Economics Aug 14, 2018
How the Coffee Industry Is Building a Sustainable Supply Chain in an Unstable Region
Three experts discuss the challenges and rewards of sourcing coffee from the Democratic Republic of Congo.
Economists are looking to private-sector investment in developing economies to make up the bulk of global growth in the future. But one limiting factor to growth is these countries’ propensity to break into conflict.
to your inbox.
We’ll send you one email a week with content you actually want to read, curated by the Insight team.
Take the coffee industry. Coffee consumers worldwide are increasingly interested in high-quality, gourmet, artisanal beans. They care where their products come from and how they are sourced. Yet across the global “coffee belt”—Colombia, Nicaragua, Vietnam, South Sudan, and central Africa—specialty coffee is intertwined with a history of conflict.
Few regions compare to the eastern part of the Democratic Republic of Congo (DR Congo or DRC). Coffee aficionados’ desire for new regional varietals, as well as the quality of Robusta and Arabica grown there, are generating excitement from buyers.
And yet, harvesting, washing, and transporting Congolese coffee beans from the area is fraught with peril, from the dozens of militia groups operating in the east of the country to decades of political instability.
Ameet Morjaria has long been fascinated by the coffee supply chain in East Africa, and in particular the DR Congo. Morjaria, an assistant professor of managerial economics and decision sciences, grew up in nearby Tanzania. Since 2012, he has advised or led both policy and academic projects with coffee authorities in Rwanda, Uganda, Ethiopia, and Burundi.
Morjaria believes that now is a critical time to focus more attention on the Congolese coffee industry.
“Development dollars have arrived at the shores of the eastern Congo, says Morjaria. “For those top dollars to have a lasting impact is not straightforward: farmers are poor, lack support, and struggle to get access to finance. Their trees are old, badly maintained, and low-yielding. On top of that, investors worry about the expense and logistics of getting produce out of the country at volume. And lastly there are issues of insecurity and poor governance.”
However, there are pathways to success for companies willing to put in the time and infrastructure. To better understand what is needed, Ameet Morjaria, an assistant professor of managerial economics & decision sciences, spoke to two experts on the Congolese coffee industry. Sara Mason is founder of SHIFT Social Impact Solutions. Angel Mario Martinez Garcia has more than 15 years of experience working with smallholder coffee producer organizations in 22 countries and is head of the DRC Producer Group Development Platform, a SHIFT project in the region
This interview has been edited for length and clarity.
Ameet MORJARIA: Why is it important for companies to continue to find inroads into the Congolese coffee market?
Sara MASON: The reason it’s essential for companies to continue working in DRC is because we see there is so much potential. We really hope that in a few years, with positive support from the government, there might be a chance to transform the sector into an agricultural growth opportunity that will fully realize its potential.
MORJARIA: When we talk about the coffee business in the Congo, what entities exactly does that entail?
MASON: We’re talking firstly about coffee producers who are small-scale or “smallholder” farmers, typically with less than one hectare of production. Sometimes for operational efficiency, access to markets, etc., these producers aggregate production to form producer organizations. Some producer organizations export their own coffee, but most work with exporters or traders who find markets and support the export of the coffee.
In DRC, most of the actual growers, the normal people who are growing coffee, they’re living in extreme poverty. Their level of education is extremely low. They may not even speak French [the region’s main language is Swahili]. So, their ability to communicate with the outside world is extremely minimal. This can leave the everyday grower vulnerable to the control of producer organization leaders who have the best access to and ability to communicate with the outside world. Sometimes the prices paid for coffee are not making it to the actual farmer who grew the coffee. Helping to support strong, transparent producer organizations was one of the drivers for creating the SHIFT DRC Producer Group Development Platform.
MORJARIA: Are there ways to level the playing field between those everyday growers and the few growers who might have that ability to connect with the outside world because they may speak French or be well connected in the Congo?
Angel Mario MARTINEZ GARCIA: Technology can help. More and more, there are people that have access to some basic technology. Cell phones are still quite limited, but there’s a sense that it’s growing exponentially. That could be a way in which people can communicate in Swahili. So there can be certain ways in which people can actually get their message out, using technology.
MORJARIA: In 2016, the DRC exported 4.5 billion dollars worth of goods, of which 85 percent was composed of minerals and petroleum products. Agricultural commodities like cocoa and coffee hardly made it to the ledger. This is in stark contrast to the days gone by. In the 1980’s coffee was the country’s second-most valuable commodity. It was not surprising to see DRC exporting around 88,000 tons of beans in a year. In 2016, it exported just 8,000 tons.
So the growth we see in the DRC now is mostly from exports of minerals, which are controlled by very few people. But then you have something like agriculture, which, to some extent, can be more inclusive. And yet coffee still isn’t considered a high-valued export, in part because farmers have very little support or training, meaning that their yields are low. Bulk or commercial coffee would have a much larger impact on the lives of the poor.
MASON: The agriculture industry faces a lot of challenges before it will be able to realize its potential to be a more inclusive industry. Something critical that is missing is legislation to ensure support for farmers and effective collaboration with the private sector. For instance, today it’s really difficult for a coffee buyer to get a visa to enter the Congo. That’s not good for business or transparency with the outside world.
