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1. Background

  • Coffee is the main cash crop of Tanzania averaging 50,000 metric tons and earning about USD 75 million.
  • Tanzania is endowed with more than 4 million hectares of high altitude potential for the production of potential Arabica coffee that commands high prices on the world market.and some medium altitude potential areas for Robusta coffee (Kagera) .
  • Coffee production is concentrated in five main geographic areas of Tanzania, in the North (Kilimanjaro, Arusha & Tarime, Manyara), in the West (Kigoma & Kagera) and South (Mbeya, Iringa and Ruvuma).
  • More than 450,000 farm families (95%) and 110 estates (5%) derive their livelihood from growing coffee . The coffee industry employs an estimated 2,000,000 people
  • The total area under coffee is estimated 265,000 hectares for both Arabica and Robusta.
  • Coffee accounts for about 20% of Tanzania’s foreign exchange earnings and has been the mainstay of the country’s agriculture-based economy for a long time.
  • Robusta is grown between 500-1000 masl and Arabica is grown at 1,000-2,500 masl
  • Average production between 2004/05 – 2010/11 is 50,000 tons of clean coffee. In 2011 Tanzania produced 56,790 tons of clean coffee. (see table below).

                  Coffee Production Trends For Seven Years

Years 2005 2006 2007 2008 2009 2010 2011
Production (MT)  57786 36434 55017 44745 68934 35668 56790 
  • Internal consumption has been increasing from 2% of total production in 2003 to 7% of total production in 2010.
  • In Tanzania 98% of the Arabica coffee is wet processed.
  • There are three types of coffee markets-
  • Internal Market – where farmers sale at farm gate price to private coffee buyers, farmer groups and cooperative. Coffee is sold in form of cherry or parchment.
  • Auction – Coffee auctions are conducted every week on Thursdays during the season (usually 9 months). Licenced exporters come to the auction and buy coffee from suppliers who can be individual farmer, groups, and cooperative or from private buyers.
  • Direct Export. Growers of premium top grade coffees are allowed to bypass the auction and sale their coffee directly. Direct export enables growers to establish long term relationship with roasters and international traders.

2. Potential for Investment in Coffee Industry

Potential for Improvement in Coffee Production

  • Expanding the existing area under coffee by opening new land for coffee planting, possible making use of mechanization for land clearing and adding high value farm inputs (fertilizers, agro-chemicals and sprayers).
  • Intensification of coffee production. Yield increase can be achieved by making use of advanced types of planting materials (‘clonal coffee’), improved agronomic practices, apply adequate amount and type of farms inputs and making use of appropriate extension services.
  • As a new venture, farmers should be encouraged to establish organic coffee plantations in high potential areas to meet growing global demands for organic coffee.
  • Improvement in management of coffee estates to enhance efficiency of operations and cost effectivity to keep the sector competitive at world market.
  • An investment in irrigation would assist in further yield increase and prevent negative effect from drought stress on the coffee trees in the dry season.
  • Potential for Improvement in Coffee Processing.
  • Improve and maintain rural road infrastructure to collect coffee beans/ bags in the most rational way
  • Establishing “central” pulperies / processing plants in key producing areas districts/regions for the purpose of quality control.
  • Improve in management of coffee processing plants to enhance efficiency of operations and cost effectivity to keep the sector competitive at world market.
  • A wide chance of investment is available in the processing of coffee (primary wet and dry processing), since a lot of coffee is still exported as raw beans creating an open room for better prices and higher returns when processed well.
  • Establishing coffee processing plants for value added “brands” such as decaffeinated coffee for export into global niche markets.
  • Potential for Improvement in Coffee Marketing.
  • A large and secure market exists in Japan for Kilimanjaro coffee where currently 35% of TZ coffee export goes to. This market can be further developed and expanded on.
  • Another secure traditional market is in the countries of the European Union; in particular the United Kingdom, Germany and Sweden which take 25% of TZ coffee exports.
  • There is also a secure traditional market in the USA . This market is most interested for decaffeinated coffee and other branded coffee, which currently takes 15% of TZ coffee.
  • Another potential large export market is emerging in Russia. This market can be further developed by TZ entrepreneurs.
  • There is also large and growing domestic market for coffee especially in urban areas due to affordability, change in taste and increase in population and also in tourist hotels.

 

     High Potential Areas for Investment in the Coffee Industry

Region Size of the potential Available infrastructure

Northern zone

(Kilimanjaro, Arusha,
Manyara)
Tanga

Produce world’s finest coffee with average production of about75, 000 to 10,000 tons per year.

They are located within easy access to the international airport at KIA and have suitable red volcanic soils and an ideal climate for production of specialty coffee. There is access to deep see port at Tanga; railway networks leading to deep-sea port at Mombasa; easy access to Moshi Coffee Auction Center; within close proximity to the Tanzania Coffee Board in Moshi.

 

Southern Highlands
(Mbinga, Ruvuma)

Mbeya

Produce 10, 000 tons of mild Arabica coffee annually


Produce 12000 to 15000 tons of mild coffee annually.

They are located within close proximity to potential export routes to
the Southern African countries. The express services of TAZARA
railway lead to exit port at Dar-es-salaam and Dar/ Tunduma Highway
provide additional reach to export markets within sub region. There
are large areas of virgin lands suitable for coffee production.

 

Kagera


Kigoma


Mara(Tarime)

Produce 21000 tons of Robusta annually


Produce 1000 tons annually


Produce 1000 tons annually.

They are located within reach to railway and shipping networks to
export routes either at Kigoma or at Dar-es-Salaam.

 

SWOT ANALYSIS FOR TANZANIA COFFEE INDUSTRY

STRENGTHS
  • Plenty of suitable land for coffee production andexpansion
  • Favorable growing conditions
  • Opportunity to further improve coffee quality
  • Availability of improved coffee varieties resistant to CBD, CLR and CWD
  • Liberalized coffee market
  • Willingness of stakeholders to support and fund coffee research
  • Political stability

WEAKNESS

  • Low productivity
  • Inadequate extension and advisory services
  • Inadequate credit and supply systems
  • Unstable local currency
  • Poor infrastructure
  • Inadequate dissemination of market information
  • Business environment to coffee is not conducive
OPPORTUNITIES
  • Tanzania is in Colombian mild group
  • Potential to gain premium prices
  • Coffee is traded in USD
  • Stakeholders to fund other shared functions in the industry
  • Potential to develop washed Robusta
  • Potential to increase local consumption

THREATS

  • Weather fluctuations
  • Increasing costs of inputs
  • Outbreak of new pests and diseases
  • Fluctuations of world coffee market prices
  • Emergence of additional certification standards
  • Competition with other crops
  • High interest rates

 

3. Financial Needs for the Coffee Sector

Entrepreneurs / farmer groups may seek financial assistance for:

  • The production of coffee seedling (including labor costs).
  • The purchase farm inputs (fertilizer, agro-chemicals, sprayers).
  • The modernization and or expansion of coffee processing plants.
  • Purchase transport and equipment.
  • Storage Facilities, Post-harvest Equipment.
  • Installation or expansion of irrigation systems and/or equipment.

 

4.  How can pass help farmers in the coffee Sector

Intensification of coffee production / improved processing & marketing:

  • Through feasibility studies and business plans PASS can assist entrepreneurs’ access to bank loans (financial linkages).
  • Organization and capacity building of coffee groups and farmer associations.
  • Training in entrepreneur / agri-business management skills in the coffee sector.
  • Assist with market research and market linkages in the coffee industry.
  • Support farmers with inadequate amount of collateral / security for a commercial bank loan.
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