Understanding the co-operative model in Kenya’s coffee sector
Historically, as many as 50% of Kenya’s coffee producers have worked with big estates or co-operatives at any given time. Across the country, these organisations have anywhere from 100 to 12,000 members.
However, over the past few decades, the number of co-operative members in the country has been steadily declining. This is a result of several complex issues, including low coffee prices and accusations of mismanagement.
Despite the criticism, however, it’s clear that when it works, the co-operative model has a number of benefits for producers. Co-ops can offer much needed support and training, as well as easier access to the Nairobi Coffee Exchange (NCE).
To learn more about Kenya’s co-op models and how they are changing, I spoke to two local farmers. Read on to find out what they told me.
You may also like our article on how micro-cooperatives are transforming the Kenyan coffee trade.
What are co-operative societies?
In Kenya, a coffee co-operative society (also known as a Farmers’ Cooperative Society) is a licensed and registered group of pulping stations and wet mills.
Co-operative societies fulfil a similar role to coffee co-operatives found elsewhere around the world – the difference in name is just that. Legally, all Kenyan co-ops must be registered under the 2004 Co-operative Societies Act.
Each co-op collectively markets all of the coffee produced by its members, but it also generally represents its members in wider discussions, including when trading with the NCE. Members of co-ops typically include the respective founders (those who sign the registration application) and producers who are accepted to join the co-op.
The first-ever co-op in Kenya was established by European colonists in 1908, and at the time, Kenyans were excluded from using it. By the 1950s, however, things changed, and Kenyans became able to form and join co-operatives of their own.
When Kenya became independent in 1963, there were around 1,000 registered co-ops. These traded a number of agricultural commodities, including coffee.
Throughout the 1960s and 1970s, several prominent co-operatives were formed in Kenya, but numbers started to decline somewhat in the 1980s.
As of 2017, there were more than 22,800 registered co-ops in the country which traded a range of agricultural crops, although this number may have changed over the past five years.
When it comes to the coffee sector in Kenya, co-operatives organise the processing, grading, packing, transport, and marketing of members’ coffee – with the latter sometimes including the support of marketing agents in the country.
Traditionally, many co-operatives include several wet mills (also called factories). However, some wet mills now prefer to register and operate separately for a number of reasons.
How are Kenyan co-operatives organised today?
Although the number of co-operatives and overall membership have both been declining in Kenya over the past several decades, there are still some prominent, well-known coffee co-ops in the country. These include Baragwi Farmers, Gikanda FCS, Othaya Coffee, Barichu, and Kabare, among many others.
Many of these co-ops are well-managed and add value to coffee in a number of ways, including through quality control, packaging, and even domestic sales in some cases.
Mr. Gathura is a retired wet mill manager from Kenya. He explains why well-managed co-operatives are essential to the success of the country’s coffee industry.
“Co-operatives can offer chemicals [such as fertilisers and pesticides] at subsidised rates,” he says. “For example, lime is provided every two years to neutralise acidity levels in soil, and sometimes it is provided for free.”
He adds that co-ops can also provide equipment, such as plant sprayers and pruning materials, and these are generally sold at lower prices than elsewhere on the market.
What’s more, co-operatives can host seminars and workshops to educate their members on ways to upgrade their coffee farms, through digitalisation and more modern mechanisation.
Another significant role that co-ops play in the Kenyan coffee industry is connecting farmers to traders. Direct trade for coffee was only made legal in Kenya in 2006, following the introduction of Kenya’s “Second Window” legislation. As such, it is still a comparatively novel concept, and anywhere between 85% and 94% of the country’s coffee is sold on the NCE year-on-year.
Co-operatives help to facilitate the sale of green coffee at weekly auctions, which are organised by the NCE. In some cases, higher-quality coffee is sold before it gets to auction, but this must be approved by co-op members.
Co-operatives decide on the price that farmer members receive, which is paid per kilogram. The farmers receive this money from marketing agents after their coffee has been purchased.
However, some farmers complain of low pay-out rates from co-operatives, which can lead to disagreements and even dissolution in some particularly dire cases.
Does the co-operative model still work in Kenya?
Once coffee is sold by a co-op, the organisation receives the money. It then deducts its fees, before remitting the money to individual members.
As a result of this, according to some local farmers in Kenya, many farmers are choosing to stop their membership. For specialty coffee producers, there is a growing belief that the Second Window can be more profitable.
There are also concerns about how co-operatives function in some cases, and that payment terms are starting to become a growing issue.
Wacira Kariuki is a Kenyan farmer who stopped working with co-operatives. He explains that in his experience, co-ops used to be the best place for farmers to sell their coffee, but he says some farmers are growing more and more distant from the model.
“I would look forward to receiving payments as I knew [I would finally have my money],” he says.
However, he tells me that the financial control given to co-operative leaders could be an issue. In some cases, he even says that finance agreements would be made with larger mills and marketing agents without the involvement or approval of the members.
“Sometimes co-ops would take out unsecured loans and advances with farmer members’ coffee, but the farmers would then effectively be responsible for the repayment of these loans,” he says.
Looking to the future
So, where does this leave co-operatives as far as the future of Kenya’s coffee is concerned?
Currently, the government is conducting an audit to assess several major co-operatives in the country, to see if anything can be done to improve performance. The objective of the audit is to understand why there are problems with co-op models and the potential solutions.
In a recent interview with Kenya’s Standard national newspaper, Nyeri’s County Governor, Mutahi Kahiga, stated that poor governance and management are major issues in some of the country’s coffee co-ops.
“This audit is going to ensure that we know the leaders managing these co-operatives are capable and honest,” he told the newspaper. “We would like to collect data to identify what farmers need in terms of inputs and support.”
However, the Kenyan coffee sector is also dealing with other issues, such an ageing coffee farmer population. Many farmers’ children are choosing to migrate to cities where they believe there are more economic opportunities for them. Furthermore, even when younger people do decide to stay in agriculture for work, they are seeing more and more incentives to switch to more profitable cash crops.
So, how can Kenyan coffee farmers overcome these challenges?
Mr. Gathura believes that producers need to be more self-sustainable, regardless of whether they work with co-operatives or not.
“We need to find ways to ensure that we are not overly reliant on external assistance or grants,” he explains. “Co-operatives should look for ways to add value to their coffee.”
He tells me that many of the better-performing co-operatives in the country have evolved to carry out more than just their traditional responsibilities.
“A good example of a co-op that functions this way is Othaya Farmers’ Cooperative Society,” he says. “They have a dry mill where they mill their own coffee, and also provide milling services to independent producers. This brings in extra income to the co-op.
“To add to this, they can also roast and package coffee on a commercial scale,” he adds. “This way they can increase the money they make, and it [promotes domestic consumption].”
Although co-operatives in Kenya face a number of issues, it’s obvious that there is still a need for them in the country’s coffee sector. While some farmers may be considering leaving co-operatives, the model still offers a number of advantages.
Furthermore, one of the biggest issues, as ever, is price. However, while this continues to be an issue for farmers, the blame does not fall squarely on the co-operative – and sometimes direct trade can actually be more economically risky in the long run if farmers are not adequately prepared.
It’s clear that there is no perfect solution to the myriad issues Kenyan coffee farmers contend with. However, restoring confidence in the Kenyan co-operative model certainly wouldn’t be a bad place to start.
Enjoyed this? Then read our article on renewing generational interest in Kenyan coffee production.
Photo credits: Peter Gakuo
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