Policy Paper No. 02 of 2001 on Policy and Legal Framework for the Coffee Subsector and the Impact of Liberalization in Kenya

Abstract

A major concern in liberalizing the coffee trade is the need to harmonize the legal framework with policy reform. In particular, the legal framework must change so the institutions previously involved in controlling and regulating coffee fit in well with the new policy framework. This paper shows that, despite policy reform in coffee processing and milling, the Coffee Board of Kenya remains the regulatory agency of the coffee industry and controls coffee marketing. Processing and milling are dominated by cooperatives and the Kenya Planters Cooperative Union. Coffee production has declined due to low use of inputs and neglect of coffee farms. This is attributed to lack of credit to purchase inputs, high prices for the inputs, poor delivery of processing and marketing services, and low payments to farmers. The low payments to farmers are due to high costs of delivery of services by various institutions, which take up about 60% of the f.o.b. world market price for smallholder farmers. Re-organization of the various institutions involved in the delivery of services to smallholder coffee farmers and enforcement of the rules that govern the delivery of the services is recommended as key to reducing the high costs.