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Rwanda: to cope at any cost....

Rwanda: To cope at any cost . . .

A small producer rools up its sleeves and confronts the free market

While the free market's inception has been a hard pill to swallow for most producers, it has hit the hardest at the undiversified and impoverished countries which derive up to 90% of their income from coffee. When in addition, you add the burden of being landlocked and of having, for all purposes mostly only one grade of coffee to offer, you are Rwanda.

As neighboring Burundi had taken, in the early 80's the road to diversify its grades, to increase its production of Fully Washed, to build new plants with state-of-the-art sorting machines, and to diversify its clients, Rwanda had not implemented any change regarding quality. The "Superior" grade was nothing but a fond memory of the 60's and the country lived comfortably in the shade of two qualities, "Standard" and "Ordinary". Selling was exclusively done through an agent in London and, with the exception of a safety valve in the shape of a small exporter as of 1984, things remained virtually static until 1987 when the Coffee Board, OCIR, got permission to export on its own.

The system had its advantages: Thnaks to special quota provisions within the ICO, excess coffee was never a major problem and Rwandese growers enjoyed some of the highest prices paid to peasants . . . a happy country, blessed in addition by some of the most beautiful landscapes in Africa.

Then came increased competition, lower world prices and the free market, all compounded by high costs and outdated processing material. The most urgent task being to reduce direct costs, Rwandese authorities immediately reduced the price to growers from 125 to 100 Rwandese Francs per kilo of coffee in parch (still a comfortable 78 [cents] /lb of green) and analyzed each line in the "Bareme," the ubiquitous tariff in which most of French speaking Africa lists every expense between the field and the ship. By trimming the fat and removing taxes, another 25 [cents] was saved. So much for immediate actions . . .

Then, the Ministry of Agriculture launched an extensive study covering all fields of the coffee sector, agronomy, processing, internal handling and pricing, marketing, transport. The support of all local participants was requested, as well as the assistance of foreign analysts and consultants.

The study per se is an all encompassing affair, the two phases of which will use up most of 1990. What is at stake, in a country which gets 75% of its foreign exchange from coffee, is no less than Rwanda's future. It involves deciding what types of coffee will be produced in the long run (previous consultants have sometimes advocated the large scale production of Fully Washed, when more than 90% of the exports (37,000 tons) is now "Ordinary," a soft Arabica of versatile use in the family of Burundis, Bugishus, Kenyas and Tanzanias), what the needs are for nursing and processing it, at what financial cost and for what expected benefits to Rwanda.

Similarly, the future of rigid "Baremes" is being evaluated, as other systems are feasible too, sometimes more flexible, such as free prices with support minima, etc.

The marketing options are also open, with Rwanda in the unique position of having a state marketing system alongside a private one, as well as experience in previous agency agreements.

If the work involved was brought to the scale of the USA or the USSR, it could best be translated as Roosevelt's New Deal or Russia's post war quinquennal plans. While it is too early to predict the shape of Rwanda's coffee trade in the future, one can predict that it will be hardly recognizable in five years.

With no new development on the ICO front, and with growing signs of disinterest by Brazil and some consumers, the path to re-structuring, followed by an increasing number of coffee producers, seems not only the most promising but virtually the only safe one. It is reassuring to see that reorganization is not the exclusive field of major exporters and that small producers too are striving to remain in the game.

Pierre Leblanche has his own consulting firm, ConsultAbroad Inc., and is also a trade advisor to the ICO.
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Title Annotation:small coffee producer confronts the free market
Author:Leblache, Pierre
Publication:Tea & Coffee Trade Journal
Date:Jul 1, 1990
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