Coffee cooperatives have urged the government to focus on supporting farmers through their respective cooperative societies or unions to increase coffee production in the country.
They argue that focus should be primarily on ensuring farmers have access to subsidized fertilizer, other farm inputs including chemicals and quality seedlings noting that this will put Kenya in the global map as one of the giant coffee producers.
Their sentiments come at a time when the cooperative societies are at loggerheads with the government over plans to pay coffee proceeds directly to the farmers under the Direct Settlement System (DSS) scheme.
The Nairobi Coffee Exchange (NCE) proposes a regulatory change that would strip farmers and their cooperative societies of the ability to manage dollar proceeds directly. Under the proposal, export earnings from coffee—currently transacted in US Dollars—would be converted to Kenya Shillings, with payments disbursed via M-Pesa or through a centralized banking platform under the DSS.
Currently, cooperatives receive dollar proceeds into aggregator accounts and negotiate competitive exchange rates, ensuring better value for their members. This proposed change would disrupt this model entirely.
In August 2023, the government introduced the DSS that is run through the Co-operative Bank. The Co-operatives Ministry followed this with a directive in November saying that the system will take effect this year.
The co-operative societies however argue that by-passing them will render them insignificant and ultimately kill them noting that they play an imperative role in collecting and marketing farmers’ coffee.
They aver that adequate and inclusive public participation must be undertaken before implementing any system of direct payment to farmers. Farmers, cooperatives, and other stakeholders must be consulted to ensure that the system reflects the interests and concerns of all parties.
The cooperatives under the Murang’a Farmers Cooperative Union led by Chairman Francis Ngone in a meeting on Tuesday reiterated that cooperatives remain the conduits between the farmer and the state should use the co-operative movement to raise coffee production.
“Co-operatives have a mandate to ensure farmers’ access to subsidized farm inputs like fertilizer and chemicals. A decision to by-pass us when it comes to payments is tantamount to leaving the farmers to operate on their own. It’s high time the government focuses on improving and raising production which will in turn generate high proceeds for the farmers,” Ngone said.
Similar sentiments were echoed by Godfrey Kanyiri Mwangi, the Chairman Kahuhia Farmers Co-operative Society said that centralizing sale and disbursement of US Dollars earned from coffee export will impoverish coffee farmers in the country as they will eke meagre earnings from their hard work.
“This plan by the Government has been rejected by the farmers we represent because it undermines the spirit of co-operatives, a system that has been built over the decades and has been successful all through. It is a plan that will weaken financial autonomy of grassroots farmers groups,” he said.
The Chairman added, ““This plan will collapse farmer societies and cripple aggregators’ capacity to maintain quality.”
Kanyiri further raised concern over the Capital Markets Authority’s (CMA) introduction of new levies and the broader implications on the financial autonomy, governance, and sustainability of farmer-led institutions.
Among the levies the farmers have rejected include the 1.8% levy introduced by the CMA on coffee marketers without due parliamentary approval or public participation as well as the 2% plus existing charges and dollar exchange losses through DSS.
“These multiple deductions, often without transparency or accountability, reduce farmer incomes and contradict the goal of equitable trade. Additionally, there is concern about efforts to monopolize U.S. dollar transactions through a single commercial bank,” Kanyiri asserted.
Margaret Wakaraka the Chairperson of Ruchu-Gacharage Farmers Cooperative Society called on the government to prioritize matters that will boost coffee farming and make it sustainable in the country.
“Farmers did not receive the subsidized fertilizer for this season and this will seriously impact production and this is one of the things we are telling the government to focus on. It’s also high time to revamp and revive coffee factories that are in deplorable state across the country,” she said.
The Co-operatives are now calling for an immediate halt of implementation of the new regulations, transparent public participation and parliamentary oversight as well as recognition and protection of farmer cooperatives’ financial autonomy.
