Friday 14 June 2024
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RABOBANK REPORT – Significant potential for Tanzanian coffee industry, but serious challenges remain

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With proper investment and training Tanzania is well placed to achieve its potential in the global coffee markets.

However, according to the latest report from Rabobank, Climbing Kilimanjaro: Tanzania’s Future in Global Coffee serious governmental efforts are needed to overcome the country’s current stagnation in production and enable farmers to improve the quality of their beans.

To address these issues, the Tanzanian government should work with the industry to create dedicated value chains.

“While Tanzania is currently considered a small player in the global coffee market, faith in its growth potential is mirrored in the country’s ambitions to increase production to more than 100 thousand tonnes, and to double the amount of premium coffee beans,” explained Rabobank Analyst Sierk Plaat.

“However, this potential has yet to materialize.”

Currently, Tanzania produces around 50 thousand to 60 thousand tonnes of green coffee beans, approximately 0.6% of the global market.

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However, a myriad of red tape, technical issues and a lack of inputs have undermined initiatives at increasing production in the sector.

In 2011 the Tanzanian Coffee Board (TCB) issued a strategy document setting out measures to double production and improve quality by 2021, thereby increasing profitability and raising the income of farmers.

However, according to the reports, these plans have failed to result in significant improvements, due to the lack of knowledge infrastructure, farm inputs and financing.

In addition, unnecessary intermediaries (e.g. small traders) are increasing transaction costs. The TCB’s recent decision to ban traders from purchasing coffee cherries directly from famers has also served to further disrupt the value chain.

For Tanzania’s coffee industry to succeed, the Tanzanian government needs to revisit legislation so that the successful traders, or “Value Chain Champions” (VCCs), get a fair opportunity to build dedicated coffee value chains.

Rabobank believes that dedicated supply chains could open up niche markets with better prices for farmers and prevent Tanzanian coffee from succumbing to lower prices and increasing price volatility.

At the same time, VCCs need high quality, certified coffee from Tanzania to satisfy the growing demand for specialty coffee. This represents a clear win/win opportunity for Tanzanian coffee.

The direct ban on cherry sales should be revoked as it breaks the value chain and prevents the coffee from being sold as premium.

The government will need to allocate more resources to research and the production of improved varieties of coffee plants, and it must seriously stimulate alignments between input suppliers, promote value chain integration and reduce red tape.

Source: Rabobank

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