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 dealers are required to make an annual cash deposit of Sh250,000 to access the samples.

Any dealer who fails to buy 1,000 bags (60kg) of clean coffee at the exchange forfeits the deposit which is then remitted to the farmers.

More recently, the market has been rocked by claims that some rogue dealers were taking the samples of exhibition coffee and selling it without buying stocks as per the regulations.

It was further claimed that the rogue dealers were forfeiting the Sh250,000 in favour of higher returns from the sale of the coffee samples helped by prevailing record prices.

The Commercial Coffee Millers and Marketing Agents Association (CCMMAA), an industry lobby group, recently said in a submission to the CBK that the industry was losing close to Sh59 billion annually in issuance of free coffee samples to licensed but dormant coffee dealers.

Operations at the exchange only resumed after Agriculture permanent secretary Romano Kiome promised to review the laws guiding the auction.

Leading forex earner Coffee was at one time Kenya’s leading foreign exchange earner but mismanagement of the sector has since seen
output decline steeply, leaving the sub-sector trailing tea, tourism and horticulture.

Most small-scale coffee farmers disillusioned by poor earnings have neglected their coffee trees or uprooted them altogether – opting to try their luck in dairy farming.

Kenya earned Sh26 billion from coffee exports in 2010/11 financial year, up from Sh16 billion a year earlier.

Earnings are expected to have climbed during the 2011/12 crop season thanks to good prices.

aodhiambo@ke.nationmedia.com