Commodities

Coffee grower Eaagads’ sales collapse amid reforms

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Deputy President Rigathi Gachagua (second left) when he presided over the reopening of the Nairobi Coffee Exchange auction on August 15, 2023. PHOTO | DPCS

The sales revenue for coffee grower Eaagads dipped over 99 percent in the six months to September to stand at Sh1.1 million, down from the Sh158.9 million recorded last year. 

This shocking disclosure comes at a time when Deputy President Rigathi Gachagua has launched an intensified reform campaign in the sector.

The drop in revenue translated into a Sh33.1 million net loss for the firm, reversing a Sh37.2 million net profit that was booked a year earlier.

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The company has attributed the deteriorated performance to the ongoing government-led reforms, which it says have negatively impacted its ability to do direct coffee sales, as has been the traditional practice.

“The lack of sales has severely impacted the company’s cash flow, leaving a financial gap that necessitated borrowing a substantial sum of Sh108 million. This borrowing has served as a means to cover operational costs, maintain business continuity, and manage existing financial obligations in the absence of revenue from sales,” said Eaagads in a statement.

During the period, the firm said, production of clean coffee dropped to 188 metric tonnes, down from the 232 metric tonnes churned out in the same period last year, on account of the severe drought experienced between October last year and March this year.

“The drought was aggravated by restrictions on irrigation and followed by a total ban on any water abstraction from the rivers. The effect of this was poor crop formation, leading to small coffee beans and poor grade recoveries for the milled coffee, thereby resulting in reduced volume,” lamented the firm.

Eaagads, however, projected that the ongoing El Niño rains would have a positive impact on the early crop for 2024, unlike the period under review, adding that it has taken the initiative to apply for a grower miller licence from the Kiambu County government, which it says would enable direct sales to progress and, in the process, streamline operations and sales processes.

The company’s woes coincide with a heightened campaign for reforms in the coffee sector under the stewardship of Deputy President Rigathi Gachagua, who oversaw the relaunch of the Nairobi Coffee Exchange (NCE) in mid-August this year.

President William Ruto had earlier in January, through Executive Order Number 1 of 2023, moved the coffee reforms to his deputy’s office, placing the latter right at the centre of the sensitive docket.

Among the proposed reforms is the introduction of a direct settlement system, while the policy documents lined up to revive the sector comprise the Draft Sessional Paper Number 1 of 2023 on sustainable quality coffee production for food security and wealth creation, the Coffee Bill 2023, the draft Co-operatives Bill 2023, and the Sessional Paper No. 1 of 2020 on the National Co-operative Policy.

The Coffee Bill proposes to reorganise the industry by transitioning the regulatory and commercial roles currently undertaken by the Agriculture and Food Authority to the Coffee Board of Kenya.

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It further seeks to transition the research on coffee currently undertaken by the Coffee Research Institute under the Kenya Agricultural and Livestock Research Organisation to the Coffee Research Institute.

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