The Agriculture Food Authority (AFA) has warned that the revocation of buyers' licences in the coffee value chain will affect trading of the commodity at the Nairobi Coffee Exchange (NCE) and the international market.
In a report that reveals the names of licensed coffee players in the country, AFA said the revocation of licences held by multinational companies could lead to retaliation from the international community.
Should the government revoke the licences, the Coffee Directorate said foreign direct investment (FDI) in the coffee value chain could suffer as other countries where the multinationals have a strong base could impose non-tariff barriers on imports of Kenyan coffee.
"This may inevitably lead to Kenya being isolated as an unreliable source of coffee and a hostile trading partner," the report says.
This comes after the government threatened during the three-day coffee conference in Meru to revoke the licences of marketers and millers alleged to be part of the cartel that exploits farmers and manipulates coffee prices in local and international markets.
"I will start the process of revoking the licences and I do not care if they take me to court or not. I will deal with it as long as I have the power as CS," Agriculture Cabinet Secretary Mithika Linturi said during the conference.
The AFA said the revocation of licences can only be done by the authority if it believes that the licence holder, an employee of the licence holder or a condition of the licence has been contravened.
"In our opinion, the licence holders we have registered have not breached any of the conditions of the licence. The revocation of these licences may therefore result in litigation and the issuance of interim orders by the court which may adversely affect the trading of coffee at the Nairobi Coffee Exchange," it said.
The AFA also distanced itself from the chaos in the multibillion-dollar sector, saying it was not responsible for the issuance of certain licences, saying the Coffee Regulations spell out the licences that should be issued by the Coffee Directorate, the Capital Market Authority (CMA) and county governments as regulators of the industry.
"The Directorate does not license related players as the regulation has transferred them to the counties for milling licences and abolished the marketing licence to replace it with brokers' and agents' licences respectively," the report said.
It also noted that there are coffee millers and marketers who have contracts with farmers that expire on 30 September, suggesting that the cancellation of licences will affect farmers' incomes.
The commercial marketers are still holding the farmers' coffee for sale, estimated at 220,000 bags of 60kg each, in various licensed warehouses.
"The revocation of the licences will make it difficult for farmers' coffee to be sold as the brokers licensed by the CMA to trade coffee at the Nairobi Coffee Exchange do not have the Direct Settlement System (DSS) structure, which is a legal requirement for them to market farmers' coffee," the report said.
AFA has recommended that licence holders continue to operate within their rights until the contracts expire and has also requested that a gazette notice be published extending the term of the commercial marketing agents' licence until September 30, when new contracts will be signed between them and the farmers.