State to probe how coffee firms accrued huge debts

What you need to know:

  • This is part of the Agriculture ministry’s effort to end misappropriation of funds by unscrupulous managers and ridding the sector of cartels.

  • Agriculture Cabinet Secretary Mwangi Kiunjuri said the audit will expose managers who have stolen farmers’ money, resulting in reduced earnings.

The government will conduct a forensic audit of all coffee factories in the country to establish their levels of debt and how they were accrued.

This is part of the Agriculture ministry’s effort to end misappropriation of funds by unscrupulous managers and ridding the sector of cartels.

Agriculture Cabinet Secretary Mwangi Kiunjuri said the audit will expose managers who have stolen farmers’ money, resulting in reduced earnings.

QUESTIONABLE

“There are people who have decided that this sector will remain their captive. They have incited farmers while still exploiting them. You cannot operate a society as if it your own property,” he said.

The CS said the ministry will bring on board the Ethics and Anti-Corruption Commission (EACC) and Director of Criminal Investigations to investigate questionable dealings.

According to Mr Kiunjuri, the coffee harvest has reduced over the years as farmers abandon the crop for more lucrative businesses due to many frustrations in the sector.

The audit will also expose some value chain players said to depositing coffee farmers money in offshore accounts to avoid scrutiny.

CONSULTATION

Several coffee factories in Mt Kenya region have closed down as a result of growing debt, mismanagement, low prices and coffee hawking. Some coffee societies have been on the spot for borrowing loans from commercial banks without approval from members.

The Senate Committee on Agriculture chairman Njeru Ndwiga said they were in consultation with Mr Kiunjuri on how the audit will be carried out to establish how many factories were in debt.

Speaking at Kithimu market, Mr Ndwiga said the probe would look into financial dealings in the last five years.

PROFITABLE

He said the committee was jolted into action after receiving petitions from many factories seeking debt waiver, while coffee farming remained a profitable venture.

“There are factories that want to be assisted to pay debts but we must know how they got in debt. At every beginning of the year, factories have a budget on how to run the co-operative for the next one year. If a farmer sells his coffee, where does the debt come from?” Mr Ndwiga posed.

This is despite the Treasury allocating Sh2.4 billion in the 2016 budget to clear outstanding loans coffee farmers owed various creditors.

RECOMMENDATIONS

Mr Ndwiga said the committee had visited several coffee buyers in the USA and realised that the crop was attracting good prices in the world market.

He said the clean-up comes at a time when farmers are set to receive Sh1.5 billion for subsidised fertiliser in a bid to reduce the cost of input and boost farmers’ profit margins.

The committee will scrutinise the coffee taskforce report, with a view of fine-tuning it, by deleting prohibitive recommendations that were rejected by a section of farmers.

According to the Report of the National Task Force on Coffee Sub-Sector Reforms released last year, farmers owed unions, co-operatives and saccos a total of Sh4.78 billion.

STABEX FUNDS

In the 2016/2017 financial year, the government cleared Sh4 billion, leaving a balance of Sh784 million.

In addition, farmers owed Stabex funds amounting to Sh1.7 billion, which came from the European Union and were administered through the Co-operative Bank of Kenya (interest accrued from the Stabex funds was Sh700 million).

Mr Ndwiga said they would be presenting the document to farmers around the country to ensure a final report was ready in two weeks.

Additional reporting by Irene Mugo