The trumpet of Pan-Africanism and Renaissance in Africa’s Agenda 2063 is summoning Africans to rededicate themselves to the enduring vision of an integrated, prosperous and peaceful continent.
This call is further amplified in the new Agreement of establishing the African Continental Free Trade Area (AfCFTA), which provides for free movement of persons, capital, goods and service, to deepen economic integration and promote agricultural development, food security, industrialisation and structural economic transformation.
Admittedly, coffee is Africa's most important export commodity and the continent enjoys significant advantage on its production. The sub-sector holds the key that could unlock Africa’s dream of inclusive growth. Therefore, restructuring Africa’s coffee sub-sector should be a priority.
Africa is the origin of coffee, the second-most traded commodity after oil and second-most preferred beverage after water, with global annual consumption of 400 billion cups. It supports at least 60 million people across many African countries.
Moreover, coffee has medicinal attributes that have not been adequately utilised, as well as other alternative uses that have not been fully exploited.
Africa’s geographic location with an endowment of vast virgin land and immense untapped water and labour resources, gives it comparative and competitive advantages.
Consequently, coffee has high multiplier effect and a credible anchor of inclusive economic growth of the 25 Africa coffee producing countries.
Globally, coffee industry is a $466 billion business, which embodies a contradiction of separate and unequal divide of global north and south.
The consuming countries of the north on one hand take the lion’s share of 95 percent of the coffee business, which translates to $443 billion.
On the other hand, the coffee producing countries of the global south share $25 billion, with Africa coffee producing countries sharing $2.4 billion of the total. This relegation and marginalisation of coffee producing countries to the less profitable part of the coffee value chain, is attributable on one hand to the imperialistic legacies of extractive policies.
Moreover, the marginalisation has been further sustained by the policy failures of coffee producing countries. On the other hand, monopsonistic dominance of international roasters that has been reinforced by importing trade barriers, has locked the coffee producers out of the most profitable market of roasting and consumption.
Globally, coffee prices have been inherently unstable with a cyclical trajectory pattern that is unable to settle to a long run equilibrium price.
This instability emanates from the inelasticity of coffee prices in both sides of demand and supply, which is driven by longevity of coffee trees and their long maturity period. In addition, with a few exceptions, coffee is mainly viewed as an exportable commodity.
Historically the inherent coffee prices volatility birthed the International Coffee Organisation, with a mandate to manage the volatility through a quota system among other functions.
However, the collapse of quota system in 1989, marked the beginning of a downward trajectory of world coffee prices, that has thrown number of producers, especially small scale coffee farmers in Africa below global extreme poverty.
In 2015, extremely low coffee prices sparked coffee farmers’ protestation in Kenya that attracted media attention. A Daily Nation report unearthed a web of syndicate with monopsonistic dominance that were defrauding the coffee farmers.
Consequently, then President Uhuru Kenyatta appointed a national taskforce to conduct a rigorous value chain analysis and recommend a turnaround strategy.
The taskforce followed the coffee seed to Nairobi Coffee Exchange (NCE), where green coffee sales are settled and tracked the money following the settlement.
Based on its findings, the taskforce recommended a farmer-centric supply side response strategy, anchored on two constitutional principles that proprietary interest of coffee belong to the farmers and decentralisation of regulatory role in favour of county governments.
To address the late payment to farmers, the taskforce recommended a direct settlement system, premised on the equity principle of settling coffee proceeds for everyone at the same time.
Admittedly, the reforms implementation agenda took a protracted and circuitous path, through many challenges of budgetary constraints, inter-ministerial territorial wars, lawsuits and coordination challenges between national and country governments.
While it is difficult to empirically determine the impact of these reforms, the preliminary coffee prices trends at NCE have been positive and encouraging. Most coffee farmers are happy with current prices.
Prof Joseph Kieyah is a policy analyst at the Kenya Institute for Public Policy Research and Analysis (Kippra).
