• Rwanda Supply Chain

In the past two decades, Rwandan coffees have changed dramatically in quality and quantity.  Government policies combined with support from various private and public stakeholders have revolutionalised the coffee sector, establishing Rwanda as a notable producer of specialty coffee. This has brought better prices to farmers. It’s now up to those like our in-origin sister company, Rwacofwhich has been investing in Rwanda since 1995, to continuing helping farmers take the next step towards higher quality to help farmers reap the benefits from even higher prices.  

We spoke with Rwacof’s Managing Director (MD), Max Veglio, about the steps Rwacof and the farmers they work with are taking to improve both yields and coffee quality and thus, increase farmer livelihoods.  

Max first arrived in East Africa during a summer break from University. He initially intended to teach for one month at a school located two hours north of Nairobi, Kenya. Instead, he stayed for three months and ended up missing the first month of fall term. He finally left very reluctantly, but he vowed to return. He had always been interested in working in commodities and three years ago was appointed as MD of Rwacof in Rwanda.  

Increase Farmer Livelihoods

For Max, coffee production in Rwanda is more than one thing. It’s both a potential avenue for improving livelihoods and an incredible source of flavor diversity. In contrast to the majority of coffee growing origins, Max says, coffee production in Rwanda is fairly antiquated. Not only are individual holdings very small at an average of 275 trees per farmer, but due to shoestring incomes and a lack of established supply chains, acquiring or paying for inputs is virtually impossible for most of the 400,000 farmers in the country. Despite these conditions, “as a collective, they’re producing some of the best coffee in the world, which is remarkable,” says Max 

Coffee and Crisis in Rwanda

Coffee in Rwanda has a long a tumultuous history, like most of the rest of the country. Coffee was brought to Rwanda in the early 1900s by the Germans. In 1930s the Belgian colonial government ramped up production. The Belgians forced native Rwandans to grow coffee in order to produce cheap, plentiful low quality coffee for export.  

Coffee production continued after the Belgian colonists left. By 1970, coffee had become the single largest export in Rwanda and accounted for 70% of total export revenue. Coffee was considered so valuable that, beginning in 1973, it was illegal to tear coffee trees out of the ground.  

Between 1989 and 1993, the breakdown of the International Coffee Agreement (ICA) led the global price to plummet. Considering the massive role that coffee played in Rwanda’s income, the government and economy took a hard hit from low global coffee prices.  

Coffee Paves the Way to a Better Future

The last decade of the twentieth century in Rwanda was marred by a horrific genocide that killed more than 800,000 people, mainly those from that Tutsi ethnic group, in fewer than 100 days between April and July 1994.    

Genocide and its aftermath led to a complete collapse of coffee exports and vital USD revenue. But the incredible resilience of the Rwandan people is evident is the way that the economy and stability has recovered since then. 

Today, Rwanda is now considered one of the most stable countries in the region. Since 2003, its economy has grown by 7-8% per year. Coffee production has played a key role in this economic growth.

This incredible recovery is due in part to the strong government support for the coffee sector as well as trade rules helping exports and international investment into the coffee sector. In the early 2000s the Rwandan government, with the input of international partners, identified coffee as a potentially key generator of much needed export revenue. The intention was to pass on some of the higher prices being paid for quality coffee as better prices to the grower. However, to do this, they had to improve coffee quality. 

Previously, Rwandan coffee farmers processed their cherry at home. They would “roughly de-pulp the cherry, wash it, maybe ferment it and probably dry it on the floor. This created a very low-quality commodity coffee called semi-washed,” says Max 

To improve the quality of coffee, the government incentivised the creation of new Central Washing Stations (CWSs) in coffee producing areas. Under the new system, people could apply for permits to build a washing station in a specific area.  

“It’s tough, but it pays better than almost anything else,” Max says. He points out that the growth of central washing stations (CWS) in the past two decades has helped increase prices for farmers and improve coffee quality. 

Today, there are about 300 stations across Rwanda. Of those, Rwacof own 19. They purchased their first station in 2006 and the latest in 2018.  

Farmer Field Schools Spread Information

The growing numbers of washing stations has made it easier to disseminate important farming information. Rwacof’s Farmer Field School organises farmers in groups of about 25-30 people. An elected leader is made head farmer. The washing stations give training sessions to groups of head farmers who then return to their group and share that information with all group members.  

Through the school, Rwacof shares information on best agricultural practices, conservation tactics, the importance of picking only ripe cherry and more.  

This is Where the Farmers Come In

Best practices alone will not increase yields and quality enough to drastically improve farmers livelihoods. The root of many of these problems—money—must also be addressed.  

“The thing really to emphasise is that these growers are completely financially excluded. They have extremely low gross income = 65-90€ annually,” Max points out. “They have very bad cash flow. Most of their crops are maturing between Jan and June but [they get] very little cash after that. If they have a cash flow issue today they only have two options. Either they go to a local cooperative bank and borrow at 30% interest or they could presell some of their crops but they can end up paying an interest rate that is even worse.”  

