Government introduces policy likely to kill smallholder coffee farming

[Mwalimu-G]

Direct settlement will cut out co-operatives from cherry processing

Coffee Farmers to be Paid Directly​

The Kenyan government has introduced a Direct Settlement System (DSS) to facilitate efficient payment of coffee farmers’ proceeds and recovery of any other commitments owed by growers to service providers. The system aims to eliminate intermediaries and ensure timely payment to farmers.

Key Features:​

1. Direct payment to farmers: Buyers will deposit funds in the DSS after every sale of coffee at the auction or through direct sales. The DSS provider or commercial bank will settle statutory charges, service provider fees, and other liabilities.
2. No intermediaries: Farmers will no longer have to deal with marketing agents or cooperative unions, which have been problematic in the past, leading to delayed payments and unclear service fees.
3. Transparency and predictability: The DSS provides a transparent and predictable payment system, ensuring that farmers receive their earnings promptly.
4. Cap on cooperative societies’ administrative and operational costs: The government has capped these costs at 20% of gross coffee earnings, subject to periodic review by the Commissioner for Co-operatives.

Recent Developments:​

1. Nairobi Coffee Exchange (NCE) to implement DSS: The NCE has invited commercial banks to express interest in the DSS ahead of an April 30 deadline to implement the system.
2. Coffee farmers seek additional DSS players: Farmers have petitioned the government to recruit additional operators in the DSS to improve remittance of their proceeds and supplement efforts by the Cooperative Bank of Kenya.
3. Farmers can choose payment currencies: Coffee farmers can now opt to receive payments in either US dollars or Kenyan shillings, allowing them to negotiate rates and determine their own payment terms.

Benefits:​

1. Improved payment efficiency: The DSS streamlines the payment process, reducing delays and ensuring that farmers receive their earnings promptly.
2. Increased transparency: The system provides clear and transparent payment terms, eliminating uncertainty and disputes.
3. Enhanced farmer livelihoods: By ensuring timely and fair payment, the DSS can improve the livelihoods of coffee farmers and their families.

Challenges:​

1. Overwhelming transactions: The DSS has faced challenges due to the large number of transactions initiated by players in the value chain, leading to delays and inefficiencies.
2. Need for additional DSS players: Farmers have highlighted the need for additional operators to supplement the existing DSS and improve payment remittance.

Overall, the Direct Settlement System aims to revolutionize the coffee payment landscape in Kenya, providing a more efficient, transparent, and predictable system for coffee farmers. While challenges remain, the government and stakeholders are working to address these issues and ensure the system benefits farmers and the broader coffee industry.

 

[Okiya]

DSS has been there since August last year. It's being handled by Coop bank

 

[Clemens]

The above points in the post reads lots like a chat gpt generated article.

 

[Mwalimu-G]

The above points in the post reads lots like a chat gpt generated article.

Yes it is, the information is derived from different media reports.

 

[upepo]

Cooperatives have been known to play games with farmers' earnings. That means direct payment could be a huge relief. Secondly, giving farmers the option to get paid in dollars gives them more autonomy on their earnings. They no longer have to accept bank exchange rates at the point of payment, which can sometimes lead to considerable losses.

 

[Mwalimu-G]

Cooperatives have been known to play games with farmers' earnings. That means direct payment could be a huge relief. Secondly, giving farmers the option to get paid in dollars gives them more autonomy on their earnings. They no longer have to accept bank exchange rates at the point of payment, which can sometimes lead to considerable losses.

My concern is that once farmers get their money they will forget to pay their co-op s costs.

 

[upepo]

My concern is that once farmers get their money they will forget to pay their co-op s costs.

I would imagine such costs are part of the deductibles before the money is disbursed.

 

[shocks]

My concern is that once farmers get their money they will forget to pay their co-op s costs.

That max 20% is not before transmission, then thats a big issue. Tho pia small holder coffee farmers are very few, I use the Thika - Gatura road nikienda to my mums relatives. You only see lots of coffee in the large scale farms before Gatunyu, and even there green houses and real estate is taking a chunk of the land. After Gatunyu where small scale farmers start there is very little coffee, macadamia and ovacado replaced lots of coffee. Only the tea zones ndio bado kuna small holder tea farms

 

[Mwalimu-G]

Tho pia small holder coffee farmers are very few,

There are very few "estate" farmers in Meru, T/Nithi, Embu, Kirinyaga, Murang'a and Nyeri. Similarly producers in Kericho, Bomet, Machakos, Nakuru, Baringo and the entire western belt are smallholders. They produce the bulk of the coffee which is processed up to parchment stage by cooperatives.