Kenya: High coffee prices in foreign markets spur illegal trade

By Ngondi Mburu

Business Daily

November 16  2011

A farmer picks her coffee crop. Photo: Courtesy of Business Daily.

High international coffee prices have spurred dramatic rise in illegal trade as the harvesting of this year’s crop begins.

Farmers are selling to berries at farm gates contravening the Coffee Act, which requires that the produce be sold to registered societies.

“Buying and selling of coffee is now being done by the roadside and at shopping centres in broad daylight in total disregard of the law,” said Newton Ndiritu, the chairman of the Othaya Farmers’ Co-operative Society.

The farm-gate sales have sparked fears of loan defaults and failure by the cooperative societies to recover early payments given to farmers.

“Some of the society members who are selling the coffee through these dealers owe debts to the society,” said Mr Ndiritu.

Farmers sell ripe coffee at Sh40 a kilogramme and as little as Sh20 for unripe berries to the middlemen. A kilogramme earns as much as Sh130 if sold through registered societies but farmers are opting for the instant pay system to meet their pressing financial needs.

Police in Othaya district arrested several suspects last week over illegal coffee buying from farmers and their vehicles impounded. They later released them.

Under the Coffee Act, only licensed millers are allowed to buy coffee from farmers through the societies that have contracted them.

The Coffee Board of Kenya early this year warned millers and dealers against handling illegally acquired coffee.

The board urged them to insist on valid movement permits for coffee stored in their premises.

Under the law, the board can de-license or fine those found to be dealing in coffee illegally for up to Sh500,000. Several players had their licenses revoked mid this year by the board due to illegal dealings.

A Coffee Bill that is pending in parliament is expected to stiffen the penalties for errant traders.

The Bill stipulates a fine of up to Sh20 million for those convicted of dealing in coffee illegally.

The government has in the recent past cancelled out debts that farmers owed while pumping billions into the industry through the Coffee Development Fund to boost the sector.

These steps, coupled with massive farmer education programmes and good prices have seen the industry record growth.