Sh6bn bailout for coffee sector will turn around farmers’ fortunes, says task force

Thursday June 23 2016

Coffee farmers in Ruiru, Kiambu. PHOTO | WILLIAM OERI | NATION MEDIA GROUP

Coffee farmers in Ruiru, Kiambu. PHOTO | WILLIAM OERI | NATION MEDIA GROUP 

By JOHN KAMAU
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By MUTUMA MATHIU
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The government has been asked to pump Sh6 billion into the coffee sector and overhaul the laws which will see farmers’ incomes double or triple in just three years.

The coffee subsidy is just one in a raft of proposals made to the government in a bid to reverse one of the worst self-inflicted tragedies in Africa that has seen the impoverishment of coffee farmers in 31 of Kenya’s 47 counties.

A team appointed by President Uhuru Kenyatta, under pressure from a Nation campaign, is recommending far-reaching changes to free farmers from the suffocating embrace of public sector bureaucracies and exploitation by millers and coffee marketers.

Kenya is ideally suited—the volcanic soils, moderate climate and high altitude—for growing the best coffee in the world.

But corruption in co-operatives, ministry of Agriculture and supervising institutions and the greed of a clique of wealthy and powerful barons has destroyed the sector. Production has plunged from 130,000 tons in the 1990s to just 40,000 tons last year, income from coffee has come down from $500 million to $150 million.

The peasant coffee farmer, who grows 60 per cent of Kenya’s coffee, is basically a serf: they don’t own their crop and have no say in how it is processed and sold.

They are herded into co-operatives by force of law. Officials of these co-operatives have made common cause with millers and other middlemen to fleece the farmers who have no say and no knowledge of the services procured on their behalf.

More than half of the value of coffee—a full 52 per cent—is gobbled up by fairly simple and routine processes such as pulping, milling, sorting, warehousing and transportation.

The collapse of the coffee economy, especially in Central Kenya, is in large part, responsible for the rise of dangerous criminal gangs such as Mungiki which promise young people a livelihood.

And the peasant farmers are livid. “We were thinking of going on strike until (President) Uhuru (Kenyatta) comes here and tells us what he intends to do about coffee,” said a farmer who has not been paid for his coffee since November last year.

Fortunately, coffee production is easy to fix: most of the farmers didn’t uproot their crop; they merely cut it and planted other things. Improved varieties developed by the Coffee Research Institute (CRI) can be grafted on to the stumps and with proper feeding, restore full production in about two years.

During the peak years, a tree of Kenyan coffee produced 30 kilograms of coffee cherry a year. Today the yield is only 2kg. This is because the farmer must use fertiliser and control pests and diseases. The Coffee Berry Disease and Leaf Rust cut production by as much as 80 per cent.

This is why the task force is recommending a Sh1.21 billion subdisidy for the first year and Sh2.47 billion for each of the two subsequent years. Farmers would have access to fertiliser, CRI would produce and distribute new varieties such as Ruiru 11, farmers will be trained to care for their crops and factories, many of which are broken down, would be rehabilitated.

In the meantime, resilient farmers are waiting for a miracle which, if the government follows through, may well come.

In a steeply-sloped plot, amongst denuded coffee farms, 39-year-old Josephine Waithera’s farm stands out like a beacon of hope amidst the encircling gloom.

Although Waithera and her 42-year-old husband, Stephen Waweru Ragae’s life have oscillated between despair and hope — they today represent the future of the smallholder multi-billion coffee industry brought down by cartels, mismanagement and wanton theft.

That hope is inscribed in their 200 coffee trees now weighed down and burdened with clusters of healthy red berries.

While coffee industry’s decadence of many years is unnerving, both Ms Waithera and Mr Ragae returned to their abandoned coffee two years ago after a political promise that prices will improve.

The prices haven’t improved but their resilience hasn’t waned either.

“We are still hopeful that something will be done. We are still waiting for a miracle,” Ms Waithera says as she admires her produce.

RECOMMENDED MEASURES

A week after a Presidential National Task Force on Coffee led by Prof Joseph Kieyah recommended measures to resuscitate the sector following an outcry that followed an exposé by the Nation on how cartels have wreaked havoc on this industry, Mr Ragae is yet to grasp the import of the report.

“We have not seen it. We hope that its recommendations have taken care of our interests,” he says.

For his part, Prof Kieyah is confident that farmers like Mr Ragae and Ms Waithera will soon start earning a fortune from their produce.

“We have proposed the setting up of a revolving fund to pay advance cash for cherry at 40 per cent of the prevailing price or Sh15 per kilogram of cherry,” he says. “We also want farmers to have a say on their coffee. It is their property.”

Recommendations by the Kieyah Task Force, if implemented, will open a new window of opportunity to those who still want to supply the world with the best coffee that money can buy.

“There is a new ray of hope in the sector. We think that these reforms are a game-changer for the industry,” says Mr William Gatei, the chairman of the Kenya Planters Co-operative Union (KPCU) which used to be Africa’s largest organised coffee body. “We hope to take advantage of the new proposals by opening new warehouses in the US.”

While ordinary farmers like Mr Ragae and Ms Waithera were frustrated by their co-operatives, KPCU was equally frustrated by the former regulator Coffee Board (now Coffee Directorate) and could not even get a marketing and dealer license.

This saw the rise of a cartel of coffee barons which had managed to put in place a marketing system that rigged the coffee prices along the value chain.

As a result, thousands of farmers, like 67 year-old US-trained economist and banker David Mumbi, abandoned coffee altogether and are not willing to be drawn back into the sector. “I uprooted the coffee trees and walked away. I don’t even know what happened to the pulping machine I had installed from Brazil,” he said about his four-acres of coffee in Kilungu village in Machakos county.

