Kenya’s Capital Markets Authority to oversee coffee exchange as new regulations kick in

KENYA – Kenya has published new regulations, The Crops (Coffee) (General) Regulations, 2019 that will see the Nairobi Coffee Exchange being the licenced by the Capital Markets Authority (CMA).

Published in July 1, the new regulations are part of the country’s drive to revive the coffee sector, that will also see the Exchange undergo a radical transformation in management.

According to new regulations, the exchange which has been operating as the Nairobi Coffee Exchange (NCE), is now defined as a “company incorporated under the Companies Act and licensed by the CMA as an exchange for trading in clean coffee”.

Coffee buyers who purchase the commodity through the exchange, which runs coffee trade through actions, will also be required to pay for the commodity within five days after a sale has been concluded.

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Coffee buyers and roasters trading at the exchange will be automatically liable for suspension from trading in case of default of payment of coffee proceeds through the direct settlement system.

According to a report by The Standard, over 90 per cent of Kenyan coffee is traded through the NCE-managed auction, with the balance being direct sales. NCE will also be regulated by the Agriculture and Food Authority.

The new regulations will also bring coffee brokers under the watchful eye of CMA, but will also have to be licensed by the exchange.

According to the regulations, all industry players (including the county governments, cooperatives and other service providers) will also be required to digitise their operations within the next year.

The digital systems, in addition to having capabilities to withstanding challenges such as hacking that come with automation, will also give access to other players to facilitate fast handling of the commodity as well as prompt payment of farmers.

“The authority, county governments, every licence holder, certificate holder and service provider shall digitise and automate their operations for efficient service delivery and information dissemination,” read the newly published regulations.

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The different players along the value chain will be required to invest in data safety mechanisms and system back-ups that would ensure that there is business continuity in case their computer systems are destroyed.

The move has the potential to streamline the sector and address challenges afflicting coffee farmers, many of whom have struggled with low prices despite the crop fetching some of the best prices globally.

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