In his capacity as chairman of the Kenya Coffee Traders Association, Jay Sondhi attended AFCA in Nairobi during February 2015 and delivered a speech entitled “The Current Coffee Marketing System in Kenya”. The speech compares Kenya Coffee’s declining production with the performance of the tea sector in Kenya. The tea sector has increased its production by more than four times over the past twenty years. The coffee sector’s production has decreased by fifty percent during the same twenty year period.
The critical difference between the two sectors is the payment to the farmer by the cooperative sector. Tea farmers are paid a portion of the value of the produce achieved at auction on a monthly basis until until they receive their final payment once all costs associated with the sale of a particular lot of tea are calculated. This means the tea farmer always has a positive cash flow. Despite the fact the the cooperative receives the payment from the marketing agent within fourteen days from the day the coffee is sold at auction, the cooperative’s board does not pay the coffee farmer for up to seven months. This delay is major reason for declining production.
This delay must be addressed by the authorities in government. Otherwise, production in Kenya could decline further and threaten the industry’s survival. By paying the tea farmer on time Kenya Tea has become the largest foreign exchange earner in Kenya and the Mombasa tea auction is now the largest tea auction in the world.
The example of teas success is apparent. The coffee industry in Kenya has only to follow the tea industry’s proven formula!
You can download the whole presentation here: 2015-AFCA presentation.
