Malawi’s New Age Guerillas
By Cindy-Lou Dale
Facing the imminent collapse of their industry, smallholder coffee farmers in Northern Malawi rallied together to salvage their livelihoods. Within a few short years, in 2005, their product was voted Malawi’s best coffee and soon after was ranked amongst the top five coffees from Africa. How were Malawi’s growers able to do this?
Although not a key producer,
when judged against giants like Brazil and Colombia, Malawian coffee farmers have learned and can teach a useful lesson to other smallholder growers who may be considering either diversification or uprooting their coffee trees. The lesson is that financial success depends not on growing more, but on reducing costs of production and bold, guerrilla-type marketing tactics.
Financial Rewards Lacking
For many years, the smallholder coffee growers of northern Malawi were overseen, and their beans sold by the state controlled Smallholder Coffee Authority. Initially, growers were excited with the Authority, as they benefited from the services provided, such as supply of farm inputs on credit and cash, extension services, coffee processing service and road maintenance. However, this excitement was short lived, when growers soon found coffee’s financial rewards to be lacking. Few growers had more than 150 coffee trees, and as such their holdings were too small to make any meaningful return. When coffee prices crashed on the international market amid soaring prices of input, many growers abandoned coffee planting and the industry nearly collapsed.
During this period of low yield, the Smallholder Coffee Authority took loans from banks to cover their operational expenses, and due to their lack of business mind-set and little consideration to costs or realistic budgeting (as is the way in most third-world countries struggling to understand the intricacies of government and budgets) they accumulated a debt equal to U.S.$ 300,000. The Malawian Government, anxious to divest itself of this significant debt, sold the poorly performing parastatal to the newly formed Smallholder Coffee Farmers’ Trust. They soon cleared the debt, and within four years could afford to pay up to 80% of the revenue earned to the growers, while simultaneously clinching major export contracts. Even more remarkable was that this turn-around of events had been achieved during a period of low international coffee prices. “This transformation in the fortunes of smallholder coffee production has been a team effort of our commitment supported by the European Union, CFC Project on White Stem Borer and the UK’s Natural Resources Institute,” says the Trust’s general manager, Harrison Kalua.
The Smallholder Coffee Authority communicated no details of operational expenses, or even the prices that the farmers’ produce received on the open market; understandably the small growers grew apprehensive. So when the government finally pulled the plug on the Authority, the coffee farmers requested that it be sold to them. Since neither the farmers nor government were sure of how to proceed, it was agreed to form a ‘Trust’ as a transitional arrangement, during which growers would be trained in association and cooperative principles. Once trained, the growers would decide on what type of organization they would like to form and register. “Our priorities have been to reorganize the coffee grower members into local associations, providing them with a feeling of ownership through representation on the management board, and to increase the financial returns to members.”
Although changing deep-rooted suspicions was not easy, total transparency of accounting and management records was called for, which gradually gained the confidence of members, making them more receptive to change and the demands placed on them by Kalua’s commercial production approach. “One of the methods used to boost members’ incomes was to produce superior berries at minimum cost,” says Kalua. “This meant replanting with new higher yielding clones and implementing new pest and disease control methods, which reduced reliance on costly chemicals. The second income builder was to start processing a proportion of the berries, and marketing a value-added, quality controlled, attractively packaged and branded product, in place of selling the low value, no-name brand bulk commodity that had been the destiny of our beans in the past.”
Kalua continued to explain that cost reduction was achieved by building a leaner and more effective management team, and the development of a pro-active marketing group. “The Trust’s marketing strategy has never followed a straight line. Faced with poor international coffee prices, too many coffee producers and strong bargaining powers of most coffee traders, the Trust focused on a special market segment. This called for opportunity analysis and studies of niche coffee markets around the world, which helped the Trust develop a growth strategy.” In order to remain competitive on the International Market, Kalua mentioned the need of the Smallhoders Coffee Farmer’s Trust to work hard at pormoting the Mzuzu brand. “Launching Mzuzu’s coffee as a finished product was not only an alternative source of income, but a strong and cost-effective promotional tool.” According to Kalua, The European Union, in particular, is helpful in funding and promoting capacity development through training. “Saving in cost of production were made by reducing the cost of disease and pest control,” he explained. “Here, the Natural Resources Institute was able to develop an effective integrated pest management program, which was less polluting and less costly than the previous chemical control system.”
