Barely two decades ago, the coffee sector in Kenya was beaming with success. Production volumes were satisfactory and rising and so were prices and ultimate earnings for farmers.
The country competed fairly well against key rival coffee growers in eastern Africa including Uganda, Ethiopia and Tanzania. As of 1990, Kenya’s coffee production was fairly in step with that of Uganda and Ethiopia, according to statistics by the International Coffee Organisation (ICO).
Today, however, the Kenyan coffee sector is in shambles — far overshadowed by its rivals in the region. Production has tumbled while farmers’ earnings are lower and no longer predictable.
Since the early 1990s to the 2010/11 crop year, the area under coffee in Kenya has declined by 35 per cent from 170,000 hectares to 109,795 hectares, while production has dipped from 130,000 tonnes in 1988 to 45,000 tonnes in the last season (2016/17) as farmers abandoned the crop due to poor management.
On the contrary, in 2017 Uganda produced 5.2 million and exported 4.6 million 60kg-bags, which earned Africa’s leading exporter and second largest producer a record $544 million — buoyed by deeper investment and a replanting programme implemented by Uganda Coffee Development Authority (UCDA).
In Ethiopia, coffee production for 2018/19 (October-September) is projected to remain largely unchanged from the previous year at 7.1 million 60-kilogramme bags (426,000 tonnes) while exports are forecast to remain at a record 3.98 million bags (239,000 tonnes).
Many farmers in Kenya have uprooted coffee trees in exchange for better-performing crops such as avocado.
Real estate projects have also wiped out coffee farming in large swathes of land — with this trend projected to worsen in the coming years as disgruntled farmers seek alternative sources of income.
Crop husbandry has worsened in Kenya with estimates by the Coffee Directorate showing that farmers are presently getting two kilograms of berries from a coffee tree against the required standard of 10kg or more.
The directorate blames poor investment for the dip in performance in Kenya unlike rivals in the region.
“The Ugandan government has, for example, done a lot in the coffee sector … from giving farmers seedlings to even planting for them at some point. All this has ensured that production in the country remains high,” said Coffee Directorate head Isabella Nkonge.
Industry insiders have also blamed the rot in the Kenyan coffee industry on long-running collusion between regulators, millers, traders and brokers which has purposefully kept coffee prices down — even when top grade produce fetched exceptional prices at the international market.
In an attempt to break the price stifling cartels, a 2016 task force proposed an increase on direct sales from the current 10 per cent to 30 per cent, promotion of speciality coffee and turning the Nairobi Coffee Exchange (NCE) to a public limited company.
Farmers have an option of selling their coffee directly to international buyers, or they could contract and authorise their marketing agents to sell through the weekly auctions at the NCE.
Currently, 90 per cent of the Kenyan coffee is traded at the NCE before accessing the export market with only 10 per cent finding its way to the international market through direct sales.
This contrasts with Uganda where more than 95 per cent of coffee produced is exported through direct sales by more than 30 companies. However, 10 companies control more than 80 per cent of the business. Italy, Germany, and Belgium remain the leading export destinations for Uganda’s coffee.
“Whereas most of the coffee is exported to markets outside the East African Community, some of the Robusta coffee is taken for processing at the soluble coffee factory in neighbouring Tanzania, and packaged for distribution in the local and regional markets,” said the Uganda Coffee Development Authority.
Industry stakeholders reckon that the lack of direct market denies farmers a lucrative income should they have procured direct sales other than going through the many chains to sell their crop at the NCE.
The report recommends the establishment of the Central Depository Unit, which will be a building block towards the transformation of the NCE to commodity exchange.
Besides the marketing woes, the Kenyan coffee industry is reeling under debt. According to the Report of the National Task Force on Coffee Sub-Sector Reforms released in 2017, farmers owed unions, co-operatives and saccos a total of Sh4.78 billion.
In the 2016/17 financial year, the government cleared Sh4 billion, leaving a balance of Sh784 million.
In addition, farmers owed Stabex funds amounting to Sh1.7 billion, which came from the European Union and were administered through the Co-operative Bank of Kenya (interest accrued from the Stabex funds was Sh700 million).