coffee market: improving the legal and regulatory...
TRANSCRIPT
Coffee Market: Improving the legal and regulatory framework in Tanzania Summary report
December 2016
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Contents
Contents ............................................................................................................................................... 1
ACRONYMS ........................................................................................................................................... 3
Preamble .............................................................................................................................................. 4
1. Overview of the coffee sector in the country .......................................................................... 5
1. Production: ............................................................................................................................... 5
2. Consumption: ........................................................................................................................... 5
3. Policy: ......................................................................................................................................... 5
4. Marketing: ................................................................................................................................. 6
2. Overall objective of the study .................................................................................................... 6
3. Methodology ................................................................................................................................ 7
4. Findings ......................................................................................................................................... 7
1. Actors of the Coffee Subsector Value Chain ........................................................................ 7
2. Institutional Framework of the coffee sector ...................................................................... 9
3. Problems related to Productivity and Quality of coffee .................................................. 10
4. Channels by which coffee is marketed .............................................................................. 10
5. Influence of future contracts on Coffee prices: ................................................................ 12
6. Taxes ....................................................................................................................................... 12
7. Coffee Racketeering ............................................................................................................. 13
8. Poor infrastructure ............................................................................................................... 14
9. Local Consumption of coffee .............................................................................................. 14
5. Inputs from the national stakeholders Workshop .............................................................. 14
6. Q&A and recommendations - National Stakeholders Workshop ...................................... 15
7. Formation of Task Force .......................................................................................................... 18
8. Conclusion, recommendations ............................................................................................... 19
9. References ................................................................................................................................. 21
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ACRONYMS
AMCOS: Agricultural Marketing Cooperative Society
CIDS: Coffee Industry Development Strategy
CSOs: Civil Society Organizations
GAIN: Global Agricultural Information Network
LGAs: Local Government authorities
MALF: Ministry of Agriculture Livestock and Fisheries
MITI: Ministry of Industry Trade and Investment
TaCRI: Tanzania Coffee Research Institute
TCA: Tanzania Coffee Association
TCB: Tanzania Coffee Board
TCDF: Tanzania Coffee Development Fund
TANICA: Tanzania Instant Coffee Company
DAICOs: District Agriculture, Irrigation and Cooperative Officers
VSO: Voluntary Services Overseas
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Preamble
This report gives the performance status of the coffee sub-sector in the country. It describes
the quo of the regulatory and institutional frameworks and their effects on the sector
performance across its value chain, which according to the study findings, the performance
of the coffee sub-sector is hindered by many factors from production, post-harvest and
marketing. The key challenges experienced by smallholder farmers include poor extension
services, high costs of inputs, adulterated inputs, low coffee price, and low level of
engagement of youth in coffee production and inadequate CPUs for processing cherry
coffee. Other challenges are poor institutional support, poor marketing systems, high taxes
and fees, and effects of climate changes. All these challenges have contributed to low coffee
productivity, poor coffee quality, low farm gate prices and coffee racketeering.
In order to address these challenges, the consultant and coffee stakeholders at the national
level recommended training smallholder farmers on good agricultural practices and proper
usage of agro-inputs. Other recommendations included uprooting of the aging coffee trees
and replacing them with new higher-yielding, disease-resistant varieties to reduce the cost
of production, improve coffee quality and increase productivity. Cooperative unions and
private companies buying coffee from smallholder farmers are urged to buy CPUs and sell
them to primary societies and farmer groups on credit facility and the repayments can be
obtained from the sale of coffee. Strengthening cooperative unions is highly recommended
in order to create profitable coffee marketing structures for smallholder farmers.
On 2nd January 2017, the President of the United Republic of Tanzania talking to the residents
of Kagera region, directed the Ministry of Agriculture Livestock and Fisheries together with
the administration of the Kagera region to immediately work on the reduction of the un-
necessary taxes and fees charged to the coffee sector. He said, almost 30 taxes and fees
were charged on the coffee sector and noted that they were significantly reducing the coffee
prices for farmers. This is an important step towards improving the performance of the
coffee sector.
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1. Overview of the coffee sector in the country
1. Production:
Coffee accounts for about 5% of Tanzania’s total exports by value and generates earnings
averaging US$100 million per year. The industry provides direct income to about 400,000
smallholder farmers who produce 90% of the Tanzania’s coffee.
The Government of Tanzania continues to implement its Coffee Industry Development
Strategy (CIDS), (2011 - 2021) by supporting a coffee production expansion program that
involves increasing yields in existing farms and facilitating the private sector to start new
farms with the main objective of doubling coffee production by 2021. Although there is an
expansion of new farms and improvement of agronomic practices, erratic weather due to
climate change remains an underlying challenge to sustainable coffee production in
Tanzania.
FAS/Dar es Salaam forecasts, a USAID Global Agricultural Information Network (GAIN, 2016)
reports that, Tanzania’s coffee production will decrease to 1.15 million bags in the marketing
year 2016/2017 from 1.2 million bags in marketing year 2015/16 due to the biennial bearing
cycle. Ending stocks are expected to decrease by 50,000 bags compared to marketing year
2015/16. Coffee stocks are held by small scale farmers' cooperatives, traders, exporters and
large scale coffee growers.
2. Consumption:
Various reports including the GAIN, 2016 show that most of Tanzania’s coffee is exported
and local consumption is estimated at 7% of the total production. Tanzania Coffee Board
(TCB) estimates that domestic coffee consumption is growing at an average of between 1.5
and 2 percent per year due to a coffee drinking culture that is gradually taking roots in the
urban and semi-urban areas.
3. Policy:
The Government of Tanzania launched the Coffee Industry Development Strategy in 2011.
The overall goal of CIDS is to improve incomes across the entire value chain by increasing
coffee production and quality. The government forecasts coffee production to reach 100,000
metric tons by 2021. According to TCB, the following has been achieved under the strategy:
Improvement of delivery of extension services: TCB in partnership with coffee industry
stakeholders have prepared a new coffee curriculum to be used by all institutions delivering
extension services to coffee farmers. The harmonized curriculum will ensure common
standards by extension service providers.
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Improving the business environment: In 2013 the government revised regulations that
guide operations of the coffee industry whereby measure to remove conflicts of interest in
the industry were taken.
Formation of stakeholders’ forum: Following the amendment of the Coffee Act in 2009,
coffee industry stakeholders have formed stakeholders’ forums which convene annually to
deliberate issues of common interest for the benefit of the sector.
Access to inputs: In 2012 TCB in partnership with coffee industry stakeholders established
the Coffee Development Fund (TCDF). The TCDF facilitates the implementation of shared
functions as agreed by stakeholders from time to time including access to inputs by
smallholder coffee farmers.
4. Marketing:
Coffee is grown in the northern, western and southern areas of the country and marketing
is centralized via an auction in Moshi, Kilimanjaro Region. About two-thirds of coffee
produced in Tanzania is mild Arabica and the rest is hard Arabica and Robusta. The Mild
Arabica coffee is wet processed, while the Robusta coffee is dry processed. Pre-auction
coffee marketing is undertaken through three channels:
Farm gate market: Producers sell their coffee either to licensed coffee buyers, cooperatives,
farmer groups or associations. Coffee is sold in this market in the form of wet processed
parchment or dried cherry. Buyers then take the coffee for drying and curing to produce
clean coffee (green beans).
Coffee auction: Coffee is sold to exporters by TCB at the coffee auctions in Moshi every
Thursdays during the season (usually 9 months) where buyers buy coffee for export. Most
of the prominent exporters are affiliated with the multinational companies which sell coffee
to roasters in consuming countries. Prices in this market are generally set in reference to
New York Futures market for Arabica coffee and London Futures market for Robusta coffee.
Direct export market: Producers of premium top grade coffees that are able to establish
direct contact with buyers overseas are allowed to by-pass the auction and sell their coffee
directly. TCB is mandated to approve the sale contract after being satisfied that the price
offered is higher compared to the coffee sold to the auctions.
2. Overall objective of the study The overall objective of the Study was to establish the status quo of the regulatory
framework and its effect on the performance of the coffee sector in the country. The results
of the study were to form a foundation for a solid advocacy proposal aiming at improving
the regulatory system and advocating for better and effective coffee marketing.
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Specific objectives were to:
I. Identify the value chain of coffee market actors, service providers, their roles and
relationships.
II. Analyze potential opportunities, barriers and causes of market failure specifically
assessing coffee productivity, coffee species, farm gate prices, farmer’s share of the
export price, quality, regulatory mechanisms, crop taxes and levies, current socio and
political economy of coffee industry.
III. Assess current and potential markets– (local, regional and international) and propose
actions on how to reach out for such markets
IV. Make recommendations on how Tanzania should optimize potential opportunities
3. Methodology The findings were obtained through field study as a source of primary data and desk review
from which secondary data was obtained. Tools of primary data collection involved key
informants and Focus Group Discussion. Secondary data were gathered through reviewing
relevant documents. The findings were validated in a series of meetings held in all the
districts where the study was undertaken including Muleba, Karagwe, Tarime, Mbozi, Moshi
and Kigoma. A national dissemination meeting was finally held in Morogoro.
4. Findings
1. Actors of the Coffee Subsector Value Chain
The study identified the following key actors and stakeholders of the coffee industry in
Tanzania:
Producers (smallholder farmers and estates): Small scale farmers constitute 90% of coffee
producers. They are at the starting point of the value chain, responsible for production. Due
to the small size of coffee production at individual level, they organize themselves into
groups which enable them to sell their coffee collectively. These groups are either farmer
groups or cooperative societies.
Middlemen: Contracted by big buyers e.g. companies and small traders (this could be an
unregistered family/individual businessman – buying directly from farmers and selling to
registered buyers e.g. companies). The majority of coffee buying companies use middlemen
to buy coffee from the farmers.
Smugglers/illegal traders (Cross border trade): These are mainly informal traders from
Uganda. They buy coffee from coffee producers in Tanzania mainly because they offer
slightly higher prices than those offered by cooperative unions and private companies in
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Tanzania. The Ugandan traders buy more coffee from Kagera especially when coffee
production is low in Uganda.
Processors / exporters: They can either be private companies or cooperative unions. They
buy cherry and/or parchment coffee from individual farmers through middlemen or directly
from the farmers through farmer groups or primary societies. Like the private processing /
exporting companies, some cooperative unions also buy cherry and/or parchment coffee
from farmers and ownership of the parchment is automatically transferred to the
cooperatives. Other cooperative unions collect, process and sell coffee on behalf of primary
societies (AMCOS) which are their members.
Local roasters: These are holders of local roasting license who buy green coffee, and make
ground coffee or instant coffee. Tanzania Instant Coffee Company (TANICA) is one of the
local roasters companies.
Institutions:
The Ministry of Agriculture Livestock and Fisheries: has vested the regulatory
powers to TCB. It provides general policy guidelines related to all crops and
backstopping support to TaCRI.
TCB: performs the regulatory function by supervising the coffee license holders and
reprimands for non-compliance actions and, facilitates a shared function with other
coffee stakeholders for promotion of the coffee subsector.
TaCRI: undertakes research activities for developing and disseminating appropriate
coffee technologies that are necessary to increase productivity, improve quality,
reduce cost of production and improve competitiveness of Tanzania’s coffee in the
world market.
Local Government Authorities (LGAs): provide support services such as extension
and regulate the coffee business.
Primary societies and farmer groups: These are groups of smallholder farmers and
are responsible for collection of their members' cherry coffee, processing parchment
and delivering it to the processing mills for curing. While primary societies are
members to cooperative unions, farmer groups were recently formed with the help
of TaCRI during the introduction of new coffee varieties.
Cooperatives unions: These are responsible for both coffee production and
marketing. They assist their members (primary societies) to access financial services
from financial institutions, marketing and sell coffee directly to international markets
or through the coffee auction in Moshi.
Civil societies Organizations (CSOs): These exist in societies and are responsible for
social, political and economic affairs of their society members.
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Supporting Organizations/ service providers: (i.e. financial institutions, NGOs,
Tanzania Coffee Association (TCA) etc.) – provide support to coffee actors along the
value chain.
2. Institutional Framework of the coffee sector
The institutional framework of the coffee sector describes the limitations and opportunities
it creates in the coffee sector and how different actors benefit from it. The study revealed
that the industry is highly regulated. Furthermore, both TaCRI and TCB were reported being
under-financed for performing their roles. With regard to the implementation of the coffee
development strategy, it is far behind the plan.
TCB: is a government organ established by the Tanzania Coffee Industry Act No. 23 of
2001. It regulates the coffee industry in Tanzania and advices the government on all matters
related to production, processing and marketing of coffee within and outside the country.
The board coordinates and monitors the processes along the value chain and represents the
stakeholders involved in the value chain. The coffee industry act identifies TCB as a custodian
for safeguarding interests of the various actors in the coffee sector with particular emphasis
on the smallholder farmers who are the coffee producer. This study revealed that TCB is
poorly funded and as a result it has not been able to carry out its regulatory functions as
required; including limited control on the influx of informal/unregistered traders who buy
coffee without licenses, whereby the sector loses tax and there are no records available for
the loss.
TaCRI: is continually increasing multiplication of improved coffee varieties and
dissemination of information to stakeholders. Stakeholders are happy with the outcomes of
research activities done by TaCRI whereby the innovations in farming practices and
development of knowledge and materials for improvement of the coffee production are
visible. However, despite the apparent achievements, the institution has also not been
adequately funded to perform its functions as required. The capacity to disseminate
technologies of the improved coffee varieties to all smallholder farmers is still a challenge
given the insufficient funds.
LGAs: Are responsible for registeration and provision of agricultural extension services to
coffee farmers. However, they have not been implementing their roles adequately and as a
result productivity and qulity of coffee have remained low. Extension services by LGAs
extension officers are limited. Where extension officers are available, their expertise on
coffee husbandry is limited.
Financial Institutions: Smallholder coffee producers have limited access to credit from
financial institutions since financial institutions have little interest in supporting coffee
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farming activities. Those who access credit from banks, they are charged high interest.
Cooperatives are weak to qualify to take loans from financial institutions for their members.
Primary societies and farmer groups: These are groups of smallholder farmers for the
purpose of accelerating farmers to access the important services needed for coffee
production and marketing. These groups are challenged with the lack of GAP knowledge,
post-harvest management and marketing skills.
Cooperatives unions: Cooperative unions are lacking good governance and have been
mismanaging their members' funds and are heavily indebted to institutions. As such they
cannot advance payment to farmers upon depositing coffee to cooperatives for sell.
Cooperatives are also weak in supporting coffee production and marketing. Farmers can
take up to three months to receive their payments after the cooperatives have sold coffee.
This is one of the reasons why farmers sell coffee parchments or cherry to agents of private
buyers and it is contributing to coffee racketeering to some of the countries such as Uganda.
3. Problems related to Productivity and Quality of coffee
Productivity and quality of coffee have remained low. Major factors reported to contributing
to these problems included:
Lack or low usage of inputs mainly due to limited access to financial services,
Limited access to extension services and insufficient coffee agronomy knowledge for
smallholder farmers.
High cost of inputs and prevalence of non-genuine inputs
Droughts
Coffee diseases mainly coffee berry disease (CBD) and coffee leaf rust (CLR) which in
some parts can cause losses up to 60%
Low dissemination of new coffee variety seedlings which are disease resistant.
Majority of farmers maintaining traditional coffee varieties as a result of high costs
related with the establishment of new farms. Currently a new coffee seedling is
subsidized at TZS. 300 from the actual price of TZS. 1,000. The number of CPUs at the
primary societies and farmer groups are not adequate for processing parchment and
instead farmers use the manually operated machines which are home based. These
contribute to the inconsistent and heterogeneous poor quality of coffee.
4. Channels by which coffee is marketed
The study identified four coffee marketing channels for the coffee subsector:
The purely private marketing channel: consisting of private coffee buyers who
purchase parchment at farm-gate or at local buying posts. The private coffee buyers
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deliver the parchment coffee to the dry mills for processing and sell at the auction. The
ownership of coffee for this channel is transferred to the parchment buyer in the private
marketing chains.
The traditional cooperative channel (e.g. KANYOVU in Kigoma, KNCU in Kilimanjaro
etc.): Smallholder farmers deposit coffee at a primary society where it is inspected and
weighed. Farmers are given the first payment by the cooperative union upon depositing
parchment. The cooperative union processes the parchment to obtain clean (green)
coffee and after which the samples are auctioned and farmers receive the second
payment for the difference between the auction price and the first payment, with costs
deducted. Ownership of the coffee remains with the farmers until sold at the auction.
Marketing Farmer Groups: A number of primary societies have left the unions to which
they once belonged and have formed alliances into farmer groups for coffee marketing
purpose. This marketing channel utilizes elements of the cooperative marketing system.
One of the farmer groups is called G32 which is based in Kilimanjaro region.
Producer Support Organizations (PSOs): The final, and most recently introduced,
coffee marketing channel is that which is coordinated by PSOs for direct export (e.g.
Kilicafe).
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The diagrammatic Presentation of the existing Tanzania's Coffee Marketing System
5. Influence of future contracts on Coffee prices:
Farm gate price (through the auction) is mainly influenced by the futures contracts at the
global markets (which is increasingly influenced by global economic conditions of the supply
and demand for coffee derivatives). The futures contracts have negative effect to local
exporters as they are neither vertically integrated in the supply chain nor can they use
hedging instruments to manage the risks of price instability (e.g. Rombo Millers was reported
as one of the local export companies which was pushed out of business because of the
consequence of the futures mechanism).
6. Taxes
Actors of the coffee value chain are concerned by the taxes, fees and levies imposed on the
coffee sector. TCA identified 26 taxes for the coffee value chain. These taxes are disincentive
to the sector. For example, the effective crop cess charged by LGAs can range from8% to
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14% depending on the pro-rata price of coffee set by the LGAs. For example, the price of
coffee sold at the auction can be TZS 2,000 per kg, but the LGA can decide to deduct the 5%
crop cess on a pro-rata price (e.g. TZS 3,500 per kg), thus raising the percentage of the crop
cess higher than 5%. Moreover, this percentage is calculated with the cost of production
inclusive, therefore lowering further the final payment to the farmer. Another factor
contributing to coffee racketeering, was reported as due to many taxes shown below:
The 26 taxes and charges to the coffee sub sector:
Taxes on coffee at producer level Value (TZS)/percentage
1. Fire and rescue license (depending on farm size) 2,000,000
2. OSHA 350,000
3. OSHA Electrical Safety 800,000
4. Land rent (depends on size of farm)
5. Crop cess 5%
6. Income tax 30%
7. Corporate tax 30%
8. VAT on inputs 18%
9. Duty on inputs: various dependent on customs code
10. Research cess 0.75%
11. Coffee Development Fund 0.1%
12. Skills and Development Levy 5% of wages
13. Labour surcharge 1% of wages
14. Service levy 0.3% of turnover
Taxes on coffee at export level
1. Fire and rescue license (depending on farm size) 2,000,000
2. OSHA 350,000
3. OSHA Electrical Safety 800,000
4. Land rent Various
5. Property tax Various
6. Municipal levy 0.3% of turnover
7. Corporate tax 30%
8. Exporters contribution to coffee development fund 0.1%
9. Skills and development levy 5% of wages
10. Labor insurance 1% of wages
11. Coffee bags Duties of 50%
12. Coffee industry licenses several
Source: TCA Study on coffee taxes
7. Coffee Racketeering
The mismanagement of funds by cooperative unions is one of the factors associated with
coffee racketeering. The higher taxes charged by various authorities and in addition to the
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levies for services provided by another factor. Likewise, the LGAs in Kagera region are
charging TZS 1 million to coffee companies as contribution for prevention of coffee
racketeering. Apart from higher taxes, farmers find profitable to sell to Uganda traders who
offer higher coffee prices than the Tanzanian cooperative unions and private companies. It
was also noted that Uganda has a simplified tax regime under one harmonized tax structure,
which is shared by various institutions including the local government authority, the research
institute, and the coffee authority. Social security and safety net of farmers are also
contributing to coffee racketeering since payment is done instantly unlike most of
cooperatives in Tanzania.