The growers reported Coffee Berry Disease and White Stem Borer to be the main problems. Since the withdrawal of Dieldrin, a stem-paint, White Stem Borer had become a serious problem. Farmers were forced to switch to Fipronil, an effective yet costly alternative, which in effect increased production costs by some 30%. The National Resource Institute considered this problem and suggested that instead of painting with insecticide, farmers should smooth the bark on the lower stems, thus denying the borer an ideal site to lay its eggs.
Enthused by this progress in pest control, Malawi’s Smallholder Coffee Farmers’ Trust is looking ahead. “The National Resource Institute is working with pheromones for White Stem Borer, which has proved successful in India and looks promising for Africa. The knowledge gained on the biology and distribution of White Stem Borer in Malawi will provide the starting point for a five-year project with Malawi and Zimbabwe, as its African partners. Meanwhile, the cost of pest and disease management has been reduced and margins increased,” Kalua continued.
Since the Trust came into being in 1999, they have nearly 4,000 growers. Since 2003, at least one-million trees have been planted annually, giving a holding size of 1,000 trees per grower. It is projected that up to nine-million trees will be achieved by 2011/12 to realize 3,000 trees per grower. “This holding should enable our growers to realize between U.S.$ 2,000 and U.S.$ 3,000 annually.”
Mzuzu’s coffee production has steadily increased from 90-mt in 1998/99 to 300-mt today, and is projected to reach 1,000-mt by 2011/12. Approximately five farmers associations have been established, giving growers participation in running their own affairs in nursery production and processing. Savings and Credit Unions have been developed (one for each association), which support members with finances for further development.
Successes are slowly emerging. “A good many of our farmers have built good houses with iron sheets and bricks. Most growers are able to send their children to good schools,” boasts Kalua. “If we could develop further and cultivate 10,000 hectares of coffee, we would. With our government’s assistance, we [could] bring in more than U.S. $60-100-million annually,” says Kalua. “We have good soil in this country and hardworking farmers, but our Ministry of Agriculture and Food Security, and Ministry of Industry, Trade and Private Sector Development are not doing enough to promote the thriving coffee industry. The tobacco farmers have been successful in the past because the government ploughed in lots of money. They should do the same with coffee, in order that we can all reap the rewards.”
Other than disease and pest control, the Smallholder Coffee Farmers Trust, assisted by staff from the Agricultural Research Station, school growers on technologies for nutrition and agronomy. The farmers Associations receive training from the Trust, which is assisted by short-term consultants. Quality control in coffee production receives the greatest attention; growers are trained in coffee processing. Cupping is done for each lot by a team of cuppers based at the Trust’s headquarters. Results are communicated to the associations, and an annual competition is held to establish which zone produced the best coffee.
Mzuzu Coffee, which is packed in eye-catching re-sealable red and gold foil, is sold to supermarkets, hotels and embassies in Malawi, and regionally in Zambia, Zimbabwe, Namibia, South Africa and Mozambique. The overseas market is already supplying to Germany, Switzerland, the Netherlands, Japan, Italy Australia, the U.S. and the UK. Headed by Donald Jobe, the Trust’s Marketing and Quality Control Department have proactively sourced their clients through seminars, conferences, trade fairs and workshops. They have also sharpened their skills through client’s visits.
As a result of increasing the farmers’ confidence -- demonstrated by planting high-yielding, quality coffee trees -- sales are increasing, turnover is rising, and the income of smallholder producers is fast improving. This is all a clear indication of the farmers’ long-term commercial approach, as opposed to the resigned, no-risk and subsistent outlook of the past. “Mzuzu Coffee has attained specialty status, and is enjoying a good price on the domestic and international markets,” says Kalua.
At grassroots level though, it goes much further. “The Trust pays me at least 60% more for my crops, compared to the 20% from the Authority,” claims Austin Phiri, a coffee farmer with the Smallholder Coffee Farmers Trust. “This additional income has allowed me to construct a house and purchase a grinding mill, and soon I will be buying a vehicle.”
Tea & Coffee - December, 2006
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