Demonstrations break out in Kenya! New government policy threatens coffee industry

Earlier, the United States Department of Agriculture released the current situation of the coffee industry in Kenya, and the report pointed out that the impact of earlier torrential rains and the reduction in coffee acreage is expected to produce 750000 bags (60 kg / bag) of coffee in Kenya in the marketing year 2024. Down 6.3% from the previous marketing year.

However, in order to improve the coffee industry, the government is taking steps to expand coffee production to 102000 metric tons by 2027, an increase of 55 per cent over current coffee production.

And President William Ruto announced that he had approved 6.7 billion shillings in the debt cancellation of cooperatives and that the government had allocated 4 billion shillings to the Coffee Cherry Fund, which would benefit farmers.

But recently, according to Kenyan local media reports, the Kenyan capital Nairobi anti-tax demonstrations broke out, during the police and demonstrators clashed, resulting in a number of deaths and injuries. And, at a later time, demonstrations in Nairobi spread to other parts of Kenya, with clashes in many places, with many calling for President William Ruto to step down and oppose tax increases.

It is understood that according to the data released by the Kenyan Ministry of Finance, Kenya's current foreign debt is about 36.66 billion U.S. dollars (about 4.7 trillion shillings). To this end, in early June, Kenya reached a preliminary agreement with the International Monetary Fund to obtain US $1.1 billion, but due to Kenya's limited repayment capacity, the Kenyan Government decided to increase tariffs in order to obtain more funding.

The conflict was triggered by the government's new fiscal bill, which will raise 346.7 billion Kenyan shillings ($2.67 billion) in additional taxes to continue to pay interest on high sovereign debt.

The new tax increase will impose a 16% VAT on the purchase of bread, sugar transportation, the use of mobile communications and financial services, and foreign currency transactions. However, for the people, they have been facing the pressure of life, as well as the continuous impact of the earlier COVID-19 epidemic, geopolitical economic shocks such as rising prices and currency devaluation, and resentment against the government has been accumulated, which eventually led to violent conflicts.

For the local coffee industry, bread is one of the staple foods of Kenyan farmers, and coffee beans are basically traded in US dollars in the international market. If the VAT is increased by 16%, the operating costs of farmers will increase.

However, according to the latest news from Reuters, the Kenyan president has withdrawn his tax increase plan, and although the president has made concessions, he is still prepared to hold a rally after that.

Coffee industry insiders said that several coffee processing plants in Kenya (including the world-renowned NKG company) have stopped operating as a result of earlier government implementation of new coffee regulations. As a result, farmers now have to handle coffee in designated and licensed factories, but some small factories have cargo accumulation and logistics challenges, and workers have taken part in the demonstrations. as a result, some coffee cherries have rotted due to delays in processing and understaffing, resulting in reduced final exports and reduced income.

In addition, it is considered that productivity and production efficiency should be improved at present, while actively expanding domestic and foreign markets and international influence to sell products. Instead of raising taxes on the people, although the tax increase plan has been withdrawn, it is uncertain about the government's future policy and believes that the future of coffee and other industries is still uncertain.