8. Poor infrastructure
Poor road infrastructure in rural areas especially feeder roads. These increase the cost of
transport, hence reducing the coffee profits.
9. Local Consumption of coffee
The consumption of coffee among Tanzanians remained low since the majority of
Tanzanians are tea drinkers. One of the reasons is the high price of coffee compared to the
price of tea. This is affordability issue.
5. Inputs from the national stakeholders Workshop Stakeholders who attended the workshop were diverse across the coffee value chain
including individual smallholder farmers, Cooperatives officers, Agricultural Marketing
Cooperative Society (AMCOS), Farmers’ Associations, Ministry of Industry Trade and
Investment (MITI), financial institutions, large scale farmers, processors, District Agriculture,
Irrigation and Cooperative Officers (DAICOs), agricultural field officers, civil society
organization (CSO), coffee inspectors, network of farmers’ groups (MVIWATA), Tanzania
Coffee Board, Ministry of Agriculture Livestock and Fishery (MALF), and Tanzania Coffee
Research Institute, VSO and ANSAF officers.
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6. Q&A and recommendations - National Stakeholders Workshop
During the workshop, a number of issues were raised and the participants came with
deliberations as follows:
No Challenge Recommendation
1.
Poor extension system: Due to
inadequate number of extension
officers in the areas growing coffee
and where they exist they are not
knowledgeable and skilled to deal
with coffee;
i. Participatory and effective extension systems be
established by having a mechanism whereby
farmers make evaluation of the performance of
extension workers
ii. On-going training of extension officers to make
them cope with emerging challenges in farming and
the changing technology.
iv. Providing Extension officers with transport
facilities and working gears.
2.
Availability of inputs and related
high costs: Usually fake inputs are
cheaper than genuine ones, it is
tempting for a farmer to buy
adulterated inputs.
Regulatory bodies such as TPRI, TBS, CARMATEC, etc.
be empowered to deal with the adulteration of
inputs.
An umbrella organization to monitor the regulatory
bodies should be established so that the
responsibility of each body could be transparent to
the actors. At the moment farmers do not know who
to contact in case of adulterated inputs between TBS
and TPRI or TFDA
3. Low involvement of youth in
coffee farming
i. The price of coffee be improved so that the youth
can see the potential of investing in coffee
ii. The government should consider seriously
improving infrastructure in the rural areas such as
health facilities, electricity, water, roads, etc.,
Improve the living standards of people in the rural
areas in order to reduce the push factors which
cause rural to urban migration.
iii. Youth be given entrepreneurship training which is
relevant to rural contexts.
4. Poor benefit of coffee returns to
women.
i. This is because in most areas where coffee is
grown, coffee farms belong to a man. It is
recommended that a proper system be put in place
that will ensure that women benefit from coffee
returns
5. Poor coffee price for farmers
Reduction of taxes which are claimed to have a
significant contribution to low farm gate prices.
LGAs should reinvest part of the crop cess into
coffee production
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No Challenge Recommendation
6. Weak cooperatives
It was advised to transfer power from the
cooperative officers to the farmers as currently all
powers have been vested in the cooperative officers.
7. Weak institutional support to the
coffee sector
i. TACRI – The government should ensure that that
research institute is well funded. The task of funding
the research institution should not be left to coffee
farmers. It was also recommended that the research
done by TaCRI should reflect the needs of the
farmers and there should be dissemination
mechanism of the research findings.
ii. TCB –should be equipped financially to undertake
its responsibilities of regulating the sector.
iii. Cooperatives should improve their effectiveness
and efficiency and should be supervised to comply
with the cooperative law. Politicians should be
avoided in managing the cooperatives;
professionalism should be instituted.
iv. The central government and LGA should ensure
that transport infrastructures are in good order;
railways should be revived, and feeder roads should
be improved.
The government should create conducive
investment climate for coffee actors to reduce
operational costs.
Bureaucracy should be reduced. For example, it was
reported that during the auction on every Thursday
buyers from outside the country have to pay
business license of about US$ 200 at the airport.