This is the cyclical nature of poverty. Without money, farmers are unable to purchase the kinds of inputs that could improve crop quality and yield and without those inputs, they are unable to make enough money from their crops to purchase them. It’s a catch-22.  

Making Farmers More Bankable…

But Rwacof is trying to break that cycle. Max asks, “How can we use our size and spending power to bring inputs that can benefit the farmer and represent positive returns to them?”  

The first part of the answer is found in the distribution of the annual bonuses. Rwacof pays their farmers a bonus after all the coffee is sold. Rwacof pays growers a seasonal bonus once most of the seasonal purchases are sold and shipped. This normally amounts to around 10% of the total harvest income.  

But instead of giving these bonuses in cash, as they normally do, Rwacof has negotiated favourable rates with a wide-reaching African bank. Farmers will have zero-fee accounts.  This means “no monthly account maintenance fees, no transfer costs, no withdrawal costs,” Max says. Further, they have access to loans with a relatively low 19% interest rate, “it’s is a lot less than 30% [which is standard in Rwanda] but not where I’d like us to be. We will work to improve this,” he continues.  

Having bank accounts not only means more secure storage for their money, but it makes farmers bankable, often for the first time. Rwanda hacredit-score systems but many people, including farmers, who don’t have official documentation of their annual incomes, are not included in retail banking systems. Banks often treat everyone outside of their system as extremely high risk and only offer loans at gouging rates, usually in excess of 30%. As farmers begin to develop banking histories, they’ll be able to negotiate lower interest rates, secure bigger loans and, in turn, use that money to increase their own incomes. As Max says, “things will get better.” We’re helping to break those destructive cycles of poverty.  

…And Inputs More Accessible

At the same time, Rwacof can leverage their existing supply chains to make inputs more readily available to farmers, who now have the money to purchase them. Rwacof plans to use its size and transportation network to purchase inputs at bulk prices and transport them to warehouses at CWSs. The inputs can then be sold at cost. “We aim to use our size to reduce costs [for farmers].” Max says. The reward, he says, is in the increased quantity and quality of the coffee they purchase. Max says they hope to roll out the input program in early 2020.  

“We can use our washing stations and the warehouses that we have there to stock things that will help make them more resilience and increase their net benefits from agriculture,” Vilgio says.  

In this way, the supply chain flows both ways. In one direction, it delivers high quality coffee to roasters in other countries. In the other, it brings the materials vital to improving production closer to the farmers. Farmers can, for the first time, not only afford but also physically access these inputs, in part thanks to the reciprocal nature of the modern supply chain in Rwanda.  

Integrated Supply Chains Mean More Traceability, Lower Costs

A major advantage Rwacof has as a coffee exporter is their integrated supply chain. Because they control every step of the process from the time the cherry arrives at the washing station to when the coffee leaves the country on a ship, they have lower overall overhead costs spread throughout a large export account. In essence, it costs Rwacof less per ton of coffee produced because they are processing and selling more coffee at a similar fixed cost. 

This “can really shorten the supply chain between the roaster and buyer and the farm,” Max explains. “When we export a container, we know more or less all the transactions that have occurred to populate that container. There’s some really good opportunities for clients to start to segregate specific premiums that they can pay directly to the growers that have contributed to their individual lots and with bank accounts that can reassure clients within that process.”  

____________________________________________________________________

Max emphasises the importance of maintaining good buying prices for quality Rwandan coffee. Fair prices for good quality coffee mean more money to farmers. The demand for Rwandan coffee has been growing, he says.  

These new coffees have just arrived this week. We’re ready and waiting to send out samples to you, contact us today!  

 

Matyazo Fully Washed 2019  
CPGP-3772-1R; 40 bags  
Preshipment Notes: Black tea, dark chocolate, ginger, lemon and red currant

Nyakizu Fully Washed 2019 
CPGP-3772-2R; 32 bags 
Preshipment Notes: Blood orange, dark chocolate, Geuze and lime

Mushonyi Fully Washed 2019  
CPGP-3772-4R; 30 bags  
Preshipment Notes: Cranberry, dark chocolate, lime, sweet and sugary

Nyamyumba Honey Processed 2019  
CPGP-3773-2R; 5 bags
Preshipment Notes: Apple, bergamot, black tea, cherry, floral, melon and vanilla

Nyamiyaga Natural 2019
CPGP-3773-6R; 10 bags
Preshipment Notes: Candied ginger, clean, milk chocolate, orange, sweet and sugary

Ngororero Natural 2019  
CPGP-3773-7R; 18 bags
Preshipment Notes: Black currant, black tea, juicy, mandarin orange, toffee and vanilla

Karambi Natural 2019  
CPGP-3773-9R; 5 bags
Preshipment Notes: Floral, orange, apple,  black tea,  chamomile,  cherry,  clean, Rooibos, spice and tropical Fruit

Humure Fully Washed 2019  
CPGP-3775-3R; 11 bags 
Preshipment Notes: Full body, cranberry, effervescent, green apple, melon and passion fruit

**All bags 60kg GrainPro**

Avatar Victoria

About the author