Despite good news, coffee investors facing problems

The case of crop purchasing either by government agencies or by private buyers provides a ready scenario.

One intense theme over the past few years in relation to agro-sector development is the building of processing factories so that smallholder farmers find a ready and reliable market.

The snag is that world market prices for all crops, just like metals, finished commodities, clothing or electronics, keep fluctuating tend to decline yearly.

When prices for instance of coffee or maize rise, the reason is that there is frost (for coffee, say, in Brazil, the world’s perennial top producer) or there is drought in neighbouring countries – and so we in Tanzania sell maize plentifully.

When things are normal for all crops in most countries, prices fall to the bottom for local producers, meanwhile as the government asks the farmers to dutifully stick to their appointed task in the agro-sector on the basis of national expectations. Images of this situation were visible when Prime Minister Kassim Majaliwa was assuring investors that the government is committed to protecting them and facilitating smooth investments in the country.

The assurance had different aspects of resonance, depending on the nature of the issue. For instance, there can be problems of permits issued by government officials, where it is perhaps charges by district councils which are at issue.

During his Ngara visit, the PM declared after inspecting a coffee processing factory that the government would not tolerate officials bent on oppressing investors.

Still, if one were to ask those officials, perhaps they would say that it is factory operators who either oppress peasants by offering low prices or don’t take up corporate social responsibility intensely enough One reason investors are likely to continue facing problems is that there are sharply contrasting agencies at work in agro-sector transactions or facilitation, often with divergent interests and ability to turn events in their favour.

The government may indeed be making the most it can to reassure investors against bureaucracy, but the result is that its popularity could still risk taking a dip.

Bureaucratic happiness is tied with effectiveness in ensuring that investors toe the line of regulatory agencies, district councils, etc., and this may not work to satisfaction.

These pressures could pull down agro-sector performance: coffee production is low in many districts because when prices are low for two years running, some farmers find no option but to turn to better-priced horticultural and other products.

Smallholders need higher prices to survive, while global markets compete by lowering prices. Investors must meanwhile deal with marketing cooperatives, and capacity utilisation stalls.

The Ngara factory the PM has been to can process an annual 28,000 tonnes of coffee, but the district has a mere 1,000 tonnes and the price is too low for the farmers’ comfort, so production won’t rise.

It’s some form of vicious cycle deliberate and relentless efforts must be made to break.