Andrew Rugasira: Farmers and private sector - key to rural transformation
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Andrew Rugasira, Founder and CEO of Good African Coffee
Allow me to set the scene for my talk with some statistics. Every day, 1.6 billion cups of coffee are consumed in the world. The producer countries, that is, Brazil with 37 million bags every year, Viet Nam with 24 million bags every year, right down to my own country Uganda with 3 million bags, earn US$24 billion a year from their coffee. The value addition countries, the coffee shops and all those roasters who process, earn close to US$100 billion a year. The coffee market, 50 per cent of that market is controlled by five companies, and 25 million small-scale farmers produce 80 per cent of the coffee that you and I drink every day.
Now hear this. In 2011, Africa produced 12 per cent of the total exports of the coffee in the world. A country in Europe produced more coffee than the whole of Africa. Germany re-exported 11.9 million bags of coffee worth US$3.6 billion. Africa produced 10 million bags worth US$2 billion. The last time I checked, I never saw a single coffee tree in Germany. It happens with cocoa. Seventy per cent of the world's cocoa production is from four countries: Cameroon, Nigeria, Ivory Coast and Ghana but they only produce 1 per cent of value added chocolate in the world. African producers fetch only 7 to 10 per cent of the retail value of the crops that they produce. There is something wrong with that picture. It is unjust, it is unfair and it must change.
Ten years ago, I began my journey. I set up a company called Good African Coffee with a vision to bring quality coffees to the global market by working with small-scale farmers in western Uganda. The journey began in the slopes of the Rwenzori mountains, where we went to meet farmers to try and partner with them in an effort to try and bring these quality coffees to the market. And when we got there, one of the interesting things was, we did not find the kind of romanticized image that we read in a lot of NGO publications, you know, these needy poor small-scale farmers, waiting for this outsider to come and save them. We found astute, we found farmers who knew what they wanted. Yes they were in poverty, but they were poor because they lacked opportunities, opportunities to improve their income and transform their households. We found that they had a lot of social capital. They had land, they had their labour, and they had some knowledge in how they grow their coffee. And so as a company, we sought to partner with them in those areas where they already had assets.
So we began with knowledge transfer. How do you harvest your coffee better that you can fetch a better price? How do you practice agronomy in a way that will bring the best crop to the market, from pruning to planting new coffee trees, to mulching, to how to harvest the red cherries, and to really bring a quality product at the end of the process, right up to post-harvest methods? We also then transferred some technical skills and also technical inputs – hand pulpers, how do you wash your coffee to be able to get a better product at the end, and we engaged in institutional capacity building, putting the farmers into producer organizations of fifty farmers per group. They elected leadership, we then trained the trainers who then trained the rest of the farmers in the group. We also found that the farmers had a big problem with the rural loan sharks, so they really had very little in terms of access to credit, so we put some people to help train them in terms of access to credit and also pulling their resources together, and in terms of financial literacy training.
Boy, it was tough to convince these farmers to come on board. I remember some of the earlier meetings we had, we would make this big announcement in Kasese and say, farmers, come to this meeting, we are here to buy the coffee and all this lovely marketing stuff that you do, and you know, we would receive like 50 grandmothers and their grandkids, you know, and I was like, this is not a good way to start a business, and this would go on for months, until we identified a head teacher in Ihandiro sub-county up in the mountain called Maserika (sp), and we went and sold our vision to him. Big lesson about rural legitimacy. You might have the best ideas, but for you to be able to have an impact and to be listened to, and to be taken seriously, you really need real partnerships where people really buy into the vision.
So when we spoke to Maserika, he said, look, I will call the meeting, and voilà. He called the meeting and 200 farmers showed up, healthy-bodied young men and women, ready to listen to what we had to share, and there began a process, farmer-by-farmer, group-by-group, village-by-village, sub-county-by-sub-county, we build 280 producer organizations, 14,000 farmers and we have 17 savings and credit cooperatives.
While that exciting stuff was happening in the rural economy, on the enterprise side, we were facing our own challenges. So our idea was to bring the quality coffees, roasted and packed at source, to the global market. Everybody talks about export-led growth, right? That is the way Africa is going to develop – export-led growth, but it took me two and a half years to get a single product on the supermarket shelf in the United Kingdom – two and a half years. You know why? Convincing the supermarket buyer that an African business, an SME, could bring a quality product to the global market, was the biggest impediment. It was not because they doubted the coffee – the coffee comes from Uganda, Kenya, Tanzania – they produce great coffee, but in the mind of the buyer was this barrier that an African business person, an SME leader, can bring this coffee to the market, because they have not been doing that. They had never dealt with many SME businesses bringing products to the market. We rarely add value to our products and we rarely bring finished products to the market. Africa exports 18 per cent only of manufactured value added products. So that mind-set issue was a big challenge.
Another challenge was access to capital. I must have visited 36 banks – you know, probably more, and took my business plan to one bank, to another – no one was interested. Adding value to an agriculture product, excuse me? Has anyone done it before? Nobody has done it before, but I am kind of thinking of myself as a pioneer. No, it is not going to work. And the tenth bank would even call the eleventh bank and say, by the way, that Rugasira chap has been here, and he might be coming your way. You know, these are lessons. Now, I have several privileges. I am bicultural, I have travelled a little bit, I speak the language so I can go to a supermarket, buy in Tesco and know how to behave myself, but just imagine all these other businesses that do not have those advantages, they might not even be able to speak the business language that is required. What is their chance, what is their opportunity? If accessing capital is so difficult for a company like ours that seemingly has some advantages, how about the other SME companies? The bankers do not lend to agriculture.
