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Coffee Act, 2001 (Amendments) - Kenya Coffee Producers' Association (KCPA)


The coffee industry is crucial to the Kenyan economy. It is a key export and foreign exchange earner with the potential to support the livelihoods of approximately 60% of the Kenyan rural population.

From the mid-1960's onwards and particularly in the 1970's, the coffee industry boomed. However, the International Coffee Organisation's quota system that fuelled the boom later collapsed leading to a worldwide drop in prices. The 1980's liberalization of the sector followed, causing Kenyan coffee production to decrease by 60% to 52,000 metric tonnes.

In recent years, various reforms including the Coffee Act 2001 were meant to boost the sector's productivity again. However, these reforms have been unsuccessful and the last few years have been unfulfilling for coffee farmers.

The issue

As of 2012, KCPA argued there were too many statutory deductions made on coffee sold resulting in very low net payments to farmers, yet the government bodies receiving these funds did not provide the substantive support required. Farmers feel that like other parastatals and county councils, the relevant organisations to coffee including the Coffee Research Foundation (CRF) and the Coffee Board of Kenya (CBK), should be funded by the government through a consolidated fund to which coffee farmers contribute. The total taxation of coffee amounts to 4% of total sales compared to just 1% for the tea industry.

KCPA  cited misrepresentation of coffee producers in the governing boards of CBK, CRF and CDF (Coffee Development Fund). This was largely caused by inconsistencies between different relevant legislative documents. For example, The Finance Act 2005 provided for the President and the Ministry of Agriculture to appoint CBK directors yet the Coffee Act 2001 stipulated that coffee producers elect members to represent them on the CBK, CRF and CDF boards.

The Coffee Act 2001 also prohibits coffee growers from roasting their coffee, selling to or purchasing coffee from any other person than licensed dealers. Therefore, growers could not exploit local markets and were legislatively bound to smaller profits. This also meant they missed an opportunity to receive more revenue for their product.

The Coffee Rules 2005 provided for direct marketing of green coffee beans (commonly referred to as the second window) of coffee by the producers. However, since its inception in 2005, farmers had been unable to sell their coffee directly on their own.

Furthermore, these restrictive Regulations prevent the Kenyan coffee industry from being certified under international trading systems such as "Fair Trade International" (Geneva) or UTZ (Netherlands) and others.

KCPA Position

KCPA wanted to see regulatory amendments in the Kenyan coffee industry. The goal was to revive the Kenyan coffee by developing a fair system of taxation in a sector. KCPA also wants all relevant players (coffee farmers, distributors, buyers etc.) adequately represented on the appropriate boards and public bodies. For maximum revenue to the Kenyan coffee industry, KCPA wanted to see a more open and competitive regulatory environment that will allow the opportunity for value addition (particularly for farmers).

If the appropriate Regulatory changes were fully implemented, KCPA anticipated that:

  • Appropriate representation of farmers on the relevant boards for the sector would ensure that their interests are looked after properly.
  • Coffee farmers would exploit value addition opportunities leading to exploitation of local markets through promotion of local coffee consumption. This would also create job opportunities for local youths who have been left out of the coffee industry.
  • Proper management of CESS deductions would mean funding would go back to farmers improving the infrastructure required for a prospering coffee sector.
  • Liberalisation of the sector would allow farmers to establish direct relationships with international buyers and allow buyers to source coffee directly from producers cutting out the currently mandatory yet unnecessary middle men.
  • Clear regulations on direct marketing (to local and international buyers) would further increase farmers' returns on their produce

Outcome

Progress on this issue has been addressed in this issue description Liberalisation of the Coffee Sector - Kenya Coffee Producers Association (KCPA).

 

 


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