Today in Kigali, the Africa Great Lakes Coffee program held a workshop at the Nobeleza hotel with about 100 Rwandan coffee industry stakeholders. The purpose was to share the progress and results of the first year of this three year project.
At the workshop Dan Clay presented the paper, "Determinants of Farmer Incentives and Capacity to Invest: Finding a Path to Sustainable Growth in Rwanda's Coffee Sector."
|Dan Clay presents "Determinants of Farmer Investments" paper.|
The paper and Clay's presentation first summarizes how the coffee value chain in Rwanda has undergone a recent transformation in quality (fully-washed coffee) and is now well established in specialty coffee markets around the globe. The value-added from this transformation has been beneficial to Rwanda. However, the coffee producers have shared the least in the new prosperity. The situaiton, a coffee-producing country struggling to maintain a sustainable, growing specialty coffee industry, mirrors the situations we see in many emerging coffee countries: Myanmar, East Timor, Philippines and Haiti, to name a few. Even some "older" coffee producers like Colombia and El Salvador are hammering the message that farmers are not receiving the benefits they should from the specialty coffee value chain. Since they are the farmers, this makes the entire industry unsustainable.
|Clay and Dr. Celestin Gatarayiha discuss policy over coffee.|
This research shows with data that failing to bring in the producers as full partners is one of the reasons that coffee production in Rwanda has declined and stagnated in recent decades. This study draws on recent quantitative and qualitative evidence to examine patterns of farmer investment in coffee to understand the drivers of such investments—what factors enable farmers to allocate land, labor and capital to coffee production, on the one hand, and what barriers may be present that restrict their investments in the coffee sector, on the other. We identify three predominant types of producers based on their relative capacities and their incentives to invest in coffee. Understanding how these producer groups differ and perform in terms of productivity and gross margins (profits) is of paramount importance to improving overall sector performance. Based on our analysis, we identify a set of steps that the government of Rwanda and other leaders in the coffee sector might consider to help create needed incentives for producers to invest in their coffee plantations and to put the sector on a path to sustainable growth.
To read the full paper, click here. Pay special attention to the diagram on page 14 that illustrates the how the spectrums of motivation and capacity decrease and increase respectively as farms move from small-scale to large scale. This drives one of the main findings of the paper, which is that large farmers (those with 1000+ trees) have the capacity to invest, but they are not motivated. Since they produce over half of Rwanda's coffee, the lack of compensation for their efforts is eroding the country's entire industry.