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Zimbabwean coffee growers in search of world markets.

After more than two decades of controls, coffee growers in Zimbabwe will now have to face the rigors of selling their produce on world markets.

The Zimbabwean Government recently approved the privatization of the coffee industry following an agreement between the Grain Marketing Board (GMB) and coffee growers after many years of negotiations.

Allegations of inefficiencies within the GMB, rising production costs and last season's drought prompted some coffee growers to threaten the abandonment of coffee production unless the industry was privatized.

Growers said that the GMB had failed to cut processing and marketing costs, resulting in them realizing little or no profits. Costs borne by farmers has risen from 3.6% in 1986 to more than 35% in 1992. What irked farmers most was that the GMB did not appear to make any attempts to cut costs, most of which were passed onto farmers, making coffee production not worthwhile.

Prior to 1972, when coffee became a controlled product, a growers' cooperative ran the operation, but experienced cash flow problems. Growers requested the government to intervene in order to facilitate orderly marketing of the crop by introducing a more efficient and guaranteed payment system.

Except for four seasons since 1972, surpluses have been generated and supplementary payments made to growers because of buoyant prices on world markets and conservative producer price estimates at the onset of most seasons.

Discussions on the privatization of coffee operations started in 1978, but collapsed and were resuscitated in 1988 resulting in the establishment of a coffee department within the GMB.

The Coffee Growers Association (CGA) proposed the establishment of a growers cooperative to run coffee operations on an agency basis in conjunction with the GMB, but was rejected by the board as being untenable. After much discussion the GMB decided that the privatization process should be done in two stages, firstly deregulation and secondly decontrol.

The advantages of deregulation are that farmers will have freedom to process and market their coffee if they find markets, but the disadvantages are that the GMB will still be bound by law to accept all coffee delivered, regardless of its quality.

With decontrol, farmers will still be free to market their coffee as they wish, but unlike deregulation, the GMB will not be obliged to buy coffee from growers and it can pick and choose only those qualities and quantities of coffee which it feels that it can market like any other private entity, assuming that it will still continue to be an active player in the coffee industry. This in turn will depend upon whether the farmers will be able to purchase the coffee processing equipment and warehouses at the going market price.

At a recent meeting it was agreed that the coffee industry must be decontrolled starting with the 1993/94 crop. Although the single channel market was seen to be ideal it was not legally enforceable. The Coffee Growers Association will market all coffee delivered to it though a telex auction system.

In order to face the rigors of independent marketing, the association is negotiating with a commercial bank for a financial package, for initial payments before growers market their crop and thus ease their financial burden.

With the decontrol of coffee marketing, growers now have three options. They can either deliver to the GMB or to the CGA or market individually. Fennell said that the CGA was going to work hard to convince growers that it could do a better job than an individual producer, although some growers who had equipment might attempt to go it alone on the export market.

Government's approval to privatize the coffee industry was a move that was intended to save the industry from collapse.

The decontrol of the crop instilled confidence in the industry and farmers are optimistic about the future and are looking forward to increased production, but it would take growers at least three years to recover from the drought and produce the normal crop size of 14,000 tons.
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Author:Kille, Turville
Publication:Tea & Coffee Trade Journal
Date:Sep 1, 1993
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