Clear the mess in coffee industry

Former Agriculture Cabinet secretary Peter Munya left behind a big mess in the regulatory framework governing the coffee industry.

Total confusion is how I describe the regulatory regime that has been in place since last June.

How do you sell or buy coffee in Kenya right now — is it through the Capital Market Authority (CMA) — a regulated coffee exchange or through the exchange owned by the state-controlled Agriculture and Food Authority (AFA)?

And, if you want to be licensed as a coffee marketer or dealer today, where do you go?

Which regulations and legal framework govern the production and marketing of coffee – that Mr Munya gazetted the coffee regulations of 2019 or the rules in June 2020 — at a time when both the National Assembly and the Senate had been dissolved?

I may not be a lawyer, but I know about the existence of a Statutory Instruments Act that requires that all regulations must be approved by Parliament before they can be put into effect.

On Tuesday, the government tried to correct the confusion by writing a letter to commercial marketing agents Kenya Coffee Traders Association, the Nairobi Coffee Exchange and coffee societies and unions telling them to ignore Mr Munya’s regulations.

My view is that this letter is not enough.

The correct thing for new Agriculture minister Mithika Linturi to do is to publish another gazette notice to unambiguously clear the mess Mr Munya left behind.

At the end of the day, this dispute was not just about the law. Behind it was a subterranean battle by greedy elites to control and change two things-namely— the system of coffee marketing and trading — and the handling of the multibillion-dollar coffee payments.

Also read: Coffee sector players upbeat Gachagua steering reforms

Mark you, the regulations Mr Munya was trying to amend behind the back of Parliament and despite a spirited litigation campaign by the Council of Governors — were not only seeking to open the incumbent system of marketing to other players but were also an attempt to introduce transparency and in coffee trading.

Inexplicably, the minister treated this battle as if the stakes were just too high for him, I have seen correspondence showing how former Attorney-General Kihara Karuiki, wrote advising Mr Munya against publishing the controversial regulations.

Under the current regime, the ordinary farmer is not allowed to sell his or her coffee unless they acquire a marketing licence from the government.

But what locks most farmers out is the condition that you have to provide a bank guarantee of $1 million before you are allowed entry into this exclusive priesthood.

The list is dominated by five top international players namely Taylor Winch, Ibero, Damando Coffee, C. Dorman and Sangana Commodities.

The locals playing in this league are politically well-connected individuals who enjoyed close links with the high and mighty of the ancient regime.

It seems to me that another area where powerful people with vested interests in marketing and trading were keeping an eye on was the proposal in Mr Munya’s regulations to establish a direct settlement system — a receipts and disbursement facility that was to be provided by a commercial bank regulated by the Central Bank of Kenya.

Any bank that managed to clinch this deal would be an instant giant in the inter-bank market for foreign exchange.

Also read: Specialty tea, coffee brews good returns for engineer

The coffee industry is in dire straits because of the gradual collapse of the institutions and pillars that nurtured and supported it — coffee societies, powerful district-wide coffee unions and the Coffee Research Foundation, among others.

When, as a young business writer, I started reporting coffee issues in the late 1980s, the Kenya Planters Cooperative Union had a balance sheet larger than most of the blue chip companies you see listed on the Nairobi Securities Exchange today.

And the large coffee cooperatives were rich and powerful institutions, paying dividends and bonuses to farmers year in, and year out.

Although the defunct Coffee Board was a State-controlled entity, it operated democratically, with its directors elected at an annual conference in which all coffee farming districts were represented.

The Coffee Research Foundation was a well-funded entity conducting rigorous cutting-edge research on modern agronomical practices and passing its findings to farmers.

Ruiru 11, the pest-resistant seed variety, was developed locally by our researchers at this key institution.

Long before the advent of multi-partyism, the coffee farming fraternity stood out as an organised and vocal group.

I still remember the exploits of the Kenya Coffee Growers Association and how farmers would rise against meddling in coffee affairs by greedy elites and politicians.

All institutions and pillars that propped up and supported the industry metastasised into parasites, eating away the margins from the farmer. In 1988, we exported 130,000 tonnes of coffee.

Today, we export less than 50,000 tonnes. Massive investment is needed to rehabilitate the institutions.