Tanzania – Tembo Coffee Company
Pioneer in quality coffee: Tembo Coffee Company
In Tanzania, coffee is traditionally traded through a centralised auction. The coffee farmer is only allowed to trade outside this venue if he gets a demonstrably higher price than at auction. Tembo broke with this convention by going directly to the farmers and offering them a higher price.
A better position for all coffee farmers in Mbeya
In Tanzania, there is insufficient trade financing available for mid-tier traders. Consequently it’s difficult for these companies to compete with the larger trading companies dominating the coffee market. The Rabo Rural Fund believes it’s important to support Tembo because the company trades directly with the farmer. This allows Tembo to invest more in coffee production, and the farmers are helped to produce higher grade coffee. This aid includes training and the supply of artificial fertilizers and pesticides. This enables the farmer to produce more coffee of a better quality, which can be sold at a higher price. Increasingly the quality of the coffee from Mbeya is rated by traders as superior. This coffee does not disappear in the mass of the central auction, and the farmers have more direct contact with buyers. As a result, coffee farmers have a stronger position in the supply chain.
The work done by a company like Tembo is not always easy, as breaking through the trade system brings certain challenges. Transaction costs in Mbeya are higher because the farmers often aren’t organised, so Tembo has to invest in the relationship with the farmer. And finally, there is considerable resistance towards the new market structure. A savvy trader drove the price up during the pre-season, so farmers brought the coffee to auction instead. By the time they arrived at auction, however, the price had fallen again, resulting in income losses for Tembo and the farmers. Such examples show how complex the dynamics are in the marketplace where clients of the Rural Fund operate.