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Confusion mars new coffee trading rules

By Macharia Kamau | July 10th 2020

Sammy Mandera tends to his coffee in Kisii County last year. New regulations require brokers to be licensed. [Sammy Omingo, standard]

Coffee farmers want the new regulations governing the sector suspended, claiming they could lead to major trading disruptions and in turn, affect their earnings.

The Kenya Coffee Producers Association (KCPA) said the confusion surrounding the implementation of the new rules has already halted the coffee auction meant to take place earlier this week.

The regulations bring the industry under the oversight of the Capital Markets Authority (CMA). “The auction was expected to open on July 7, after a one-month recess yet it did not take off. We have existing contracts with marketing agents and we have released our coffee to them for sale,” said KCPA chairman Peter Gikonyo

The new regulations, gazetted in April, require the Nairobi Coffee Exchange (NCE) and brokers to be licensed by CMA.

The new regime has however started on a wrong footing, with the auction failing to take place on Tuesday when it was scheduled to resume after a month-long recess.

KCPA said this was due to lack of preparedness by players including CMA, which it noted, had the potential to plunge farmers into financial distress.

This could hurt smallholder farmers who depend on regular proceeds from the sale of their coffee to service loans and pay coffee pickers.

CMA had however issued transitional guidelines on Monday, allowing players to use the previous rules.

“The following measures have been put in place; the NCE is granted permission to operate as it works towards full compliance with the regulations. All the applicants intending to offer coffee brokerage services are allowed to continue performing the role once they apply and as they work towards full compliance,” said CMA acting chief executive Wyckliffe Shamiah.

NCE attributed the failure to have the auction as being occasioned by lack of clarity.

But Shamiah said the marketing agents would continue paying farmers through the current framework before the Direct Settlement System is in place. Currently, farmers are paid through their cooperatives.

The Capital Markets (Coffee Exchange) Regulations 2020 are among a raft of measures being implemented to revive the coffee sector, and form part of the recommendations by a task force formed in 2016 to look into what ails the industry.

KCPA chair said further delays in kick-starting the auction might result in buyers finding alternatives for their home markets as well as prices of local coffee tanking.

Gikonyo rooted for the suspension of the new rules until structures and systems are in place, including amendment of Crops Act 2013 to accommodate the role of CMA in coffee trading.

“Farmers have borrowed and so the delayed payments will mean increased interest on loans,” Gikonyo said.

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