Market regulator Coffee Board of Kenya has issued new guidelines that change the way players in the coffee market will operate. The guidelines, which CBK says are aimed at breaking industry cartels, phase out double or multiple licences, and restricting each player to a single licence for a specific market function. The regulations were expected to come into effect in the new coffee season that began on July 1.
" The minister is expected to publish a Gazette notice to legalise the changes that took effect on July 1, 2007," CBK chief executive Solomon Waweru said. CBK is mandated to issue all the licenses in the industry each year in consultation with the Agriculture ministry.
The decision that is expected to rattle many players in the Sh8 billion ($120 million) a year industry came on the back of an outcry by farmers that some merchants had gone into coffee marketing, milling and even dealing at the Nairobi Coffee Exchange, giving them immense influence in critical areas such as pricing. The cartels are said to have re-emerged late last year after the government liberalised coffee marketing by opening a second window that brought in the direct-sales system.
"Our aim is to empower the coffee growers to be in-charge of their business, particularly by linking them directly to the market for improved returns," Agriculture minister Kipruto arap Kirwa said when he announced the coming into effect of the direct-sales system.
Barely two months later, unscrupulous operators moved into the market to cash in on the "free environment" to manipulate prices throughout the production chain. Farmers say the cartels control pricing from the farm gate to bidding on the floor of the auction. "We must admit that cartels have once again re-emerged and are causing confusion in the industry having taken advantage of the liberalisation programmes," Waweru said.
Peter Michori, the CBK chairman, says the new rules will ensure that players choose whether or not they want to operate as commercial marketing agents or dealers.
The number of licences per individual line of operation, however, remains unaffected by the changes. "We are encouraging more people to seek licences for specific tasks or roles to increase competition," Waweru said. "Only cross-roles will be prohibited to guard against conflict of interest."
The Minister of Co-operative Development and Marketing, Njeru Ndwiga, recently said the move to license dealers as marketers was a mistake and blamed it for poor prices paid to growers this year. "Coffee prices are going down, not because of the second window, but due to the fact that those who got marketing licences are also dealers," he said, adding that marketing licences for dealers will be cancelled.
The coffee industry has gone through turbulent times this year, prompting officials of the NCE to invoke a quota sales system to salvage prices that had dropped to low levels. Though the trend could have been attributed to market fundamentals such as demand and supply both locally and internationally, some analysts believe the apathy could have been the work of the cartels, in a bid to maximise their earnings from the business.
Business Daily
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