Coffee trade risks disruption in July as new rules start

Women pick coffee at a farm in Nyeri town. PHOTO | JOSEPH KANYI | NMG

Kenya’s multi-billion-shilling coffee trade is at risk of disruption starting July as the Capital Markets Authority (CMA) and Nairobi Coffee Exchange remain mum over the establishment of the Direct Settlement System (DSS) as the old regulations come to an end this month.

The CMA had extended the use of the old coffee regulations to June 30 in the absence of DSS in place. The platform is meant to facilitate payment between farmers and coffee brokers.

The new law — the Capital Markets (Coffee Exchange) Regulations 2020 — was to be effected in July 2020 but since then it has been postponed twice amid fights between the CMA and the Ministry of Agriculture.

“We have no comment on this matter,” said the CMA in response to the Business Daily query.

In 2020, the market regulator allowed the use of the older rules pending the creation of the DSS, with marketers required to remit the funds to farmers under the old regulations.

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“CMA directs that the existing payment mechanisms be utilised in the interim period as the DSS is being put in place. Details of direct coffee sales will be reported to the Nairobi Coffee Exchange,” said CMA chief executive Wycliffe Shamiah, then.

The coffee trade was disrupted for two weeks in July 2020 following confusion over the implementation of the new rules as marketers didn’t know how to settle farmers’ dues.

Agriculture Cabinet secretary Peter Munya opposed the role of the CMA in the coffee auction, saying it should be done by the Agriculture and Food Authority. The CS also extended the old laws to the end of this month.

Farmers and traders are now worried that trade at the auction could be impacted negatively starting July 1 as there is no indication of a DSS being in place by the beginning of next month.

“We are concerned that our coffee will not trade at the auction starting July for lack of a DSS in place,” said Peter Gikonyo, chairman of the Kenya Coffee Producers Association.

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The Capital Markets (Coffee Exchange) Regulations 2020, which were gazetted in April 2019, gave the authority the mandate to license the coffee exchange and brokers.

The CMA has so far fully licensed five brokers to trade at the Nairobi Coffee Exchange (NCE) between last year and now.

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