Rwanda Coffee Development Authority

In its Vision 2020 plan, Rwanda set ambitious goals for its development.  Between 2000 and 2020, the country targets per capita GDP growth from $250 to $900, which implies that the overall economy needs to expand by over 600% when population growth is taken into account.  Coffee has traditionally been one of Rwanda’s most important export sectors and one of the most important cash crops for close to half a million coffee grower families.  Coffee exports accounted for about 58 million US$ and 60% of total exports in the early nineties but experienced a severe crisis so that revenues were down to 20 million US$ in 2001 and represented 30% of total exports.

In 2002, a National Coffee Strategy, developed with the participation of all stakeholders, was adopted.  It targeted investments of $70 million in order to raise projected total receipts to above $600 million by 2010.  Members of the coffee cluster committed to coordinate twelve programs.  Upgrading capacity of coffee associations and farmers, and replanting of trees were fundamental to building a strong Production pillar.  Carrying out a GIS (Geographic Information System) study and ensuring that CWS were placed in Rwanda’s top 50 coffee producing districts were deemed a priority.  Furthermore, quality control systems, market information and innovative branding activities were core actions needed in Sales and Marketing.  Strengthening OCIR Café’s capacity and providing a financial framework throughout the coffee chain were identified as two essential priorities in upgrading of institutions.

The Strategy targeted the specialty coffee segment as it enjoys higher and more stable prices than the commercial coffee segment which is subject to global commodity price swings.  Furthermore, the specialty coffee segment was projected to grow at 7.2% per year between 2000 and 2010 whereas commercial grade Arabica was expected to fall at 2% year over the same period, and Rwanda has all the natural attributes to compete in this segment.  Fully washing the coffee was seen as the key to potentially selling it as a specialty product.  Positioning Rwanda as a specialty coffee producer would best enable the sector to contribute to the growth and prosperity of the country.

Since the Strategy was developed in 2002, farmers have begun to see the value in producing coffee since cherry prices have more than doubled since 2003.  The capacity to fully wash cherries has also significantly improved so that, in 2006, average prices gained by Coffee Washing Stations (CWSs) for their coffee translated to a premium of 45 cents per lb over the New York C-Price (the standard reference price for coffee worldwide), placing Rwandan fully washed coffee firmly in the fine coffee and specialty price range.

Coffee has again become one of the country’s foremost exports, with receipts growing at an average of 30% per year during the period of 2002 to 2006.  Despite little overall growth in the quantity of fully washed coffee being produced, Rwanda’s coffee industry has gained a positive profile and created tremendous demand for its high quality bourbon Arabica.  Long-term relationships with household names such as Starbucks and Marks & Spencer have the potential to complete the transformation of the industry.

However, despite impressive progress in transforming the Rwandan coffee sector, the sector is currently falling short of the targets it set itself in 2002.  The current major constraint to growth is the insufficient production of coffee cherries.  This, combined with high operating costs and weak management skills, has resulted in many washing stations struggling to turn a profit and deliver on sales commitments.  The planned move towards value addition in coffee over and above the introduction of washing stations has also been slower than anticipated.  Furthermore, data on the coffee industry is out-of-date, so monitoring and evaluation of progress is difficult.

Given these concerns, this document sets out a Revised National Coffee Strategy, which seeks to address these major constraints and others, as well as presenting revised targets for the industry based on the new direction.  This revised strategy recognizes that the original direction set out in 2002 was well-founded and hence fully washing coffee can and should be a profitable business in Rwanda.  While Rwanda has broken into the ranks of specialty coffee nations, it now needs to consolidate this progress by increasing the quantity and quality of coffee available.

This strategy, like the previous one, does not target 100% of coffee cherries to be fully washed, as this is not a rational objective for two reasons.  First, coffee washing stations must be selective about the coffee cherries that they wash, because fully washing low grade cherries does not add any more value than semi-washing such cherries.  Hence, fully washing should be undertaken only for the best cherries and semi-washing should be undertaken for the lower quality cherries.  Second, despite rapid growth in coffee washing stations Rwanda has existing capacity to process roughly a third of its coffee.  Targeting 100% of fully washed coffee could therefore only be achieved by dramatically cutting production and forcing farmers to sell to coffee washing stations.  This would be a negative step for the industry as it would reduce overall revenues and likely cut prices paid for coffee cherries.

This new Strategy targets production of 33,000 tons of coffee by 2012, with 19,000 tons of this fully washed.  This should generate exports of $115 million by 2012.  The graph above shows the key actions that will result in this revenue increase.  It is important to emphasize that this means Rwanda will continue to produce both fully washed and ordinary coffee, although the majority will be fully washed.  The benefits of continuing to produce both types of coffee are: that it provides competition for cherries which in turn ensures farmers receive the highest possible prices for their cherries; and that it ensure Rwanda is not solely reliant on the specialty coffee market.

Five priority programs costing $9million have been identified to remove key binding constraints to success.  These programs are:
•    improving the use of good farming practices and integrated pest management systems through focused agronomist support;
•    providing a voluntary turnaround support program for Coffee Washing Stations that have the potential to become profitable
•    improving sales and distribution mechanisms through capacity building of private exporters;
•    implementing a census and GIS study of all coffee producing regions;
•    implementing value addition activities including Toll Roasting in China, Toll Roasting in Middle East, and a partnership with M&S.
These five key priority programs are supported by a number of other actions costing $42.8million that are also crucial to the further development of the coffee industry.  These actions are set out in five key areas – production, processing, sales and marketing, research and development, infrastructure.  The table below shows all of the major programs and budgets.

Full Document(PDF)