NUCAFE

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NUCAFE

Uganda
Project Stage:
Scaling
Budget: 
$1,000 - $10,000
Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

Although coffee is one of the most lucrative agricultural industries in Uganda, the current value chain leaves farmers with only 2-7 percent of the retail value, leaving most trapped in poverty. Through a transition to a “farm ownership” model that removes middlemen and increases the value that farmers retain, Joseph is combatting the poverty cycle for Ugandan coffee farmers and increasing the overall return for one of the country’s primary exports.

About Project

Problem: What problem is this project trying to address?

Coffee sales accounted for close to 30 percent of Uganda’s export revenue in 2012. Although its contribution to export revenue has dropped since the 1990s, coffee continues to be the country’s most important agricultural commodity. 80 percent of Uganda’s workforce is employed in the agricultural sector and the coffee sector alone employs over 3.5 million people (10 percent of Uganda’s population) on approximately half-a-million smallholder farms. Uganda is second only to Ethiopia as the continent’s largest supplier of coffee to the global market and accounts for 2 percent of global production and 3 percent of global exports. However, despite the size and importance of this sector, most Ugandan coffee farmers continue to grapple with crippling poverty and live on less than $2 a day. Over the last three decades, significant challenges to the sector have contributed to this paradox: civil war sterilized the sector in the early 1980s; the coffee cooperative movement rose and fell between the mid 1980s and the late 1990s; coffee wilt disease killed half of the country’s crop in the early 1990s and; there was a significant slump in world coffee prices in the early 2000s. The combination of these events and a market structure that has historically provided farmers with the smallest return in the value chain, left most smallholders trapped in poverty. Many farmers, particularly the younger ones, have been unable to cope with the increasing cost of living and abandoned their coffee farms to seek better economic opportunities in cities and small towns. The top-end of the coffee value chain presents a wholly different picture. The global consumption of coffee increased by 91 percent between 1970 and 2010 and retail sales have increased threefold in the last decade alone. Coffee prices reached a 34-year high in 2011 and prices are projected to increase in the future. Coffee-producing countries earned a combined income of $23 billion in 2011 (a 40 percent jump from 2010 due to higher prices) and the global coffee industry earned $70 billion in the same year. However, these profits are blemished by the fact that just five companies, all at the top of the value chain, control 50 percent of global coffee revenue. While farmers retain between 2-7 percent of coffee’s value, roasters and retail traders retain 84-87 percent and the remaining 6-10 percent is directed towards logistics and export fees. Coffee beans change hands dozens of times as they move up a complex value chain from producer to consumer. Small farmers typically sell their coffee beans in raw or dried form to traders who are often agents of large coffee millers. Traders take advantage of their negotiating power and often pay cash to further strengthen their position. It is difficult for most farmers who face short-term economic needs to resist the lure of immediate financial gratification that the traders offer. Traders then transport the beans to processing plants, which process and sell it to local exporters. In turn, the exporters sell the coffee to international traders, from whom the roasters purchase the semi-finished product. After roasters add another layer of value to the coffee, they sell the now ready-to-consume coffee to retailers and cafes all over the world. A farmer earns $0.2 for a 1kg bag of unprocessed coffee that eventually yields about 80 cups of coffee sold for $2 a cup at a café. Joseph believes that this market structure is designed to benefit players at the top of the value chain at the expense of those at the bottom. The Ugandan government was quick to recognize coffee’s potential as a cash crop and prioritized strengthening the sector after independence in 1986. A national coffee cooperative, the Coffee Marketing Board (CMB), was established to purchase coffee from farmers for international export. The government offered farmers a fixed price for their coffee in order to protect them from price fluctuations in the market. The government’s monopoly also meant that farmers were protected from profiteering middlemen and shrewd traders. Despite these benefits, over 90 percent of the coffee produced in the country was still exported in raw form and sold for extremely low prices in the global market. Without any effort to add value to the raw product before exportation, the government’s investments in the sector were directed towards increasing production yields to drive up the volume of exports. In this way, Ugandan coffee revenue depended almost entirely on quantity sold rather than increased margins per unit. Thus, despite the government’s efforts to prop up the sector, coffee farmers earned little and remained poor. Moreover, farmers often had to wait months before receiving payments from the government for their coffee. These inefficiencies at the CMB, coupled with the inability of poorly paid farmers to cope with increasing global demand, pushed the government to liberalize the sector in 1992 and ushered in a wave of private sector players and independent cooperatives. This temporarily spurred growth and coffee sales accounted for an unprecedented 60 percent of Uganda’s export revenue by 1996. However, this growth was unsustainable due to the focus on raw coffee exports, the lack of government regulation and diminishing production due to low prices and a shortage of land. Following its peak in 1996, the coffee bubble finally burst and eventually led to the collapse of the cooperative movement in 2000.

Solution: What is the proposed solution? Please be specific!

Joseph is unlocking the tremendous economic potential of the global coffee market to give Ugandan coffee farmers a chance out of poverty. By unlocking opportunities for farmers to engage at higher levels of the value chain, he is not only increasing their incomes but challenging and reshaping the power relations in this industry. This new architecture redefines the role of farmer organizations and transforms them from merely organizational buyers of produce to partners who help farmers increase the value that they receive from coffee sales. Coffee processors are introduced to a new win-win relationship with farmers where, instead of buying raw produce from farmers at low prices and reselling this to the next player upstream, they are now offering their value addition expertise and facilities to farmers for a fee. In doing so, they enjoy higher operational capacity and increased revenue. Simultaneously, this value addition allows farmers to retain ownership of a more valuable form of coffee that earns a higher return in the market. This simple idea of “farmer ownership” is at the core of this role-reestablishing architecture. Joseph believes that farmers can only be fairly rewarded for their participation in the sector by enabling them to tap into the market value that is retained at the top of the value chain. The principle of equitably sharing work and value across the value chain underlines the entire model. He has taken this principle and the farmer ownership approach as a basis for advocacy work at a national, regional and international level and succeeded in having a Coffee Policy established in Uganda for the first time. He has, over the last 10, years demonstrated the life changing impact of the farmer ownership model- through a national level organization- for over 600,000 farmers across the country. He has spread the principles behind his work through publications and manuals so as to influence the regulation, management and governance of regional farmer organizations. These publications have been spread widely and are used as references by policy makers and education institutions nationally and regionally.