When President William Ruto assigned his deputy Rigathi Gachagua leadership over coffee sector reforms in a new Executive Order in January that replaced an initial one issued last year, he swore that the government would eliminate cartels in the coffee, tea, and milk sub-sectors. 

Trade around the sub-sectors and especially coffee, remains highly protected and attempts to streamline it have in some cases been met with violence, given the susceptibility of cartels in the sector to resist any attempts at disrupting the status quo.

In Kenya, coffee farmers’ troubles start when they deliver their produce to the factory. After handing over their produce, they do not know how much to expect, even where their processed coffee is sold and how much it fetches. It is at this phase where cartels thrive.

Previous governments, including the current one, have blamed cartels for running down the sector, resulting in low earnings that have seen many coffee farmers abandon the crop.

“Revitalisation of the coffee sub-sector in Kenya will directly impact the lives of smallholder farmers who, for a long time, have remained unheard and have been taken advantage of. The philosophy of the Bottom-Up economic transformation model envisages restoring dignity to the people at the bottom of the socio-economic pyramid, and that is what we are doing,” the Deputy President said.

The law protects the rights of the farmer at every stage of the value chain. The Crops (Coffee) (General) Regulations 2019 recognise the coffee grower as the owner until the coffee is sold and paid for. This implies that the farmer’s interest does not end when they deliver the crop to the factory but extends to when the farmer receives money for the produce. However, this is not the case since the dingy coffee processing and marketing system tends to consign the smallholder farmer to the periphery of critical decision-making in the coffee value chain.

Interventions

Already, the DP has held several engagements with the Parliamentary Caucus on Coffee Reforms to discuss how to revive the sub-sector. During the meetings, laws, policies and regulations that need to be enacted were discussed. The meetings also identified the existing laws, policies and regulations that need review to make coffee farming attractive once again.

As a result of this, in February, the government placed the Nairobi Coffee Exchange (NCE) under the Capital Markets Authority (CMA). This decision assigned several roles previously filled by marketing agents associated with millers to licensed brokers, including coffee classification, preparation of sale catalogues, and submission of coffee for sale at the NCE.

Also, the National Assembly is currently considering a coffee bill (The Coffee Bill, 2020) which would confirm the placement of the NCE under the CMA. Additionally, if enacted the bill would provide permanent funding for the Coffee Research Institute (CRI) through a one percent ad-valorem levy on marketed coffee.

Sector players note that access to consistent funding would likely boost CRI’s ability to provide new research and products, including improved coffee varieties and seedlings. The bill would also reestablish the Coffee Board of Kenya and CRI as semi-autonomous agencies. CRI is currently under the Kenya Agriculture and Livestock Research Organisation (KALRO). The Coffee Board is Kenya’s principal regulatory agency and was placed under the Agriculture and Food Authority (AFA) and rebranded as the Coffee Directorate in 2013.

Some sector players are calling for the push for the finalisation of the mediation process on the Coffee Bill 2020, passed by both Senate and the National Assembly, and still held up in the Mediation Committee stage since June last year. Some farmers’ unions have expressed concerns over the content of the Bill saying some of its provisions are not “friendly” to the sector and they want their views incorporated before it is passed.  

Early this month during the Coffee Reforms Conference in Meru County, Mr Gachagua said beyond the legal, policy and operational measures, capacity building and strengthening between and among farmers has the potential of improving production.

The government through the Office of the Deputy President has been engaging experts from Ethiopia to share knowledge on good practices in coffee farming and running farmer-centred cooperatives. These engagements are also meant to help local farmers get direct linkages to consumers in high-value markets such as the US.

Coffee prices

During the 2022/23 coffee Marketing Year (MY), prices lagged below MY2021/22 due to higher global supplies as production in key exporting countries such as Brazil and Colombia returned to historical levels. As of April 2023, MY2022/23 prices averaged US$194 per 50kg bag, a 34 percent drop from MY2021/22 according to Nairobi Coffee Exchange (NCE).

Last month, coffee factories in the Mt. Kenya region started releasing payout rates of between Ksh50 and Ksh90 per kilogram on average. This was a drop from the previous year’s (past three years) when farmers pocketed on average Ksh100 per kilogram of coffee delivered to their respective factories. The low payout rates have been attributed to poor market prices at both the auction and direct sales as well as harsh weather conditions that were occasioned by the drought that affected flowering and berry formation during the last crop year.

Trade

According to the United States Department of Agriculture (USDA Foreign Agricultural Services), the post forecasts for MY2023/24 coffee exports will increase by 5.5 percent to 760,000 bags from 720,000 bags in MY2022/23, buoyed by increased production. Kenya produces higher-priced mild arabica coffees and accounts for less than one percent of global exports.

During the last MY2022/23, the US retained its position as the leading export destination for Kenyan coffee. Other key destinations included Belgium, Germany, and South Korea.

Political goodwill

Stakeholders in the sector express optimism for tangible results after reforms targeting the production and marketing of coffee were moved to the Office of the Deputy President. Previously, the coffee sub-sector implementation standing committee, which had been tasked with reviving the ailing sector, had been domiciled at the Office of the President during the previous government.

They say when the president assigned his deputy the responsibility to address the challenges facing the sector, political goodwill was demonstrated following the DP’s earnest move to work with all stakeholders to clean up the coffee value chain.