Farmers’ coping strategies with the changes of coffee marketing system after economic liberalisation: the case of Mbinga District, Tanzania

Abstract

Mbinga District is well known as one of the major coffee producing areas in Tanzania. The inhabitants of the district known as the Matengo, combine ngolo cultivation to produce food crops and also engage in coffee cultivation for income. In 1986, the Tanzanian government introduced an Economic Recovery Programme that liberalized coffee marketing in 1993. In 2002, the government introduced a single licensing system in the coffee industry to stimulate competition among buyers and improve income for farmers. At the same time, the global coffee market witnessed improvement in production and processing technology, and the entry of new coffee producing countries. These resulted in global overproduction that decreased prices of coffee to unprecedented levels. A coffee industry that supported the national economy of Tanzania for many years was ushered into a period of transformation and uncertainty. This thesis documents and examines the trend in policy evolution and the effects these have had on the practice of stakeholders in Mbinga District. The nature of the rural economy is evaluated under the previously state controlled marketing system. The farmers’ responses and coping strategies during the period of economic liberalization are then analysed and discussed. Chapter 1 describes the historical transition of policies from African Socialism to economic liberalization and the tendency of diversification of rural livelihoods after which the objectives of this study are stated. In Chapter 2, an outline of the livelihoods is described and coffee cultivation is contextualized with the farming system. Chapter 3 compares changes in coffee marketing policies before and after economic liberalization, and sequences the characteristics in a historical perspective. In chapters 4 to 6 the case study of Mbinga District is documented, analysed and presented. Chapter 4 outlines the roles of and changes in the Mbinga Cooperative Union (MBICU), Private Coffee Buyers (PCBs), and Primary Societies (AMCOS), and analyses the marketing system. In Chapter 5 describes the current situation and problems of the coffee industry in Mbinga, the fluctuation of coffee prices and cost of agricultural inputs, and the strategies employed by stakeholders to cope. Prior to economic liberalization, MBICU facilitated coffee farming by providing credit, affordable inputs and marketing. After economic liberalization, MBICU could not obtain loans from commercial banks to continue supporting coffee cultivation because it did not service loans that were previously provided. Moreover, its capacity was rapidly weakened due to competition from the PCBs and it subsequently collapsed in 1996. The PCBs filled the gap left by MBICU. However, the PCBs did not provide services to coffee farmers similar to that provided by MBICU. They did not avail agricultural inputs and credits to fanners. The fanners, who previously depended on MBICU for the provision of affordable inputs, faced severe economic difficulties as production costs increased. The farmers were dissatisfied by the purchasing system adopted by the PCBs. The price of chemical fertilizers began to increase after 1996, while the market price of coffee decreased rapidly. In 2002, when a single license system was introduced, AMCOS started to purchase coffee and established a payment system where part of the farmer’s income was paid in form of input purchase vouchers. This system assisted the farmers to obtain inputs thereby contributing to solve the problem of inputs. Chapter 6 examines farmers’ coping strategies in response to policy changes by analysing the results of field research conducted in the villages. The transformation of both the rural economy and the fanning system are described. Although many farmers who marketed coffee through the AMCOS appreciated the voucher system, they preferred selling coffee to the PCBs to the AMCOS. As such PCBs bought more coffee than AMCOS. This indicates that the farmer’s recognized the importance of management of expenditures based on their previous experiences with market economy, which greatly changed the structure of the rural economy. Consequently, coffee revenue, which was once invested in business, is currently invested in other activities to generate income and this assists the farmers to reduce the risks. When the global market prices stagnated, the government encouraged the purchase of coffee according to each grade a situation that motivated the farmers to produce high-quality coffee in a bid to increase income. The farmer’s organized themselves into groups that trained farmers to produce high quality coffee and identify appropriate marketing outlets. Introducing improved varieties and obtaining appropriate technology enhanced coffee quality. Selecting the most cost effective market for each grade maximized income. Networks and linkages among farmers’ groups became well established. The strategy of producing high quality coffee and identifying the most cost effective buyers spread fast among farmers in Mbinga District. An evaluation of the farmers’ coping strategies after economic liberalization revealed a structural transformation of the rural economy. The farmers tried various strategies to cope with policy changes within the context of their natural and social environment while making the best use of their experiences with the market economy. However, oversupply keeps prices stagnant while the prices of inputs keep rising. The sustainability of coffee cultivation in Mbinga will depend on constant supply of inexpensive inputs. It is presumed that formation of a cooperative union that pursues profit and values transparency while facilitating coffee farming, AMCOS and farmers’ groups would play a key role. It can be concluded that ten years of economic liberalization detached farmer’s from a state subsidized system to one of economic self-reliance that modified the structure of the rural economy.