Omens, from James Baker down, were stacked against farmers and their union

It was just after lunch.

The meeting had been called to approve the purchase of a new coffee mill valued at tens of millions of shillings.

But not all board members were convinced that the giant Kenya Planters Co-operative Union needed a new mill. Tempers rose. Somebody whipped out a pistol and threatened to shoot Mr Abraham Mwangi, the chairman. The meeting turned into a punch-up. It was eventually called off.

Another meeting called to approve the purchase of computers — valued at Sh11.2 million — also ended with fistfights and buttons ripped off shirts. The matter ended up in court as Mr Stephen Kirubi and Mr Kariuki Muiruri sued fellow board members for attempted fraud.

That was how KPCU, at least in its dying years, was run.

“We realised that the coffee mill and computer purchase was a scheme to milk millions of shillings from farmers. Some of us protested and that is how chaos broke out on both occasions,” recalled Mr Muiruri about the two incidents.

Once a vibrant farmer-owned enterprise, records show that KPCU was deliberately brought down to allow private entrepreneurs have a stake in the coffee business; key among them were KPCU board members and others sitting as regulators in Coffee Board of Kenya.

The others were new investors who wanted a stake in the free-for-all multi-million business. The cast of characters mentioned, all tied by insatiable greed to make quick money, reads like who-is-whom in the coffee sector.

ECONOMIC SABOTAGE

At the heart of KPCU’s fall are personal intrigues that narrow down to economic sabotage coupled with a blind liberalisation forced onto Kenya by bilateral donors, led by the World Bank and the International Monetary Fund.

While the theatre was both local and international, KPCU had no one in Kenya to rescue it from its leaders’ chicanery and greed when caught up between these interests.

Instead, one of the biggest and most elaborate falsehoods ever sold to farmers was put in motion — that KPCU was the problem and that smaller unions were better.

With that lie, a chance to amass personal fortune arrived. Commercial banks did not spare KPCU either and squeezed the fragile giant union to its last drop. They seemed happy to make money from the crashing monolith, according to insiders.

In its dying years, any official who complained about embezzlement of farmers’ money and unmitigated corruption was edged out. Those who remained were either compromised or marginalised.

In 1989, the coffee industry had received a jolt, following the collapse of the quota system after Central American states and Mexico, with the backing of the United States, pressed for a much bigger slice of the market at the expense of Brazil — which resisted this — and African producers.

The departure of the US from the International Coffee Organisation, which regulated exports, gave global cartels and roasters an excuse to hoard stocks and then dictate prices under the guise of a free market.

As the international market was thrown into disarray with violent gyrations, there was no shortage of reasons and excuses at the local scene why the coffee market was in a tailspin.

WINDOW FOR STEALING

Two years earlier, Kenya’s coffee industry had reached its peak with KPCU milling 130,000 metric tonnes. That record has never been broken.

The US move to engineer the collapse of coffee quotas not only disrupted the market but also the credit lines that local farmers had relied on to finance production.

With the collapse of the system, coffee prices plummeted by 50 per cent and KPCU members started to default on loans. This too opened a new window for stealing since KPCU would continue to dish out cash to indebted, politically-correct big shots.

The world was going through a momentous period too.

Berlin Wall had just been brought down in 1989 and Kenya was going through a patchy moment with President Moi under siege by an emerging opposition demanding return to a multi-party system of governance.

Donors had cut off aid and state coffers were running dry. As everyone concentrated on politics, Goldenberg billions and survival, KPCU and other institutions became the looting ground.

And as this happened, the World Bank and IMF, with the backing of the US, started pushing for the implementation of the free-market “Baker Plan” – championed by Secretary of State, James Baker.

The thinking was that developing countries would only achieve growth by adopting free market policies and that in a liberalised economy, banks would put up money to rescue the debt-ridden nations.

Kenya was one of the countries targeted and coffee farmers were the guinea pigs.

UNLOCK DONOR CASH

With the Moi government desperate for aid — and with cash tied to liberalisation of the market — the President allowed the donor prescription and implemented the Structural Adjustment Programmes into the coffee sector in a frantic bid to unlock cash from donors too.

“Moi sacrificed coffee growing areas; after all they had voted for the opposition,” says former Githunguri MP and coffee activist Njehu Gatabaki.

Even with that, the cash never came. Instead, a chaotic reform of the sector started in 1992 as the country coyly implemented “Bakers Plan.”

In the confusion, nay desperation, the government allowed the licensing of new coffee millers to compete with KPCU and introduced a payment system that by-passed the union.

