AIII #25: The Potential of Coffee in eastern Congo

The Potential of Coffee in eastern Congo

Baraka Kasali

 

The global academic and journalistic narrative about Congo has been filled with sexual violence, conflict minerals and an alphabet soup of armed groups identified by a corresponding alphabet soup of acronyms.  Yet the motors of insecurity should not only be interpreted in terms of physical violence and political instability.

Another set of acronyms—ONC (Office National du Café), OCC (Office Congolais du Controle) which supervises exports, DGDA (formerly OFIDA, Customs), OGEFREM (Maritime Freight Bureau), DGRNK, and DGRAD, among others—have played a role in stifling the value of the economic activity of many residents in the eastern region of Congo. These government agencies are active in customs procedures, collecting taxes on imports and exports, with ONC holding jurisdiction in the coffee sector and training of coffee farmers. These elements of the state bureaucracy impact the day-to-day livelihoods and opportunities of rural populations.

The coffee trade in eastern Congo exemplifies the impact of not too little, but too much, state regulation on rural livelihoods. Many middle-aged and young adults have vivid memories attending school and eating regular meals on the basis of their parents’ involvement in coffee farming.  Coffee accounted for over 75% of Congo’s agricultural exports according to the International Finance Corporation with a high percentage of production located in the Kivus and Orientale Province.  Until the early 90’s Congo was a leading African producer of both the Robusta and Arabica coffee varieties, with farmers near the Uganda border earning nearly 70% of f.o.b. prices – the rate paid for commodities before shipping costs.

Rural populations began to achieve real benefits from the coffee trade in 1976, when the liberalization in the coffee sector began to improve production and price efficiencies. Once fully controlled by OZACAF (the predecessor of ONC – Office Zairois de Café), liberalization allowed for the private sector to take over export of coffee and compete for the availability of farmers’ coffee.  With volatility in the global coffee market, the government removed all export taxes in 1989 to encourage the development of the coffee sector, continuing until the late 1990’s.  With the creation of the ‘Third Republic’ and a new government seeking to increase revenue, taxation was re-instituted – taxation in the coffee sector.  Taxes were set at approximately 13% of f.o.b value – in real terms, taxes can reach up to 18% after inofficial taxes are levied.   In comparison with the neighboring Rwanda, Burundi and Uganda, where taxes are all under 5%, Congolese coffee is no longer competitive in global markets.

These tax increases occur alongside a predatory bureaucracy that levies informal fees on traders. Tax increases have coincided with a crackdown on the ports of exit for coffee, with many of the small border posts along the Congo-Uganda frontier no longer authorized for coffee export. Together, increased taxes and a restriction of export posts not only correspond with higher costs for rural producers but also increase the premium on personal relationships held with individual customs’ agents.  This makes it more difficult for smaller-scale coffee producers and traders to profit from the coffee trade directly, and increases the need for them to sell products to larger commercial traders within Congo.  It also does little to build transparency or accountability within the state bureaucracy, or to meet the government’s goal of increasing revenues.  While also victims to the context, larger traders with more substantial relationships with custom agents use these informal structures to develop barriers of entry to new entrepreneurs thus limiting the competition that increases the price paid to farmers.

 

It cannot be understated that the climactic, political and security instability has disincentivized long-term investments by intermediaries as well as coffee producers.  The coffee wilt disease, tracheomychosis, that wiped out coffee crops in the Grand Nord was debilitating. Violence that has been localized and targeted rural areas naturally is a deterrent for farmers to go to their fields.  Women who play an active role in farming are at risk of sexual violence. At best, farmers aren’t taking all the necessary steps needed to produce market quality standards.  At worst they are being displaced from their farms and even killed.  To compound these factors of instability, however the additional taxes and multiplicity of taxing agencies make the cost of coffee production and trading expensive and slow. Taxes are often passed on to farmers limiting their share of f.o.b prices.  The slow pace of customs services limits traders’ ability to manage price-risks.

The tax regime in coffee was reinstated by a young government desperately searching for revenues to govern a vast country.  It was only logical to find revenues in a sector that accounted for 75% of agricultural exports, however, 15 years later, these policies have slowed what was once a thriving economic driver and distributor of revenue to rural communities.  Reforming the alphabet soup of state agencies to reflect the established nature of the government, declining exports and a compromised global reputation of Congolese coffee is an important part of stabilization in the region. Some steps have already been taken, such as the creation of the ‘guichet unique’ to speed up the export process but more must be done to ensure the stability of communities most effect by political instability and conflict.

These dynamics also draw attention to an often overlooked set of contributors of instability that stem not from armed groups or from an ‘absence of the state’ in conflict zones as highlighted in several UN Security reports highlight the near ‘absence of the state.’ These perspectives overlook the daily bureaucratic encounters that result from and compound conflict dynamics—with economic activity stifled in sectors that affect a large portion of the population and render them vulnerable to political and security shocks.  Communities are ill equipped to manage the shock of violent outbursts and develop negative, often revengeful, attitudes towards their aggressors sometimes leading to retaliatory violence or isolation.

Coffee is an example of a livelihood opportunity that is undermined not by conflict directly but by over regulation and manipulation of power to coerce rent from the population. Yet limiting economic opportunity has implications for the region’s stability to manage or even overcome the consequences of conflict.

 

Baraka Kasali is a Programme Officer with Eastern Congo Initiative.

Advertisements
Comments
One Response to “AIII #25: The Potential of Coffee in eastern Congo”
  1. John Quattrochi says:

    Baraka, thanks for the post. Are coffee growers or traders organized? Can outsiders do anything to help? Adam Smith International has had some success lobbying for lower taxes in some sectors of the Congolese economy. Could a similar approach work here?
    Thanks,
    John Quattrochi

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: