The turnaround of coffee cooperatives following the introduction of cherry advances to the farmers by New KPCU, a state corporation, elicited mixed reactions from those expected to benefit from the proposed interventions.
A cursory assessment shows that the uptake of this facility remains way below expectations despite frantic efforts being made by industry players.
I have perused the said Regulations together with the Crops (Coffee) (General Regulations, 2019 and here below are my observations thereon as they apply to coffee cooperatives.
Before I do so, it is absolutely important to understand and appreciate the nature of cooperatives and how they carry out their businesses within the legal, regulatory and policy frameworks.
All cooperatives in this country are subject to the Cooperative Societies Act (Cap 490) of the Laws of Kenya as far as their Constitution, Registration and Regulation is concerned.
Specifically, sections 27 and 28 of this Act provide that Annual General Meetings and Management Committees of cooperatives constitute the “supreme” and “governing” authorities of these cooperatives respectively.
As far as hierarchical order of our legal infrastructure is concerned, the Cooperative Societies Act (Cap 490) remains the main source of cooperative law and is only subservient to the Constitution.
Other subsidiary legislation/ Regulations/Rules made thereunder cannot subjugate the provisions of the parent Act. That I think is something to bear in mind as we discuss any regulations that may be made to affect cooperatives.
Secondly, our cooperative legislation is tailored to be in tandem with the universally accepted cooperative principles that are well listed in Section 4 of the said Act and, as a matter of legal requirement; all proposed societies seeking registration must anchor them in their bylaws.
This has been the practice ever since the Act was repealed in 1997(Amended 2004).
Briefly, the seven (7) principles highlight among others Democratic Member Control” as well as “Autonomy and Independence.”
Thirdly, Cooperatives are legal entities and as such once in a while they enter into contracts with third parties on behalf of their cooperatives/ members.
For this to happen legally, they derive such authority from the supreme organs or general meetings.
That explains why they always need to cite the relevant minute numbers to back up their important decisions when committing their societies while entering into contracts with third parties.
That demonstrates their observance of the Legal Standard of Care required of them as “ordinary men of business” who must be prudent and diligent in all their dealings lest they face dire consequences specified in the law(s.).
Fourthly, it should be emphasized that cooperatives are 100 per cent private sector enterprises and the role of government is largely to provide appropriate policies as well as enact suitable laws that spur their growth. Put another way, cooperatives are NOT appendages of government.
With the foregoing in mind, in my own interpretation of the law, I note a few fundamental flaws in the Cherry Advances Regulations, 2019 as follows;
a. Eligible borrowers (Regulation 10).
As far as I know, cooperatives are jointly formed by members and in the event of entering into any contractual agreements with third parties; it is the Societies through their committees that sign the required contract documents.
By overstepping this order, the lender is actually usurping the role of the committees.
b. Regulation 11 provides that: “A person “desirous” of accessing the fund shall apply in writing for the coffee advance. ……”
The point here is that borrowing from this Fund is not mandatory!
c. Form A1 to be filled by individual farmers should be “Authorised” by the CEO/Manager and the Chairman.
As far as I know, most cooperative societies have Executive Officials (Chair/Vice/Treasurer/ Secretary) who have signing mandates anchored in their bylaws.
In any case, cooperatives must observe their own registered bylaws to the letter lest they are punished for any breach thereof!
d. Use of Societies Common Seal.
In keeping with Societies bylaws, the affixing of the Common Seal to signify the Societies’ commitment must be “minuted” but not as proposed in Form A1.
e. The official mode of communicating any important information such as the participation of members in any project through the society should ideally be done in duly convened general meetings.
That way, the committee would have no excuse but execute general meeting resolutions.
That is the democratic member control that underpins the cooperative business model the world over!
My understanding of the law is that the structures and organs created by an Act of Parliament cannot be subjugated by Regulations which are merely sources of subsidiary legislation.
To that end, the Cherry Advance Regulations need to be harmonised with the parent Act (CSA) or else we will be perpetrating an illegality that would be very costly to the struggling coffee cooperatives.
Way Forward
i. Review the Coffee Cherry Regulations to recognise the organs established by the Cooperative Laws;
ii. If there are any misgivings about the integrity of those running the coffee cooperatives, tackle them head on without creating more anxiety and uncertainty among the members.
Remember, some of the leaders are respectable opinion leaders in their areas hence they require protection for them.to continue whipping their members to expand coffee growing in their areas.
All said and done, there is need for creation of more awareness on the Fund so that the members “buy in” willingly without appearing to be bulldozed.
Bottom line, address the mismanagement of coffee cooperatives, where it exists ,without interfering with the structures and organs created by law bearing in mind the fact that all Regulations or Rules cannot override Acts of Parliament.
By Fred Sitati
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