October 13, 2022

Why are people calling for reform in Kenyan coffee production?


According to the International Coffee Organisation, Kenya was Africa’s fifth-largest coffee producer in 2020. Naturally, this makes it one of the most important origins across the entire continent.

However, the country’s coffee production has been steadily declining since the 1990s for a number of reasons. These include a widening generational gap in coffee farming and the increasing prevalence of several pests and diseases.

Some coffee professionals believe that for Kenyan coffee production to return to its former heights, however, change must occur at a policy level. Some steps have already been taken to change the structure of the country’s coffee sector – most notably the country’s Coffee Bill 2021.

To learn more about this bill, other proposed reforms, and how they might affect the Kenyan coffee sector, I spoke with two local coffee professionals. Read on to find out what they had to share with me.

You may also like our article exploring the role of a Kenyan coffee marketing agent.

A Kenyan coffee trader takes down prices at the weekly auction of theNairobi Coffee Exchange April 29, 2002. Two Kenyan entrepreneurs (notin the Picture) have launched East Africa's first Internet coffeeauction, hoping to find new markets for the regio

A brief overview of Kenya’s coffee sector

According to the Kenyan Agriculture And Food Authority, coffee was grown on around 119,000ha of land in 2019, making it one of Kenya’s biggest cash crops.

The vast majority of Kenyan coffee is sold on the Nairobi Coffee Exchange (NCE), which is organised by the country’s Exchange Management Committee. Every Tuesday, an auction takes place, unless the volumes of coffee brought to auction are too low.

The NCE system works in a unique way. After harvesting cherries, farmers transport them to a local washing station, which is usually operated by a co-operative. The co-operative then sends the coffee to a dry mill where it is assigned a unique tracking number – known as an “out-turn number” in Kenya.

Once the green coffee is milled, graded, and packaged in jute bags, it is handed over to a coffee marketing agent. This person will prepare a catalogue of the coffees available for auction, and will pass this on to traders at the NCE.

Like most auctions, buyers place bids for coffee which are available on the trading floor. The highest bidder will receive the particular lot they want to purchase.

Once payment is complete, a warehouse worker where the coffee is being stored will issue a “warrant”. This provides the buyer with formal ownership of the particular coffee.

However, some coffee professionals are critical of the NCE system – particularly producers and other stakeholders who work at the beginning of the supply chain. This is largely because it is the responsibility of marketing agents to pay farmers, and payments can sometimes be delayed for months.

Furthermore, the number of people involved in the supply chain ultimately reduces final payments for producers as other supply chain actors take a percentage.

The co-operative model in Kenya has also come under criticism in recent years. As co-ops receive the money once a coffee is sold, deduct fees, and then remit money to individual members (per kg of coffee), it can sometimes lead to disagreements and discontent over the amounts received.

Kevin Karuga is a coffee farmer in Kenya. He believes that reforms are overdue in the Kenyan coffee sector.

“The management of co-ops should be transparent so that they can account for the money paid to farmers,” he says. “Reforms are necessary because the coffee industry is meant to benefit all actors in the value chain.”

drying coffee in kenya

Are reforms necessary?

As a result of the issues which Kenyan coffee production faces, many in the sector are calling for more reforms. 

However, in response to a range of criticisms, the Kenyan government has implemented a range of new measures in recent years.

One of the most significant changes to the country’s coffee sector was the introduction of the “Second Window” in 2006 – effectively a direct trade system in Kenya. This means international roasters and traders were able to buy coffee directly from producers in the country, although the system is still largely unused.

Lucy Wanjugu is a coffee farmer in Kenya.

“When the ‘Second Window’ was introduced, some farmers thought they would receive more money, but this has not been the case,” she says. “Farmers are the most vulnerable to low coffee prices, so if we don’t have a system in place to ensure reforms work then [Kenya’s coffee industry cannot grow].”

Another major reform was the Coffee Bill 2020, which was instituted in October 2020 as an effort to streamline the supply chain. Some of the changes the bill enacted included ending some coffee trade licensing requirements, as well as removing some supply chain intermediaries.

However, despite these reforms, many issues still pervade in the Kenyan coffee sector. 

As with a number of other African coffee origins, the average age of Kenyan coffee farmers continues to rise. Ultimately, this will mean producers could become less physically able to carry out labour on coffee farms in the long term, and also means that the industry is at risk of losing hard-earned expertise without a clear succession plan.

To exacerbate this problem, many younger people in Kenya are migrating to urban areas in search of different lines of work. In many cases, younger generations aren’t as interested in coffee production, largely because it isn’t viewed as financially stable or viable.

