Rwanda and Coffee

1
Rwanda and Coffee
By Misaki Fukushima
2
1 Basic Information sourced from
http//www.fco.gov.uk/

• Area 26,338 sq km
• Population 7,229,129
• Capital City Kigali (238,395)
• People Hutu 84, Tutsi 15, Twa 1
• Language(s) Official (Kinyarwanda, French and
  English), universal Bantu vernacular, Kiswhili
  (Swahili) used in commercial centres.
• Religion(s) Roman Catholic 65, Protestant 9,
  Muslim 1, indigenous beliefs and other 25.
• Currency 1 Rwandan franc 100 centimes
• Government Republic
• Head of State President Maj. Gen. Paul Kagame
  (since 22 April 2000)
• Prime Minister/Premier Bernard Makuza
• (since 8 March 2000) 1

3
What is the coffee situation in Rwanda?

• More than 90 of the population continues to live
  outside the cities and depend on
• Primary industries 1. Coffee has been the main
  agricultural export product in
• Rwanda for more than a decade. In 1987, coffee
  production accounted for more than
• 80 of its growth export earnings - 46,000 tons
  2 compared to 17,000 tons in 2003
• 3. Today, about 5 million Rwandans out of a
  population of 8,3 million live on less
• than a dollar a day 4. It is still one of the
  poorest countries in the world, ranking
• 172nd in accordance with the GDP per capita. 5
• 1 Neil Ford, Rwanda Economy will provide the
  acid test, African Business, Issue. 292 November
  2003.
• 2Rwanda Economic Overview sourced from
  (http//www.countrywatch.com/) accessed on
  11/05/2004.
• 3 Ford, Rwanda Economy will provide the acid
  test
• 4 Gertrude Kamuze, Coltan Up, Coffee Down As
  Rwanda Grows 6pc, African Service, February 18
  2002.
• 5 Rwanda Enhanced Structural Adjustment
  Facility Economic and Financial Policy Framework
  Paper for 1998/992000/01 sourced from
  (http//www.imf.org/external/np/pfp/Rwanda/rwanda0
  1.htm.) accessed on 10/05/2004

4
What are the causes of its economic decline?

• The impact of 1994 genocide and continuous civil
  war
• Lack of financial aid
• A Decrease in Coffee Price in the World Market

5
The impact of 1994 genocide

• The genocide in 1994 was triggered firstly by
  Hutu extremists
• supported by Hutu peasants. They seized power and
  massacred
• many Tutsis. During the war between Tutsis and
  Hutus in 1994,
• around 10 of the population estimating around
  800,000 people
• lost their lives and hundreds of thousands of
  people were
• displaced either internally or externally. 1 As
  a result, about 50
• of its economic activity disappeared. 2
• 1 Basic Information sourced from
  (http//www.fco.gov.uk/)
• 2 Rwanda Enhanced Structural Adjustment
  Facility Economic and Financial Policy Framework
  Paper for 1998/992000/01

6
Economic Problem

• A decade loss of coffee production during the
  1990s
• and a decline in the price of coffee has made it
• difficult for Rwanda to recover its economy due
  to

• Lack of access to credit for farmers seeking to
  re-
• establish their plantations or to set up new
  areas of
• cultivation 1
• 1 Ford, Rwanda Economy will provide the acid
  test.

7
Economic Problem

• Low savings, a weak financial sector, and heavy
  dependence on foreign aid
• A narrow export base, with the bulk of export
  earnings derived from coffee and tea
• A weak and inefficient economic infrastructure
  1
• 1 Rwanda Enhanced Structural Adjustment
  Facility Economic and Financial Policy Framework
  Paper for 1998/992000/01 .

8
A Decrease in Coffee Price in the World Market

• World coffee prices dramatically dropped in the
  late
• 1990s. Some 25 million families depend on coffee
  farming
• around the world today 1, normally ensuring the
  
• livelihood of over a hundred million people. 2
  In many
• cases prices do not even cover the costs of
  production. At the
• same time, the worlds biggest coffee buyer
  Nestle profited
• 16 higher in 2001 than 2000. 3
• See the graph The Worlds Coffee Price from
  1997 to 2002.
• 1 Sourced from http//www.ico.org/crisis/main.ht
  m.
• 2 Sourced from http//www.fairtrade.net/sites/pr
  oducts/coffee/why.html.
• 3 Sourced from http//www.fairtrade.net/sites/pr
  oducts/coffee/why.html.

9
(Graph reproduced from, http//www.ico.org/crisis/
main.htm)
The Worlds Coffee Price from 1997 to 2002

10
Why has the price of coffee been in a dramatic
decrease in the world market?
11
Low coffee prices are the result of

• an excess of supply over demand, and the
  liberalisation of the coffee trade!

