Editorials

Implement new coffee trading rules urgently

coffee

That the Capital Markets Authority (CMA) has allowed trading on the Nairobi Coffee Exchange (NCE) under the old payment rules until the end of June is laudable. FILE PHOTO | NMG

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Summary

  • That the Capital Markets Authority(CMA) has allowed trading on the Nairobi Coffee Exchange (NCE) under the old payment rules until the end of June is laudable because it guarantees continuity as the market transitions.
  • The regulator should, however, avoid falling into a common trap of lethargy and lack of continuity in policy implementation.
  • The proposed changes under the Coffee Exchange Regulations, 2020 carry hope of restoring value in farming of the commodity after several decades of graft and mismanagement.

That the Capital Markets Authority (CMA) has allowed trading on the Nairobi Coffee Exchange (NCE) under the old payment rules until the end of June is laudable because it guarantees continuity as the market transitions.

The regulator should, however, avoid falling into a common trap of lethargy and lack of continuity in policy implementation.

The proposed changes under the Coffee Exchange Regulations, 2020 carry hope of restoring value in farming of the commodity after several decades of graft and mismanagement.

Notably, the new regulations to be effected through Section 12(1) of the Capital Markets Act would cover all key coffee trading functions, including licensing of brokers, establishment of trading companies, as the establishment of a direct settlement system and guarantee speedy and transparent payment of proceeds.

For instance, a direct settlement system shall also be established by a licensed commercial bank competitively selected by a coffee trading company subject to approval from the CMA in a move aimed at limiting diversion of sales proceeds.

According to the new rules, officials will be required to maintain a database for records of coffee sales at the auction floor and establish a linkage between the direct settlement system provider and licensed coffee warehouses to facilitate release of coffee to buyers or roasters upon payment.

Further, coffee trading companies will be required to establish a direct link between their systems as well as software with the CMA’s to boost transparency.

Clearly, these new regulations promise to be a game-changer and the CMA should strive to implement them soonest possible.

The coffee industry has long been captured by cartels who denied farmers their rightful earnings.

There has been a long-running collusion between regulators, millers, traders and brokers, keeping coffee prices down even when top grade produce fetched exceptionally high prices at the international market. This rot should end.

The CMA should, however, be ready for resistance in implementing the new regulations because cartels are likely to attempt to protect their sources of ill wealth.