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Africafe and stories of our miseries

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by Geza Ulole, Dec 31, 2009.

  1. Geza Ulole

    Geza Ulole JF-Expert Member

    Dec 31, 2009
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    Winfrith Hikloch Ogola

    Tanzanian instant coffee Africafe, in its red-brown-gold tins or plastic packages, used to be a well-known brand in Finland and other Northern European cities. It was promoted through intensive efforts by various well-wishers. Its main importer, "Tampereen kehitysmaakauppa" or in English the Tampere Third World Shop, supplied roasting and packaging machinery to Africafe Packers, Tanzania Tea Blenders Ltd.

    At one time Africafe instant coffee was widely available in popular supermarkets in these cities. It is still all over the place in Tanzania, but the varieties sold as Africafe in Finland when I last visited there in November this year look somehow different, and its visibility has gone down. What has happened?

    The story of Africafe is an interesting example of the economics and politics of coffee production in an African country. It involves forces and factors such as local and global coffee markets, politics of patronage, and international aid, and holds important lessons for Aid for Trade (AfT). In fact, the "ethical privatization" that Finland has registered in its AfT statistics in Tanzania was related to the privatization of Africafe's packer, Tanzania Tea Blenders Company Ltd (TTBL).

    Africafe continues to be the main TTBL brand, with its 75% market share it dominates the instant coffee market in Tanzania. But, TTBL does not produce any coffee itself. It only packages it at its Dar es Salaam factory, and markets it domestically and internationally. The coffee inside the Africafe packets and tins is produced far inland, in Bukoba, Kagera region, on the shores of Lake Victoria, by a company called Tanganyika Instant Coffee (Tanica).

    Tanica's factory in Bukoba is the only factory in Tanzania, and indeed in the whole of East Africa, which produces instant coffee. It buys the beans from local farmers, takes the water from the lake, and produces spray-dried instant coffee powder in a process that consists of roasting green beans; grinding them; extracting coffee soluble by mixing them with water under high pressure; and drying this extract by spraying it into a hot air tower. It mixes Robusta and Arabica in differing blends for different markets.

    The factory has been running like this for the last 42 years since it started operating in 1967. The Africafe brand also originates from those times. While Tanica has always been a state owned company, it was initially under foreign management: Lyons 1967 - 1972 and Nestle 1972- 1982. It has been under local management since 1982. A few changes were made in the machinery by Nestle, but fundamentally the factory remains as it was designed and built.

    The installed capacity of the plant is some 500 tonnes of instant powder per year. This is very little by modern standards. World Production of instant coffee- powder and granular together - is roughly 500,000 tonnes. However, the production of Tanica has never reached its designated capacity. The nearest it has ever come was some 450 tonnes in the 1980s, according to inside sources. In recent years it has been closer to 300 tonnes annually on average.

    In addition to old machinery, Tanica suffers from many other problems. For example, it often does not have money to buy green beans and fuel when they are most needed. Another major problem is its dependency on TTBL. Tanica provides more than a third of its instant coffee powder in bulk to TTBL, which transforms it into Africafe and sells up to 100 tonnes per year in the domestic market at a good price. Tanica has tried to develop its own brands on basically the same bulk (Tanica and Kilimajaro café) but it is unable to compete with the well established Africafe, although it offers its brands at some 30% lower prices.

    As long as Tanzania pursued its ujamaa policies, and both Tanica and TTBL were parastatal, i.e majority government-owned companies, the working arrangement did not seem problematic. But when the market economy came to Tanzania in the late 1980s, not least because of the insistence of the donors, the coffee and tea companies were designated for privatization and the old partners went separate ways. At this point, Tampere Third World Shop became deeply involved in the process.

    When TTBL was privatized, i.e. liquidated, Tampere Third World Shop made a joint bid, together with a number of co-operative unions and workers, for the company, but they lost out to a Tanzanian company run by a well-connected family of Iranian origin.

    Tampere Third World Shop had prepared themselves for such an outcome by declaring that in case of possible privatization, the Africafe roasting and packaging machinery the Shop had donated- financed mainly from the NGO funds of the Finnish Foreign Ministry - would not be included in the offer but could be handed over to the workers or claimed back.

