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Audit dispute rocks Sh3bn coffee fund

Thursday June 27 2019

Coffee farmers protests outside Ndaroini factory

Coffee farmers protests outside Ndaroini factory in Nyeri County against the management of Gikanda Coffee Society on January 14, 2019. PHOTO | JOSEPH KANYI | NATION MEDIA GROUP 

MUCHEMI WACHIRA
By MUCHEMI WACHIRA
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Uncertainties over the credibility of many coffee unions in handling a Sh3 billion revolving fund established to lower the cost farmers incur during harvesting may delay disbursement of the kitty.

The money, which was factored in this year’s budget, has already been released by the Treasury and farmers are hoping to start receiving it from next month, as President Uhuru Kenyatta promised in March. The State Department of Co-operatives is, however, said to be busy working on mechanisms of disbursing the funds.

PROSECUTED

But the question of whether a forensic audit should first be carried out on farmers’ co-operative societies before the individual growers can start accessing the Cherry Advance Fund (CAF), is yet to be settled.

The forensic audit seeks to establish if funds have been misappropriated and those found guilty, prosecuted.

According to the Coffee Sector Implementation Committee, which is mandated to oversee enactment of coffee reforms, the forensic audit has not been carried out as recommended by a presidential task force.

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“We must first know the level of indebtedness in these co-operatives and how the debts were incurred before the money is disbursed,” said the committee chairman, Prof Joseph Kieyah.

But the acting Commissioner for Co-operative Development, Didacus Ityeng’, said he was not aware of the forensic audit and, instead, a financial audit is underway.

“Our understanding is that the audit (financial) is ongoing and we are working on modalities of distributing the funds,” Mr Ityeng’ told Daily Nation.

The financial audit only seeks to establish the status of the co-operatives.

CREDITORS

The committee denied reports that a financial audit is already being conducted by the State Department of Co-operatives, saying this was not the presidential task force’s proposal.

The task force, which Prof Kieyah chaired, had recommended a forensic audit after establishing that some unions had been borrowing money without members’ consent. Some had over borrowed. Others were receiving loans from coffee millers and marketers, which the task force termed illegal, citing conflict of interest.

What the committee proposed was to have an independent body conduct the forensic audit, saying they doubted the capacity of officials from the co-operatives department. Among the committee’s recommendations was to write off outstanding loans the farmers’ unions owed various creditors. President Kenyatta acted in accordance with the advice by writing off these loans.

And in March this year, he directed establishment of the CAF that was also part of the committee’s suggestions to resuscitate the subsector.

The chairman of the Agriculture and Livestock Committee of the Senate, Mr Njeru Ndwiga, has also been quoted saying no meaningful reforms can be achieved in the subsector without a thorough forensic audit.

Early this year, then Commissioner for Co-operative Development Mary Mungai, who has since retired, had said they did not have the funds to do the forensic audit. Prof Kieyah had asked the government to provide at least Sh500 million to complete the entire audit of the 450 coffee societies.

“We now need political goodwill for this audit to be carried out,” he said during an interview early this week.

SMALLHOLDER

The purpose of CAF is to address problems like delays in coffee payments to smallholder farmers, which takes close to nine months.

The delay has seen some growers resort to hawking fresh coffee cherries at the farm gate.

Such illegal activities are supposed to come to an end once CAF is operationalised. Hawking of coffee has resulted in low production. It has even forced some to close down due to inadequate cherries.

Cherry advance payment is, however, not new. It was introduced under phase II of the smallholder’s coffee implementation project (SCIP) in 1990.

But SCIP II, as it was commonly known, did not meet its expectations of boosting coffee production.

The fund collapsed following the withdrawal of Commonwealth Development Corporation (CDC), which was co-financing the project. It financed it jointly with Co-operative Bank, which sourced for the loan money through a lending programme with International Development Association Credit.

It took the intervention of the government when former President Kibaki wrote off the non-performing loans.

Co-operative Bank managed to source for other funds from Stabex.