Global Coffee Miller NKG to Close Operations in Kenya Amid Gov’t Regulatory Changes

KENYA – NKG Coffee Mills Kenya, a member of Germany’s Neumann Kaffee Gruppe, has announced its decision to shut down operations in Kenya next month due to the challenges posed by government-backed reforms in the coffee sector.  

The global coffee miller plans to lay off its staff by the end of February, attributing the move to recent regulatory changes in the industry, specifically the Coffee Regulations, 2019, and Capital Markets (Coffee Exchange) Regulations, 2020. 

In a statement, NKG Coffee Mills Kenya Ltd expressed its inability to secure the required milling license following the regulatory changes. 

The company highlighted the potential for certain positions within its staff establishment to become redundant in the wake of ongoing alterations in the sector. 

The announcement came through a letter from the company’s regional head of Human Resources (HR), Hellen Akumu, following a meeting held on January 16 to assess the impact of the reforms on its operations. The letter outlined the company’s commitment to exploring alternatives through consultations before the February 29 deadline. 

NKG Coffee Mills Kenya, which operates globally with more than 60 companies, is finalizing its plans in the coming months. The business plans to conduct consultative meetings in January and February 2024 to consider alternative solutions before communicating the final decision on the intended redundancies. 

Ms. Akumu stated, “Whilst exploring alternative avenues during consultations, we wish to notify you of the intended redundancy. If no alternative is found and the redundancy confirmed, as per existing laws, it will be effective from February 29, 2024.” 

The Hamburg-headquartered NKG operates in Kenya through two subsidiaries: Ibero Kenya Limited, focusing on export and milling, and Tropical Farm Management Kenya, a marketing agent, financer, and service provider to farmers. 

The closure of NKG’s operations is expected to impact not only its employees but also farmers and other workers connected to its operations across value chains. 

The move follows President William Ruto’s executive order in January 2023, assigning his deputy, Rigathi Gachagua, to lead reforms in the coffee and tea sub-sectors. 

The proposed restructuring includes the introduction of a direct settlement system (DSS) for expedited and transparent payment of coffee sales proceeds. 

Additionally, the Coffee Bill 2023 aims to reorganize the industry by shifting regulatory and commercial roles from the Agriculture and Food Authority to the Coffee Board of Kenya. 

The proposal also suggests transitioning coffee research from the Coffee Research Institute to the Kenya Agricultural and Livestock Research Organisation. 

However, these reforms have led to chaos in the sector, causing delays in the issuance of marketing and milling permits. This has left millers and marketers without stocks for processing and sale, contributing to the challenges faced by NKG Coffee Mills Kenya and its subsequent decision to cease operations in the country.  Food Business Africa.