While Uganda is one of the world’s largest producers of coffee, the local industry has faced challenges in ensuring the quality of the coffee it produces. Partnerships involving producers and local traders offer one way to address this challenge to the development of a thriving and globally competitive industry.
In Eastern Africa coffee production provides a livelihood for many rural farmers and offers employment opportunities through local trading companies such as The Edge Trading Uganda Ltd. based in Uganda. This company has been in the coffee trading business for over ten years, and provides employment to 11 permanent staff and around 50 additional staff, mostly women, during the two coffee seasons. The core business of the company is to sort and grade the coffee collected from farmers to an exportable class and then to sell the sorted and graded coffee to export companies, which are mostly multinationals. Coffee trading is an integral part of the coffee supply chain and although initially perceived by some as exploitative agents, local coffee traders are increasingly being acknowledged for their role and contribution to coffee marketing and for providing employment, especially to women. Partnerships have been one of the ways we have sought to improve relations with the public sector, while engagement in multi-stakeholder platforms has yielded benefits such as access to market information, linkages with prospective business partners, and opportunities to contribute to policy dialogue.
The Ugandan coffee industry
Uganda is among the top producers of coffee globally. Prior to economic reform in the early 1990s, coffee marketing was the responsibility of the government of Uganda, farmers were organised through cooperatives for the production and marketing of coffee and quality was rewarded with price bonuses. With the advent of liberalisation however, the industry’s dynamics changed. The local market began producing a wider range of products, such as ordinary green beans, value added beans (sorted and graded), unmilled dried beans and processed/milled dried beans, while it also witnessed a corresponding increase in the number of market actors, including foreign buyers, who represented unforeseen competition and introduced price wars in coffee procurement. Cooperatives were dismantled with the erosion of their key role in coffee marketing and quality assurance and this coincided with the beginning of a decline in coffee quality in the country. Cases of exporters paying penalties of up to €400,000 for poor quality beans sold to the European market became common and this served as a great disincentive for exporters. A blame game followed, whereby coffee consolidators and traders in the domestic supply chain were accused of adulterating cherries. This affected the image of local traders and in turn, their prospects for positively engaging in the local coffee industry.
The industry has nonetheless remained resilient over the past decade, even amidst price volatility and economic crisis, poor coffee quality and pressure on farmers to abandon coffee for other crops such as sugarcane and horticultural products. The strong cultural values associated with coffee production in Uganda, the limited capacity of farmers to diversify to other crops, and the continuous fruiting of the crop even with minimal management have been some of the factors that facilitated the continued production of coffee in the country. Building on the good will of farmers, in 2008 the government embarked on a coffee production programme that included the distribution of coffee seedlings, an initiative that has stimulated interest by commercial farmers in coffee production, which was historically dominated by smallholder farmers.
The role of local coffee traders
The presence of local coffee traders in Uganda is an outcome of the liberalisation process and our roles and functions have been shaped by the trends in the country’s coffee industry. A good example is our role in improving coffee quality, a role that has been appreciated across the board. Coffee traders typically serve as an intermediary between producers and market agents, and play a number of roles such as guaranteeing supplies and a market for the exporter and farmer respectively, value addition services through grading and sorting for export readiness, and pre-financing for farmers to ensure supply. Farmers are increasingly dependent on traders to decide on timing, volumes and the prices for coffee beans. To function effectively in this role, we have created supply structures in the different producing regions, and conduct market research on prices, quality, and volumes to inform our decisions and activities. Playing this role is not easy and involves building and sustaining the supply structures amidst significant competition.
Partnering to address quality concerns
The Edge Trading Uganda Ltd. is a member of the Uganda Quality Coffee Traders and Processors Association (UQCTPA) which was formed by the private sector in 2010 to respond to the urgent need to address coffee quality concerns and to improve the competitiveness of the coffee industry in Uganda. The UQCTPA, which includes traders, farmer representatives, primary processors and exporters, provides a platform to engage with the Ugandan coffee regulating authority, the Uganda Coffee Development Authority (UCDA) on coffee quality improvement, and to support the UCDA in ensuring compliance with coffee quality standards throughout the Ugandan supply chain. One of the key accomplishments of the UQCTPA so far has been the countrywide tour it conducted with the UCDA. This was aimed at improving compliance with quality standards and raising awareness about methods to ensure coffee quality and the disadvantages of poor quality produce. Such initiatives to ensure quality are important for developing the local coffee industry as it has been shown that buyers are willing to pay premium prices for good quality coffee.
The issue of poor coffee quality prompted actors to jointly identify common solutions and the partnerships created to address the problem have been commended. Local multi-stakeholder committees have also been created in coffee producing regions to monitor and advise on quality issues, and UQTPA was at the centre of this development. At the regional level, dialogue and information sharing is facilitated by the African Fine Coffees Association which has attracted participation from coffee producing regions worldwide to network and share experiences and knowledge on thematic areas such as gender, sustainability, and insurance. Regional cooperation may have an important role to play, as regional bulking is increasingly being viewed by private actors in Eastern Africa as a way to consolidate volumes and increase industry competitiveness in the region.
Other benefits of partnerships
Recent developments in the region’s coffee industry present opportunities and lessons for small coffee traders in Uganda to diversify their businesses by engaging in production or export activities. Of importance to our company is the opportunity to acquire information and knowledge on global coffee production and consumption trends through participation in multi-stakeholder forums and also meet prospective buyers and partners offering more ‘friendly’ coffee trading terms. Although existing multi-stakeholder platforms have emerged as a response to particular challenges, these should consider adopting a more strategic role to continuously identify and respond to challenges in the industry as they emerge in order to remain relevant to the interests of their stakeholders.
About the author
Amos Kasigi is the CEO of The Edge Trading Uganda Ltd., a coffee trading firm in Uganda, and the Vice Chair of the Uganda Quality Coffee Traders & Processors Association (UQCTPA).
This article was published in GREAT insights Volume 4, Issue 2 (February/March 2015).
