DP Gachagua says farmers reaping benefits of coffee reforms, better pay ahead

A coffee farmer in Murang'a attending his coffee during harvesting season. [Boniface Gikandi, Standard]

Deputy President Rigathi Gachagua claims the fruits of coffee reforms are already being enjoyed.

The separation of licenses for milling, brokerage and marketing, and buying of coffee has removed the longstanding conflict of interest among players in the sub-sector.

In an interview with The Standard, Gachagua noted that although the move attracted opposition from “major interest groups in the sector”, the decision saw the players trooping back to the Nairobi Coffee Exchange (NCE).

“Some major players in the sector who had been benefiting from overlaps boycotted the auctions resulting in depressed prices at the Nairobi Coffee Exchange and noticeable low volume of coffee offered by farmers for sale at the auction only to later troop back,” he said.

Gachagua was referring to the performance of NCE this week where the produce sold increased to Sh824 million compared to Sh54.8 million recorded five months ago when the auction was reopened.

According to provisional results released by the NCE secretariat this week, average prices increased to $194.22 (Sh29,909.88) compared to $186.55 (Sh28,728.70). 

The number of bags traded increased to 23,167, the highest since the auction was reopened on August 15 after a three-month recess.

The provisional results further showed that the value of coffee increased to Sh824 million this week compared to Sh54.8 million recorded on August 15, accounting for a 1,403 per cent increase.

The change of payment model to the Direct Settlement System (DSS), Gachagua noted, has also improved transparency. He said farmers are now involved in the coffee value chain unlike before when the whole system had been operated opaquely.

The Deputy President, who was tasked by President William Ruto to oversee the sub-sector reforms, said with the Cabinet approval of additional Sh4 billion to the New KPCU to enhance the Coffee Cherry Advance Revolving Fund, payment rates will shoot from Sh20 currently to Sh80 per kilo and a new operations advance of Sh5 per kg of cherry.

Staggered payments

He explained that there would be staggered coffee advance payment where Sh40 per kilo will be paid at the factory once farmers deliver their cherry while the second payment will be done at dry mill level once parchment is delivered and quality determined.

“This is the realization of our campaign pledge of Guaranteed Returns Prices even as we continue reforming the sector so that our farmers can have money in their pockets,” Gachagua noted.

He said the government has also managed to look for a market as opposed to the local produce being used to mix with other varieties.

“Our Kenyan coffee produce is rated as specialty coffee, but is usually mixed with other low grades and hence lower prices. We have also agreed to open warehouses and sell our coffee to various coffee buying countries.”

He disclosed talks were in advanced stage with Belgium, Dubai and Germany, among other countries, to open warehouses where small coffee roasters will be bidding for the Kenyan produce and in turn give Kenyan farmers better pay.

He noted that the State would facilitate the whole process in the pilot stages and when once structures are established, the coffee societies through the New KPCU will be left to run the programme, saying by January 15 a payment system between the international and local warehouses will have been finalised.

On to the progress of the deal with the Java Coffee Company for the purchase of 10,000 bags directly from farmers, the Deputy President disclosed that Mwirua and Kaliluni factories in Kirinyaga and Machakos counties respectively had their produce pass the test.

Separately, Cabinet Secretary for Co-Operatives and Micro, Small and Medium Enterprises Development Simon Chelugui said the ministry was now focusing on quality production campaigns so that the local coffee retains its value to the consumers.

“Following the State’s interventions in the coffee sub-sector, our price is now being exposed globally and for that we now want to push for a value market and not a price market.  We target to improve national productivity per coffee tree, from 1.5 kilogram to 10 kilograms which will push our national production from current 50,500 metric tonnes to 200,000 metric tonnes per year, positioning Kenya at top 10 coffee producers in the world,” the CS said.

He noted that the Coffee Bill and the Cooperative Bill seek to ensure there’s a limit to how much money non-farmers can make per kilo, so that the farmer knows what will be removed for value-addition services in his product, and can plan what to expect.

Governance structures

“We seek to cap all the expenses in the coffee value chain at 20 per cent because we have realised that most of the farmers’ money are deducted for marketing agencies, management costs, stock exchange and in milling while farmers are left with meagre payments,” he said.

According to Chelugui, who is the chairperson of the coffee sub-sector technical team, the Bills are also aimed at strengthening institutional frameworks, improving governance structures in cooperatives and mainstreaming in the agricultural sector.

The Cooperatives Bill, which has already been approved by the Cabinet, introduces the Inter-Government Cooperatives Relations Technical Forum while also strengthening the office of the Commissioner of Cooperatives to enhance governance.

Real Estate
Koskei urges housing stakeholders to leverage on technology
Financial Standard
NSSF basket grows to Sh43b on higher contribution rates
Business
Derisk infrastructure projects to woo investors, African States told
Financial Standard
Premium How Kenya could lose out on billions in rushed climate deals