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Fair Trade:Overview, Impact, Challenges
Annex 3: Case Study - Coffee in Tanzania
over from cotton and sisal. Tanzania’s coffee exports reached a peak in the boom
years of the 1970s, accounting for 41% of total Tanzanian exports (equivalent to US$
223 million). In the 1980s, coffee comprised between 40% and 65% of mainland
Tanzanian export revenue. However, cotton overtook coffee as the most important
export crop in 1991, largely because of low international prices for coffee.
Export marketing is implemented through regular auctions in Moshi organised by the
Tanzania Coffee Board (TCB) and attended by private exporters, many of whom are
linked to multinational coffee companies.
4.3 Co-operatives and the Tanzanian Coffee Market
Tanzania's coffee market has been organised along co-operative lines for much of the
20 th century. Co-operatives were first established in Tanzania in the 1920s, with a
view to providing farmers with an alternative to private traders. Since Independence,
government policy has had a profound effect on the structure and performance of cooperatives.
The promotion of the Ujamaa villages in the 1970s led to the replacement
of co-operative unions by crop authorities, and primary societies by village
governments. Government involvement in co-operatives in the late 1970s and early
1980s resulted in a highly politicised co-operative structure. The failure of these
approaches led to the re-introduction of member-based co-operatives through the
1991 Co-operative Act. This development coincided with the adoption of coffee
market liberalisation policies and the entry of private traders into the coffee market.
Since liberalisation, private traders have purchased a growing proportion of
Tanzania's coffee crop. Their market share has increased from less than 10% in
1993/94 (the first year of liberalisation, when the co-operative unions were at the peak
of their financial problems), to more than 70% in 1998/99. There are now around 20
private traders operating most of whom are vertically integrated from parchment
buying at farm gate level, through to the point of export. Many are subsidiaries or
agents of multinational companies, and such relationships are felt to represent a
barrier to other potential exporters.
Table 3.8 Tanzania: Shares of Auction Deliveries by Organisational Type
from 1994/95 to 1997/98 (%)
Year Cooperatives
94/95
95/96
96/97
97/98
Unions
58
44
22
27
Private
traders
13
40
68
67
Source: Analysis of Auction Deliveries, Anna Temu.
The co-operatives suffer from the following disadvantages.
Others Total
29
16
10
6
100
100
100
100
♦ The high cost of domestic capital relative to foreign capital. Generally, the cost of
domestic credit in Tanzania is higher than the cost of capital to which traders and