This is a disincentive for buyers from outside the
country.
vii. Local Government Authority (LGAs) – Enforce
laws and orders, make by-laws and regulations at
the District Council level. It is recommended that the
20% of the cess should be brought back into the
coffee sector in the respective District Councils. The
government should review laws and regulations
governing the coffee industry.
vii. Financial institutions- should ensure access to
finance especially for smallholder farmers is
available and affordable
viii. Input suppliers –Should ensure that adulterated
inputs are controlled.
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No Challenge Recommendation
8.
Coffee marketing system:
Farmers not knowing what the
market needs especially in terms of
quality and instead they sell what
they produce and do not sell what
the market wants.
Multiple licensing - Some traders
receive more than one license
contrary to the requirements of the
law. A good example is ACOF which
buys coffee at the auction in Moshi
but at the same time it buys coffee
from farmers under a different
name. This creates fake
competition at the auction.
TCB and LGAs should continuously offer awareness
creation campaigns about the marketing system.
This should include provision of market information.
It was recommended that TCB should carry out due
diligence to the companies seeking licenses in order
to avoid multiple licenses problem.
Legal and regulatory framework in coffee marketing
should prevent the problem of black market/coffee
racketeering.
Multitude of taxes and levies on coffee should be
reduced.
TCB must increase efforts to promote Tanzania’s
coffee in the international market.
9.
Unclear farm gate definition: It is
difficult to understand how farm
gate prices are determined; crop
cess is calculated based on the
coffee prices before deducting the
production costs which erodes
farmer’s profit
The crop cess is paid by farmers
instead of buyers as stipulated in
the law. The situation is like this
because when the law was enacted
there was a clear separation
between producers and buyers. But
now the business environment has
changed; some farmers, through
their associations, are able to sell
coffee directly to the auction and
crop cess is forthwith deducted.
The way the 5% crop cess
calculated, it is a disincentive to
farmers who produce good quality
coffee. This is because high quality
coffee fetches premium price on
the market. As such a farmer with
good quality coffee pays more cess
than that producing low quality
coffee as their coffee prices are
higher. This implies that a farmer is
The law should be amended to be able to address
the current challenges
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No Challenge Recommendation
punished for producing good
quality coffee.
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High interest rates charged by
banks
Farmers need to organize themselves into groups to
ensure large quantities of coffee collections that can
guarantee issuance of loans with low interest rates
due to economies of scale.
11.
Poor extension services provided
by the government as compared
with extension workers of the
coffee companies
The multiple responsibilities of the government and
the limited budget were the factors reported. It was
further noted that poor performance of the LGA
extension officers is due to their lack of expertise in
coffee
The government is urged to provide ongoing
refresher training to the LGA extension officers and
urged other coffee stakeholders to complement to
the government support.
12.
Fungus problem on coffee: Some
farmers from the coffee producing
districts are still not able to obtain
the new coffee variety seedlings
multiplied and disseminated by
TaCRI.
Cooperatives were urged to liaise with the Tanzania
Coffee Research Institute (TACRI) for collecting them.
Replanting new coffee varieties will resolve the
challenge of fungus.
13.
Low or non-participation of
youth in coffee production:
Coffee is not regarded as a
profitable business. Youth are
much more willing to engage in a
crop in which they view less
barriers and more profit as
compared to coffee. It was also
revealed that youth have limited
access to the land and inputs
preventing them from engaging in
the sector.
The farming environment needs to be improved in
order to attract more youth in coffee production.
7. Formation of Task Force
A task force was formed to prepare resolutions of the meeting for sharing with a wider
spectrum of stakeholders. The team was formed comprised of representatives of different
groups of stakeholders taking gender and geographical location into perspective. The
taskforce will also identify stakeholders that are targeted in the advocacy strategy. The team
agreed to meet in August, 2016. The task force agreed to align with the meetings of
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parliamentary committees. Such synchronization is critical in order to minimize time wastage
for the Task Force members in achieving its objectives.
