Cindy-Lou Dale

Facing the imminent collapse of their industry, smallholder coffee farmers in Northern Malawi rallied together to salvage their livelihoods. Within a few short years, in 2005, their product was voted Malawi’s best coffee and soon after was ranked amongst the top five coffees from Africa. Stoically resisting the temptation to adopt a child, Cindy-Lou Dale traveled to Malawi to discover how this was done.

Although not a key producer when judged against giants like Brazil and Colombia, Malawian coffee farmers have learned and can teach a useful lesson to other smallholder growers who may be considering either diversification or uprooting their coffee trees. The lesson is that financial success depends not on growing more but on reducing costs of production and bold, guerrilla-type marketing tactics.

For many years, the smallholder coffee growers of northern Malawi were overseen and their beans sold by the state controlled Smallholder Coffee Authority. Initially, Growers were excited with the Authority as they benefited from the services provided such as supply of farm inputs on credit and cash, extension services, coffee processing service, and road maintenance; but this excitement was short lived when growers found coffee’s financial rewards to be lacking. Few growers had more than 150 coffee trees and as such their holdings were too small to make any meaningful return. When coffee prices crashed on the international market amid soaring prices of input, many growers abandoned coffee planting and the industry nearly collapsed. 

During this period of low yield, as is the way in most third-world countries struggling to understand the intricacies of government and budgets, the Smallholder Coffee Authority, run with no business mind-set and little consideration to costs or realistic budgeting, made loans from banks to cover their operational expenses. Within a short time-frame they had accumulated a debt equal to near US$ 300,000. The Malawian Government, anxious to divest itself of a significant debt, sold the poorly performing parastatal to the newly formed Smallholder Coffee Farmers’ Trust. They soon cleared the debt and within four years could afford to pay up to eighty percent of the revenue earned to the growers, simultaneously clinching major export contracts. Even more remarkable was that this turn-around has been achieved during a period of low international coffee prices.

“This transformation in the fortunes of smallholder coffee production has been a team effort of our commitment supported by the European Union, CFC Project on White Stem Borer and the UK's Natural Resources Institute,” says the Trust’s General Manager, Harrison Kalua.

The Smallholder Coffee Authority communicated no details of operational expenses or even the price the farmers produce received on the open market; understandably the small growers grew apprehensive. So when the government finally pulled the plug on the Authority, the coffee farmers requested that it be sold to them. Since neither the farmers nor government were sure of the way forward, it was agreed to form a Trust as a transitional arrangement, during which period growers would be trained in association and cooperative principles. Once trained, the growers would decide on what type of organisation they would like to form and register.

“Our priorities have been to reorganize the coffee grower members into local associations, providing them with a feeling of ownership through representation on the management board, and to increase the financial returns to members.”

Although changing deep rooted suspicions was not easy. Total transparency of accounting and management records was called for which gradually gained the confidence of members, making them more receptive to change and the demands placed on them by Kalua’s commercial production approach.

“One of the methods of boosting members' incomes was to produce superior berries at minimum cost,” says Kalua. “This meant replanting with new higher yielding clones and implementing new pest and disease control methods which reduce reliance on costly chemicals. The second income builder was to start processing a proportion of the berries, and marketing a value-added, quality controlled, attractively packaged and branded product, in place of selling the low value, no-name brand bulk commodity that had been the destiny of our beans in the past.”

Kalua continued to explain that cost reduction was achieved by building a leaner and more effective management team, and developing a pro-active marketing group.

“The Trust’s marketing strategy has never followed a straight line.  Faced with poor international coffee prices, too many coffee producers and strong bargaining powers of most coffee traders, the Trust focussed on a special market segment. This called for opportunity analysis and studies of niche coffee markets around for world, which helped the Trust develop a growth strategy.” 

“For the Smallholders Coffee Farmer’s Trust to remain competitive on the International Market, we worked hard in promoting the Mzuzu brand,” Kalua continued.  “Launching Mzuzu’s coffee as a finished product was not only an alternative source of income but a strong and cost effective promotional tool.”