“This meant that farmers and unions that owed KPCU money to prepare farms and harvest were at liberty to change millers at will and default.

That is what happened and the government allowed it,” says Kimathi Mutuerandu, a former KPCU chairman.

The cut-throat competition by the millers saw a scramble of the dwindling coffee beans — especially in the Mt Kenya region — as multiple players sought to have a stake.

Giant co-operatives came under pressure to split as politicians in the opposition and ruling party Kanu joined the fray.

Farmers in the countryside were bombarded with lies. The deception was that large cooperatives were the cause of coffee woes and that their leaders had become tin-gods.

This became the truth. It was sanitised by a presidential task force, which recommended the split of cooperative unions into small “manageable units”.

Splitting the unions was thought to be the panacea to the raging problems. However, it marked the beginning of the end of the coffee sector and smallholder units. Naturally, KPCU was the first victim.

“Legally, we could not go after the new co-operatives to repay our money,” says Mr Mutuerandu. “That was the beginning of our end.”

In 1988, Murang’a-born but Kitale-based coffee dealer, Abraham Muchugu Mwangi used his political connections to take over the chairmanship of KPCU. Backed by his friends who included powerful Nandi District Kanu Chairman Ezekiel Barngetuny, Mr Mwangi sailed into the citadel of fortune.

OWN CLASS

In embezzling funds and corrupting senior officials, audited reports show that Mwangi was in a class of his own.

In 1988, Mr Henry Kinyua, regarded as one of Kenya’s best coffee managers, was forced out as KPCU Managing Director.

In those days, the MD of KPCU was also the automatic chairman of Coffee Board. When President Moi ordered a probe into KPCU in 1990, the investigations exposed underhand dealings between the politicians and managers after Mr Kinyua left. That report was shelved.

It was during this period that Mr Mwangi and his group were entrenching themselves. The liberalisation wave found him at the heart of the coffee industry.

He was ready to make a kill from within – and so were his allies at the Coffee Board.

Mr Mwangi was a coffee farmer, a big planter. His company, Raki Investments, with a godown at Gikomba, was a big roaster and exporter.

Besides being KPCU’s chairman, Mr Mwangi was director of the Coffee Board, the market regulator.

He was also the chairman of Coffee Research Foundation and sat in various coffee committees. As long as farmers continued to deliver their beans to KPCU amidst the liberalisation chaos, and as long as complaints were smothered, the directors at KPCU and Coffee Board continued to take advantage of the collapsing citadel – the coffee spills.

As farmers complained, a game of musical chairs started. KPCU was put under a new management led by Mr James Nyaga who took over from Mr Gitonga Chabari.

The latter had been removed after a “probe report” indicated that he was running down the company. The untold story is that he was sacrificed to save Mr Mwangi and his henchmen.

MO COLLATERAL PROVIDED

Agriculture Minister Simeon Nyachae acknowledged in Parliament that known personalities had looted Sh700 million from KPCU and that by the end of 1992, it was owed Sh844 million. Even with that nobody was prosecuted.

Farmers who were not repaying loans continued to receive more money as “inflated advances” and rejected applications got approved following calls from State House, according to then Imenti MP, Kiraitu Murungi.

In Parliament, MPs were told by Butere MP Martin Shikuku that farmers who received credit did not provide collateral security and that some of them, with huge outstanding advances, had stopped delivering coffee to KPCU.

This meant that KPCU was simply dishing away cash borrowed from banks and sinking deeper into debt.

While the first blame was laid on Mr Chabari, it seemed that the problem was higher than that: “Is it in order for the minister to blame Mr Chabari for lending money without following authorised procedures when he knows well that Mr Chabari loaned out this money after being summoned to State House?” asked Mr Murungi.

Mr Nyachae cleverly ducked the question.

The exit of Mr Chabari and entry of Mr Nyaga was of no help to KPCU – with Mr Abraham Mwangi lording over the system.

A “Strictly Confidential” letter from a KPCU manager to President Moi dated May 1994 detailed a litany of botches that the organisation was going through under Mr Nyagah.

“We suggest that Mr Mathews Nasibu takes over as KPCU Managing Director,” the letter signed by Capt (Rtd) Godfrey Mbogori said.
Mr Nasibu was appointed the MD as Mr Nyaga “took an early retirement”.

In 1995 Coffee Board directors colluded with some KPCU directors sitting on its board to register other commission agents, including themselves, and they ignored an industry requirement that prohibited farmers from changing the agents before obtaining a no objection letter from previous agent, to protect recovery of credit advanced to the farmers.

INVOICES IGNORED

This exposed KPCU with uncollected advances of Sh1.2 billion in June 1996.

