Reform of Kenya's troubled coffee sector resumed progress with the announcement in January that the Capital Markets Authority (CMA) has approved four additional coffee brokers to trade at the Nairobi Coffee Exchange (NCE), raising the total number to 10.
The brokers represent major coffee cooperatives, helping ensure that farmers will earn higher incomes through auctions, which handle as much as 95% of all coffee sold.
Farmer groups have complained that auctions are subject to collusion and manipulation that account for falling prices, which dropped by 50% to around US$200 per 50kg for top grade Kenya AA in December, from US$400 in January 2022.
The Capital Markets Authority was given oversight of the Nairobi Coffee Exchange and broking licenses in 2020 under reforms intended to increase transparency and efficiency. Broking licenses were previously controlled by the Agriculture and Food Authority’s Coffee Directorate. Last year the Authority tried to challenge the Capital Markets Authority's role in issuing licenses, but it recently reversed this stance, paving the way for reforms to continue.
The four new brokers approved are Kinya Coffee Marketing Agency Limited; Kiambu Coffee Marketing Company Ltd; Bungoma Union Marketing Agency Ltd; and Meru South Coffee Marketing Company Ltd.
The Capital Markets Authority had previously approved only six coffee brokers to trade at the Exchange under the new Capital Markets (Coffee Exchange) Regulations issued in 2020. The regulations cover the services of coffee exchange, licensing of brokers, and the establishment and management of a direct settlement system to facilitate faster, more transparent payments to cooperatives and farmers.
Beyond auctions, about 5–15% of Kenya's coffee is sold on a direct basis through so-called "second window" sales under a liberalization introduced in 2006. Under this system cooperatives arrange their own transactions with overseas buyers.
Meanwhile, the Capital Markets Authority has extended the operating license of the Nairobi Coffee Exchange to April 30, 2023, to enable the Exchange to comply with the requirements of the new regulations. The license had been set to expire on December 31, 2022.
Low prices and other problems have contributed to an exit of farmers from the sector. Kenya's production has been on a long decline in recent decades, falling from a peak of 129,000 metric tons in the 1983/84 crop year to less than 40,000 metric tons in 2020.