15 farmer-owned coffee mills reopened in renewed war on cartels

At least 15 coffee mills owned by farmers in different counties, which had been shut down due to rot in the sector, have been re-opened since August last year, the Ministry of Co-Operatives and MSMEs has said.

The ministry also says that following the continued implementation of reforms in the coffee industry, which started in earnest last year, payment for the cherries farmers deliver to factories has increased from Sh60 to Sh80 per kilogramme. It blamed the previous cases of poor payment of farmers on cartels that he said had captured the industry.

Cabinet Secretary Simon Chelugui further said that more gains, including the trading of coffee valued at about Sh5 billion, have resulted from the implementation of the Crops (Coffee) (General) Regulations 2019, which has also caused disruptions for established coffee dealers in the country.

“151,198 bags of coffee have been traded at the auction for $31,331,345, earned at an average price of $195, which is equivalent to Sh100 per kg to the farmer. Our cherry advance fund is giving Sh80 per kg of cherry, which means we are Sh20 above the cherry advance,” CS Chelugui said.

“Since the reopening of the Nairobi Coffee Exchange in August last year, 15 county-based mills belonging to farmers, that were initially shut, have been fully activated, creating employment for thousands of young Kenyans in coffee-growing counties,” the CS added.

Gachagua reforms

Officials within the ministry, who have spearheaded the reforms since last year, under Deputy President Rigathi Gachagua's leadership, said the previous system worked against farmers as it allowed many players in the industry to hold multiple licences, creating cartels.

The ministry argues that by preventing trade participants from holding multiple licences, the government eliminated “collusion, conflict of interest and cartelism”.

Chelugui further said that thus far, 15 brokers have been licenced to sell coffee across the country via auction and that young Kenyans with coffee-tasting, cupping, and selling skills are, for the first time, involved in the exchange trading process.

The changes, which the ministry says are being effected with the support of county governments, have caused disruptions in the coffee industry, which could lead to the loss of jobs as established players are rattled.

Germany-owned Neumann Kaffee Groupe (NKG), which is based in Ruiru, Kiambu County, last week announced that it would close shop by the end of February 2024, following reforms that culminated in it being denied a licence.

NKG, which operates through its subsidiaries Ibero Kenya Limited, a coffee buyer at the Nairobi Coffee Exchange, and Tropical Farm Management, a coffee agent, issued a notice of redundancy to its employees, signalling the depth of the disruptions in the industry.

“Following these changes, NKG Coffee Mills Kenya Ltd has not been able to secure the milling licence, and it is in this regard that the company has taken the decision to close the milling operations. In these ongoing changes, there is the potential for certain posts within the company’s staff establishment to become redundant,” the company said.

NKG is the biggest coffee buyer in the country, meaning the shutdown will have a heavy impact on the industry.

During the reforms, the government revoked a commercial miller’s licence that was issued last June by the Kiambu County Government.

“While exploring alternative avenues during consultations, we wish to notify you of the intended redundancy. If no alternative is found and the redundancy confirmed, as per existing laws, [it] will be effective from February 29, 2024,” it said last week.

Despite the disgruntlement in the sector, the government says it will push the reforms to their conclusion so as to eliminate the cartels that have captured the industry.