The Capital Markets Authority (CMA) has capped the service fees on the gross value of crops traded on the Nairobi Coffee Exchange (NCE) at a lower 1.8 percent, marking savings for growers who market their produce through the weekly action.
Kenya’s coffee is marketed either through the weekly auctions at the NCE or sold directly to buyers abroad.
The changes under the newly gazetted Capital Markets (Coffee Exchange) (Fees) Regulation, 2024 mean that service provider fees fall from the previous cap of 2.1 percent of the gross value of the traded crop.
“The purpose of these regulations is to cap service provider’s fees at the exchange (The Exchange, Coffee brokers, the Direct Settlement System) as well as the CMA transaction fees with the aim of minimising operational exchange transaction cost burden to growers from 2.1percent (brokers fees at 2percent and coffee exchange fees at 0.1) currently charged and cap it at 1.8percent of the gross value of coffee sales proceeds,” the regulator said in a brief.
In the changes, the commission charged by brokerage firms has been capped at 1 percent of the gross value of sales proceeds at the NCE, marking a major drop from the 2 percent rate charged currently.
“Limiting brokerage commission at a maximum of 1 percent is on account of brokerage function being exclusive of settlement responsibilities assigned to the DSS (Direct Settlement System) provider as well as the coffee exchange central role to ensure settlement of transactions at the exchange both from a proceeds perspective and a warehouse perspective,” the CMA said.
“The operational cost has been minimised as coffee brokers are no longer required to deposit a $1 million (Sh129 million) bank guarantee to be admitted at the auction floor,” it added.
The DSS enables the farmers to receive coffee payments immediately after payment from buyers, as opposed to an intermediary.
The new rules have introduced and limited the DSS provider fee to 0.3 percent to cater for administrative and settlement-related expenses while a CMA regulatory transaction fee has been introduced and capped at 0.2 percent.
“Increasing NCE fees from 0.1 percent to a maximum of 0.3 percent to ensure that it adequately funds the extra responsibilities as assigned by the Capital Markets (Coffee Exchange) Regulations, 2020. In addition, the Coffee Exchange (NCE) is required to establish a compliance department and in future grow to a self-regulatory organisation hence need for more resources,” the regulator said.
The new regulations form part of wider reforms aimed at restoring success in Kenya’s struggling coffee industry.
Kenya’s coffee is much sought after by roasters and blenders and the country sells its coffee to the world market. The international prices are used as a benchmark for the local price at the NCE.
However, the sector is limping and requires a revamp as more farmers abandoned the crop for better rewarding ventures such as real estate and avocado farming. The State is currently battling to curb the slump amid concerns that the once thriving coffee sub-sector has lost its shine, with production declining from 130,000 tonnes to an average of 40,000.
Data shows that the value of coffee sold on the NCE increased by 93.4 percent in the first seven auctions of the 2024-2025 marketing season, driven by higher volumes. Coffee buyers have purchased cherries worth $22.8 million (Sh2.94 billion).
This was nearly double the $11.8 million (Sh1.52 billion) purchases in a similar period of the previous year. The higher earnings were primarily due to a 41.7 percent jump in sold volumes to 4.38 million kilogrammes, up from 3.09 million in the previous window.
