The coffee sector in Kenya is grappling with numerous challenges, including decreased production and governance issues within cooperative societies. Coffee production has significantly declined, dropping from a peak of 128,000 metric tonnes in 1989 to just 34,500 metric tonnes in the 2020-2021 period.
This decline is attributed to various factors such as high input costs, shrinking coffee-growing areas, delayed payments to farmers, climate change, and fluctuating market prices. Governance challenges within cooperative societies and outdated legislation have further compounded the sector’s problems, hindering its growth potential and economic contributions.
To address these challenges, the government has reaffirmed its commitment to reforming the coffee sector. Through policy, legal, and administrative measures, key initiatives have been implemented to address these longstanding issues. Among these are the development of new policies and legislative frameworks, including the Coffee Bill and the Cooperative Bill 2024. These legislative tools are aimed at addressing governance challenges, modernizing operations, and boosting productivity in the sector.
The restructuring of the Nairobi Coffee Exchange has been a critical step in enabling coffee cooperative unions to participate more actively in auctions, empowering farmers and cooperatives to secure better prices for their coffee. Additionally, the government has operationalized the Direct Settlement System (DSS), which has significantly reduced delays in payments to farmers, ensuring they receive timely compensation for their produce.
Reforms have also targeted the coffee value chain to enhance transparency and accountability. This includes streamlining roles within the value chain by separating milling, marketing, and cooperative development activities. A dividend policy for cooperatives has been developed to ensure financial sustainability. This policy prevents cooperatives from borrowing funds to pay dividends or declaring dividends during periods of financial loss, preserving the spirit of service to members rather than focusing on profits.
Governance has been recognized as a critical pillar for the success of cooperative societies. To this end, a cooperative governance guide, similar to the Muongozo Code of Ethics for state corporations, is under development. This guide will provide a blueprint for the effective management of cooperatives, fostering transparency, accountability, and the proper use of resources for the benefit of members.
The government is also engaging stakeholders, including Members of Parliament from coffee-growing regions, to sensitize leaders and farmers about the challenges facing the sector and explore viable solutions. This consultative approach aims to ensure that reforms and initiatives align with the needs and expectations of those directly involved in the industry.
Efforts to revive the coffee sector go hand in hand with enhancing the role of cooperatives, which play a pivotal role in supporting small-scale farmers. By addressing governance issues, improving policy frameworks, and reducing systemic inefficiencies, the sector is expected to regain its former prominence. These interventions aim to increase production, stabilize income for farmers, and strengthen the overall competitiveness of Kenyan coffee in global markets.
The government remains committed to ensuring that the coffee sector achieves sustainable growth and contributes significantly to the national economy. Through the combined efforts of policymakers, cooperative leaders, and farmers, the sector is poised for a transformative journey toward improved productivity and resilience.
