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A Fight For The Truly Ideal Price Of Coffee

The International Coffee Council of the International Coffee Organization (ICO) will meet in Nairobi, Kenya, from March 25 to 29, at a moment of serious crisis in all coffee-producing regions due to the exploitative prices paid by coffee-importing nations.

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By: Fernando Morales-de la Cruz, Founder of Café For Change

Opinions expressed by Forbes Africa contributors are their own.

The International Coffee Council of the International Coffee Organization (ICO) will meet in Nairobi, Kenya, from March 25 to 29, at a moment of serious crisis in all coffee-producing regions due to the exploitative prices paid by coffee-importing nations.

Unfortunately, at the ICO, the coffee importing members do not include the United States and Canada and, usually, the European Union, importer of 41% of all coffee in the world, is represented at ICO meetings by European Commission officials with no influence on trade issues.

Switzerland, a country that is home to 70% of all coffee trading and even chairs the ICO, is also represented at the ICO by public officials with little or no authority on major trade issues. The ICO and its meeting in Nairobi are therefore of little or no use for solving the coffee crisis.

The increasingly profitable global coffee industry is controlled by a smaller number of more powerful multinationals. A concentration of these companies, in Switzerland, that are trading green coffee,  have put 25 million coffee producers and more than 125 million people living in coffee communities in a deep economic and humanitarian crisis, and in a situation of defenselessness.

The drastic fall in the price of coffee, which is not a new issue, has also had a devastating impact on the economies of the coffee-growing countries. Not only coffee growers and workers depend on coffee production. Coffee growing, like many other rural activities, has a huge economic impact on national economies and, even, in the capitals of those nations.

Coffee multinationals now pay less than one dollar per pound of coffee, a price that is 74% less than that agreed in the International Coffee Agreement of 1983. Recently, the price of coffee fell to $0.93 per lb. This amounts to only $0.36 at 1983 prices, according to the Consumer Price Index (CPI) of the United States DOL. The coffee price in 1983, agreed by the importing countries (Europe, Switzerland, United States, Canada, Japan, etc.), was $1.20 to $1.40 per lb because it was estimated that this amount could, reasonably, cover production costs in the coffee countries.

The “Ideal Price” of Coffee
The solution to the crisis in the price of coffee has been further complicated by the position taken by the National Federation of Coffee Growers of Columbia, FNC, representing the third largest coffee producer in the world, to try to set and promote internationally an “ideal price” of only $1.40 to $1.50 per lb, even below the false and unjust “fair price” of $1.40 + $0.20 premium, defended by “fairtrade”.

The “ideal price” proposed by the FNC, $1.50 per lb, is less than 42% of the price of the 1983 International Coffee Agreement. That price is “ideal” for multinationals but it is not ideal for coffee-growers or rural workers in any country in the coffee belt.

It is absolutely unfair that farmers should receive 58% less in 2019 than what they were paid by multinationals in 1983, more than 35 years ago. The production costs of farmers have increased substantially since 1983 but, on the other hand, they have also increased by tens of billions of dollars per year, in coffee-importing countries, the profits, the added value and the taxes generated for the coffee crop to be sold to the final consumer.

The multinationals estimate internally the FOB value of coffee at between $4 and $5.50 per lb., an estimate that makes a lot of sense when calculating that the price of $1.40 of the ICA of 1983, adjusted for inflation and using the CPI of the US Department of Labor, would today be $3.61 lb. After adding taxes in origin, the true cost of land, social security, pensions and education to the price of coffee of 1983, the current price should be between $4 and $5.50 per pound, as the multinationals estimate internally.

Obviously, the multinationals work with development agencies on false sustainability initiatives, and NGOs that claim to fight against poverty, even though they perpetuate it, “studying” and promoting production costs that only suit multinationals and condemn farmers and workers, and their children, to extreme poverty.

“Production costs” that also guarantee underdevelopment in rural communities so that coffee continues to be available, together with many other agricultural products, at a very low price for the developed nations.

One of the greatest challenges for coffee-growers is that most of them are poor and have no way of defending themselves against greed and the influence of multinationals in their own cooperatives and organizations, nor in their national governments and institutions.

Farmers operate locally, regionally and, in very few cases, at the national level, while on the other hand, multinationals, by their nature, operate and have economic, political and communication influence at a global  level.

It is much easier for a multinational to influence the national agricultural policy of any country, or all of them simultaneously, than for the majority of coffee farmers together. It is obvious that neither national coffee organizations nor governments have known how to, or have wanted to defend producers for decades and this is why we have reached the unacceptable reality that multinationals now buy coffee 74% cheaper than 36 years ago and farmers receive less than two cents for every cup of coffee served in developed nations.

This cannot go on like this. It is essential to create and implement a transparent shared value system that compensates producers and workers, and also rural communities, with at least $0.10 per cup.

