Coffee Bill headed for Senate as MPs endorse provisions

Coffee factories and societies will no longer take loans without farmers’ approval if a Bill passed by the National Assembly yesterday becomes law.

Any loans borrowed in contravention of the law will be statutorily converted into personal loans of the officials of the offending factory or society.

The Coffee Bill, 2020, sponsored by the Agriculture and Livestock Committee of the Senate, seeks to provide for the regulation, development and promotion of the coffee industry.

The Bill reintroduce coffee levies that were abolished in 2014 through the creation of a technical board and a stakeholder council. If it becomes law, the National Treasury will introduce a coffee research levy at not more than 1 per cent of the gross coffee proceeds to support extension services and research at the Coffee Research Institute (CRI), 

CRI’s 50 per cent funding came from the Coffee Research Levy at two per cent of gross coffee proceeds, but the levy was abolished in 2014 when the food authority, with an annual budget of Sh3 billion, came into force. 

Currently, factories or societies borrow money from the financial institutions without consulting farmers. Although farmers pay for the interests on the loans, they have no control of how the funds are expended.

MPs also moved in to safeguard farmers by providing that those who present their coffee to factories shall not be charged more than 19 per cent of the cost of one kilogramme of beans in cleaning costs. Currently, farmers are charged at least 30 per cent for any kilo of beans in cleaning costs.

Restore order in the sector

The Bill provides that the interest rate on borrowing by factory management against growers’ assets held in trust by factories and societies be capped at five per cent per annum. The borrowing must first be approved at an annual general meeting. 

“A factory or society shall not contract any loans or advances except with the support of a resolution in an annual general meeting passed by a majority of the growers to that effect.”

The Bill is headed for the Senate for concurrence before it is transmitted to the President for assent. It seeks to create the Coffee Board of Kenya, whose duty will be to regulate the industry; it will register warehousemen, buyers, commercial millers, grower millers, independent cupping laboratories, roasters, liqueurs, processed coffee importers, clean coffee importers, marketing agents, bags suppliers, and certification entities.

The Bill also provides that the price at which a licensed grower offers coffee for sale shall bear a favourable comparison to the price at an exchange.

To restore order in the sector, a licensed grower and licensed roaster shall be required to submit monthly returns to the board on sales undertaken and include coffee grade, quantity, price, quality report, a dispute resolution clause and mode of payment, among others.

The Bill, however, makes it clear that it does not prohibit farmers from directly borrowing money from banks or any government-established funds against their deliveries of cherry, parchment and clean coffee. 

To protect the farmer from exploitation, it provides that a miller and a marketing agent shall not lend to farmers on interest.

Farmers abandon the crop

“A miller or marketing agent who contravenes this provision commits an offence and shall have his or her licence revoked or suspended,” the Bill reads.

The Cabinet Secretary in charge may, by regulations, determine the period for revocation or suspension of a licence.

The passage of the Bill signals the end times for the Agriculture and Food Authority (AFA) as sector reforms will see the return of the export commodities regulatory institutions barely six years since they were coalesced. 

In 2020, Agriculture CS Peter Munya endorsed the separation of the directorates into independent institutions through enactment of the Coffee Bill; the Miraa, Pyrethrum and Industrial Crops Bill; the Horticulture Crops Authority Bill; the Fibre Crops Development Bill; and the Food Crops Development Bill. 

The move led to the creation of AFA and was meant to revamp the agricultural sector and ensure efficiency, but little has been achieved. For instance, a visit to the CRI in Ruiru by the parliamentary committee in 2020, showed an institution in a sorry state.

The team established that the coffee farm faced challenges, including coffee berry disease, absentee staff, delayed employee salaries, lack of farm input such as pesticides, lack of seedlings, lack of funding, and ghost estates. These problems saw farmers abandon the crop.

The team said the abandonment saw the land under coffee reduce from 170,000 hectares to about 109,795. Growing areas include Nakuru, Laikipia, West Pokot, Kericho, Vihiga, Kirinyaga, Bungoma, Kiambu, Kakamega, Busia, Trans Nzoia, Taita Taveta, Tharaka Nithi, Nyamira, Homa Bay, Kisii and Kisumu. 

[email protected]