Project description and activities

Co-financing and other forms of partnership

With respect to the industrial tea development at Nshili, BADEA will fund the cost of the detailed design and feasibility study for the tea factory, the construction of factory buildings and ancillary facilities including the water supply, the purchase of the factory equipment, and the connection of the factory site to the national electric grid. IFAD will fund the equity capital of the Nshili Tea Company on behalf of the cooperatives of smallholder growers. The overdraft facility required by the company will be funded by IFAD to the extent of 75% and by other Rwanda financial institutions (including the RDB) to the extent of 25%. The coffee processing equipment will be funded by IFAD, through pre-financing the shares of the cooperatives in the equity capital of the enterprises, and the long-term loans to be extended by the RDB. However, the overdraft facilities of the CPMCCs will be funded by IFAD to the extent of 75% and by other Rwanda financial institutions (including the RDB) to the extent of 25%.

TWIN will contribute to project costs in two ways. One way represents direct cofinancing of project activities. During the 5 years of the contract with the project, TWIN will contribute an amount of USD 380 000, of which USD 300 000 represents TWIN own costs and USD 80 000 would be paid by the FT “Producers Support Fund (PSF)” of Café Direct and of other FT organizations that market the project coffee production. The other way represents the continuation of TWIN support to the Rwanda producers after the completion of the contract with the IFAD project. For years 6 and 7 of the project, this contribution is estimated at USD 40 000 per annum, a total of USD 80 000 for the two years, sufficient to pay for the remaining services of TWIN. Resources will be drawn from the FT PSF. In addition, after project completion, TWIN will continue supporting the Rwanda Cooperatives over the foreseeable future, drawing resources from the PSF at a rate equivalent of between USD 60 000 and 70 000 per annum. This arrangement ensures the sustainability of TWIN contribution over time and of the relationship of the Rwanda cooperatives of coffee and tea producers with the FT network. TWIN own support to the project initiatives, calculated over a period of 15 years, would be of the order of USD 1 million.

The partnership with TWIN is the key to establishing a workable and effective link between associations of poor agricultural producers in Rwanda on the one hand, and, on the other hand, the complex world of global markets and the niche markets that can best add value to poor producers’ efforts, and thus improve their livelihood. TWIN, as the key technical partner of the project, will play a central role, complementing the knowledge and experience of both IFAD and the GOR. The choice of TWIN as project technical partner is by virtue TWIN’s experience and capacity in both the FT market and in poor producers’ cooperatives training and development. TWIN expertise far exceeds those of other FT organizations, and it has experience with operations in two of Rwanda neighboring countries, Uganda and Tanzania.

Smallholder coffee and tea growers will co-finance the project development costs to a significant extent, through the value of the family labor applied for tea and the private woodlot planting in Nshili and Mushubi (USD 325 000) and in the rehabilitation and expansion of the coffee plots (USD 60 000).

Government contribution will also consist of two parts. The resources directly made available to the project cash flow are estimated at USD 2.1 million. In addition, the Government contribution includes the transfer of the housing compound and of the woodlot plantations in Mushubi to the Nshili Tea Company. Whereas the current value of the houses is limited (the project will spend USD 355 000 for rehabilitation from the war damage), the woodlots have a good commercial value. The form of the transfer to the Nshili Tea Company could either be a grant to the company, or a long-term lease at a reasonable annual cost to the NTC.