Nyeri, Kenya, Dec 13 – Controversy has erupted in the coffee sector following a directive by the Ministry of Cooperatives requiring farmers to be paid directly for their produce, bypassing cooperative management boards.
The directive mandates the Nairobi Coffee Exchange (NCE) to pay farmers directly through a direct sale settlement system, crediting funds into farmers’ accounts or via M-Pesa upon the sale of their coffee.
However, stakeholders, including cooperative society boards, millers, and coffee brokers, have opposed the move, citing potential harm to cooperative movements and rural savings and credit cooperatives (saccos).
“This directive is impractical. How will farmers receive payments directly when coffee is sold in dollars? Are farmers delivering as little as one kilogram expected to open dollar accounts? This is a flawed boardroom decision,” said Mureithi Maina, chairman of Irianini Farmers Cooperative in Mathira, Nyeri County.
Maina added that cooperatives act as guarantors for farmers to acquire loans from saccos based on the kilos delivered. If farmers are paid directly and default on their loans, the cooperatives would bear the legal burden, jeopardizing their survival.
“We have refused to provide data to the NCE, as ratified in our annual general meeting. Memories of the 1988 crop disappearance due to government intervention are still fresh, and we will continue with our current payment arrangements,” he said.
The directive is among ten issued by Cabinet Secretary for Cooperatives and Micro, Small, and Medium Enterprises (MSMEs) Development, Wycliffe Oparanya, on November 18.
Oparanya’s directive also caps cooperative societies’ administrative and operational costs at 20 percent of gross coffee earnings, subject to periodic reviews by the Commissioner for Cooperatives.
“Cooperative societies must maintain two separate accounts to distinguish between the society’s operational funds and farmers’ payments to facilitate the Direct Settlement System,” Oparanya stated.
These reforms were initially championed by former Deputy President Rigathi Gachagua to boost profitability and competitiveness in the coffee sector.
The changes are part of the Crops (Coffee) (General) Regulations 2019, which stem from the Crops Act of 2013 and aim to regulate and support the coffee industry.