8. Conclusion, recommendations The study noted that, small-scale farmers are placed at the center of almost all agricultural
policies and strategies, ranging from the Vision 2025 to the National Strategy for economic
Growth and Reduction of Poverty (NSGRP) and specific policies and projects. Policies,
strategies, and programs provide to a large extent policy statements and objectives that
favor the interest of small scale farmers. The District Agricultural Development Plans (DADPs)
focus on improving the livelihood of the small scale farmers, for example increased
agricultural mechanization and irrigation, improvement of crop and improvement of market
infrastructure and cooperatives. The main challenge has always been on the implementation
to have the benefits reflected on to the beneficiaries. In addition to these recommendations,
the President of the United Republic of Tanzania while talking to the residents of Kagera
region on 2nd January 2017, directed the Ministry of Agriculture Livestock and Fisheries
together with the administration of the Kagera region to immediately work on the reduction
of the un-necessary taxes and fees charged to the coffee sector. He said, almost 30 taxes
and fees were charged on the coffee sector and noted that they were significantly reducing
the coffee prices for farmers. This is an important step towards improving the regulatory
and institutional frameworks for the coffee sector in the country. The following are main
issues raised and recommendations provided in this study (some are policy issues).
Issue Recommendations
Good Agricultural Practices: The
problems of low productivity and low
quality of coffee are due to lack or
insufficient good agricultural
practices. Majority of these
smallholder farmers are facing critical
problems related to lack or low
insufficiency usage of quality inputs
and are also facing limitation to
accessing extension services.
Training of smallholder farmers on good agricultural and
usage of agro-inputs. In addition, farmers could be
sensitized on gradual uproot of aging coffee trees and
replace the new higher-yielding, disease-resistant
varieties. Farmers will make more profit through the
reduction of operational costs and increased prices due
to high quality of coffee of the new varieties.
Insufficient CPUs: Most of the coffee
processed in Tanzania is home based
which tend to result into inconsistent
and heterogeneous quality because
of the deficient postharvest practices.
Cooperative unions and private companies buying coffee
from smallholder farmers can facilitate the purchase of
CPUs for primary societies and farmer groups and can
deduct their repayments from the farmers’ coffee sales.
Efficiency and transparency of the
coffee marketing channel: The
Strengthen the cooperative unions so that they are
capable of obtaining more stable prices for coffee
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Issue Recommendations
study revealed that the coffee
marketing channels are inefficient
and they lack transparency.
Cooperative unions are among those
with inefficient and non-transparent
marketing channels. This is
contributing to high transaction costs.
producers than the private companies since they can
have a stable payment system; offering producers the
opportunity to sell their crop early and still benefit from
potential increases in price once the crop has been sold
to exporters through the auction.
Cash outlay required by farmers
upfront: Access to credit by
smallholder coffee farmers’ remains
limited due to the nature of
unpredictability in agricultural
production. Cooperative unions
which are responsible for facilitating
the availability of credit to farmers,
are mismanaging funds and are
lacking good governance.
Cooperative unions need to be strengthened and this
should be the responsibility of all coffee stakeholders.
This can be done through articulating the 2013
Cooperative development policy to ensure the Unions
and Primary Societies become viable economic entities;
strengthening democracy and financial literacy skills.
Taxation and licensing:
The 5% crop cess charged by LGAs is
too high for farmers.
Taxes and fees charged on the coffee
sector are disincentive to actors of
the coffee sector. The 26 taxes are
inhibitive to the growth of the sector.
It is recommended to reduce or to remove the crop cess
for farmers
A harmonization and reduction of taxes for the coffee
sub-sector is proposed
Problem of Coffee
Racketeering/illegal coffee trade
Establish mechanisms to increase coffee prices.
The responsible authorities could learn from Uganda’s
simplified tax regime working under a harmonized tax
structure that allows institutions (LGAs, research institute
& coffee authority) to share the revenue of tax collection.
Law enforcement authorities are expected to conduct
their business without expecting allocation from coffee.
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9. References 1. The Tanzania Coffee Industry Development Strategy 2011/2021;
2. Tanzania Coffee Industry Regulations, 2012;
3. Tanzania Coffee Industry Act., 2001,
4. Tanzania National Agricultural Policy, 2013,
5. Amended Local Government Financial Act, 2015
6. USAID GAIN, 2016, Tanzania Annual Coffee Report