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Coffee Market: Improving the legal and regulatory framework in Tanzania Summary report December 2016

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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.

10

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