenya nearly six years ago have run into legal hurdles as opposition to the proposed new sector regulations intensifies hence jeopardizing the envisaged far-reaching recom- mendations on revitalization of the performance of the once top foreign exchange earner for the East Africa country. The High Court in Kenya halted, albeit temporarily, the implementation of the 'Crops (Coffee)(General)(Amendment) Regula- tions, 2022' until a court case filed by the Council of Governors, a non-partisan organization made up of governors of the Ke- nya's 47 counties, challenging the legality of the new rules is heard and determined. In the build-up to the new coffee regulations, the govern- ment, at the initiative of President Uhuru Kenyatta, formed a taskforce in 2016 to look into the woes afflicting Kenya's coffee sector leading to the compiling of a comprehensive report with several recommendations on how to rejuvenate coffee subsector. "It is from these recommendations that the national gov- ernment in collaboration with counties and other stakeholders, instituted a number of reforms in the coffee sub-sector which have resulted in a positive impact within a very short period," said Peter Munya, Kenya's Cabinet Secretary for Agriculture, Livestock, Fisheries, and Cooperatives. According to a separate statement on the impact of the regu- lations by the Coffee Directorate, which is under the ministry's Agriculture and Food Authority, the proposed rules would help Legal Complications Halt Reforming of Kenya's Coffee Industry "streamline the structure of Kenya's coffee industry to allow co- ordinated regulation of the coffee value chain, create a level play- field for all value chain players, and promote fair trade practices to support the production, processing and marketing of coffee." "The regulations will in particular reform the processing of coffee in Kenya which has remained a weak link in the value chain due to the high losses experienced both in quality and quantities during processing and the high charges that growers have to meet for processing services and processors' dishon- esty," the Directorate said. Under the new regulations coffee growers have the oppor- tunity to appoint their preferred coffee milling companies. The rules have also capped allowable milling losses to 19% of parch- ment coffee milled and the cost of coffee milling and related activities (handling, sorting, grading, packaging, warehousing charges) not to exceed KES4,000/ton (US$34.24/ton) of cof- fee delivered for milling. "This will protect growers from excessive charges for ser- vices rendered by miller-marketers and ensure processing ef- ficiency thus enabling better returns for growers," the Coffee Directorate explains. Furthermore, the regulations propose capping market- ing fees at up to 1% of the value of the coffee sold while also "granting an independent auction organizer the role of conduct- ing business at the coffee auction from the exchange as the case has been." "The introduction of an independent auction organizer, in- dependent coffee liquorers, and licensing of cupping centers will ensure fair trade practices in quality assessment processes and the coffee auctions," the Directorate says. Meanwhile, to discourage the possibility of coffee buyers growing into an oligopolistic or even monopolistic coffee agen- cies, the regulations propose separation of roles within the cof- fee industry such as buying, processing, and marketing coffee. Furthermore, the regulations propose the restructuring of the governance in primary coffee cooperative societies by limit- ing the term of office for the directors to two terms of five years each and ensuring a two-third gender representation to ensure "the integrity of directors and increased participation of mem- bers in the making of key decisions such as the appointment of service providers and borrowing of finances." "This is expected to enhance the performance of these Co- operatives and reduce losses, reduce colluding in underhand deals of the society management decision making and unap- proved borrowing which has driven many coffee cooperatives into unserviceable debts," says the Directorate's report. In order to improve predictability in Kenya's coffee industry value chain, the new regulations propose specific costs and rates for key parameters in various coffee processing and marketing operations. Currently, the Coffee Directorate cites the variation in the average coffee yield estimated at 302kg/ha for smallholder farms and 556kg/ha for estate farms. It also gives the example of cherry payment rates previously set by law at 80% of the total upon delivery but which at the moment varies from one coop- erative society to the other with some paying as low as 10.2%. "The costs for processing and marketing vary widely as these two nodes [processing and marketing] of the value chain have been dominated by cartels who are out to maximize profits Council of Governors Chairman Martin Wambora.

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