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Coffee reforms off to shaky start as MPs pull in different directions

BUSINESS
By Macharia Kamau | July 4th 2021
A woman sorts her coffee cherry at Dedan Kimathi University of Technology's coffee Factory in Nyeri, November 24, 2020. [Kibata Kihu, Standard]

The government’s plan to reform the coffee sector is off to a stormy start with the two houses of Parliament appearing to be reading from different scripts on turning around the sector, while sector players have opposed key proposals by both houses.

The National Assembly and the Senate are currently debating two coffee Bills, which are eventually expected to help in governing the sector.

The two draft laws seek to reintroduce key agencies such as the Coffee Board of Kenya (CBK) and the Coffee Research Institute (CRI) to enhance the general governance of the crop.

However, they disagree on key issues such as the licensing of coffee sector players by the counties and national government as well as how the produce should be marketed.

The Bill before the National Assembly fronted by the Agriculture ministry appears to give more power to CBK and CRI in the licensing and governing of the industry.

The Coffee Bill that has been tabled at the Senate, on the other hand, is keen on having more of the licensing functions undertaken by the county governments, arguing that agriculture is a devolved function and the regions should have more say in how the sector is governed.

It is sponsored by Njeru Ndwiga, chairman of the Senate’s agriculture committee.

The Bill drafted by the ministry, for instance, allows county governments to issue only two categories of licences - for a pulping station and warehousing. It leaves the bulk of the other licences that players in the industry need to the coffee board.

On the other hand, Senate wants the majority of the licences to be issued by the county governments, leaving CBK to oversee functions such as export and import of coffee, licensing buyers as well as issuing coffee liqueur’s and warehouseman’s licences.

[Kibata Kihu, Standard]

The two Bills have been read for the first time in the respective houses and were recently subjected to public participation.

“There is a need to harmonise the two draft Bills, for there cannot be two Bills to legislate one crop that is dwindling in production,” said Kenya Coffee Producers Association (KCPA) Chairman Peter Gikonyo.

“Review them and develop one that will facilitate the farmers to perform their role in coffee.”  

KPCA also poked holes in the two laws, saying they do not have the interests of farmers at heart, and they have been excluded from the agencies that will be managing the sector.

Among the areas they took issue with are the proposed CBK, CRI and the Nairobi Coffee Exchange leadership, where though there are slots set aside for farmers, they will be appointed by the Cabinet Secretary for Agriculture.

Mr Gikonyo said farmers’ representatives should be chosen by farmers. “Government appointees will by no means serve the interests of the farmer but those of the appointing authority,” he said.

“Does this mean the farmer is not capable of making decisions on coffee farming business, yet is capable of making decisions to bring the product on the table for sale? No one goes to help the farmer in decision-making at the farm level when he is struggling to produce coffee.

“The farmer is the principal owner of coffee and must be respected, appreciated and consulted on all matters from production to market for the growth and sustainability of the industry.”

The Commercial Coffee Millers and Marketing Agents Association said the Bills are in addition to other recent proposals and laws that bring the risk of over-regulating the industry.

It noted that there has been vigour to introduce new laws to oversee the crop, which might end up strangling the sector.

Fred Kirubi (right) and James Mwangi, a farmer, at a coffee plantation in Kiambu County, July 28, 2014. [Standard]

Even then, numerous laws have failed to establish mechanisms to reverse declining coffee production.

“In the recent past, specifically during the last three years, the coffee industry has had to deal with at least six legislations, all of them targeting coffee trading and leaving out all the critical aspects,” said the association in a memorandum to Senate’s agriculture committee.

“All these Bills have not adequately factored in the views, challenges and the expectations of the coffee stakeholders along the value chain due to little or lack of public participation, and hence there’s no solution to the real issues facing the coffee sector in the Bills.”

“The Bills (including the Senate Coffee Bill No 22 of 2020) seek to introduce too many government appointments in farmer bodies. There is also an implied over-regulation through suggested enactment of county-specific laws on coffee.”

The association also expressed concerns that the proposed laws fail to address the country’s declining coffee production.

“The Bill does not provide any mechanism that will assist the farmer increase production and productivity of their coffee enterprise,” said the memorandum.

“It is our considered opinion that as long as the Coffee Bill, 2020 does not address the issues of productivity and climate change… it shall not be anywhere nearer to addressing the challenges that the coffee farmers are facing today.”

According to the International Coffee Organisation (ICO), Kenya produced 790,000 60-kilogramme bags of green coffee in the 2017-18 year, about 0.5 per cent of the total world production of over 158.56 million bags.

East African countries produced 14.71 million bags of green coffee in the period, with Ethiopia producing 7.65 million bags (52 per cent) followed by Uganda with 5.1 million bags (35 per cent)

Kenya contributed only about five per cent of East Africa’s output.

This is unlike in the 1970s and 1980s which were booming years for the crop and saw the commodity rise to be Kenya’s largest foreign exchange earner.

The country would export more than 1.5 million bags annually at its peak in the 1980s.

Marion Wanjiku explains the growth of coffee berries at Embu University model farm on June 19, 2021. [David Gichuru, Standard]

This has, however, dropped and production stood at 650,000 bags in 2020-21. The crop has experienced consistent declines with production standing at 775,000 bags in 2018-19 and dropping to 725,000 bags in 2019-20.

According to the millers association, Kenya has been reduced to accepting prices offered by coffee buyers because of the decline in volumes.

The country’s output is too small to give Kenya much say in global coffee matters.

“Because of the production limitations that it has, Kenya’s bargaining power in price setting is also limited and hence it becomes a price taker. This is because 0.5 per cent of world coffee is not significant enough to influence the world coffee prices,” said the association.

Despite the problems, coffee still rises above other sectors when looked at from certain parameters and is not beyond salvation, according to the millers and marketing agents.

The commodity fetches higher prices per unit compared to top foreign exchange-earners such as tea and horticulture, as well as coffee produced elsewhere.

It is also a top-shelf product, with high demand in the world market and buyers willing to pay top dollar for it.

“When compared to other agricultural sectors in Kenya or to comparable coffees sourced from other producing countries, pound for pound, Kenya coffee consistently fetches higher prices,” said the millers and marketing agents in their submission to the Senate.

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