Weak saccos to blame for faltering coffee reforms

Rigathi Gachagua

Deputy President Rigathi Gachagua (centre) with Buuri MP Mugambi Rindikiri (left), Governors Stephen Sang (Nandi), Kawira Mwangaza (Meru) and Kahiga Mutahi (Nyeri) at Three Steers Hotel in Meru County on June 9, 2023, where the DP is hosting the inaugural coffee conference. 

Photo credit: Charles Wanyoro | Nation Media Group

Coffee growers’ cooperative societies have remained the main impediment to proposed government reforms aimed at revitalising the dwindling sub-sector.

This is an area past administrations have failed to address, resulting in the collapse of most of the unions, which started disintegrating in the early 1990s following the liberalisation of the economy.

To the smallholder farmer, a cooperative society means everything. They use these societies to apply for advances to buy farm inputs and to meet other costs they incur to prepare their crop. It is through these cooperatives that growers market their produce. Proceeds from sales of their crop are also channelled through the same organisations.

Restructuring farmer’s cooperatives was one of the proposals the National Taskforce on Coffee Sub-sector Reforms had made to the government. In their recommendations, the task force, which first reviewed the entire coffee value chain before suggesting what was needed to resuscitate the sub-sector, first proposed the writing off of all outstanding debts. These are the debts farmers owe commercial banks and other creditors through their respective cooperatives.

Another recommendation was for the government to introduce a Sh3 billion revolving fund to be disbursed to the growers as Coffee Cherry Advance Revolving Fund (CCARF). This is where the rubber would finally meet the road after the government failed to fully comply with the taskforce recommendations even after providing the Sh3 billion revolving fund.

Forensic audit

For the coffee unions to disburse the CCARF to their members, a forensic audit of all these cooperative societies had to be carried out first. The audit was to establish the level of the indebtedness and how the debts had been incurred before action is taken against those found responsible of the entire mess.

In other words, officials found guilty of misappropriating funds belonging to their members, it was recommended, must be prosecuted. Very few farmers’ cooperatives met demands set by the Treasury to disburse the CCARF to their members. Most of them, as the taskforce had established, were heavily indebted. Their officials had borrowed expensive loans from commercial banks using assets owned by members as collateral. They had done this without the members’ consent.

There are management officials who have blocked their members from accessing the revolving fund in order to continue with the high-interest loans since they get kickbacks. To access the Sh3 billion advance, the government incorporated the defunct Kenya Planters Cooperative Union (KPCU) into a state corporation to disburse the funds to growers. Constant calls by the government to union officials to allow their members access to the CCARF have not borne fruit.

Many farmers still have the phobia of losing money to KPCU, which they once owned before it went bankrupt.

The taskforce, which was subsequently morphed into Coffee Sub-sector Implementation Committee (CSIC), eventually encountered several other hurdles in its bid to implement the reforms it had proposed.

It had come up with legal reforms or the Crops (Coffee) (General) Regulations 2019. Its chairman, Prof Joseph Kieyah, who had chaired the taskforce, admitted that without undertaking the forensic audit first, implementing the new regulations was a waste of time.

For farmers to improve production, they must access to the CCARF and other credit. The audit had to be completed before operationalising the new regulations, he demanded.

The State Department of Cooperatives locked horns with the CSIC. The two state agencies differed on the modalities of conducting the audit with the latter doubting the capacity of the former. Prof Kieyah wanted an independent body to undertake the process he estimated would cost millions of shillings.