Can coffee save the African economy?

11th April 2012

Her former professor, Jeffrey Sachs, has begged to differ. The director of Columbia University's Earth Institute has long critiqued his student's work, maintaining that the life-and-death consequences of denying international aid are too strong to ignore and pointing out that some of Moyo's supporters-and Moyo herself-have benefitted from the leg up that they purportedly wish to deny others.

Lately, that debate has been re-opened. Forbes reported last week that microfinance firm Accion has launched Venture Lab, a $10 million investment outlet to provide seed capital and management support to financial inclusion start-ups around the world, particularly in East Africa and India.

Venture Lab hopes to make 20 investments over the next three years, pledging to invest anywhere between $100,000 and $300,000 in companies "developing game-changing technologies and disruptive business models with the potential to transform the quality and scale of financial services available to the world's un- and under-banked," per Accion CEO Michael Schlein.

Two days later, The New York Times ran a feature piece by Daniel Bergner posing a relevant question: "Can Coffee Kick-Start an Economy?". The piece profiles Andrew Rugasira's journey to begin Good African Coffee, an attempt to reverse poor farming techniques in Uganda by organizing farmers into producer groups, offering an intensive training scheme, and paying higher initial costs to produce a higher quality Arabica coffee and ensure better returns on their harvest. Since the company's South African launch through the Shoprite Checkers supermarket chain in 2004, Good African Coffee has been stocked on the shelves of Waitrose and Sainsbury's, and in October 2011, it was introduced to the largest consumer coffee market in the world: the U.S.

The effect of Bergner's piece is tangible -the Good African website has it featured on their homepage, alongside a note from Rugasira. "The response has been tremendous," he reports, "with readers purchasing our coffees in unprecedented numbers. The result is a stock-out." This stock-out means a replenishment of the company's web store-and a promise of positive change for the more than 14,000 local farmers who make up Good African's suppliers.

Grown in the tropics, coffee is a crop that is consumed most often in Europe, the U.S. and Japan. In the UK, over 90 percent of the country's trade is controlled by Nestle, Kraft and supermarket chains. In return, growers receive only 10 percent of the crop's value, and when a cup of Starbucks coffee is sold at a value of $2 to $3, a Ugandan farmer receives one percent of that value. This inequity led Rugasira, who received a degree in law and economics from the University of London, to ignite the African entrepreneurial spirit that Moyo promotes.

"For decades Africans have produced what they do not consume and consumed what they do not produce," Good African's website notes. "With few exceptions, processing and value addition has historically taken place outside Africa. Good African decided to address this by setting up a roasting and packaging facility in Kampala in July 2009. Processing the coffee in Uganda where it is grown allows the company to retain a greater proportion of the value addition thereby enabling the Company to better support the farmers and empower their communities."

Rugasira's success follows years of struggle. He made 14 trips to the UK before finding international success. The United States Agency for International Development has provided one-eighth of all funds for Good African, since investors for African ventures have been historically scarce. He has often had to battle, he told Bergner, "the idea of Africa being a backward, primordial society with nothing going for it, a continent of conflict, a continent just begging for handouts, a basket case." And when success finally came, it tasted bittersweet.

"It used to be a badge of pride that we were the only African coffee brand in British supermarkets. Now I see it as shameful," Rugasira told The Economist   in 2010. "Africa has plenty of entrepreneurs. They just need you to take your dollars out of your pockets and spend them on their products."

In light of Bergner's piece-and Accion's investment-the world appears poised to do just that. Drawing from the views of Moyo and Sachs alike, Rugasira has proven that the potential for African internal development is great, a success story that will encourage investment in local entrepreneurs and yield greater financial reward for those who produce the labour. The combination of higher quality technical training and product output fixes the issue of poor farming practices yielding lower quality products that had plagued Uganda for years. Rugasira's decision to initially pay 70 percent more for a product that would satisfy a wider range of markets, rather than selling to cheap traders, has become an investment that will now enjoy a stronger economic output.

By addressing the roots of the problem, Rugasira has used his education to elicit a sense of resolve with the power to jump start an economic market in a continent that, in the words of Forbes Contributor Mfonobong Nsehe, "is no longer the moribund, conflict-ridden continent the world envisions. Africa is developing- slowly but steadily. World-class business concerns are fast emerging, technology utilization is at an all-time high, infrastructural development is on a major increase, and good governance is gaining ground."

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