Government pledges to settle Sh9b debt owed by cof fee farmers

Wangari Ndirangu-KNA

The Government is committed to clearing off the Sh9-billion debt owed to financial institutions by hundreds of coffee farmers in the country.

The Cabinet secretary for Cooperative and Micro Small and Medium Enterprises (MSME) Wycliffe Oparanya stated that the Government is devoted to paying the accumulated debt on behalf of coffee growers as part of boosting their morale to produce more beans. 

“In the current financial year, the National Treasury and Planning Ministry extended Sh2 billion as part of money to clear the debts.

"This demonstrates government assurance to support the coffee industry which is currently struggling with low production and stiff competition from other beverages,” Oparanya said during a cooperatives leaders conference in Naivasha. 

The debt waiver is in the second phase with Sh12.2 billion having been written off in the first phase more than a decade ago.  

CS Oparanya stated that the coffee sub-sector, once a leading foreign exchange earner, is currently struggling with poor governance and grand corruption, a situation, he said, is denying farmers their hard-earned sweat. 

“Government will ensure the legislations and regulations are fully implemented to ensure there is level playing ground. We have had cases in farmers’ coffee societies where directors and managers have been borrowing money to pay the growers high rate against income earned,” the CS noted. 

He further said that farmers in these societies cannot meet their daily financial obligations, warning that the government will not tolerate corruption in the coffee industry as it works towards restoring confidence in the sector. 

On the debt’s waiver programme, the Commissioner for Cooperatives David Obonyo said debts that farmers had incurred from local financial institutions, and mainly Co-operative Bank of Kenya, to finance coffee processing equipment among other needs had reached Sh6.8 billion in January. 

To ensure there are no debts left unattended, he explained that the Cooperative Department requested for further information on claims from farmers, coffee cooperative societies and financiers with the deadline in May this year. 

This led to the debt portfolio increasing to over Sh9 billion. Obonyo said to avoid duplication in payment, the Department of Cooperatives and the National Treasury and Planning constituted a seven-member taskforce to validate all the debts and that the team is expected to submit an interim report by the end of this month. 

“According to the claims by the counties, financiers’ and farmers’ cooperative societies' accumulated debts stand at Sh9 billion. The figure might remain the same or reduce based on the authentication by the seven-member task force team," Obonyo said. 

The coffee industry debt waiver programme was initiated by the former administration of President Mwai Kibaki in 2006 as part of assisting the local farmers overcome challenges disrupting desired growth. 

Between 2006 and 2019 government waived Sh12.2 billion through Cooperative Bank of Kenya, though value chain players claimed the written-off debts and other reforms enacted did not motivate desired development in the subsector.

Government waived Sh5.8 billion Stabilization of Export Earnings (STABEX) to Cooperative Bank, money that had been granted by the European Union (EU) under a compensatory finance scheme to stabilize export earnings of the African, Caribbean and Pacific Group of States (ACP). 

National Coffee Cooperative Union (NACCU) Limited chairman Francis Ngone said debt increase in the coffee industry had contributed to frustrations and lack of morale to farmers.

He hailed the debt waiver programme by the government saying it will boost morale to the farmers and lead to high production. 

Ngone confirmed that over Sh10 billion coffee proceeds have been paid to farmers through Direct Settlement System (DSS) between January and now. This is coffee sold at Nairobi Coffee Exchange (NCE). 

The payment of the impressive earnings follows aggressive implementation of reforms in the coffee industry initiated in 2016 making it easy for farmers to benefit from their hard-earned sweat. 

“This year we have recorded a big milestone in terms of coffee payments and enhanced voice of the growers as they are now participating at the market arena,” said Ngone. 

The DSS, established more than one year ago, has contributed to improvement of payments of proceeds to the farmers unlike before where the income took a long time.