Another deliberate policy move was in 1995 when Coffee Board asked millers to submit invoices for charges deductible from farmers and it undertook to recover these after it sold the coffee and remit the money to millers.

Coffee Board ignored most of the invoices raised by KPCU and paid farmers either without deducting the milling charges or deducting and keeping the cash!

It also delayed and withheld KPCU’s revenue which only hurt the union’s relationship with banks.

The tussle on how much Coffee Board owes KPCU has not been resolved since and runs into hundreds of millions of shillings.

For years, KPCU used to mill the country’s coffee and hand it over to Coffee Board of Kenya to sell since the board held the sole marketing licence. Both were supposed to champion the interests of farmers. But with the liberalisation chaos, they didn’t.

Instead, KPCU joined what was known as Forum of Coffee Millers — a loose outfit of interested parties that was roaming coffee growing areas “to bring awareness…on recent developments” according to letters dispatched to farmers.

As this was happening, KPCU was owed more than Sh1 billion by various people.

The MD was still assigned four cars — a Mercedes Benz 280SL, a Range Rover, a BMW for his wife, and a Peugeot 405 for his children — besides unlimited use of a credit card.

Coffee Board continued to hold the marketing monopoly, allowing a few individuals and their companies a chance to make windfalls.

ACT AS MONOPOLY

Privileged dealers, led by Mr Mwangi, sat in both KPCU and Coffee Board, acquiring insider information necessary to manipulate the markets.

The registration of Mr Pius Ngugi’s Thika Coffee Mills in 1994 changed the matrix. Different co-operatives were now either allied to TCM or KPCU. Farmers would occasionally be incited to retrieve their coffee from either stores.

Within Coffee Board, opponents of TCM worked hard to frustrate Mr Ngugi.

“Farmers are being fought and injured and their property is destroyed while the Coffee Board watches,” TCM once lamented in a press release.

While the announced government policy was liberalisation, those at Coffee Board continued to act as a monopoly and TCM was forced to ask its farmers to seek crop advances from the board.

After all, it was not sure at what point the milled coffee would be sold by the board. TCM accused Coffee Board of planning to “ferry hired thugs and farmers” to picket at its mills.

By this time, KPCU was going through liquidity problems and big cooperatives were split in the middle.

Those directors who refused to play ball had their nominating unions liquidated and they were forced out of the board since they had no “nominating union”.

Documents show that directors who would otherwise be disqualified for being indebted to KPCU were retained or re-elected.

As that happened, Coffee Board remained quiet and when the government decided to make new marketing rules, it ironically relied on the contribution of these directors and interested parties to chart the way forward.

They entrenched the role of Coffee Board since it had been advised so by the interested parties.

ROGUE AGENCY

As the liberalisation wars continued, Coffee Board stopped remitting money to KPCU and became a rogue agency. After all, KPCU representatives within the regulatory agency, led by Mr Mwangi, had become part of the problem.

With all these, insiders say, the government refused to insulate KPCU, which was also unable to recover credit already given to the societies and large scale farmers now delivering coffee to rival mills.

By 1996, the coffee debts stood at Sh1.2 billion.

As pressure from two KPCU board members — Mr Kinyua Mbui, the Ndia MP, and Mr Kariuki Muiruri — increased, Mr Mwangi’s wing decided to collect 503 member shareholders’ signatures calling for an extraordinary meeting at Moi International Sports Centre, Kasarani.

Most farmers never knew that the man behind this was Mr Mwangi. Although it was reported that Mr Mwangi “boycotted” the meeting, his ally Zacharia Gakunju was picked to chair the meeting.

The agenda was simple: Removal of alternative voices within the board. Out went Mr Mwangi’s deputy, SM Kioko, directors Kariuki Muiruri and Kinyua Mbui, and KPCU MD James Nyaga.

“The problem with farmers is that they never understood the coffee politics. They voted like robots,” a former KPCU insider says.

The removal of Mr Muiruri and Mr Mbui cleared KPCU of Mwangi’s opponents. Thus KPCU and Coffee Board were now in the hands of like-minded cartels. While the ministry defended the reforms, the opposite was happening to the industry as production dropped to a low of 50,000 metric tonnes.

In 1999, the Coffee authorised marketing agents rules were finally gazetted. They entrenched the role of the board as regulator. It was supposed to license and supervise competitors.

With such powers, Coffee Board would take beans from KPCU mills, sell it and never remit the payments to farmers. Few raised a finger – and agriculture ministers looked inept.

On Tuesday, in Gold to Dust: How minister delivered well timed deathblow to KPCU