12

An access of supply over demand

• While coffee production has risen at an average
  annual rate of
• 3.6 in the last ten years, demand has been
  increasing by only
• 1.3 a year. At present less than 20 of the
  world population
• consumes coffee, with the most consumption (58)
  taking place
• in mature markets of the European Union, the
  United States and
• Japan, although the fastest growth in consumption
  has been in the
• Asian and Pacific region and in Central and
  Eastern Europe. The
• remaining 25 is consumed in the countries where
  the coffee is
• produced. 1
• 1Sourced from http//www.ico.org/activ/promotio.
  htm

13
An excess of supply over demand

• Many coffee producers hardly have an alternative
  to
• growing coffee. Thus, when coffee prices fall,
  most
• will try to produce even more coffee as a means
  to
• maintain their income thus automatically
• exacerbating the problem of overproduction.
• However, their alternatives includes producing
• coca, selling land and become landless, or
  migrant-
• labour. 1
• 1 Sourced from http//www.fairtrade.net/sites/pr
  oducts/coffee/why.html.

14
The Liberalisation of the coffee trade

• Multinational control of the coffee trade has
• dramatically increased since the collapse of
• the worldwide Coffee Agreement in 1989. At
• the same time, the small and medium-sized
• coffee producers have lost the control to
• dictate conditions and prices. 1
• 1 Sourced from http//www.fairtrade.net/sites/pr
  oducts/coffee/why.html.

15
A Decrease in Coffee Price in the World Market

• In 1999, the world largest producers were Brazil
  (25),
• Colombia (10) and Vietnam (7). The Ivory Coast
  Cote
• DIvoire (5,6) and Ethiopia (3,6) contributed
  only a small
• percentage despite the fact that these two
  countries were the
• largest coffee producers in the African region,
  and the climate
• is ideally suited for coffee growing. 1 (See
  Table 1.)
• 1 Rory Hillocks, Coffee is it still a viable
  cash crop for smallholders in Africa? Outlook on
  Agriculture vol. 30, No. 3, 2001, 205.

16
Table. 1.
Rory Hillocks, Coffee is it still a viable cash
crop for smallholders in Africa? Outlook on
Agriculture vol. 30, No. 3, 2001, 206.
17
Government Response
Rwandas President Paul Kagame has aimed at
rebuilding the country through economic developmen
t. He believes that economic growth will
stabilise the country. 1
1 Ford, Rwanda Economy will provide the acid
test.
18
President Kagame stated, There are some who are
scared by unity and by building a country on the
basis of ideas. They are still using ethnic
criteria and believe that politics should be
based on ethnic belonging, religion or other
criteria which divide people. I thought we had
outgrown that. 1 1 Ford, Rwanda Economy
will provide the acid test.
19
The government has implemented a strategy for
rebuilding its economy in response to sustainable
and equitable growth and poverty reduction.The
key elements are

•      a) Maintenance of macroeconomic
  stability
•       b) Economic diversification,
  export promotion, and
• services development
• c) Improvement in agricultural
  productivity and rural
• infrastructure 1
• 1 Rwanda Enhanced
  Structural Adjustment Facility Economic and
  Financial Policy
• Framework
  Paper for 1998/992000/01.

20
Government Response

• d)  Maintenance of export competitiveness
  through a further liberalization of the trade,
  exchange, and investment regimes
• e)  Promotion of private, small-scale
  enterprises in the rural and urban areas
• Support for skills formation through vocational,
  technical, and management training programs, as
  well as enhancement of the role of women and
• g) Effective mobilization of domestic and
  foreign resources to finance investment and
  growth. 1
• However, its implementation is still hampered
  by the clan division
• that still exist in Rwanda.
• 1 Rwanda Enhanced Structural Adjustment
  Facility Economic and Financial Policy
• Framework
  Paper for 1998/992000/01.

21
International Support and

• Cooperation between
• the Hutu and the
• Tutsis tribes

22
International Support

• Rwanda is still highly dependent on foreign aid,
  which
• accounts for more than 60 of its national
  revenue. 1 In regard
• to the production of coffee, the U.S. Agency for
  International
• Development is funding a Rwanda government
  project supervised
• by Michigan State University and Texas AM
  University. Their
• aim is to improve the quality of coffee and to
  bring its coffee
• production onto the American and European
  markets. Their aid
• programme has financed the purchase of more
  efficient machinery
• in the production of coffee. 2
• 1 Finance And Economics Lion cubs on a wire
  Economics focus The Economist, vol. 368, Iss.
  8337, August 16 2003.
• 2 Carter Dougherty, Rwandan Coffee Farms Brew
  Success The Washington Times, January 23, 2003.
  (resourced from http//www.acidvoca.org/acdivoca/)
  accessed on 11/05/2004.

23
International Support

• A washing station has recently been established
  as
• part of this programme. A washing Station is a
• combination of machinery, water basins and drying
  
• tables. Unwashed coffee has a bitter taste which
• brings the price down.

