The Nation (Nairobi)
Mwaniki Wahome
27 June 2009
Nairobi — Deeply entrenched interests in coffee marketing are threatening the government's efforts to introduce amendments to the Coffee Act.
The government had in 2007 granted interim licences after changes introduced in 2007 introduced severe conflicts of interest as it sought to streamline the cash crop's marketing.
The amendments allowed dealers and millers to also acquire marketers licences, which raised concerns over possible manipulation leading to low producer prices. "The dealers have been undertaking activities in the whole chain from the farm to the market, which has created severe conflicts of interest and disadvantaged farmers," said a major player who requested not to be named due to the sensitivity of the matter.
The source said some dealers had moved to coffee societies and through their marketing outfits offered the same coffee through the auction system, creating the conflict.
"The coffee societies that refused to offer their coffee through some of these dealers were blacklisted and had their produce bought at lower prices at the auction," said the source.
This put the giant Kenya Planter's Co-operative Union (KPCU), the umbrella body of 300 co-operatives with 700,000 mainly small scale farmers at a disadvantage because the same dealers are the major buyers at the auction. This explains why the government last week published the Financial Bill 2009 that aims to revert to the earlier system of licensing players in the sector.
If passed, the Bill will strip the dealers of the role of marketing coffee by introducing marketing agents licence in a move viewed as intended to remove the conflict of interests.
Lock out
Dealers also registered their marketing outfits which meant they could lock out other players by buying clean coffee beans including Mbuni, acquire processors' licence and undertake milling, roasting, blending and packing.
If the Bill is passed, millers will be licensed separately, but it is not clear if they will be granted marketers' agents licences. Trading in coffee is second to oil in the world, not just in turnover but also in attracting traders, turning the commodity into a highly controversial affair.
That is why any attempt at changing entrenched systems elicits sharp reactions from the players. There have been complaints about cartels at the Nairobi Coffee Exchange, although those in the auction deny their existence. "I have been here for several years now and I have not seen those cartels," said Kenya Coffee Producers and Traders Association chief executive Daniel Mbithi.
Agriculture minister, William Ruto, last month indicated that the government would do away with the auction system for coffee and tea by year end, accusing players of cartel-like behaviour. He said Kenya coffee would be processed and branded and sold as a premium product.
However, Mr Dirk Sickmueller, a major dealer at the Exchange who trades under Taylor Winch (coffee) Limited, dismissed the idea as unworkable.
"It sounds good but that is not the reality about coffee marketing," he said in response to government's push for finished product.
He added: "The reality is 99 per cent of coffee in the world is sold as green bean or unprocessed. There is no demand for roasted Kenyan coffee on the international market," he said. Mr Sickmueller said the situation is unlikely to change soon.
He poured cold water on intentions the to fold the auction system and sell directly sell processed coffee as a premium product. "This is a pipe dream," he said.
In the meantime despite the existence of a window for local coffee dealers to import and process clean coffee the opportunity is largely unexploited in spite of the Coffee Act containing the relevant clause. "The possibility (of importing clean coffee beans) has always been there but its not done," said Mr Sickmueller.
But unlike other crops, coffee is different and emphasis is quality-specific. "It's better left to specialists in these countries who have competence in different coffee," he said. This is one of the twists in the marketing of coffee both locally and in the international level.
The amendments categorise the various types of licences for the players in the sector into coffee dealers licence, millers licence, marketing agents licence, warehouseman licence and pulping station licence. Dealers will roast, blend and package coffee unlike the current situation where these roles are carried out under coffee processors licence.
Coffee production has plummeted from the 1980s highs of 130,000 metric tonnes. According to the 2009 Economic Survey, coffee registered a 21.3 per cent decline in production from 54, 000 metric tonnes in 2007 to 42, 000 metric tonnes in 2008.
The low production has spawned a cut-throat competition for the little available coffee beans in the local market.
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