Coffee farmers receive Ksh23b through DSS plan

Coffee farmers have been paid close to Sh23 billion through the Direct Settlement System (DSS) in the last one year, a Nairobi Coffee Exchange (NCE) report has revealed.

Lisper Ndung’u, NCE chief executive confirmed yesterday that farmers have received Sh22.6 billion through the one- year-old payment system managed by Co-operative Bank of Kenya.

“The payment paid through the system is for the period between August 15, 2023 and Sale 35, conducted on July 3, 2024. Since the system was put in place farmers have been receiving payments after coffee sale and all creditors paid,” she said in a phone interview.

Along the way the system experienced some challenges, though through collaboration with stakeholders the implementation is well undertaken,” Ndung’u added.

Nairobi Coffee Exchange on August 9, 2023 appointed the Co-operative Bank of Kenya as the provider of DSS to coffee value chain players after every sale in the country. DSS is a technology platform on which coffee trading is conducted as provided for in the new coffee trading regime supervised by the Capital Markets Authority (CMA).

Implementation of reforms

It is one of the key recommendations highlighted by the Prof Joseph Kieyah National Task Force on Coffee Sub-Sector Reforms established in 2016 by former President Uhuru Kenyatta.

Kenya Kwanza Government has been pushing for the implementation of the reforms leading to licensing farmers-led organisations as coffee brokers. Currently, CMA has licensed 16 coffee brokers to trade at NCE.

Karatina-based Iria-ini Farmers Co-operative Society Chairman Bahama Muriithi confirmed that his farmers have been receiving the proceeds without days.

“We have been receiving our proceeds seven days after sale is undertaken at the coffee auction. The DSS is a game changer in terms of payment of coffee farmers. Today the majority of farmers are receiving their payment within days stipulated under the trading regulations,” he said.

Muriithi added that the system has contributed to the changing lives of farmers mainly shielding them against exploitation by secondary players in the coffee value chain.

Last month, CMA approved the Nairobi Coffee Exchange Limited Trading Rules, 2024, heralding a new trade-off regime coupled with tough penalties in the event of violating the rules.

In another development NCE stated coffee farmers earned Sh21 billion for the period between July 2023 and July 2024, thanks to high demand of the clean beans globally and relatively fair prices locally.

Ndung’u noted that despite the challenges that affected the industry in the review period, consumers globally maintained their demand for the Kenya coffee beans. She explained that the overall value of the coffee sold increased as well from $125,570,487.36 (Sh16.3 billion) to $161,723,014.98 (Sh21billion) representing a 28.79 per cent increase as end of July, 2024 from end of July 2023.

“Equally, the prices increased by 13.06 per cent from an average of $178.14 (Sh23,140.386) to $201.40 (Sh26, 161.86) in July 2024 per 50kg.The increase was occasioned by a steady increase in the New York Intercontinental Commodity Exchange (ICE), which works as the benchmark for Arabica coffees,” said Ndung’u.

During the period under review volumes sold through the auction went up as compared to the same cumulative period last year by 12.22 per cent from 521,334 to 585,066 of 60kg bags.

Overall, Ndung’u disclosed, there has been a steady demand for Kenyan coffee in the global market despite the fears that Kenyan Coffee is not available.

“On average the prices have remained relatively fair in the national market compared to the global market hence affecting the overall value realized at this time of the year,” she added. Last August, Deputy President Rigathi Gachagua reopened the Nairobi auction after a two-month recess.

Raft of changes

Speaking during the event, the DP reiterated his commitment to ensure the raft of changes in the coffee sub-sector are realised as tasked by the President despite antagonism from some quarters.

Gachagua said measures put in place were slowly bearing fruits but urged farmers to remain patient even as he maintains they have no interests in it.

He said he is aware of brokers keen on sabotaging the reforms process by discouraging potential buyers.

“We have had some saying they will not buy these coffees because of these reforms and that we should revert to the old ways but there is no problem because even if they refuse to buy we are organised, we set some funds and pay farmers,” Gachagua stated.