Dilemma hits coffee sector as brokers’ trading permits expire
Uncertainty and fear loom over coffee industry as current marketing licences expire in the next 10 days.
Players fear that marketing of clean coffee at the Nairobi Coffee Exchange (NCE) under the Capital Markets (Coffee Exchange), Regulations 2020 from July 1, 2021 may not happen as the necessary structures to support the rules are yet to be established.
Industry stakeholders warn that the scenario is likely to renew and escalate a tussle between Capital Markets Authority (CMA) and marketing agents last year which prompted Agriculture Cabinet Secretary Peter Munya to extend trading licences issued under the Coffee General Rules 2002.
For the Capital Markets (Coffee Exchange), Regulations 2020 to take off, various governance systems ought to have been put in place by the end of June this year.
This includes the establishment of the Direct Settlement System (DSS), a payment system to handle all the coffee earnings to the value chains.
Further, the NCE ought to have a full board that will help in management of the auction as well as selection of a commercial bank to make the DSS operational.
Currently, the NCE secretariat has no board but only a few employees who handles auction activities.
These are parts of the recommendations that had been proposed by the Taskforce established by President Uhuru Kenyatta to interrogate the entire coffee value chain and identify areas requiring interventions such as production, processing and marketing of coffee. Further, the Senate and National Assembly are each fronting a coffee bill to revive the coffee industry.
Up to now no broker has applied for licence from the CMA though the latter declined to confirm when contacted.
Small-scale coffee farmers under the umbrella of Kenya Coffee Producers Association (KCPA) fear that the auction might be interrupted like last year when the licences led to loss to farmers.
Address the media during a press conference in Nairobi yesterday, Peter Gikonyo, KCPA chairman said farmers are in a confused state as the ministry is pursuing the Coffee Bill 2021 and CMA wants coffee exchange regulations 2020 be adhered to.
“We do not know what will precede the other. However, as farmers, we already have existing contracts with marketing agents and we have released our coffee to them for sale,” he said.
Economic loss
In case of any delay of selling coffee, Gikonyo said means farmers will incur increased economic loss.
Further, he added, the new marketing regime cannot succeed based on the fact that CMA and National Treasury and Planning ministry have not established key operations structures.
“Under the trading regulations, the coffee exchange is under the licensing and regulations of CMA.
So it is not clear on what legal authority the Cabinet Secretary will make regulations on NCE management,” said Gikonyo.
Farmers’ proposal is that coffee marketing be regulated by the Coffee Board owing to its expertise in the area and therefore call for amendment of the Finance Act, 2016,” he added.
In mid-March this year, CMA issued a public notice on gazettement and implementation of the Capital Markets (Commodities Markets) Regulations 2020 and Capital Markets (coffee exchange) regulations 2020.
The capital markets regulator required coffee sub-sector players to comply with the protocols by April 3, 2021.
Brokers are supposed to seek licences from the CMA by June 30, 2021 so that they can be allowed to trade at the NCE under the regulation of CMA starting July 1, 2021.
“During this transition period, the CMA is committed to working with all stakeholders in a collaborative and non-disruptive manner to ensure the envisaged market reforms are implemented successfully,” stated CMA management in a circular published on its websites then.
But, Munya immediately dismissed the notice, saying it is misleading the coffee value chain players and equally not well structured.
“NCE as a selling platform of coffee beans in the country is under the management of the Agriculture ministry and no other institution is supposed to obstruct the process.
CMA main work is to regulate securities and thus should desist from interfering with the coffee,” the minister said at the time.