In Uganda today, only 3.8 per cent of loans goes to the agriculture sector, 3.8 per cent. But 70 per cent of the population earn a living from agriculture, and supposedly, the private sector is an engine for growth. There is something wrong with that picture. Not only was it difficult to get the product on the shelf, it was difficult to access capital, it was difficult to get technologies and to know about all the branding that is required to be competitive, and let us talk about competitiveness. If I am borrowing at 28 per cent per annum as a coffee brand owner company, how am I going to compete in Waitrose with someone who borrows at 3 per cent or 4 per cent? It is a big issue. It is a big problem and we need to focus the conversation on those issues.
We have witnessed some degree of impact. We have bought 1,500 tons of coffee and the farmers, thank goodness, have been able to link quality with price – that was the biggest issue. We never wanted to communicate to them that we are paying you a premium price because we feel sorry for you. These are savvy business people. It was to make the link between a quality product and a quality price. If you do these things that ensure the quality of your coffee is great, you will get a better price – it is not because we feel sorry, but because that is what you deserve, so that was a success.
We managed to put the product on the shelves in the United Kingdom and made some forays into the on-line in the United States and are also retailing our coffees in the region in Uganda and Kenya and Tanzania. But the farmers also came together and began to work in their producer organizations. They began to pool their savings into their savings and credit cooperatives. So there was an impact, the beginnings of an impact in the communities. Their household incomes went up. Farmers who were delivering – I do not know if you have seen images of farmers in the mountainous areas delivering coffee on their head, bare feet, they tie the sack of coffee on their back and the rope goes on their head, and they deliver it down the mountain. Undignified, for a commodity that you and I spend US$2 per cup on average. But today, these farmers bulk their coffee, they hire trucks, they move from walking on foot to bicycles, to motorbikes, what we call boda-bodas in Uganda, and they are delivering these coffees and getting a good price and transforming their lives.
We are only a catalyst, we are not this romanticized saviour that comes riding in to solve their problems. No one can ever be. The key to their transformation is them. We can help unlock, we can help empower, we can help give knowledge, we can help share knowledge, we can help create an incentive regime that points them into the direction where they can get better prices for their crop, but it is ultimately them who have the key for their transformation.
As I close, I would like to leave you with some thoughts. Western economic theory puts at its central foundation the importance of the private sector. The private sector is the engine for growth. The private sector are the innovators, the creators of jobs, the taxpayers, the ones who create prosperity, but in the conversation on Africa, the private sector is just part of rhetoric, part of rhetoric. How much money is spent on agriculture in Uganda every year – four per cent of the budget. I have told you already that 3.8 per cent of loans go to agriculture. Why is this reality not translated into the policy documents, into the conversations, and into the capital flows? Up to today, my own company cannot access capital to scale up – it cannot. We have put a product on the shelf, in 2005, we were the first African owned brand to put a product on the shelf. At that time it sounded great, but when you think about it, it is embarrassing. I mean, robuster coffees indigenous to Uganda, I mean, Africa is the origin of Arabica coffee? I mean, shame on us, we should have branded coffees all over the place. Switzerland imports 2.4 per cent of the global production of coffee, yet exports the highest value of coffee – US$8 billion. I mean there is something wrong with that picture.
So what I would like you to go away with, is how can we privilege in a real and meaningful sense, the conversation around the private sector involvement in transformation? How do we get capital flows? Instead of just dealing with the public sector as a solution to market failures and constraints to growth, why do we not make it available to the private sector? Every single stimulus programme that has been witnessed, drawn, implemented over the last three or four years has focused on who? On the private sector, because in a real sense, they are the engine for growth. Why are we not the real engine for growth in Africa? I hope you can take this conversation in your discussions, in your policy discussions, in your programmes, in your capital flows, to change the accent on who is the real engine and key for transformation. We have seen farmers, like Kitson Charles (sp), Xavier Wanandeke (sp), who when we met them had mud and waddle houses. Today they have corrugated iron sheets, they have dignity, because they have not been given something because someone feels sorry for them, they have dignity because through their innovation, through their hard work, through their focus, they have been able to transform their lives, bring dignity to their families and to their communities, and guess what? They want the same things you and I want. They want good health care, they want good education. In Wanandeke's (sp) village called Katalwe Kenene (sp), when we went there is 2004, there was no single university graduate. Today, there are five, and one of his daughters was translating with some friends who had gone to visit Wanandeke (sp), and so one of my friends, a guest, asked, so what would you like to be, would you like to be a farmer like your father because the assumption is, ‘like-child-like-father', and she was, absolutely not, I do not want to be a farmer, I want to be an engineer. Something happens when people's household income grows, their aspiration grows, when they are involved and engaged in a little more complex business activities, their whole mind-set and worldview shifts. Will you also shift your mind-set? Will you put the resources, the thinking, the documentation, where the real key to transformation in Africa is? And that is with the farmer and with the private sector. Thank you.