Eaagads’ financial performance suffers amid industry reforms

KENYA—Coffee growers’ sales revenue has declined by Sh1.1 million (US$7,177.81) year on year to Sh158.9 million (US$1.036 million), according to Eaagads.

This stunning finding comes at the same time as Deputy President Rigathi Gachagua’s stepped-up reform efforts in the sector.

Eaagads reported a significant decline in revenue, leading to a shocking Sh33.1 million (US$215,986.95) net loss, reversing the Sh37.2 million (US$242,740.62) net profit declared a year before.

The company attributes this deterioration in performance to ongoing government-led changes, claiming that these measures have hampered its capacity to engage in traditional direct coffee sales.

In their statement, Eaagads also acknowledged that the lack of sales has had a significant impact on the company’s cash flow, leaving a financial deficit that necessitated borrowing a significant sum of Sh108 million.

Furthermore, this borrowing has been used to cover operational expenditures, preserve business continuity, and handle existing financial obligations in the absence of sales revenue.

During the same time period, the company recorded a decrease in clean coffee production to 188 metric tonnes (MT), down from 232 MT in the previous year’s similar period.

This decline is attributed to the severe drought experienced between October of the previous year and March of the current year, exacerbated by restrictions on irrigation and a subsequent total ban on water abstraction from rivers.

Eaagads emphasized that the drought was exacerbated by irrigation limitations, which were followed by a total prohibition on any water abstraction from rivers.

This resulted in poor crop development, leading to undersized coffee beans and poor grade recoveries for milled coffee, resulting in lower output.

Despite these challenges, Eaagads expects the recent El Niño rains to have a positive impact on the early crop in 2024.

The company has taken the initiative to apply for a grower-miller license from the Kiambu County government, aiming to enable direct sales and streamline operations and sales processes.

The company’s difficulties align with the broader context of increased changes in the coffee business under Deputy President Rigathi Gachagua’s leadership.

In mid-August, he coordinated the relaunch of the Nairobi Coffee Exchange (NCE). President William Ruto, through Executive Order Number 1 of 2023, transferred the coffee reforms to his deputy’s office, putting Gachagua at the center of the delicate docket.

Among the suggested modifications is the implementation of a direct settlement mechanism.

The policy documents drafted to revitalize the sector include the Coffee Bill 2023, the Draft Co-operatives Bill 2023, and the Sessional Paper No. 1 of 2020 on the National Co-operative Policy.

The Coffee Bill proposes reforming the sector by transferring regulatory and commercial responsibilities from the Agriculture and Food Authority to the Coffee Board of Kenya.

It also intends to transfer coffee research from the Kenya Agricultural and Livestock Research Organization to the Coffee Research Institute.