Businesses & Financial News

Tea lobby wants milling fees reduced in the proposed Bill

By Steve Umidha

The Kenya Tea Sector lobby has proposed a reduction of milling fees in its submission to the Coffee Bill 2020, just hours before the compliance deadline came to a close Wednesday.

The Lobby has also proposed capping of milling losses, reduction of market agent fees and removal of underhand dealings between millers, buyers, and marketing agents – with the proposals meant to ensure that farmers have more money in their pockets and more control of the multi-million industry.

“We propose for the restriction of marketing agents and millers from lending to farmers, usually because of the opportunity to make money from providing exorbitant advances to farmers, millers and marketing agents hoard farmers’ money and on-lend part of it to them at 14 percent interest.

“With the creation of the cherry advance fund at New KPCU that lends at 3 per cent, millers and marketing agents are being prohibited from lending to farmers,” the lobbyist said through its Chairman Irungu Nyakera, adding that their endorsement is a solidarity one meant to support counterparts in coffee farming.

The bill among other things, further proposes that independent factories can apply to become stand-alone societies. This will allow factories to move away from societies that collude with millers and marketing agents to steal from them and give farmers a chance to determine their destinies.

It will also block societies from using farmers’ assets for acquisition of expensive loans that have constrained farmers owing to their intricate terms – unfair arrangements that have seen some cooperatives societies take up loans from financial institutions and the funds cannot be accounted for.

As a result this has seen banks and Sacco’s issue stern threats in selling farmer assets “leading to many farmers to start running away from society because their coffee earnings are being used to pay for these loans. In some documented cases, there is a conflict of interest between the cooperative society and the Lender, leading to opaque advances to Cooperative societies,” said Mr. Nyakera in a statement.

“This will be a big win for farmers because for the first time the veil of secrecy surrounding deductions from coffee sales and payments to societies, millers, and marketing agents will be opened to public scrutiny,” he said.

The Bill proposes the establishment of the Nairobi Coffee Exchange, as Coffee will be offered for sale through both auction and direct sales.

Buyers will be required to remit money to marketing agents within 7 days for all bided coffee. If they fail to do so, they will be penalized by meeting any difference in the value of coffee when it is re-offered for sale if it fails to realize the original bid value.

In May this year the tea sector received a boost with the recommendations of new tea regulations supposed to end the historical suffering of tea farmers and increase their prices and power are set to be gazetted into law.

“The tea industry now has a set of robust and progressive tea regulations that will steer the industry well into the future,” Agriculture CS Peter Munya said at Kilimo House.

The regulations reduce management agency fees for smallholder tea factories from 2.5 per cent to 1.5 percent of the value of tea sold.

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