The true ideal price of coffee, cocoa, tea or any other product is one that allows all farmers and workers, and all their children, to aspire to be middle class, because they are the basis of an industry that generates tens of billions of US dollars in profits annually.

To all the friends of the National Federation of Coffee Growers, to the 25 million producers from all over the world, to all the organizations of coffee-growers and to the presidents and officials of the governments of coffee-producing countries, I invite you all to fight together for a truly ideal price that allows everyone from the coffee belt, and all their children and dependents, to live with dignity by growing coffee.

Neocolonialism and the exploitation of farmers, workers and millions of defenseless children and the fraudulent “fairtrade” and false certifications cannot be part of the “coffee landscape” of each chocolate bar or any other industry that presumes to operate within of the law, respecting human rights and the rights of children.

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Opinion

Xenophobia: Time For Cool Heads To Prevail In Nigeria And South Africa

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The latest xenophobic attacks in South Africa have ignited the long-standing tensions between the country and Nigeria. These are captured in the retaliatory attacks on South African businesses in Nigeria and the diplomatic outrage by Nigerian authorities.

Nigeria also boycotted the recent World Economic Forum (WEF) meeting in Cape Town. More critical was the temporary closure of South African missions in Abuja and Lagos and Nigeria’s decision to recall its ambassador.

But in the larger scheme of things, xenophobia is a distraction from the leadership role that Nigeria and South Africa should play on the continent on fundamental issues of immigration and economic integration.

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A constant irritant

Accurate figures are hard to get. But Statistics South Africa put the number of Nigerian migrants at about 30,000 in 2016, far below Zimbabweans and Mozambicans.

Xenophobia has remained a constant irritant in Nigeria-South Africa relations since the major attacks on African migrants in poor neighbourhoods in Cape Town, Durban and Johannesburg in 2008 and 2015.

But, contrary to popular perception, xenophobic attacks do not disproportionately target Nigerians. Nigerians often exaggerate the effect of violence on their citizens. That is probably because Nigeria has a better organised, savvy, and loud diaspora constituency in South Africa.

Unfortunately, the loudness of the Nigerian diaspora transforms victimhood into foreign policy, generating the reactions that have been witnessed recently. It also plays into the naïve narrative of the “liberation dividend”. This entails Nigerians seeking to be treated uniquely because of their contribution to the struggle for majority rule in South Africa. There were no such expectations from the other countries that supported South Africa’s liberation struggle.

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This narrative has taken on an equally economic tinge. South African companies are heavily invested in Nigeria. So, they often become targets of Nigerian ire in times of xenophobia.

The accurate picture is that xenophobia affects all African migrants. These are mostly migrants from Malawi, Zimbabwe, Mozambique and, increasingly Ethiopians, Kenyans and Somalis. Nigerians are affected. But they’re not on top of the list.

The Nigerian responses are understandable in light of the frequency of these attacks. But, it is important to probe the drivers of xenophobia to understand it more deeply.

What drives xenophobia?

First, some studies reveal that the intrusion of foreign migrants into vulnerable communities beset by joblessness and despair inevitability produces a tinderbox that sparks violence .

Migrants are easy targets. That’s because they are seen as being better off by the locals. They therefore become targets of people who feel their circumstances have not been addressed by government. It is no surprise that xenophobic attacks have typically occurred in poor neighbourhoods that have been affected by service delivery protests since the mid-2000s.

Second, xenophobia thrives on ineffective policing in South Africa. Barely two days after the Johannesburg attacks started, the national police spokesman admitted that the police were running out of resources to manage the violence. This prompted the Premier of Gauteng, the country’s economic hub, to threaten to also deploy the army if the violence continued.

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Examples of the police’s inability to maintain order and respond to threats to property and livelihoods are legion. This, in part, forces people to take the law into their own hands.

But the police are sometimes complicit in stoking anti-foreign sentiments. The July 2019 raids on foreign-owned businesses in Johannesburg in apparent efforts to stamp out illicit goods added to the current climate of xenophobia. When some business owners retaliated against the police, some local leaders appropriated the language of “threats on South Africa’s sovereignty” to justify the police response.

Reforms are urgently needed to create a competent, less corrupt, better-resourced, and civic-minded police service.

Xenophobia is also an outcome of a rickety migration and border control regime. Efficient border controls are one of the hallmarks of sovereignty and the first line of defence against xenophobia. Broken borders breed criminality. These include human and drug trafficking. Human and drug trafficking feature prominently in the discourse on xenophobia in South Africa.

How, then, does xenophobia distract South Africa and Nigeria from what should be their leadership on core African issues?

Overreaction

The weighty issues of creating a humane and just society for South Africans and migrants alike will ultimately be led by the South African government. Outsiders can make some diplomatic noises and occasionally boycott South Africa. But these actions are unlikely to drive vital change.

