KENYA – Coffee sector reforms spearheaded by Kenya’s Deputy President, H.E Rigathi Gachagua have had a rocky start with many trades and buyers staying away from the Nairobi Coffee Exchange (NCE) forcing the volume and prices of coffee sold to dwindle sharply.
Many experts attribute the dismal performance at the NCE to confusion over the issuance of trading permits by the State with many traders who were previously active on the exchange lacking the necessary permits to do so.
Official data from the NCE, show auction volumes for August dropped from 4,380 tonnes to 192 tonnes this year representing 95.62 percent.
Additionally, the average price for a 50-kilogram bag of coffee beans fell by 31.13 percent to Sh183.41 (US1.24) from Sh266.32(US$1.80)
At the moment, the auction attracts an average of 25 buyers on each auction date, due to the low numbers of buyers, hampering competition for bids at the auction where up to 80 percent of Kenyan coffee is traded.
According to sources at the Agriculture and Food Authority, only 58 buyers have been registered at the NCE to buy from the auction out of the 121 licensed to buy coffee in the previous season.
A significant number of contracted millers are also reported to not being able to secure licenses issued by county governments, a factor limiting their operations and further resulting in dwindling volumes at the NCE.
As no coffee is yet to be certified in the current licensing cycle that commenced in July, coffee traders express fears that global coffee roasters such as US-based chain Starbucks will move away from buying Kenya’s coffee,
NCE chairman Peter Gikonyo however said that he is not aware of the suspension of any licences as the licences were to expire at the end of June when the transition from previous regulations was set to kick in.
“I would encourage brokers to comply and make applications for licenses with their respective regulators,” he urged.
As confusion on how to operate under the new reforms continues, coffee millers are now considering massive layoffs as most of their capacity is idle due to lack of sufficient coffee.
While attending the consultative meeting held in Nairobi by Crop Development Principal Secretary Kello Harsama, the millers made public their plans to retrench thousands of their workers in a month due to the suspension of their trade permits.
“We do not have trading licenses and as a result, we are not able to sustain our workers. Before the end of October, we will be laying off a substantial part of our staff who number more than 18,500,” said James Muriithi, who represented the seven of the largest coffee millers.
Some of the proposals under the new reforms include a proposal to transition the regulatory and commercial mandate from the Agriculture and Food Authority (AFA) to the Coffee Board of Kenya.
There is also a proposal to elevate the Coffee Research Institute, currently under the Kenya Agricultural and Livestock Research Organization (Kalro), into a standalone independent organization.