Even with the new proposals, Mr Mumbi is one of the farmers who were heartbroken by the state of coffee industry and are reluctant to put faith in it, again. For Mr Mumbi, he would rather wait and see.

On the day the Nation visited Mr Ragae’s Kiratina village in Githunguri, Kiambu County, he was busy spraying pesticide on the 200 trees. He grows the newer Ruiru 11 variety.

“We have put back all our faith in this crop, but if nothing is done, we may have to look elsewhere,” says Mr Ragae who has planted napier grass on another section that has abandoned coffee bushes planted by his father in 1960s.

While many of his age-mates have been frustrated out of coffee farming, he remains one of the few returning farmers.

Last year, the family harvested some 6,000 kilos of cherry which is equivalent to 857 kilos of clean coffee — or about 18 bags of 50kg coffee. This year, they are targeting some 7,000 kilos, equivalent to 1,000 kilos of clean coffee or 20 bags of 50kg.

If Mr Ragae manages to sell his clean coffee at the Nairobi Coffee Exchange at the current average price of Sh24,000 per 50 kg bag, he would fetch approximately Sh480,000 next year. At the moment, he is paid Sh30 for his cherry meaning that next year would have earned only Sh210,000 while the balance of Sh270,000 is taken away by brokers, co-operatives and agents.

“We are proposing a system where the farmer has a final say on his coffee and controls his money,” said Prof Kieyah.

Under the new proposal, farmers will now be able to sell their coffee at the Nairobi Coffee Exchange and will not have to rely on marketing agents. Also, the US$1 million bank guarantee demanded by the Coffee Directorate will be scrapped, giving farmers a direct avenue to sell their coffee.

“These (marketing agents) were perceived to be farmers’ representative, but they were not. They were middle-men or companies set up by the dealer. They colluded with these dealers and did not in any way act for the interest of the farmers, yet they were central in the coffee chain,” says Prof Kieyah. “To make it worse, they were also paid by the farmers and not the dealers! These are the people who delay payments to the farmers because after receiving the money, they can keep it for months.”

The report of the task force mainly concentrated on the future of smallholder farmers like Ms Waithera and Mr Ragae.

It found that there was very weak enforcement of regulations and coffee farmers had serious cash flow problems.

“We harvested our coffee in December and up to now we have not been paid. And yet, we are supposed to buy pesticides and fertilisers for the next crop,” complains Mr Stephen Mungai, another young farmer in Kibichoi village.

TO BROKERS

To navigate this problem, Mr Mungai and other farmers are forced to sell their cherry to brokers at Sh30 per kilogram after abandoning their Komothai Coffee Society which has an installed coffee mill.

“Co-operative societies are our main problem at the local level. They have no mercy on the farmer and when we elect leaders, they turn against us,” say Mr Mungai.

Lack of democracy and infiltration of co-operatives by coffee cartels has been cited as the number one problem facing farmers.

In the neighbouring Gatundu, farmers are paid Sh70 per kilogram of cherry while in Githunguri, despite having their own mill, they are paid Sh30.

“We were told that the local cartels at the co-operative level were as bad as the international cartels,” says Prof Kieyah. “Thus, co-operatives, millers and marketers do not act in the interest of farmers.”

Our previous investigations indicated that the coffee circus started at the milling where the farmers co-operatives take their parchment. After the milling, the miller prepares a report which states the primary factory and the number of 50kg bags sorted accorded to bean size. Size AA is supposed to be top grade, followed by AB, PB, C, E, TT, and T. Kenya’s AA is considered one of world’s finest gourmet coffees.

But here, farmers’ coffee is not only downgraded with the connivance of the marketing agent but also the milling loss is exaggerated. At one point, the giant Othaya Coffee Cooperative Society was informed that their milling losses were between 25 to 35 per cent. This went down to between 16 and 22 per cent when they started milling their own coffee, according to Mr Newton Nderitu, the chairman of the Othaya Coffee Co-operative Society in a published interview.

Another smallholder problem at the moment is that farmers who take care of their crops have their harvests mixed with those from unattended farms.

“We think this is very unfair because we all earn the same amount and we are not paid by the quality at the co-operative level,” argues Ms Waithera, who feels that all her efforts go down the drain.

Farmers like Ms Waithera will now be allowed to run their own pulping factories and to roast their coffee if they desire.

“We want farmers to help us to promote local consumption of coffee. They will also earn a lot of money from that business,” says Prof Kieyah.

Also, a new Coffee Training School will be established at the Utalii College to train the youth to take advantage of the emerging market.

Previously, a farmer would never get to know how much his coffee fetched at the international market. An insider told the Nation that there was no way the farmer would know since he had to rely on his Marketing Agent who is in league with the buyers. At the auction, two market reports are prepared for the public and the insiders.

While the public report had information on grades, quantities and average prices and is published at the end of the coffee year, the sales report kept by the Marketing Agent indicating how much each lot was sold and average value of coffee sold in the pooled category is never revealed.

“We don’t know how much our coffee fetches. We rely on what we are told,” says Mr Peter Thang’wa, another coffee farmer in Kigumo location in Kiambu.

By selling their coffee directly, smallholder farmers may now be able to follow the path of large estates which have not been affected by dwindling prices. For years, smallholder farmers had to contend with excessive coffee processing, handling and marketing costs and received lower prices for their produce compared to the elite-owned plantations. They also suffer long delays in payments.

“The problem with Kenyan rural farmers is that they do not know the quality or profile of their coffee” says a manager with a milling plant in central Kenya who sought anonymity.

He says: “If they knew the kind of quality they have, they will certainly demand more”.