Policy failures and inadequate technical capacity hurting Kenya’s coffee industry

Coffee is an important cash crop in Kenya due to its contribution to foreign exchange earnings, farm incomes, rural development, employment generation and food security, especially to smallholder coffee growers who belong to cooperative societies.

Currently, it is estimated that about 135,000 hectares of land is under coffee in Kenya, of which about 67 per cent is in the cooperative sub-sector and 33 per cent is in the estates.

The highest coffee production figures in the country were recorded in 1987/88 when 128,926 tonnes of clean coffee was produced. This has been consistently reducing to the slightly above 40,000 metric tonnes produced in the last season — 2011/2012.

The importance of the coffee sector in Kenya’s economy is reflected in the direct relationship between sector performance and key economic indicators.

Declining coffee production experienced in recent years is reflected in slow growth in GDP, increased levels of unemployment in coffee-growing areas, increasing levels of inequality, inability to cater for basic educational and medical needs and a general rise in the poverty index.

Policies that affect the performance of the coffee industry are, therefore, important.

The most recent objectives for policy strategy have been increasing coffee production, making credit available and affordable to coffee growers, value addition and market access.

Sadly, the Coffee Board of Kenya — which is the regulator — has failed in all its roles and responsibilities of guiding the industry through prudent policy formulation and promoting Kenyan coffee globally.

The role of the board as the regulator will soon be taken over by the Agriculture, Fisheries and Food Authority as provided for in the AFFA Act, 2013.

However, some of the policies and rules that the board has gazetted are unsatisfactory, illegal, prohibitive, anti- coffee growers, pro-cartels and inconsistent with both the Constitution and the AFFA Act. The rules gazetted on October 5, 2012 and cited as the (Nairobi) Coffee (Exchange Trading) Rules are one example.

The coffee board has never had a board of directors as provided for in Clause 4(1) of the Coffee Act, 2001. It has been operating with a “board” comprising the managing director and a chairman, with no other single member representing the interests of the millions of coffee growers.

But, even more fundamental is that the board has never convened an annual general meeting of representatives of coffee growers nor made its audited books of accounts available to coffee farmers and the public for more than 10 years.

Transparency, financial accountability and order has been lacking at the board, with misgivings regarding its operations, capacity, competence and conduct. More specifically, the board currently has no gazetted coffee inspector, no licensed coffee liquorer, and no qualified internal auditor.

Secondly, Clause 31 of the gazetted (Nairobi) Coffee (Exchange Trading) Rules, 2012, does not take constitutional cognisance of the existence of counties and devolved governments. Under the new Constitution, the role of managing agricultural value chains, including coffee processing and marketing, has been devolved to the counties.

It is thus unconstitutional to lock out county coffee marketing associations by compelling them to sell their coffee only through the few marketing agents at the Nairobi Coffee Exchange (NCE).

Some of these agents hold multiple licences, including both milling and dealer/exporter licences, and have been accused of exploiting farmers through corruption, contract manipulation, presenting exaggerated coffee milling losses, tampering with milling screens and price fixing .

Thirdly, there has been a lot of agitation among players at the NCE regarding provision and collection of coffee trade samples.

Growers argue that there are dealers who collect large volumes of coffee samples yet they do not participate in any sales auction, making farmers lose large quantities of coffee.

Clause 51 of the Coffee General Rules, 2002, clearly provided the Coffee Board of Kenya with the mandate to deregister any dealer found to be dormant for three consecutive months.

Unfortunately, it is the same board that deleted this rule through the Coffee (General) (Amendment) Rules 2006.

Fourthly, Clause 40 of the AFFA Act, 2013 provides for close consultation with all registered farmers’ organisations in the development of policies or regulations and before the making of any major decision that has effect on the agricultural sector.

It would be illegal for the board or the yet to be constituted Agriculture, Fisheries and Food Authority to gazette any rules or nominate anybody to the newly created NCE management committee without consultation.

Finally, we hope that the Cabinet secretary in charge of Agriculture, Livestock and Fisheries will, in accordance with the law, amend or revoke legal notices that are inconsistent with the law for the benefit of an industry so important to the economy.

The author is an agribusiness policy consultant at Kenya Agribusiness Policy Centre, and head of Communications at Kenya Coffee Producers and Traders Association.