Tanzania: Trusting your business partner

Yorick Bruins is Agriterra business advisor in Tanzania. This week he explains why farmer cooperatives will become increasingly important in feeding our planet.

 

Changing ideas about cooperatives

Yorick: “At Agriterra we are specialized in farmer cooperatives because we know that they will play an increasingly important role in feeding the world and kickstarting local development. However, in some regions the concept of ‘cooperative’ has a negative connotation due to bad examples. In Tanzania many cooperatives were government imposed, instead of bottom up originated from the will of the farmers, or strongly influenced by the government. In Tanzania some of these structures were used as political instruments. This is all really unfortunate because cooperatives can be so much more.

 

However, in the Netherlands we’re very much aware of the major positive aspects that cooperatives can have on the quality, security and financial position of individual (smallholder) farms as well as for food security and rural economic development in general. The Dutch are champions of cooperative working. During my studies and in my work for the Slow Food Network I’ve seen how cooperatives enable farmers to increase their leverage in their own production chain. And more broadly; to improve the position of farmers in our global food system.

 

The most important effect of a ‘coop’ is that you reach more together. For example; attracting capital, finding markets and lobbying for an enabling environment. Farmer interests are extremely vulnerable. On the other hand, working together in a cooperative can be quite a challenge for farmers; you’re in effect starting and leading a new jointly owned company next to your original small holder farm. This is a big responsibility. But, once cooperatives are of a certain size and are sufficiently motivated, Agriterra can step in to help professionalize their business.”

 

Cooperative benefits in practice

“An example of this is the work I’ve done with a Tanzanian coffee cooperative last year. Agriterra has guided them with marketing their product and enabling them to find a buyer outside of the strictly governmentally controlled ‘auction system’ in Tanzania. What Agriterra basically has done is giving both parties enough trust in the process that they feel they no longer need a middle man to cushion the risks of doing business. Nonetheless, bypassing the middle men is not always the way to go. Sometimes their role is viable for business. Another option is involving the middle man in the cooperative, maybe even as employee

 

Tanzanian middle men are often very professional and make sure that trading goes smoothly. They also absorb risks in the business relationship. But they do not always put the interests of the farmers first. For instance, they know when the farmers are short on cash. Middle men visit these farmers and offer them a lower than market price for the coffee, but offer to pay immediately, in cash. You can see why this can be seen as a good proposition for many farmers. A strong cooperative structure, risk-sharing and equal buyer-seller relationships can help protect farmers from these practices.

 

In Tanzania there is very little experience in direct trading between buyer and seller in the coffee sector, and as such there is very little trust. So it is in everyone’s interest that Agriterra helps to strengthen relationships.”

 

The future of farmer cooperatives

 

“If a Dutch business wants to source coffee or other products from Tanzania, Agriterra can also play the role of trustworthy broker. We select cooperatives on the basis of governance, financial situation, quality of product and motivation of the members. We train and advise them how to professionalize and ready their products for international exports according to the required standards. This close relationship and our knowledge helps us to connect them to international buyers. A partnership with Agriterra can be seen as a quality mark for cooperatives. This makes doing business a lot easier for Dutch businesses.

 

The cooperatives that we are working with in Tanzania will be directed more and more towards the global market and because Agriterra hails from the Netherlands, Western Europe will be a major focus. This means that we will have to improve the quality and quantity of coffee, tea and spices coming from many smallholder farms. It also means that we work on more knowledge and sensitivity of the needs and character of the buyer and sellers. Even though these farmers will have never visited a hipster coffee bar in Amsterdam, they should understand what it is that Dutch buyers are looking for. This includes presenting a unique farming story as well.”

 

Next week Yorick will explain what wild coffee is and how you can effectively do business in Tanzania.