MARTINEZ GARCIA: And then there is the security issue, of course. There are not many coffee buyers who will venture into the Congo. It’s risky.
“A quick fix is never going to work in the Congo. And sometimes it’s a challenge to find someone who’s able to provide resources and time and energy for people to work there in the long run.” —Angel Mario Martinez Garcia
MORJARIA: The threats are real: death threats, kidnapping, and extortion. Since May 2017, 535 foreigners and Congloese were abducted and held for ransom.
How are buyers responding to these challenges?
MASON: They try to be supportive, and there are really two kinds of coffee buyers: specialty buyers who will buy a smaller quantity because they are interested in having coffee from DRC, and larger buyers who are really the ones that you need to be on board to achieve any kind of scale for the coffee industry. It might be possible for someone who’s buying 10, 20, 30 bags to be flexible when there are challenges that effect coffee quality or delivery times. But, if you have a very large-scale buyer who needs 20 containers of coffee, and you’re four months late delivering because you just can’t get the coffee out of the country because of delays in customs or border issues, then that’s really hard for buyers because this will negatively impact their business.
MORJARIA: I hear there’s a lot of taxation—both formal and informal. Bureaucracy along the supply chain really kills the farmer’s incentives. Officially, the tax rate is less than 0.5 percent, but in practice it is more like 15 percent. This is remarkably high compared to neighboring countries like Uganda and Rwanda.
MARTINEZ GARCIA: In Goma [the capital city of the North Kivu province], you’re directly next to the border into Rwanda. Goma is maybe 20 kilometers away from a growing production area, but it takes several hours to reach the coffee because of the several control points along the way. And at every control point, there might be informal taxation or some other type of negotiation. So, basically, because of these costs, the price of the coffee doubles by the time it arrives in Goma. Those are costs that private sector companies must absorb; otherwise the coffee will never make it into land harbors, and it will never be exported.
MORJARIA: That supports a recent study that identified 798 roadblocks in the provinces of North and South Kivu, operated mostly by the Congolese army, the FARDC. The roadblocks were separated by an average distance of just 11 miles. The report found that six trucking companies in North Kivu were paying a combined total of more than $1.5 million in fines each year. Are there steps that your organizations, or other organizations like yours, can take to deal with the financial stresses and to discourage corruption along the supply chain?
MARTINEZ GARCIA: Definitely. With the Producer Group Platform we are working with producer organizations, giving them the tools and skills and knowledge of what’s going on in the world of coffee so they can also start increasing their awareness. And from the other side, we need to have more intervention from international buyers and organizations that can discuss with local and regional governmental institutions regarding the difficulties they face in getting more coffee out of the Congo, without it creating a conflict. And then we need to to find a business model that everybody can benefit from. The more coffee they can export, the higher the amount of money that is going to come in from taxes—which could help eliminate the informal taxes. Then it’s just promoting exports that bring taxes into the Congo in an official way.
MASON: One of the challenges is that much progress has been made on paper, but the Congo, it is a huge country, and so you might have reforms being made in the capital, Kinshasa, but most of the coffee is produced in the eastern side of the country. So, regardless of what kind of reforms are passed in the capital, it’s critical these reforms translate into additional support for the coffee sector in the eastern part of the country.
MORJARIA: All this rebuilding and restoration of the coffee sector is happening while in the background the political and humanitarian situation remains fragile. There was a recent outbreak of Ebola, for example. The political situation is such that the UN in fact has repeatedly said the DRC has reached a “breaking point,”with elections twice delayed since 2016 when Kabila’s term came to an end. There is a huge power struggle going on in the country. Are there steps that you’re taking to sustain and stabilize the work that you’re doing and guard against this instability? Or is that something that’s just so strong and all you can do is react?
MASON: The best thing we have found is to have strong relationships with the people we work with in-country. Right now, I can’t go to the places I need to go. But I have very strong relationships with the local staff that I work with. And so, even when it’s too dangerous to go to some areas of the eastern Congo, if you have the people whom you really have faith in, that’s going to get your business through those times.
MARTINEZ GARCIA: A quick fix is never going to work in the Congo. And sometimes it’s a challenge to find someone who’s able to provide resources and time and energy for people to work there in the long run. It is really important to continue supporting producers, to continue increasing skills and knowledge. Because they are the ones, even after we end any activity or any project we have there—in a year or 10 years or 20 years—who will still be there working and living and discussing any future of the coffee sector in the Congo.
Glenn Jeffers is a writer based in Los Angeles.
New research shows that you and your organization lose out when you procrastinate on the difficult stuff.
When done thoughtfully, authenticity can make for more confident, ethical leaders. Here’s how to ensure you’re being your true self.
Coworkers can make us crazy. Here’s how to handle tough situations.
Plus: Four questions to consider before becoming a social-impact entrepreneur.
Finding and nurturing high performers isn’t easy, but it pays off.
A Broadway songwriter and a marketing professor discuss the connection between our favorite tunes and how they make us feel.