In fact, the overreactions by Nigeria and other African countries simply undercut the South African constituencies that have a crucial stake in wide-ranging reforms that address the multiplicity of problems around xenophobia.

In the previous instances of xenophobic violence, Nigeria urged the African Union (AU) to force South Africa to take action. But such unhelpful statements only inflame passions and prevent civil diplomatic discourse.

Instead, the best policy would be for Nigeria to engage South Africa through their existing binational commission. Nigerian President Muhammadu Buhari is scheduled to visit South Africa next month.

Taking the lead

Rather than the perennial relapse into shouting matches and hardening of rhetoric, it is essential for Pretoria and Abuja to take decisive leadership at the continental level. The two nations must articulate immigration policies.

The newly-inaugurated AU Free Movement of Persons Protocol will not be implemented if South Africa and Nigeria do not join hands to make it a reality. More ominously, migration to South Africa as the premier African economy will only get worse in the coming years. This, as Europe and the United States tighten their borders against African migrants.

Also, without the leadership of its two major economies, Africa is not going to make any traction on the new treaty establishing the African Continental Free Trade Agreement. Ironically, the WEF meeting in Cape Town addressed ways to boost intra-African trade. Nigeria should not have boycotted it because of xenophobia.

-Gilbert M. Khadiagala; Jan Smuts Professor of International Relations and Director of the African Centre for the Study of the United States (ACSUS), University of the Witwatersrand

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It’s Time For Africa’s Gazelles To Shine

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Africa has many reasons to be optimistic; this year has seen a raft of new elections, economies are growing in amid an uncertain economic climate and new measures such as the African Continental Free Trade Agreement promise new solutions to the age-old problem of Africa’s economic integration.

The recent decision of US investment bank Goldman Sachs to apply for a South Africa banking licence, and the effects of US and Chinese e-commerce giants to develop footholds in African markets, are just two examples in 2019 of how attractive the region has become for those with skill, knowledge and patience.

Much is made of Africa’s population being the youngest in the world. Undoubtedly, this poses challenges, most specifically, in terms of finding gainful employment and decent livelihoods for a growing number of people.

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During my time at the World Economic Forum, my impression of the continent’s youth has been overwhelmingly positive, a mixture of awe at the entrepreneurial spirit and inspiration at the determination felt by younger generations to overcome long-standing barriers and collaborate across cities, countries and ethnic lines to forge a better future.

Add the fourth industrial revolution into the mix and the picture starts to look interesting. Success in this new age of economic development is by no means assured: barriers to entry can be considerable and investment in new technologies – not just development but equally importantly implementation – inevitably brings failure as well as success. 

While none of these risks must be discounted, the next phase of humanity’s growth and development will be built on entrepreneurial talent and this Africa has in rich abundance.

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Since its launch in 2007, M-Pesa, the mobile payments system developed initially for the Kenyan and Ugandan telecommunications market, has served as a symbol for African innovation and ability to leapfrog generations of technology.

Twelve years on, the system is providing benefits to investors and consumers across the emerging world but it is by no means alone. This year’s billion-dollar listing of home-grown e-commerce giant Jumia is only the latest success in Africa’s burgeoning technology landscape.

With this in mind, the question I find myself asking more and more these days is not ‘how do we identify Africa’s next entrepreneurial superstars’, but ‘how do we help Africa’s entrepreneurial superstars scale up and fulfil their potential?’

While private investors, corporate intrapreneurs, foundations, development agencies and governments have all played an active role in helping get the region’s best and brightest entrepreneurial talents, the priority now is to help this new generation of wealth creators and employers reach a critical mass of scale so they can compete across borders and employ the kinds of numbers that will help provide livelihoods for a growing workforce.

How do we do this? For one thing, it will require action on the part of government. There are a number of ways governments can improve the enabling environment just by drawing on existing best practices across the region.

Reforms such as cutting red tape and making it easier to start a business: too often, it takes weeks where it should be days or even hours. Other successful ‘quick win’ policy innovations include offering tax breaks and concessions on labor laws for businesses whose revenues or workforces are below a certain size.

Shielding businesses from the harshest challenges of the open market during their formative years would be beneficial to governments in terms of value once they are able to stand on their own two feet.

Building a platform for Africa’s gazelles, high-growth companies capable of sustaining high rates of year-on-year growth, will be a key aim of the World Economic Forum on Africa 2019.

 Africa’s future lies in increased integration and interaction within its own borders as well as overseas.

Just as the gazelle is an iconic form on the African landscape, Africa’s own tech gazelles need to define their own identity in the fourth industrial revolution.

Elsie Kanza is Head of Africa at the World Economic Forum.

