Kagera Coffee Union (KCU), Tanzania

Use Amount (US $)
Payments to farmers: 4,766,000
Education:    359,000
Bonus to farmers for organic production:    235,000
Purchase of shares in Tanica instant coffee factory: 1,068,000
Internal loan scheme for farmers:    465,000
Social premium to village co-operatives:    255,000
Total: 7,148,000

All figures are approximate, mainly because of continuous devaluation of the Tanzania Shilling against the US$ from Tsh167: $1.00 in 1990 to Tsh982: $1.00 at the end of 2003.

Fairtrade empowers coffee producers in Tanzania

The Kagera region of north-west Tanzania is a remote and isolated location between the Rwanda mountains and Lake Victoria where Livingstone and other 19th century explorers searched for the source of the Nile. In recent decades, the people there have had their share of adversity. In the 1980s, a well-intentioned project to increase fish stocks in Lake Victoria ruined the lake’s delicate ecological balance and led to endemic insect plagues which had serious consequences for agriculture in the region. Since then, over a quarter of the population has contracted HIV. In 1995, the ferry from Kagera, the region’s main lifeline to the outside world, capsized, killing over five hundred people. And in the ensuing years, world market prices for coffee, Kagera’s only cash crop, plunged to record lows, reducing farmers’ income to less than a dollar a day.

It’s in this difficult environment that the Kagera Co-operative Union (KCU) operates. Founded in the 1930s, it currently comprises some 90,000 small-scale coffee farmers organized in 124 village co-operatives. In total, there are upwards of 130,000 small-holder coffee farmers in the region. Most of those who are not members of KCU are affiliated to the Karagwe District Co-operative Union in Kagera, which is also Fairtrade certified.

In Kagera, “small-scale” means half a hectare of land on average, which must feed a family of six and generate sufficient cash income, through the sales of coffee, to pay for school fees, clothing, health care and all the daily necessities. In Kagera, for a small farmer, it’s quite a challenge to make ends meet.

Fairtrade organizations started buying from KCU in 1988. Early on, it became obvious that the best way to increase farmers’ share of the coffee’s value was for the Union to start doing its own exporting, which is why in the first years the extra income generated through Fairtrade was used to set up and equip an export office.

Instant Coffee

In the following years Fairtrade purchases from KCU continued to increase. While still representing only a few percent of the total coffee production of the tens of thousands of farmers in Kagera, the extra income through Fairtrade was able to increase farmers’ income by a few extra dollars. At the same time, the Union’s leadership thought hard about how to use the extra money to achieve sustainable longer-term improvement in their farmers’ livelihoods. The thinking concentrated on Tanica, the region’s only factory, set up by Tanzania’s state-run coffee marketing board in the 1960s to produce instant coffee powder. For Kagera’s farmers, the production of instant coffee is crucial because it is virtually the only outlet for their second-grade, non-exportable coffee. Yet the management was doing little to expand the business. When the decision was taken to privatize Tanica, KCU’s farmers gave their approval for the Union to use some of the Fairtrade income to buy shares – a few every year, as finances permitted. In 2004, after 14 years, the aim of owning 51% of the factory was reached. At last, KCU can implement its ambitious marketing plan to multiply instant coffee sales by making it available in every corner of Tanzania. Controlling Tanica fills the farmers with pride and has acted as a catalyst in increasing the farmers’ commitment to their Union. And from a business point of view, Tanica is bound to strengthen the Union as it diversifies its income and reduces its dependence on exporting.

Investing in the future

Through the years, the Union also used part of the Fairtrade income to invest in the three schools it runs for children from the coffee farmers’ villages. Far away from where the bright lights, not many good teachers are attracted to the area. Yet thanks to Fairtrade, KCU has been able to increase teachers’ salaries and increase the quality of education. And Fairtrade has also managed to provide more nutritious school lunches for the pupils.

As of 2000, KCU started promoting organic coffee production. Although organic coffee fetches better prices than conventional coffee, farmers are often reluctant to convert because in the transition period while production volumes may go down remuneration doesn’t increase because the coffee isn’t yet certified. To bridge the resulting income gap, the Union uses part of the Fairtrade income to offer supplementary payments to farmers who do decide to convert to organic. As a result, thousands are doing so; in 2000, KCU exported its first containers of organic coffee. In 2004, organic coffee represented 7% of the Union’s total coffee exports.

To assist farmers in financing their coffee business, KCU has its own bank, and an elaborate system that in the end allows farmers to obtain small loans to purchase seedlings, equipment and other agricultural inputs. By holding a farmer’s village society responsible for loan reimbursement, the Union succeeds in keeping defaults low and in instilling a more entrepreneurial attitude among its membership. Part of the Fairtrade income has been used to increase the bank’s loan capital.


Yet of all uses of the Fairtrade income, arguably the most significant and long-lasting impact is being achieved with very little money.

A few years ago the Union’s ageing general manager was replaced by a young and dynamic new manager. Seeking to reinvigorate the farmers’ participation in their co-operatives, the new management proposed to the Union’s 2004 general assembly – the annual event where delegates of all 124 village co-operatives approve the budget and decide on the use of the Fairtrade benefits – to allocate about $2,000 of the Fairtrade money to each village co-op. The assembly agreed, ruling that each village co-op must first agree how to use the money before it was disbursed.

Simple as the measure was, its effect has been amazing. In dozens of villages in Kagera’s hilly countryside, farmers are passionately discussing in meetings what to do with the $2,000. Should the bridge of the main road that was washed away by the monsoon rains be reconstructed? Should a co-operative store be set up, so that villagers no longer have to walk an hour to the next village to buy sugar or soap? Or would the money be better spent on repairing the church?

In Kagagwe, a village you won’t find on any map, the meeting quickly agreed to use $300 to set up a small pathology laboratory in the village dispensary for the analysis of blood and urine samples, and to use $700 to repair the building where harvested coffee is stored until the Union’s truck comes to collect it. But a hot debate ensued about the remaining $1,000. Part of the assembly proposed buying a coffee hulling machine, to extract the coffee beans from the harvested ripe coffee berries in the village instead of at the Union’s warehouse in far-off Bukoba. Their arguments: the hulls or husks would be used in the village as fertilizer, better control of the quality of the coffee delivered by the farmers to the village co-op, and lower transport costs. Others wanted to build extra classrooms so that school education in the village could be extended from 9th to 12th grade.

In the end, the hulling machine received most votes. As it costs $3,500, the Union’s bank supplied a $2,500 loan, refundable in the next two years. Yet beyond the final decision, the money provoked Kagagwe’s farmers to debate their future. In their meetings, arguments went back and forth over investment in education or in economic strengthening. Visions of the future were presented and defended. Perspectives on a better life were exchanged and considered. In the end, beyond the outcome, the meetings encouraged villagers to strengthen their grip on their future. They came away empowered – and confident that next year, thanks to Fairtrade, those three extra classrooms would surely be built.

Similar processes are taking place in the other village co-operatives. Most decide to invest in education. One co-op is spending $700 to buy schoolbooks, another is buying new blackboards, many have opted to repair or extend schoolhouses. And in most, it has raised farmers’ awareness of the Fairtrade concept, reviving discussions on the international coffee trade and the benefits Fairtrade’s preferential markets is giving them.

All in all, just $255,000 of Fairtrade money is making thousands of farmers consider what Fairtrade is all about: empowerment and sustainable development.
Fairtrade Foundation February 2005

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