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Daily Nation : January 28th 2014
r story TOP COFFEE DEALERS 1 Taylo Winch Ltd 2 Diamond Coffee Co. Ltd 3 Armajaro Kenya Ltd 4 Ibero (K) Ltd 5 C. Dormans Ltd 6 Louis Dreyfus Commodities (K) Ltd 15.05 12.06 10.78 9.87 9.15 7.53 Nyeri Governor Nderitu Gachagua DAILY NATION Tuesday January 28, 2014 SETBACK No end in sight to troubles afflicting giant coffee miller LIKE A BAD DREAM, talks on revival of Kenya Planters’ Co-operative Union have collapsed before the teams could make their first move on the agreed route from receivership. Kenya Commercial Bank, who placed the giant miller in receivership in October 2009 over a Sh644 million debt, moved to court and obtained orders to have the receiver managers return to take charge of KPCU assets. Deloitte Consulting are the ap- pointed receiver managers. KPCU management had earlier on moved to court accusing the receiver manager of misplacing 14 titles for assets estimated to be worth Sh2.5 billion. In an agreement entered into in De- cember, the KPCU board were to provide Sh100 million as part payment as the first condition for KCB agreeing to lift the receivership. Such are the legal rigmarole that has Kirinyaga Governor Joseph Ndathi defined operations of KPCU in recent years. However, it is the accusation of vandalism that has led farmers to question whether KPCU will ever get on its feet again. In the latest accusation, the board ffee sector A source said some dealers had moved to coffee societies and, through their marketing outfits, offered the same coffee through the auction system, creating the conflict. “Societies that refused to of- fer their coffee through some of these dealers were blacklisted and had their produce bought at lower prices at the auction,” said the source. That is why, the source said, OR G R tu u R GE any attempt at changing entrenched coffee marketing systems elicits sharp reactions from the established players. The governors said their aim is to take control of coffee processing and marketing and seek the best price for farmers. Come on board To achieve this, Mr Gachagua said, all the six coffee growing counties in Central and Eastern — Nyeri, Embu, Murang’a, Kirinyaga, Kiambu and Meru — have to joint hands. The governors also plan to lobby members of county assembly to take a common legislative stand on the issue. They will also lobby and educate constituents on their plans. “If this (initiative) fails to take off and coffee does not earn money for farmers, we will urge them to revert to other crops like macadamia,” Mr Gachagua says. The governors have received support from the Kenya Coffee Producers and Traders Association, which has written to Agriculture Cabinet secretary Felix Koskei and the regulator, Coffee Board of Kenya, asking that coffee producing counties be included in the management of the Nairobi Coffee Exchange. KCPTA communications of- ficer Selvestre K’okoth said the two entities are yet to respond to the demand to have farmers represented at NCE. Coffee marketing is the second largest globally, after oil, and attracts a lot of interest, with an estimated $80 billion (about Sh7 trillion) coffee traded every year. When he was Agriculture min- ister in the last regime, Deputy President William Ruto had indicated that the government would do away with the auction system for coffee, accusing players of cartel-like behaviour. He said Kenyan coffee would be processed, branded and sold as a premium product. Coffee production has plum- meted from the highs of 130,000 tonnes in the 1980s to an average of 45,000 today. The low production has spawned a cut-throat competition for the available coffee beans in the local market. “Coffee marketing is competi- tive and the multinationals react to any slight indication that new players could undermine their cartel that dictates the price movement. “Most of the wrangles in the sector are not without underhand prodding of these cartels using some of the union officials,” said a source familiar with the goingson in coffee marketing. “KPCU HAS ASSETS THAT ARE THE ENVY OF THE COMPETITORS. SOME OF THESE PRIVATE ENTITIES HAVE LEASED OR HIRED THESE FACILITIES Meru Governor Peter Munya Francis Mara, Gitwe Coffee Society chairman Kiambu Governor William Kabogo Murang’a Governor Mwangi wa Iria says over and above the missing title deeds for land, a milling machine at Wakulima building in Nairobi estimated at Sh859million has been vandalised. On March 27, 2012, computer sys- tems at the Dandora plant that held vital data were also stolen in unclear circumstances. Last week, board chairman William Gatei said they had instructed police to investigate the lost title deeds and destruction of the union’s assets. “The loss of the title deeds and the destruction of the plant have negative effects on the balance sheet and the future business plan of KPCU,” Mr Gatei said. Established in 1937 as a farmers union to enable them access inputs and smart company 9 sell coffee in bulk, KPCU remains the single largest miller with the required infrastructure that include milling plants and warehouses across the country. The union has been an anchor for small-scale coffee farmers estimated at 700,000. It has over the years enabled them access inputs at reasonable prices and market their coffee in bulk. “KPCU has assets that are the envy of competitors. Some of these private entities have even leased or hired these facilities. The union can easily get back to business with prudent management. Like New Kenya Co-operative Creameries, KPCU cushioned farmers from exploitation by private players,” said Mr Francis Mara, the chairman of Gitwe Coffee Society. “It’s possible to turn around the miller despite competition from others because of the facilities it holds.” Eroded market share Woes of the union started in the 1990s after the sector was liberalised. Former chairman of the board, Mr Kimanthi Mutuerandu, accused the regulator, Coffee Board of Kenya, of not cushioning the union as some farmers fled without paying loans estimated at Sh800 million they had taken to buy inputs. Private players steadily eroded the market share of KPCU, leading to its inability to meet financial obligations. Success will, however, depend on how fast the union is able to regain farmers’ confidence. Some farmers have yet to be paid Sh148 million for coffee delivered before it went under in 2009. As coffee production increases in the country, KPCU plans to go into value-addition and hiring out warehouses to other millers, particularly those trading at the Nairobi Coffee Exchange. The depots are strategically linked to the railway system that is currently being revamped, giving it an edge over its rivals. But it will have to find ways to clear debts amounting to Sh2.6 billion, that includes the amount owed to KCB. The House committee on agriculture had recommended that the govern- ment provides Sh1.2 billion to the union to clear the debts and enable it resume business, but this is yet to happen. Other dues comprise money owned to creditors (those who supplied inputs to farmers under a KPCU arrangement and were not paid), lawyers, and statutory fees owed to the Coffee Board of Kenya and the Coffee Research Foundation.
January 27th 2014
January 29th 2014