Kenya's CMA to tighten regulation of coffee sales as way to combat cartels

In a bid to tackle the long-standing issue of cartels manipulating coffee prices at auctions, the Capital Markets Authority (CMA) in Kenya is set to tighten regulations on the sale of coffee at the Nairobi Coffee Exchange. The move comes following the publication of draft regulations by Treasury CS, Ukur Yatani, which will see the Agriculture and Food Authority's Coffee Directorate relinquish its regulatory role over coffee sales. George Bodo, Director of Callstreet Research, shed light on the motivations behind these changes during a recent interview on CNBC Africa. Bodo emphasized that the primary objectives of these regulatory changes are to enforce market conduct and ensure fair price discovery in the coffee sector. He highlighted the prevalent issue of cartels manipulating prices at auctions, leading to a distorted market and limited benefits for coffee farmers. One of the key points raised by Bodo was the need for CMA to step in as an enforcement agency to crack down on market manipulation and enhance transparency in price discovery. By vetting auction players, imposing capital requirements on brokers, and introducing stringent reporting mechanisms, CMA aims to bring accountability to the coffee trading landscape. Additionally, the regulatory overhaul seeks to address farmer grievances regarding pricing disparities at auctions. Bodo reiterated the importance of empowering coffee farmers and fostering a more equitable distribution of benefits within the sector. While concerns have been raised about potential disruptions and increased bureaucracy, Bodo remains optimistic about the long-term positive impact of these regulatory changes. During the interview, the role of commercial banks in the coffee trading chain was also discussed. Bodo clarified that commercial banks are likely to serve as clearing agents to facilitate fund transfers between buyers and sellers. While some skeptics have raised concerns about exclusion of traders not utilizing commercial banks, Bodo assured that the involvement of commercial banks is not a new concept but rather a reinforcement of existing practices. Furthermore, the interview touched upon the broader implications of these regulatory measures in the context of President Uhuru Kenyatta's anti-corruption efforts. While some speculate that the move aligns with the government's commitment to combating corruption, Bodo refrained from drawing a direct connection, emphasizing that the fight against corruption transcends individual regulatory initiatives. In conclusion, the regulatory changes initiated by CMA signal a significant step towards instilling transparency and accountability in the coffee trading sector. By addressing market manipulation, enhancing price discovery mechanisms, and prioritizing farmer welfare, Kenya aims to revitalize its coffee industry and position itself as a competitive player in the global market.