“The European Union was particularly helpful in funding capacity development through training,” Kalua explained. “Savings in cost of production were made by reducing the cost of disease and pest control; here the Natural Resources Institute was able to develop an effective integrated pest management program which was less polluting and less costly than the previous chemical control system.”

The growers reported Coffee Berry Disease and White Stem Borer to be the main problems. Since the withdrawal of Dieldrin, a stem-paint, White Stem Borer had become a serious problem. Farmers were forced to switch to Fipronil, an effective yet costly alternative, which in effect increased production costs by some thirty percent. The National Resource Institute considered this problem and suggested that instead of painting with insecticide, farmers should smooth the bark on the lower stems, thus denying the borer an ideal site at which to lay its eggs.

Enthused by this progress in pest control Malawi's Smallholder Coffee Farmers' Trust is looking ahead. “The National Resource Institute is working with pheromones for White Stem Borer, which has proved successful in India and looks promising for Africa. The knowledge gained on the biology and distribution of White Stem Borer in Malawi will provide the starting point for a five-year project with Malawi and Zimbabwe, as its African partners. Meanwhile the cost of pest and disease management has been reduced and margins increased,” Kalua advised.

Since the Trust came into being in 1999 they have near 4,000 growers. Since 2003 at least 1-million trees have been planted annually, giving a holding size of 1,000 trees per growers. It is projected that up to 9-million trees will be achieved by 2011/12 to realize 3,000 trees per grower.

“This holding should enable our growers to realize between US$ 2,000 and US$ 3,000 annually.”

Mzuzu’s coffee production has steadily increased from 90mt in 1998/99 to 300mt today, and is projected to reach 1,000mt by 2011/12. Five farmers Associations have been established, giving growers participation in running their own affairs in nursery production and processing. Savings and Credit Union have been developed - one for each Association which support members with finances for further development.

Successes are slowly emerging. “A good many of our farmers have built good houses with iron sheets and bricks. Most growers are able to send their children to good schools,” boasts Kalua.

“If we could develop further and cultivate 10,000 hectares of coffee, we could, with our government’s assistance, bring in more than US$ 60-100-million annually,” says Kalua. "We have good soil in this country and hardworking farmers - but our Ministry of Agriculture and Food Security and Ministry of Industry, Trade and Private Sector Development are not doing enough to promote the thriving coffee industry. The tobacco farmers have been successful in the past because the government ploughed in lots of money, they should also do the same with coffee in order that we can all reap the rewards."

Other than disease and pest control, the Smallholder Coffee Farmers Trust, assisted by staff from the Agricultural Research Station, school growers in technologies  of nutrition and agronomy. The farmers Associations receive training from the Trust, which is assisted by short-term consultants. Quality control in coffee production receives the greatest attention and growers are trained by Trust staff in coffee processing. Cupping is done for each lot by a team of cuppers based at the Trust’s headquarters. Results are communicated to the Associations and an annual competition is held to establish which zone produced the best coffee.

Mzuzu Coffee, which is packed in eye-catching re-sealable red and gold foil, is sold to supermarkets, hotels and embassies in Malawi and regionally in Zambia, Zimbabwe, Namibia, South Africa and Mozambique. The overseas market has been developed and is already supplying to Germany, Switzerland, the Netherlands, Japan, Italy Australia, the United Stated and the UK.

Headed by Donald Jobe the Trust’s Marketing and Quality Control department have proactively sourced their clients through seminars, conferences, trade fairs, workshops, and sharpened their skills by client visits.

As a result of growing farmer confidence, demonstrated by planting new high-yielding, quality coffee trees, sales are increasing, turnover is rising, and the income for the smallholder producers is fast improving; a clear indication of farmers’ long-term commercial approach as opposed to the resigned, no-risk, subsistence outlook of the past.

“Mzuzu Coffee has attained specialty status, and as such it enjoys a good price on the domestic and international markets,” says Kalua.

At grass root level though, it goes much further. “The Trust pays me at least 60 percent more for my crops, compared to the 20 percent from the Authority,” claims Austin Phiri, a coffee farmer with the Smallholder Coffee Farmers Trust. “This additional income has allowed me to construct a house and purchase a grinding mill and soon I will be buying a vehicle.”

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