How lawsuits risk freezing coffee earnings

Kenya: Nyeri coffee farmers may go for months without income after creditors seeking Sh800 million from co-operative societies started filing cases to freeze payment.

The litigation is also likely to decrease the Sh1.9 billion farmers are said to have reaped under the county’s pool milling and marketing initiative for last season’s crop.

News of the lawsuits has hit farmers like a lightning bolt, with some such as Stephen Karanja, of Gichatha-ini Factory under Gikanda Coffee Society, saying there appeared to be too much that the county government was concealing while releasing inspiring payment rates.

Karanja faced the wrath of farmers when he tried to raise the issue during Governor Nderitu Gachagua’s consultations with farmers last week. Gachagua was meeting farmers to explain the delay. The farmer had said the fact that rates had been announced before all coffee was sold was a major cause of concern and could mean farmers were being taken for a ride.

Operating expenses

Gachagua told farmers’ meetings in Mukurwe-ini and Mathira constituencies that the county government was seeking to be enjoined in cases filed by the creditors against most of the societies.

Those seeking payments of debts include marketing companies that handled the crop before the county government took over this year. They are allegedly seeking recovery of funds advanced for onward lending to farmers or for operating expenses and purchase of inputs.

Other creditors include suppliers of inputs as well as commercial banks and savings and credit societies (saccos). They are applying to freeze society accounts pending arbitration of the dispute, which could leave farmers cashless for months.

Mary Wairimu, 60, a farmer from Kangocho Factory in Mathira, worries about the implication of the litigation. “We are looking at another school term without money,” says Wairimu, who delivered 3,000 kilos of cherry this season.

The county government, which has hired auditors from the Jomo Kenyatta University of Agriculture, claims most debts are doubtful. Gachagua has urged farmers to give the auditors two weeks to approve the debts to be cleared.

Last week, Gachagua visited Gikanda, Mathira North, New Gikaru, Tekangu, Iria-ini and Mugaga coffee societies, where he announced payments ranging from Sh60 to Sh80 per kilo of cherry.

But creditors have, for example, gone to court seeking Sh17 million against New Gikaru in Mukurwe-ini, which has more than Sh74 million debts in its books. Others are seeking to recover Sh184 million from the Rumukia cooperative society in the same area.

 

The county government said doubtful debts was the major reason it would sponsor legislation allowing farmers to monitor the milling and marketing process.

“The Coffee Inspectorate Service Bill will provide that four representatives from the county government, coffee factory, marketing agents and the Dedan Kimathi University monitor the process to prevent traders from exploiting farmers,” said Gachagua.

Shadrack Mubea, the County Secretary for Agriculture and Co-operatives, said the debts are not only doubtful but worrying, and would substantially eat into farmers' earnings if they are factored into this year’s earnings.

“The auditors are looking into the process used to incur the debts. We have asked them to establish whether the elaborate process of obtaining debts set in the Co-operative Societies Act, including approvals at Annual General Meetings, was adhered to,” said Mubea.

During meetings in Mathira and Mukurwe-ini, farmers proposed that ousted society directors shoulder the cost of irregular loans and be prosecuted if they failed to repay the money.

Farmers are also worried about whether the pool marketing system will pay dividends at the end of the day. Though the announced rates are impressive, they are also misleading. The amounts are gross, for a start, and do not capture the cost of factory and society expenses, as well as the now disputed debts owed to other creditors.

“At the end of the day, I see most farmers getting Sh30 per kilo and below when the actual costs are factored in,” said Macharia Muhuni, chairman of Kiandu Coffee Factory that stayed out of the marketing plan.

Kiandu paid its farmers Sh62.40 per kilo.

Of the 23 coffee societies in the county, only Kiandu and two other societies in Tetu Sub-district, controlling only eight pulping factories between them out of Nyeri’s 104 factories, opted out of the coffee marketing pool.

After last week’s meetings, it appeared that farmers, though obviously disappointed, still had a lot of faith in the governor. In Mukurwe-ini, a member of the county assembly was heckled when he tried to discredit the system.

But Mathira MP Peter Weru, who together with Mukurwe-ini’s Kabando wa Kabando was accused by Gachagua of having sought to sabotage the initiative, maintained that farmers were shortchanged and owed an apology. According to Weru, the main mistake was seeking to replace a parasitic system of brokers with a similar set of exploiters.

The county government however says things can only look up next season when they will set sights on improving governance in the sector. Mubea says they will be proposing to merge small societies based on optimum number of members per society combined with other factors such as production levels, turnover and number of pulping factories.