Government is committed to clear off Sh 9 billion debts owed to financial institutions by hundreds of coffee farmers in the country, Cabinet secretary for Cooperative and Micro Small and Medium Enterprises (MSME) Wycliffe Oparanya confirmed.
Oparanya stated that the Government is devoted to paying the accumulated debts on behalf of coffee growers as part of boosting their morale to produce more beans.
“In the current financial year, the National Treasury and Planning Ministry extended Sh2 billion as part of money to clear the debts. This demonstrates government assurance to support the coffee industry which is currently struggling with low production and stiff competition from other beverages,” said Oparanya during a cooperatives leaders conference in Naivasha.
The debt waiver is in the second phase with Sh12.2 billion having been written off in the first phase more than a decade ago.
CS Oparanya stated that the coffee sub-sector, once a leading foreign exchange earner, is currently struggling with poor governance and grand corruption, a situation he said is denying farmers their hard-earned sweat.
“Government will ensure the legislations and regulations are fully implemented to ensure there is level playing ground. We have had cases in farmers’ coffee societies where directors and managers have been borrowing money to pay the growers high rate against income earned,” the CS noted.
He further said that farmers in these societies cannot meet their daily financial obligations and thus warned that the Government will not tolerate corruption in the coffee industry as it works towards restoring confidence in the sector.
On the Debts waiver programme, the Commissioner for cooperatives David Obonyo said debts that farmers had incurred from local financial institutions and mainly cooperative bank of Kenya to finance coffee processing equipment among other needs had reached Sh6.8 billion in January.
To ensure there are no debts left unattended, he explained that the Cooperative department requested for further information on claims from farmers, coffee cooperative societies and financiers with the deadline to put on May this year.
This led to the debt portfolio increasing to over Sh 9 billion. Commissioner Obonyo confirmed that to avoid duplication in payment, the Department of Cooperatives and the National Treasury and Planning constituted a seven-member taskforce to validate all the debts and the team is expected to submit an interim report by the end of this month.
“According to the claims by the counties, financiers’ and farmers’ cooperative societies accumulated debts stand at Sh 9 billion. The figure might remain the same or reduce based on the authentication by the 7-member task force team,” Obonyo said.
The coffee industry debt waiver programme was initiated by the former administration of President Mwai Kibaki in 2006 as part of assisting the local farmers overcome challenges disrupting desired growth.
Between 2006 and 2019 government waived Sh12.2 billion through Cooperative Bank of Kenya, though value chain players claimed the written-off debts and other reforms enacted did not motivate desired development in the subsector.
Government waived Sh5.8 billion Stabilization of Export Earnings (STABEX) to Cooperative Bank, money that had been granted by the European Union (EU) under a compensatory finance scheme to stabilize export earnings of the African, Caribbean and Pacific Group of States (ACP).
National Coffee Cooperative Union (NACCU) Limited chairman Francis Ngone said debt increase in the coffee industry has contributed to frustrations and lack of morale to farmers. He hailed the debt waiver programme by the Government saying it will boost morale to the farmers and leading to high production.
Ngone confirmed that over Sh10 billion coffee proceeds have been paid to farmers through Direct Settlement System (DSS) between January and now. This is coffee sold at Nairobi Coffee Exchange (NCE).
The payment of the impressive earnings follows aggressive implementation of reforms in the coffee industry initiated since 2016 making it easy for farmers to benefit from their hard-earned sweat.
“This year we have recorded a big milestone in terms of coffee payments and enhanced voice of the growers as they are now participating at the market arena,” said Ngone.
The DSS, established more than one year ago, has contributed to improvement of payments of proceeds to the farmers unlike before where the income took a long time.
He confirmed 12 specific coffee brokerage companies which are affiliated to county coffee cooperative unions have been registered by the Capital Markets Authority (CMA) to compete with other private companies in the market.
The DSS, Ngone observed, ushered in unprecedented price transparency at the coffee auction, where even rural societies can link up with the market and monitor their coffee being traded on a real-time basis.
DSS is the technology platform on which coffee trading is henceforth conducted as provided for in the new coffee trading regime supervised by the CMA.
The technology is part of the coffee sub-sector reforms that the Government has been pushing since 2016 when the Coffee Sector Reform Taskforce led by Prof Joseph Kieyah was appointed by former President Uhuru Kenyatta. Under the new regime CMA has registered 12 unions as coffee brokerage companies.
The DSS facility was developed by the NCE to ease payment to farmers after every sale and appointed Cooperative Bank of Kenya on Aug 8, 2023 to manage it after beating other commercial banks that had applied for the same.
Ngone, who is also Muranga farmers’ coffee cooperative union chairman further stated that since 2016, a lot has been achieved in terms of reforms implementation.
“We have witnessed farmers’ profiles enhanced as they are now able to participate deeply and aggressively along the value chain. Reforms have contributed to separation of functions between the National Government and counties. The inclusion of farmers as dealers at NCE has contributed to realignment in the entire value chain,” he added.
However, Ngone lamented that the coffee market is still grappling with interference by non-players in the sector.
“We are appealing to the Government to implement the enacted regulations given to govern the market arena. We are further appealing to the Government to be more vigilant to ensure the market is free of interference by self-interested individuals and business associations,” Ngone cautioned.
The main coffee growing areas in the country are from central namely Kiambu, Nyeri, Muranga, Kirinyaga and Thika. Besides the small-scale farmers, the central region also has most of the large coffee estates.
Kenya has an estimated 800,000 coffee farmers with about 70 percent of them being smallholders and out of which 30 percent are women.
By Wangari Ndirangu
