New rules rolled out to end coffee reforms stalemate

coffee beans

Coffee beans on display for auction at the Nairobi Coffee Exchange in the Kenya Planters’ Cooperative Union building along Haile Sellassie Avenue, Nairobi, on October 2, 2018.

Photo credit: File | Nation Media Group

The state has prepared new rules it hopes will end an impasse that has delayed the implementation of reforms in the coffee sector.

The Crops (Coffee) (General) (Amendment) Regulations, 2022, has amended the Crops (Coffee) (General) Regulations, 2019, restoring the mandate of registering and regulating coffee marketers to the Agriculture Foods Authority (AFA)/Coffee Directorate.

In the amended rules, it is the Capital Markets Authority (CMA) that has been issuing marketing permits. It also supervises the Nairobi Coffee Exchange (NEC) and all other operations at the weekly auction—a function the new regulations have reverted to the AFA/Coffee Directorate.

The role assigned to CMA by the amended rules and the subsequent Capital Markets (Coffee Exchange) Regulations, 2020, formulated to incorporate coffee exchange and licensing of brokers is what triggered the stand-off three years ago. It all started after trading licences expired on June 30, 2020. The necessary structures were not in place at NEC when the rules came into force.

This compelled Agriculture Cabinet Secretary Peter Munya to intervene after operations at the weekly auction were paralysed. Mr Munya had to issue a one-year transitional period for players to prepare conforming to the new law. Some, especially multinationals, had questioned CMA’s capacity to implement the aforementioned coffee exchange regulations the National Treasury developed after amending the Capital Marketing Act, 2016. This was part of the reform programme set out by the Coffee Sub-Sector Implementation Committee chaired by Joseph Kieyah.

Mr Munya also came to express reservation about the CMA’s new role, saying it is not well structured to oversee agriculture commodities exchange.

The amended rules, which Prof Kieyah developed, barred millers from acting as marketing agents. It was also made optional for farmers’ cooperative societies to appoint a marketer or broker to sell coffee on their behalf.

The regulations that were predicated on a national taskforce the President had appointed in 2016, had emphasised growers’ unions milling and marketing their own coffee, apparently to reduce expenses and eliminate cartels. This was another contention. However, the new rules have re-introduced a miller-marketing licence. It has also retained a grower’s miller marketing permit.

The regulations, gazetted last month by Mr Munya, have changed the date of expiry of the marketing licences, which is renewed from July 1 of every year. “Licences issued by the licensing authority shall run from October 1 to September 30,” they state.

So, marketing agents’ licences that were to expire on June 30 will remain in force. Mr Munya has specified in the rules that the licences will remain valid until a direct settlement system is established for the processing of coffee sales proceeds.

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