Stand-off looms as Kosgei kicks cartels out of coffee exchange

• Agriculture minister Sally Kosgei has gazetted new regulations that remove the Nairobi Coffee Exchange (NCE) from the hands of the cartels and give the government supervisory powers over the market.
• The regulations have effectively brought the exchange under the Coffee Act to be managed by the nine-member committee with the powers to enforce the Nairobi Coffee Exchange Trading Rules – dealing the cartels a fatal blow.
• The committee is made up of five representatives of growers who trade at the exchange and three dealers. Millers and marketers, warehouses and the Coffee Board of Kenya have one representative in addition to an executive officer.
• The new rules also require managers of the exchange to file mandatory monthly returns on the market’s operations to ensure accountability.
• The takeover comes in the wake of increasing complaints by farmers that cartels have taken over the market denying them full returns from the sale of their produce.
• Cartels have emerged over the years and infiltrated the liberalised system to enrich themselves through phony deals.

The management of coffee trading at the Nairobi exchange is set to take a new shape following the introduction of rules targeting cartels.

Agriculture minister Sally Kosgei has gazetted new regulations that remove the Nairobi Coffee Exchange (NCE) from the hands of the cartels and give the government supervisory powers over the market.

“The Nairobi Coffee Exchange shall be managed by the exchange committee as provided for in the Nairobi Coffee Exchange Trading Rules,”
Dr Kosgei says in a Legal Notice.

The regulations have effectively brought the exchange under the Coffee Act to be managed by the nine-member committee with the powers to enforce the Nairobi Coffee Exchange Trading Rules – dealing the cartels a fatal blow.

The committee is made up of five representatives of growers who trade at the exchange and three dealers. Millers and marketers, warehouses and the Coffee Board of Kenya have one representative in addition to an executive officer.

The new rules also require managers of the exchange to file mandatory monthly returns on the market’s operations to ensure accountability.

“The new arrangement gives the government a say in what happens at the auction. Those who have been handling matters in disregard of the law will have to play ball or ship out,” said an industry official who is backing the reforms.

The exchange is currently managed by the Kenya Coffee Planters and Traders Association (KCPTA), which is registered under the Societies Act Cap 108.

Its core business is stated as running the commercial coffee trade sample room and ensuring smooth auctioning of produce.

The takeover comes in the wake of increasing complaints by farmers that cartels have taken over the market denying them full returns from the sale of their produce.

READ: What turned sweet taste of coffee farming into bitter brew?

Lack of a legal mechanism has however prevented the authorities from intervening in the market’s affairs despite persistent complaints over mismanagement and the rise of cartels.

KCPTA is not answerable to the Ministry of Agriculture or the Coffee Board of Kenya (CBK), the sector regulator, making it impossible
for the two to intervene in the market’s affairs.

KCPTA’s article of association exempts it from the provisions of the Coffee Act 2001 or the Coffee (General) Rules 2002 that govern all other coffee industry institutions.

The association has therefore only had a weak link with the government through the office of the Registrar of Societies where it files annual returns. However the registrar has no powers to intervene in its operations.