24
International Aid

• Sourced from http//www.oecd.org/dataoecd/0/38/187
  8989.gif.

25
Cooperation between the Hutu and the Tutsis
tribes

• Ten years after 1994, Killers and survivors live
  together on
• the same land and share common interests. A
  cooperative
• called Abahuzamugambi those who share the same
  goal
• in the local language is trying to overcome
  poverty and to
• promote unity and reconciliation between two
  tribes 1. It
• focuses on producing special Arabica bourbon
  coffee for
• export to Britain and the United States.       
• 1 Maraba coffee project fights poverty,
  fosters reconciliation in Rwanda Agence France
  Press, resourced from (http//elibrary.bigchalk.co
  m/) accessed on 11/05/2004.

26
Cooperation between the Hutu and the Tutsis tribes

• Its also an example of people working together
  
• people who escaped the genocide, killers, Tutsis,
  
• Hutus all working together. Its hopeful. If we
• continue to have peace and jobs, then even more
• will change. 1

1 Rwandan coffee hits Sainsbury's Fair trade
success for Rwandan coffee co-operative
Resourced from http//www.developments.org.uk/data
/issue25/better-class.htm accessed on 10/06/2004
27
FAIR TRADE COFFEE
28
Fair Trade Coffee

• Fair trade coffee is coffee that is traded by
  bypassing the coffee trader and
• therefore giving the producer (and buyer) higher
  profits. TransFair USA is an
• independent 3rd party certification that ensures
  that
•      
• Coffee importers agree to purchase from the small
  farmers included in the International Fair Trade
  Coffee Register.
• Farmers are guaranteed a minimum "fair trade
  price" of 1.26/pound FOB for their coffee. If
  world price rises above this floor price, farmers
  will be paid a small (0.05/pound) premium above
  market price. 1
• 1 Sourced from http//www.coffeeresearch.org/pol
  itics/fairtrade.htm.

29
Fair Trade Coffee

• Coffee importers provide a certain amount of
  credit to
• farmers against future sales, helping
  farmers stay out of
• debt to local coffee "coyotes" or middlemen.
•       
• Importers and roasters agree to develop direct,
  long-term
• trade relationships with producer groups,
  thereby cutting
• out middlemen and bringing greater
  commercial stability
• to an extremely unstable market. 1
• 1 Sourced from http//www.coffeeresearch.org/pol
  itics/fairtrade.htm.

30
Fair Trade Success

• Coffee producers in Rwanda are slightly
  benefiting from fair
• trade in the world market today.
• The Abahuzamugambi Co-operative produces Café de
• Maraba, widely recognised as Rwandas finest
  coffee,
• sold in the capital Kigali. The very best beans
  have been
• bought at fair trade prices (roughly three times
  more than
• offered by local merchants) by Union Coffee
  Roasters, a UK-
• based ethnical coffee company. 1
• 1 Rwandan coffee hits Sainsbury's Fair trade
  success for Rwandan coffee co-operative.

31
Bibliography

• Journals
• Ford, Neil. Rwanda Economy will provide the
  acid test, African
• Business, Issue. 292 November 2003.
• Kamuze, Gertrude. Coltan Up, Coffee Down As
  Rwanda Grows 6pc,
• African Service, February 18 2002.
•  
• Hillocks, Rory. Coffee is it still a viable
  cash crop for smallholders in
• Africa? Outlook on Agriculture vol. 30, No. 3,
  2001, pp. 205-212.
•  
• Finance And Economics Lion cubs on a wire
  Economics focus The
• Economist, vol. 368, Iss. 8337, August 16 2003.
•  

32

• Internet Sources
• http//www.fco.gov.uk/
• Dougherty, Carter. Rwandan Coffee Farms Brew
  Success The
• Washington Times, January 23, 2003.
• (http//www.acidvoca.org/acdivoca/) accessed on
  11/05/2004.
•  
• Maraba coffee project fights poverty, fosters
  reconciliation in Rwanda
• Agence France Press. (http//elibrary.bigchalk.com
  /) accessed on
• 11/05/2004.
•  
• http//www.oecd.org/dataoecd/0/38/1878989.gif
•  
• http//www.coffeeresearch.org/politics/fairtrade.h
  tm
•  

33
Internet Resources

• Rwandan coffee hits Sainsbury's Fair trade
  success for
• Rwandan coffee co-operative
• http//www.developments.org.uk/data/issue25/better
  class.htm
• http//www.ico.org/activ/promotio.htm
• http//www.countrywatch.com/
• http//www.ico.org/crisis/main.htm  
• http//www.fairtrade.net/sites/products/coffee/why
  .html

34
Internet Resources

• Rwanda Enhanced Structural Adjustment Facility
  
• Economic and Financial Policy Framework Paper for
  
• 1998/992000/01 sourced from
• (http//www.imf.org/external/np/pfp/Rwanda/rwanda0
  1.htm)