New coffee rules to do away with double licensing

By: John Kamau

The government on Wednesday said it was investigating interrelated firms in the coffee sector to determine how this is affecting the market.

It, however, denied claims of price-fixing at the coffee auction, which insiders blame for the poor pay farmers get.

In a written response to the Daily Nation’s expose on how coffee cartels have infiltrated the system, Mr Alfred Busolo, the interim director-general of the regulatory body, Agriculture, Fisheries, Food Authority (Affa) said it was investigating “possible conflict of interest”.

“Related firms with different directors are being investigated on their likely impact on competitiveness in the value chain and possible conflicts of interest.

In addition, the authority is in the process of reviewing the coffee industry regulations to deter players from multi licensing,” he said.

While the Nation had reported that a conspiracy between regulators, millers, traders and brokers, had intentionally kept the Kenyan coffee prices down – even as the country’s top grade Arabica coffee continued to fetch premium prices at the international market, the regulator said “there is no evidence of coffee rigging at the auction”.

MARKETING SYSTEM

“No cartel of coffee traders has put in place a marketing system which manipulates prices in the Nairobi Coffee Exchange (NCE). The coffee marketing is as per the Crops Act, 2013 and Coffee General Rules, 2002 and the Exchange Trading Rules, 2012. Every coffee player is licensed based on the provisions of the Crops Act,” he said.

Mr Busolo, however, admitted that there were no rules at the moment governing the coffee sector following the repeal of the Coffee Act.

This has left a void in the multi-billion shillings industry which is operating without any rules.

“There is need to hasten the gazettement of the proposed Coffee General Regulations, 2015 in order to implement the Crops Act (2013) to steer the coffee industry,” said Mr Busolo while denying that this has created disorder within the sector.

“There is no confusion in the coffee industry,” he added.

While the previous rules allowed marketing agents to also double up as a dealers, millers and farm management agents, the regulator said that the new rules would address that anomaly to ensure that only one licence is issued to each value chain player.

Our investigations indicated that by holding multiple licences, the coffee merchants had managed to rig the system and in its place put a false auction system.

PRICE FIXING

The previous Coffee Act allowed them to legally do this, which insiders say has led to price fixing.

Mr William Gatei, the chairman of the giant Kenya Planters Cooperative Union (KPCU) says the situation was worse.

“When they sit there (at the Nairobi Coffee Auction) they negotiate between the same parties owned by the same company. After they buy the commodity here, they all ship it to Geneva – because they don’t want to declare the correct price. In essence, they export the coffee to themselves again and they are now free to re-export it again. The effect of this is that with this price transfer they won’t pay the right taxes here,” said Mr Gatei.

Mr Busolo, however, has defended the multinationals involved saying that Kenya cannot do without them.

This is because in most trading commodities, producers are in most cases not involved in market discoveries, adding that traders were the risk takers compared to producers who are risk averse.

“The presence of multinationals is a plus not a disgrace to the industry,” he said

The regulator said that any trade without the involvement of an international company was meaningless. Whatever names they are given, buyers are linkages between producers and consumers in all aspects of commodity trading.

SOURCE: DAILY NATION