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Tanzania & Malawi: Coffee diversification – raising income security of smallholder coffee growers

General information
Project location: Tanzania & Malawi
Contracting organization: Common Fund for Commodities (CFC)
Type of assignment: Project identification & formulation
Project period: October 2008 – March 2009

Malawi and Tanzania are not among the world’s largest coffee exporters. However, in terms of export earnings and income generation for small farmers, coffee is a very important commodity in both countries. Coffee is Tanzania’s most important export crop and in Malawi only commodities such as tobacco, sugar and tea are more important export products than coffee. Coffee prices fell sharply to the lowest level for a century in the period from 2000 to 2004, but recovered thereafter. Still, farmers’ gains resulting from higher coffee prices have been significantly eroded by high oil prices (via increasing costs of farmers’ inputs) and the continued weakness of the US dollar. Increasing and sustaining coffee farmers’ income and export earnings in Malawi and Tanzania is an important policy goal. Through diversification coffee farmers’ income levels can be stabilised and increased.
Diversification can be both horizontal, involving alternative crops or economic activities, or vertical, developing new types of coffee products. Some examples of diversification include: (a) intercropping coffee with (fruit) trees, especially in relation to shade coffee production; (b) alternative cropping (such as reforestation) in areas where coffee production is only economically viable when world coffee prices are high; (c) the introduction of better coffee cultivation, grading and certification systems so that different markets can be supplied and premium prices obtained.
Advance Consulting was hired by the Common Fund for Commodities (CFC) to develop a new project supporting coffee growers in Malawi and Tanzania in their endeavour to increase and stabilise their income from coffee. The overall objective of the assignment for CFC was:

  • To assess the needs and the feasibility of enhancing the capacity of coffee farmers in Malawi and Tanzania to produce and sell different commodities;
  • To prepare a full project document with clearly elaborated activities and components including costing of the activities.

As part of the assignment both countries were visited and views and opinions of different stakeholders in the coffee value chains – coffee growers and their associations, auctions, credit organisations, research organisations, ministries, etc. – were collected. Based on the assessments and commitments of different stakeholders a capacity build

ing project was designed with a budget of USD 3.0 million (of which 72% to be funded by CFC). Key drivers behind the project will be various smallholder coffee growers’ associations in Northern Malawi and Tanzania who will be supported by credit organisations, regional research institutes and a business support organisation. Key components of the project relate to agronomic improvements, medium credit and strengthening the performance of coffee growers’ organisations in terms of pot-harvest handling and trade of coffee and other products. The expected impact of the project will be increased income levels and enhanced food security among smallholder coffee growers. In addition income fluctuations between the years should be reduced.

 

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