Reducing poverty among smallholder farmers through enhanced trade regimes and value chains for coffee in Tanzania

Neema Kumburu, Moshi Co-operative University, Tanzania, John Sumelius, University of Helsinki, Finland & Qiuzhen Chen, University of Helsinki, Finland | 27 May 2024

Tanzania is one of the largest coffee growing countries in Africa, with an annual production of 66,042.0 tons according to 2020/2021 data. Coffee accounts for nearly 5% of Tanzania’s total exports with an average annual export value of 100 million USD. Statistics show that most of the coffee produced in Tanzania is exported and local consumption is estimated to be only 7% of total production.

In order to examine how to reduce smallholder farmers poverty through enhanced coffee trade regimes and its value chains in Tanzania, our case study has surveyed a total of 150 coffee smallholders in the Kilimanjaro, Mbeya and Songwe regions of Tanzania, which are the traditional coffee growing areas (Kilimanjaro, Mbeya) and emerging coffee growing area (Songwe), as well as 15 officials from the Ministry of Agriculture, Tanzania Coffee Board, Farmers Kilimanjaro Coffee Company Limited (FAKICO), Ministry of Industry and Trade, farmers, exporters and processors as key informants, and conducted five focus group discussions with representatives from the surveyed primary co-operative societies, namely Mruwia and Mamsera in Kilimanjaro, and Makandara and Isansa in Mbeya, and Songwe regions, respectively.

Using content analysis and narratives for qualitative data and descriptive statistics and gross margin analysis for quantitative data, the study explored the roles, interests and responsibilities of key actors, their involvement in pricing,  and how they respond to the risks and impacts of power inequalities, participation and public interest, and assessed the profitability of coffee value chain and its effects on smallholder income and poverty reduction, and also analysed domestic government measures and international standard regimes and practices that have a bearing on reducing poverty among coffee smallholder farmers. Meanwhile, the study evaluated the adoption of Fair-trade Schemes and consideration of human rights perspective in the Tanzania coffee value chain and strategies to attain SDG1, 2, 3, 5 and 13, and examined the transparency and roles of coffee value chain actors in agri-food chains and the impact of digitalization on poverty reduction among smallholders in Tanzania.

The main findings suggested that there is a lack of integration and synergy among actors in the coffee value chain to participate in decision-making. Small-scale farmers are the least privileged because of their passive position in major decision-making. The study also found that although small-scale farmers have positive operating margins, such margins are still not competitive enough to compensate for the farmers’ efforts. Each actor in the value chain appears to maximize its own interests at the expense of smallholder farmers, who continue to be mistreated and thus unable to improve gains from the coffee sector. The national and supranational legal and policy frameworks are also complex and they have failed to create a conducive environment for small holder farmers to realize better returns, although much has been done at the national level including the establishment of the coffee industry stabilization fund, coffee research institute, the production and distribution of free coffee seedling, the promotion of co-operative institutions and public-private partnerships in the coffee industry, the creation of political will for the development of the coffee industry, and other efforts including ensuring laws and regulations that govern coffee production, processing, transportation, marketing, and other related activities in Tanzania. However, these efforts have not been sufficient to bring the desired benefits to smallholder farmers. Coupled with the complexity of international coffee trade standards and marketing procedures, smallholder farmers are unable to realize the potential benefits from the international coffee market. In addition, the study also indicated that fair-trade schemes are expected to lead to, and ultimately benefit, smallholder farmers by making consumers pay a premium for social and economic change and environmental sustainability. However, the schemes are often based on a lack of understanding of production realities, leading to a gap between producer and consumer countries. Lack of transparency and information asymmetry are some of the factors that inhibiting smallholders from benefiting from fair-trade schemes and, as a result, they have limited access to human rights considerations at the lower end of the coffee value chain and are unable to enjoy the benefits of digitization in the modern world.

Therefore, based on the above key findings, it is recommended that the government establish farmer profiles to identify the various information and advisory needs of smallholder farmers in order to provide tailored services. Public-Private Partnerships (PPPs) can be established to revitalize the coffee industry through improved recommended agricultural practices, marketing efficiencies, and technological changes to promote production growth in order to address the constraints affecting the effective participation of smallholder farmers in Global Value Chains (GVCs). Certification organizations should provide opportunities for producing and consuming countries to establish the necessary supportive environment for producers in international value chains to operate in a more sustainable manner. Governments and other actors should ensure that standards are tailored to local realities (“institutional adaptation”) and prioritize this for the adoption of global sustainability standards. This also includes measures to level the playing field between international players and local farmers, such as fair pricing mechanisms and market access. In addition, local government and other actors should strengthen farmers’ digital innovation capacity and make farmers aware of available digital services to obtain information on coffee prices and international market trade, while improving the physical infrastructure for digital access and lowering costs associated with access to the internet and digital devices to increase participation by smallholders. Digital services providers should integrate digital communication into multimodal services to expand inclusive activities such as financing, inputs, weather, pricing and international trade opportunities.

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