•Capital Markets Authority to regulate trade.
•The Coffee sub-sector supports an estimated five million Kenyans, both directly and indirectly.
Coffee dealers must purchase coffee through the Nairobi Coffee Exchange auction, government now says, as reforms in the sector kick-off.
This, as it moves to revoke licenses of 'cartels' who have infiltrated the coffee sector in the country.
Deputy President Rigathi Gachagua in June read the riot act to cartels in the coffee sector telling them their time to reap where they had not sown was over.
"Dignity of farmers who toil in their farms only to reap peanuts from their produce will be returned and coffee made the black gold that it was for years," Gachagua had said, during the first national Coffee Reforms Conference, in Meru Town.
The DP said farmers had been exploited for long promising to deal with the cartels and other interests by accelerating reforms in the sector.
Part of the reforms was the closure of trading at the NCE which now re-opens tomorrow.
The resumption of activities at the NCE, which provides a platform where marketing agents sell coffee on behalf of smallholder growers, will end a month-long wait that had slowed down coffee trade.
Trading is expected to resume tomorrow according to Cooperatives Principal Secretary Patrick Kilemi, under a new regulatory framework.
Co-operative Bank has been appointed by the NCE to provide the Direct Settlement System (DSS) technology platform, on which coffee trading will henceforth be conducted.
This is as provided for in the new coffee trading regime, supervised by the Capital Markets Authority.
Coop Bank was picked as DSS service provider following a competitive bidding process that had nine financial institutions submit their bids.
A forum to train the coffee market users, which includes brokers, traders, warehousemen, coffee farmers and other service providers, on the workings of DSS, was held in Nairobi last week.
This is ahead of the auction resumption by newly-licensed coffee trading firms wholly owned by coffee societies.
The entry of farmer-owned coffee brokerage companies on the NCE trading floor is one of the most significant milestones in the coffee reforms journey that the government is executing, the PS said.
“We would like to invite our coffee traders and buyers both local and international to support the farmers and the government by offering prices that are commensurate to the farmers' efforts in the farm and the quality of our coffee,” Kilemi said.
There has been no auction since the beginning of July when the current marketing system resumed, a move that left farmers holding on to stocks with millers hard-hit.
According to the PS, the government has embarked on implementing reforms that will benefit both growers, as the produce owners, up to the point of sale while at the same time protecting the right of coffee consumers.
The sub-sector supports an estimated five million Kenyans, both directly and indirectly.
Coffee in Kenya is produced under two farming systems; smallholder estimated at 700,000 growers and large, medium and small estates estimated at 3,000 in number.
The smallholder producers are clustered into 559 active coffee cooperative societies to enjoy economies of scale.
The cooperative societies operate 1,065 wet mills where they process and market their coffee collectively. The estates operate 2,132 wet mills of various capacities and models.
President William Ruto early this year delegated his deputy to jumpstart and fast-track the implementation of the coffee sector reforms.
So far, 11 coffee co-operative unions have been licensed to sell coffee directly at the exchange and overseas, thereby eliminating the need for middlemen between the farmer and the buyer.
Five other unions will be licensed before end of August, the PS said, leading to a total of 16 unions representing coffee farmers across the coffee growing zones.
CMA has been entrenched as the regulator of the NCE, with the expectation of a transparent and efficient price discovery process.
“The Nairobi Coffee Exchange has appointed, and Capital Markets approved the Direct Settlement System which will lead to speedy and transparent clearing and settlement of the coffee sale proceeds to the coffee farmers,” Kilemi said.
This will help improve the accountability and governance of co-operative societies.
The PS further noted that the government has ensured there is order and fair play in the coffee value chain by eliminating conflict of interest among players.
County governments, CMA and Agriculture and Food Authority will license milling, brokers and buyers respectively.
By having three distinct licensing authorities, there will be checks and balances along the value chain for the best interest of the farmers, the PS noted.
“We are in the final stages of working on a modality jointly with County Governments and Capital Markets Authority on registration of Small, Medium and Large Estates into Co-operatives or Associations to enable these categories of farmers also access brokerage licenses,” he said.
The government has committed to support production of coffee from the current 51,000 metric tonnes to 81,000 metric tonnes by 2024 and progressively to 260,000 tonnes by 2027.