Coffee sub-sector committee mulls waiver on farmers’ debt


Coffee sub-sector committee mulls waiver on farmers’ debt
A worker sorts coffee berries at a factory in Kienjege, located in western Kirinyaga county, northwest of Kenya's capital Nairobi, July 24, 2014. REUTERS/Thomas Mukoya/File Photo

In Summary

  • The consideration will come as a relief to farmers who owe their respective cooperatives an approximated Ksh.700 million in total.
  • Chairman to the coffee sub-sector Prof. Joseph Kieyah however expects the audit of existing debt obligations to precede any thoughts for a waiver, highlighting on the importance of reconciling existing debt.
  • The reforms by the task-force makes up the lifeline for the once thriving agricultural sub-sector which currently find itself on the rocks as farmers abandon the trade for more lucrative ventures such as real estate.

Coffee farmers have received a shot in the arm, this as the 2016 presidential instituted task-force on coffee sector reforms and implementation considers a waiver on debt accruing to cooperatives.

The consideration will come as a relief to farmers who owe their respective cooperatives an approximated Ksh.700 million in total.

Further, the deliberation comes in days to the operation of the Ksh.3 billion cherry evolving fund, a financing line set to go online on the 1st of July 2019, credited to President Uhuru Kenyatta’s March directive.

The directive has since followed course signaled by the allocation of Ksh.3.03 billion under the 2019/20 fiscal estimates.

Chairman to the coffee sub-sector Prof. Joseph Kieyah however expects the audit of existing debt obligations to precede any thoughts for a waiver, highlighting on the importance of reconciling existing debt.

“We need a forensic audit. What makes up genuine debt and what doesn’t? At this time, any advancement of funds without due diligence is likely to bear no benefits for the indebted farmers,” he said.

Prof. Kieyah who spoke during the coffee sub-sector committee stakeholder validation forum on Tuesday warned that some cooperatives may have taken advantage of an ongoing crisis to in the sector to rip-off farmers without there being credible receipts to transactions.

“Some debt waivers have been given in the past but were farmers credited for the same? We also need to know what ends up as the real cash transfers to individual farmers,” he added.

The stakeholder validation by the committee comes ahead of the gazette of new sector regulations under the 2019 Crops Regulations and the Capital Markets Coffee Exchange Regulations.

This follows the completion of a second round of engagement with sector players through public participation.

At the center of changes and in addition to the operation of the cherry fund will be the dual-licensing of value chain players by both the national government and counties while the Capital Markets Authority (CMA) will for the first time play an oversight role in the execution of transactions.

Further to licensing will be the direct crediting of farmer accounts through the Direct Settlement System (DSS), in an evolution from the facilitation of payments through the cooperative units.

The amendments if successful are expected to inject an additional 10,000 metric tones (MT) of produce per year to push Forex earnings by an additional Ksh.3 billion (USD 300 million).

The success of the interventions are also set to increase youth participation in the sector while bringing in an addition Ksh.120,000 in producer earnings per acre.

The reforms by the task-force makes up the lifeline for the once thriving agricultural sub-sector which currently find itself on the rocks as farmers abandon the trade for more lucrative ventures such as real estate.

Coffee production has eased in the last five years peaking at an average of 50,000 MT per year against a historical high of 130,000 MT at the end of the 80s.

Declining production has further been worsened by the volatility of the commodity’s pricing in the international market in a matter which has left Kenya as a price taker rather than a price determinant despite the consistent grading of the country’s coffee.

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