(DTIS) Update, Volume 1 – Main report - Enhanced Integrated ...

Recommendationsi. Addressing barriers that affect trade costsTrade logisticsThe logistics system upon which the coffee chain depends critically impacts the performance of thesector. Beyond the border regional logistics, especially on the central corridor going to the port of Dar esSalaam through Tanzania, are of major importance for Burundian coffee exports. As argued in Chapter4, Burundi should push for logistical improvements on the main corridors and for the removal of nontariffbarriers in the context of EAC integration. While Burundi has no direct control on logistics inneighboring countries, it is critical to ensure that all links in the domestic system function efficiently,from production to export. As discussed in Chapter 5, Burundi has sound basic infrastructure for coffeelogistics comprised of roads, local storage capacities, processing plants and export processing facilities.In particular, the dense network of CWSs in coffee growing regions ensures relatively short travels fromfarms, which is important as quality coffee requires cherries to be delivered for depulping within a fewhours after being picked. However, Burundi currently ranks last of all the countries surveyed in the latestLogistics Performance Indicator (LPI) conducted by the World Bank (Chapt. 5). Local logistics costsalready represent an estimated 12 percent of coffee value when delivered to exporters.It is important to ensure that the organization of the value chain enables maximal logisticefficiency, so as to reduce transport cost, potentially through consolidation of shipments. Accordingto an estimate for landlocked Rwanda, a 50 percent reduction in the transport costs in rural areas wouldlead to a 20 percent increase in producer prices for coffee, which in turn would reduce poverty incidenceamong coffee farmers by more than 6 percent (Diop et al. 2005). Although situations are not perfectlycomparable due to differences in coffee sectors and domestic logistics, this suggests that improvingtransport could have a positive impact on access to markets and farmers’ income.Access to financeAccess to finance is a major impediment in the coffee sector. In 2005, the State decided that it wouldno longer guarantee loans made by a consortium of Burundian banks to the public agency OCIBU (nowARFIC) to finance the coffee campaigns. This put the companies managing washing stations(SOGESTALs) in a difficult situation, as they were expected to finance the purchase of cherries andother expenses, but had no access to working capital given the absence of collateral (CWSs remainedState property and were only rented to SOGESTALs). The SOGESTALs and SODECO (dry mills) arein a dire financial situation and the banking sector has become increasingly reluctant to extend new loansto the industry. Recent campaigns were marked by tough negotiations in which the governmentintervened despite the theoretical deregulation initiated in 2005 (World Bank 2011c).Affordable financing channels must be made available to producers and their associations tofacilitate the use of inputs and replacement of aging trees by farmers or to enable them to buyshares in CWSs. A new financing arrangement for the coffee sector has to be found, especially forSOGESTAL-owned CWSs 76 . It will be critical to facilitate credit allocation to the coffee sector inBurundi, and the regional integration of financial services could ease financing constraints in thisregards. Various types of actors, from banks to microfinance institutions, NGOs and donors, could play arole concerning the different financing needs of actors in the coffee sector. In recent years, the USAIDhas for example worked on issues related to campaign financing and purchase of inputs/equipments withthe specialized credit institution Root Capital, Burundian banks such as InterBank, and coffee sectoractors (USAID 2010).76 Private operators with large financial capacities, such as Webcor, face less difficulty to mobilize financing.62 / 153