Coffee stakeholders oppose new directive for direct coffee farmer payments
KENYA – Kenya’s coffee sector is grappling with controversy following a new directive by the Ministry of Cooperatives, requiring farmers to be paid directly for their produce.
The mandate bypasses cooperative management boards and has sparked strong opposition from various stakeholders, including cooperative society boards, millers, and coffee brokers.
The directive, issued by Cabinet Secretary for Cooperatives and Micro, Small, and Medium Enterprises (MSMEs) Development Wycliffe Oparanya, instructs the Nairobi Coffee Exchange (NCE) to implement a direct sale settlement system.
This system will credit coffee sale proceeds directly into farmers’ accounts or through M-Pesa.
While the government argues the move will enhance transparency and ensure farmers receive timely payments, critics warn it could undermine cooperative movements and rural savings and credit cooperatives (saccos).
“This directive is impractical,” said Mureithi Maina, chairman of Irianini Farmers Cooperative in Mathira, Nyeri County. “How will farmers receive payments directly when coffee is sold in dollars? Are farmers delivering as little as one kilogram expected to open dollar accounts? This is a flawed boardroom decision.”
Maina emphasized that cooperatives play a crucial role as guarantors for farmers seeking sacco loans based on the quantity of coffee delivered.
He warned that paying farmers directly could lead to loan defaults, placing cooperatives under legal and financial strain.
The directive is one of ten reform measures introduced by Oparanya to improve profitability and competitiveness in the coffee sector.
These measures include capping cooperative societies’ administrative and operational costs at 20% of gross coffee earnings, separating operational funds from farmer payments, and requiring service contracts to be lodged with commercial banks for settlement through the Direct Settlement System.
In addition, cooperative societies must digitize coffee weighing scales and stock cards, centralize data access for growers by 2024/2025, and insure coffee against loss or damage.
Societies and associations are also required to seek member-approved loans and ensure these are sanctioned during annual general meetings attended by county cooperative directors and the Commissioner for Cooperative Development.
Officials holding roles in both primary cooperative societies and saccos have been ordered to relinquish one of the roles immediately.
These reforms, originally championed by former Deputy President Rigathi Gachagua, are part of the Crops (Coffee) (General) Regulations 2019, established under the Crops Act of 2013.
The government maintains that the changes are necessary to regulate and bolster the coffee industry.
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