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Challenging The Gender Divide

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In recent years there has been significant improvements towards empowering women in Africa and the Middle East (AME). Despite these steps towards inclusion, according to the World Economic Forum’s 2018 Global Gender Gap index , it will take more than 150 years to close the gender gap between men and women in Africa and the Middle East.

The effect of gender divide means women often face barriers and end up in insecure, low-wage jobs, and constitute a small minority of those in senior positions.

The divide hasn’t gone unnoticed. Regional governments are increasingly moving ahead with progressive policies and legislation, whilst Non-Governmental Organisations (NGOs) have been instrumental in providing women with new skills and spurring attitudinal change.

A solid foundation has been laid for women to maximise their potential, however government legislation and NGOs will not suffice if we are to truly level the playing field. For this to occur, the private sector must be engaged as a key partner to deliver on female equity.

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To begin with the public sector, governments across the region have moved to increase female participation in the workplace in recent years. In the UAE, the government recently passed a resolution to increase women’s representation in the Federal National Council (FNC) to 50 percent , whilst South Africa President, Cyril Ramaphosa has just announced that government plans and budgets will have to include gender-specific delivery targets.

Governments across the region have also been instrumental in introducing legislation to encourage women both in, and into, the workplace. For instance, Lebanon has increased paid maternity leave from 49 to 70 days.

Progressive policies are not only helping women enter and stay in the workforce, but in the long-term will have a positive impact on the region’s GDP. In the GCC alone, some estimates tout a 50 percent boost to economic output if women participate in the workforce to the same extent as men.

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International organisations have also contributed to significant advances in female economic empowerment across Africa and the Middle East, with a significant impact on attitudes towards equality. The United Nations (UN) has led this charge, with gender equality high up on its agenda as one of the Sustainable Development Goals (SDGs).

In the Middle East, UN Women awarded 200 youth volunteers at HeForShe for reaching 20,000 commitments on women’s empowerment , and in Africa, the organisation aims to empower up to two million women through various initiatives aimed at increasing income, wealth and business leadership skills.

Beyond the UN, a large number of international organisations have also been instrumental in empowering women across the AME region. Oxfam, for example, has launched a global campaign called Raising Her Voice (RHV) which aims to promote women’s rights.

This included a budget in Pakistan of over US$500,000 between the years of 2008-2013 . In South Africa, the RHV campaign received roughly US$50,000 annually for training and workshops that involved feminism and advocacy skills .

Local NGO initiatives have also been key in the advancement of female inclusion throughout the AME region. As an example, five Lebanese NGOs and the Lebanese League for Women in Business (LLWB) teamed up in 2016 to form Girls Got IT, an NGO to provide female students with access to hands-on tech workshops, talks by industry leaders and tutorials on digital innovation.

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To take but one of many examples from Africa, a Tanzanian NGO called ‘Village Enterprise’ works on ending extreme poverty by helping women in rural areas through entrepreneurship and innovation. The group has been working successfully and achieved a milestone of one million lives transformed in May 2019 .

It’s clear that governments and civil society have done much to integrate women into AME economies, positively affecting millions of lives along the way. Nevertheless, much remains to be done. Female labour force participation rates vary widely among African states, with South Africa at 49 percent and Tanzania at 80 percent.

On the other hand, in the GCC, women comprise just 19.2 percent of the workforce according to one study . In this context, the private sector, with all of its economic might, constitutes perhaps the most crucial element in addressing the balance. A recent study by Deloitte showed that Africa’s private sector represents 75 percent of generated wealth and 90 percent of all employment opportunities in the continent .

Fortunately, there are encouraging signs that companies are stepping up across AME and pursuing a concerted effort to empower women with new skills and opportunities. Standard Chartered stands as a case in point.

The Bank has committed to raise USD50 million, between 2019 and 2023 through fundraising and Bank-matching, to empower the next generation to learn, earn and grow via its Futuremakers programme.

By no means is Standard Chartered satisfied to merely provide financial donations – it also actively implements women’s empowerment programmes such as Women in Tech, aimed at promoting the economic and social development of women entrepreneurs.

To date, this programme operates in five countries with entrepreneurial female participants from Pakistan, Nigeria, the US, the UAE and my home country, Kenya. The Bank is also committed to creating a more inclusive environment to help working parents balance work and family responsibilities; its staff can enjoy the benefit of flexible working policy, a parental paid leave of up to 140 calendar days for the mother and two weeks for the spouse.

Achieving gender equality is an important moral principle and acts as a catalyst to other development outcomes such as poverty reduction, well-being and health. Governments and NGO’s have been active in empowering women; however, change will take a collective partnership between government, NGO’s and private enterprise across the region to elevate women to an equal status.

The outcome of maximising women’s potential and achieving gender equality will result in greater contributions being made and benefits to the entire region.

-Olga Arara-Kimani, Regional Head of Corporate Affairs, Brand & Marketing for Standard Chartered in Africa and the Middle East

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