In the vibrant heart of Nairobi, a transformation is underway in the coffee industry that promises to reshape the fortunes of coffee farmers. The Nairobi Coffee Exchange (NCE) auction, after a brief suspension aimed at implementing substantial reforms, has now resumed operations, breathing fresh hope into the lives of coffee growers across the nation.
A mere month-long hiatus was all it took for the NCE auction to recalibrate its approach and implement reforms that hold the potential to revolutionize the coffee sector. These reforms, geared toward enhancing the financial prospects of coffee farmers, are grounded in the concept of direct sales through the auction. This novel approach allows farmers to bypass intermediaries and directly sell their coffee, curbing the profiteering practices that have plagued the industry.
Breaking the Chains By Eliminating Middlemen
One of the cornerstones of this transformation is the introduction of the Direct Settlement System (DSS) technology platform, brought forth through a partnership with the Co-operative Bank. This innovative platform is the conduit through which all future coffee trading will occur. By embracing technology, the auction is not only modernizing its operations but also streamlining the trading process for coffee farmers, making it more efficient and transparent.
Transparency is a key ingredient in fostering trust and growth within any market. In line with this ethos, the Capital Markets Authority has stepped up to oversee the proceedings of the NCE auction. This measure adds an additional layer of oversight, ensuring that every transaction is conducted fairly and every participant has a level playing field.
Before the auction resumed, a comprehensive training forum was organized to familiarize all stakeholders with the intricacies of the new Direct Settlement System. Brokers, traders, warehouse operators, and coffee farmers convened in Nairobi to gain insights into the workings of the DSS, fortifying their ability to participate effectively and maximize their returns.
Empowering coffee farmers lies at the heart of these reforms. To this end, 11 coffee co-operative unions have already secured licenses to directly sell their produce at the exchange and internationally, effectively eliminating the role of middlemen. This move not only ensures better financial remuneration for the farmers but also enhances their agency in the coffee trade.
The momentum of change continues as an additional five unions are set to be licensed before the end of August. This will increase the total number of farmer-owned coffee brokerage companies to 16, according to the Cooperatives Principal Secretary. This diversified landscape promises to provide more options and opportunities for coffee farmers to find the right avenue for their produce.
In a bid to ensure fairness and equity, three distinct licensing authorities are now involved in the process: county governments, the Capital Markets Authority, and the Agriculture and Food Authority. This multi-layered approach establishes checks and balances along the entire value chain, safeguarding the interests of coffee farmers and promoting a sustainable trade ecosystem.
Acknowledging the diversity within the coffee farming community, the government is collaborating with county governments and the Capital Markets Authority to enable small, medium, and large estates to form co-operatives or associations. This move aims to democratize access to brokerage licenses, ensuring that all categories of farmers can benefit from the reforms.
Kenya’s coffee production is characterized by two distinct systems: smallholder farming and larger estates. The smallholders, totaling around 700,000 growers, are organized into 559 active coffee cooperative societies operating 1,065 wet mills. Meanwhile, the estates, estimated at 3,000, operate 2,132 wet mills. This dynamic landscape reflects the intricate fabric of the coffee industry in Kenya.
With a commitment to bolster coffee production from the current 51,000 metric tonnes to 81,000 metric tonnes by 2024 and ultimately to 260,000 tonnes by 2027, the government is paving the way for a more prosperous future for coffee farming in Kenya. These ambitious targets underscore the transformative power of the NCE auction reforms and their potential to reinvigorate the coffee sector.
The revival of the Nairobi Coffee Exchange auction marks a watershed moment in the history of Kenyan coffee. Through innovative technology, enhanced transparency, and a renewed focus on empowering farmers, the auction is poised to create a fairer, more equitable, and thriving coffee ecosystem. As Kenya sets its sights on greater coffee production, these reforms stand as a testament to the resilience and determination of the nation’s coffee industry.