Furthermore, increasing rates of urban development near Kenya’s larger cities means there is less land available for coffee production. 

This has led some smallholder farmers to lease land instead of purchasing it for themselves. While leasing land can have its benefits, there are also some downsides – notably disagreements between producers and landowners about plant ownership and harvest payments at the end of the lease.

Coffee Beans Tree Farm in Ruiru Kiambu County Kenya

Understanding the Coffee Bill 2020

Considering most of Kenya’s coffee is still not sold via the “Second Window”, the Coffee Bill 2020 has arguably had the most impact on the country’s coffee industry.

One of the most prominent changes was the formation of the Coffee Board of Kenya. The board allows producers to provide their insight through appointed members of co-operatives and registered estate associations.

“Farmer representation on the board is a positive thing, but if the representatives don’t have our interests in mind then there will be no benefits,” Lucy says.

The Coffee Bill 2020 also seeks to establish the Kenya Coffee Council, which will aim to provide advice and guidance to the Coffee Board and national government, as well as advocating for smallholder producers.

However, the new bill has also implemented some positive changes on the ground.

Smallholder farmers no longer need to own five acres of coffee to obtain a licence for a pulping station. Instead, they must own two and a half acres – making licensing more accessible for some farmers to diversify their income.

The bill also provides more support to the Coffee Research Institute (CRI), which is working to develop more climate, pest, and disease-resistant coffee varieties.

In an effort to streamline the supply chain, local county authorities can also now issue relevant licences and registrations, as well as having the means to establish funding and support programmes for producers. These projects may cover new infrastructure projects, technical assistance, or market access.

“In theory, anyone who wants to open a coffee business will have easier access to the licence and registration offices,” Kevin explains.

In terms of financial stability, changes made by the Coffee Bill 2020 should also allow producers to reliably receive a higher income

Prior to the introduction of the bill, only marketing agents were licensed to sell coffee at the NCE. Now, however, “grower marketers” and millers can also oversee transactions.

Furthermore, under the new regulations, washing station owners are prohibited from receiving money on behalf of farmers. Instead, all payments to dry mill operators, marketing agents, washing station workers, and individual farmers will come from the Direct Settlement System.

Payments to factories or societies from the Direct Settlement system for operations and maintenance is capped at 5% of the value of coffee sold, including the milling, warehousing, and marketing costs, or the actual cost of running a factory or society over the previous crop year – whichever is lower.

“When farmers receive payments directly into their accounts, they stand to gain more,” Lucy says. “The new rules state that the money should be deposited into our accounts within seven days.”

She also tells me that reforms mean marketing agents and dry mill operators are no longer authorised to offer loans to producers.

“These loans are part of the reason why co-operatives can fail and why farmers can receive less money,” she explains. “Our grower assets used to be kept as collateral, but then payments were low, which meant assets were used to recover the loans.”

a kenyan coffee worker operates a depulping machine

What changes could be made in the future?

Currently, the Coffee Bill 2021 is still undergoing public participation with supply chain stakeholders, farmer representatives, local leaders, and government officials.

However, there are already some disagreements between the proposed reforms between the two bills. As a result of this, producers are calling for more crossover between the two bills, as there are still opportunities for them to remain economically vulnerable.

And although the Kenyan Coffee Producers Association claims producers are satisfied with current coffee prices, it is also requesting that the bills complement one another more effectively.

So how might the country’s coffee industry change in the coming years?

While these proposed reforms could well improve outcomes for smallholder producers in the Kenyan coffee sector, they have been met with some opposition.

Several court injunctions have prevented the implementation of certain other legislative developments, too. Kevin explains that there have been a number of delays at a policy and implementation level.

“It has prevented the development of the country’s coffee sector and some smallholder farmers have suffered as a consequence,” he says.

Furthermore, many smallholders in Kenya continue to struggle with illiteracy and a lack of formal coffee training opportunities. In order for the reforms to be truly effective, they need to address these problems.

As well as this, encouraging younger generations to become more involved in coffee production will definitely be essential.

“More young people should be leading the coffee sector,” Kevin concludes.

a kenyan coffee producer holds washed coffee beans

Although many of these reforms are yet to be implemented, both of the Coffee Bills 2020 and 2021 certainly have the potential to improve outcomes for Kenyan coffee farmers.

However, more formal education is needed, especially for smallholder producers who struggle with market access, financial literacy, and existing infrastructure problems.

Ultimately, if these reforms can offer a step towards restoring Kenya’s coffee industry to its former glory, then perhaps they can set out a policy pathway for recovery.

Enjoyed this? Then read our article explaining the Nairobi Coffee Exchange.

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