Coffee exchange in cash crunch as row with agents bites
The Nairobi Coffee Exchange. A dispute between the Kenya Coffee Producers and Traders Association and marketers over payment of auction levies has left the exchange in a financial crisis. Photo/FILE
What you need to know:
The marketers have since February failed to remit auction fees to the Kenya Coffee Producers and Traders Association (KCPTA), who manage the weekly auction.
This has lead to a cash crisis that is threatening the association’s ability to meet key costs such as payment of workers’ salaries.
Coffee marketing agents are required to pay Sh10 per bag offered at the auction while dealers pay a similar amount for every bag bought.
Nairobi Coffee Exchange (NCE) has started experiencing a cash crunch following a protracted row with marketers over payment of the auction levy.
This comes at a time when the Ministry of Agriculture has published rules governing sampling, whose alleged pilferage has been at the centre of a bitter dispute.
The marketers have since February failed to remit auction fees to the Kenya Coffee Producers and Traders Association (KCPTA), who manage the weekly auction, leading to a cash crisis that is threatening the association’s ability to meet key costs such as payment of workers’ salaries.
“We will not remit any amount to KCPTA until it releases all amounts it owes to farmers,” Commercial Coffee Millers and Marketing Agents Association secretary Martin Ngare said.
Coffee marketing agents are required to pay Sh10 per bag offered at the auction while dealers pay a similar amount for every bag bought.
Industry estimates showed that between February and August alone, KCPTA had been denied at least Sh6 million in unremitted auction fees by marketers.
“The decision to hold the levy is hurting us because we need to finance our operations at the auction,” said NCE chief executive Charles Mbaluka.
The exchange has been at loggerheads with millers and marketers over payment of fees collected from samples of beans offered for sale.
According to existing regulations farmers are required to hand in representative samples weighing 14kg per lot of coffee marked for sale to their respective marketing agents, at least eight working days prior to a scheduled auction.
The marketing agents then present the samples to the NCE where they are taken up by licensed dealers who are required to make an annual cash deposit of Sh250,000 to access the samples.
But in a scandal that has rocked the auction, some rogue dealers are opting to sell the samples of exhibition coffee amassed from farmers and fail to buy stocks from them as per the regulations.
The rogue dealers are also choosing to forfeit the Sh250,000 in favour of the higher returns from the sale of the coffee samples due to the prevailing record prices of the commodity in the market.
Angry marketers have consequently opted to withhold auction levy until KCPTA refunds farmers more than Sh10 million.
“It is upon them to return what they owe to farmers and all will be fine. The arrears are accruing and will hit Sh20 million soon,” Mr Ngare said.
Meanwhile, the NCE has reduced the frequency of auctions due to reduced supply of coffee beans. The auctions will now be held once every fortnight instead of weekly.
The volume of crop offered for sale at the NCE has dropped to an average of between 10,000 and 20,000 bags per auction against an optimal 30,000 bags.