    The successful bidder insisted they had bought the machinery as well. A long and acrimonious row over "Tampereen Machinery" ensued and went to Court. The Tanzanian High Court gave a ruling in favour of Tampere Shop, but the new owners of TTBL appealed. The case has been hovering in the Tanzanian legal system for years and is still pending.

    Meanwhile Tanica came up for privatization. Tampere Shop backed a consortium of local co-operatives: Kagera Co-operative Union, Karagwe District Co-operative Union and the Federation of Tanzanian Co-operatives, which won the bid. Old partners had now turned into rivals and Tanica is, with support from Tampere, trying to conquer the market share now held by TTBL. Tampere Shop plans a major rehabilitation of Tanica and is seeking support from, among others, Finnfund.

    TTBL has continued to market Africafe internationally, but it has lost some of its Fair Trade related markets. To be sure, Africafe has never been officially certified by the Free Trade Labelling Organisation, but it has enjoyed a "fair" image because of its close relationship to European Fair Trade organizations such as Tampere Third World Shop and Twin Trading in UK. "The Tanzania Co-operative Unions were able to muster the capital for their bid for Tanica basically thanks to commitments from the Northern Fair Trade organizations", says Jarna Virtannen of the Tampere Shop.

    As of now, Tampere shop has discontinued any dealings with TTBL. The shop now buys instant coffee in bulk from Tanica through the Kagera Co-operative Union, packs it in Finland, and sells it under the name Africafe without using the elements of the original logo. It also imports Fair Trade certified coffee from co-operatives in Kilimanjaro. Sales are fairly modest; but Tanzanian coffee fetches a good price at Finnish solidarity markets and keeps Tampere shop in business.

    Virtanen says over the whole period, more than 160,000 Euros of Finnish development aid, and probably even more of Tampere shop owned funds, originating not least from its coffee business, have been used: first to deliver the machinery to TTBL; then, unsuccessfully, to try to rescue it from TTBL's custody (which was what "ethical privatization" was all about). It is believed, the machines are still at the TTBL compound in Gerezani in Dar es Salaam. The company boasts that it is doing well enough and does not need such antiquated machines and can even "donate them back". Yet these could be word wars and the machines can actually be at work!

    In principle, instant coffee could be a good business to be involved in Tanzania, if more value added could be created inside the country. One kilo, packaged in 100g pouches, fetches almost 50 Euros in Finland. It is sold by Tanica at less than 10 Euros. In very rough terms, the farmer may at best get some two Euros (Tsh. 2000) for the raw coffee needed to produce one kilogram of instant coffee.

    The co-operative which turns the cherries into clean coffee, takes perhaps another two Euros. Taking the production cost into account, the margins for the value chain are small up to the exit door of Tanica. Inside Tanzania, TTBL and the retailer add more to the value. In an upmarket supermarket in Dar es Salaam, a kilo of Africafe in tins of 250 g sells at around 15 Euros, while that of Tanica brand sells at around 10 Euros.

    Tanzanian prices, however, are high by international standards, and competition outside the solidarity markets is stiff. Brazil's big factories can churn out instant coffee perhaps at one third of the cost of Tanica and sell it correspondingly cheaper to the world market.

    Also the world demand for instant coffee seems to be shifting from powder to granular form. It is hard to see how any conceivable Tanzanian producer the size of Tanica could be competitive in the open world market. Important questions include: how long are the solidarity customers willing to pay the premium, and how will the home market for coffee in Tanzanian develop?
  2. Geza Ulole

    Geza Ulole JF-Expert Member

    Dec 31, 2009
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    i never understand what can we do best?
  3. babukijana

    babukijana JF-Expert Member

    Dec 31, 2009
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    i knew there is something happen to it,nina kopo la africafe hapa but is tasting different not as usually as africafe of tanica,also gold colour is more dark and company produce is afri pacage,i swear its not tasting well and its so fake,now i cnt even recommend it to my guest