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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

Why Now Is The Time To Invest In African E-commerce

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Although Africa is all too often viewed by investors and the public at large as being the “dark continent”, more often than not, they are letting prejudices and misconceptions cloud their judgment about some of the most exciting investment destinations available. In 2018 alone, six of the ten fastest growing economies in the world were in the African continent.

This prejudice is compounded by the natural tendency for investors to invest in what they know best and are most familiar with, which is often what is in their own country. Globalization has, however, made markets more interconnected, and distance is becoming less of the obstacle it once was.

The continent is blessed with strong demographics, considerable natural resources, and increasingly, a more stable political and investment environment for multinationals to operate within. Even traditional hindrances such as poor infrastructure can be viewed as a potential opportunity, particularly in the area of financial services and e-commerce.

READ MORE | Fewer Billionaires, Poorer Billionaires On African Continent In 2019

Jiji, is the largest classifieds business marketplace in Nigeria, it was started from scratch five years ago, by a group of seasoned e-commerce professionals. With a market of 200 million people, Nigeria provides enormous upside should a business take off. The horizontal classified business model (any online business using http) does, according to Goldman Sachs, offer one of the most attractive investment models in the world, along with search engines and social networks.

It’s not hard to see why it’s such an attractive model, when the “winner takes it all” model is applied, in certain markets, the number one online classifieds controls over 80% of market share. The size of earnings opportunity equals 6 b.p. of the national GDP with 60% of long-term EBITDA margin. It is also an asset-light business model that requires minimal investment in heavy machinery and ensures high cash flow conversion.

The potential upside to the classified business model is particularly evident in a market such as Nigeria that has a young population of just over 200 million people. Nigeria is a mobile-only country (where 90% of traffic is on mobile web and is rapidly shifting to apps) with high and growing Internet penetration. In Africa, classifieds provide the ideal platform for e-commerce, as it enables people to buy and sell both second-hand goods and new ones.

Over the course of the last five years, Jiji has become the largest classifieds marketplace in Nigeria. The platform has just over 6 million unique active monthly users and more than 50,000 professional sellers listing over one million items. In 2018, the Jiji app was rated number one by Android users in the Nigerian shopping category, it is currently the highest rated app in Nigerian e-commerce.

READ MORE | The Top 7 Investment Trends That Have Been Identified In 2019

Having cemented its leading position in Nigeria, the team have set their sights on expanding into new African markets, and recently decided to redirect OLX users in Nigeria to Jiji and to acquire OLX businesses in Kenya, Ghana, Uganda, and Tanzania. After the transaction is completed, Jiji will have a presence in five markets, with 300 million people.

In a couple of years, Jiji’s monthly audience is expected to cross the threshold of 10 million users which will make it one of the largest classifieds by traffic. Jiji’s ambition is to build the biggest Africa-based classifieds business, creating a new retail experience for Africa’s fastest-developing countries with a combined population of 300 million.

The deal will allow OLX users in these countries to benefit from Jiji’s market-leading products and services. OLX’s reach combined with Jiji’s own proprietary search and delivery algorithms, will give users a radically streamlined experience and ensure the experience of buying and selling goods more convenient and transparent than ever before.

Africa has in the past been viewed very negatively by potential investors and businesses in general, however, as technology breaks down barriers to accessing finance and supply chain infrastructure the potential opportunities have never been greater.

READ MORE | How Nigeria Can Attract And Keep The Right Kind Of Foreign Direct Investment

This combined with greater access to the internet and mobile phones provides imaginative entrepreneurs and businesses a chance to rethink traditional business models and create different systems that cater to the needs of this young, diverse and commercially underserved region.

The team at Jiji recognize the potential benefits and opportunities that this region has to offer, only time will tell if other foreign investors recognize the upside African economies have to offer.  

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Opinion

Over The Rainbow: 25 Years Of Freedom For South Africa

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South Africa survived colonialism followed by apartheid, and most recently, a new pandemic, HIV/AIDS. While we are living through the aftermath of the old order, the words often attributed to Italian philosopher, Antonio Gramsci, could not be truer: “The old is dying and the new struggles to be born. Now is the time of monsters.”

The dragons we need to slay are clear. We have unacceptably high levels of poverty, youth unemployment, child illiteracy and nutritional stunting. All of which are systematically undermining the next generation’s ability to enjoy freedom.

That said, these are but the more visible aspects of our life together. There are others – the more subtle, social dimensions.

In 2019, non-racialism – the bedrock of the new South Africa – struggles to find relevance in the public imagination in light of the disillusionment many experience in the new political dispensation. It remains devoid of substantial weight and consequence.

Its original purveyors did not theorize it or write about it extensively, making it all the more elusive. What we do know is that race is a social construct and that it has no biological grounding. While it does not exist in a scientific sense, race has profound political, social and economic implications. And it continues to be an undeniable fault-line within South Africa.

What is clear is that non-racialism does not mean not-seeing-race-ness. In this lesser sense, it mimics the American notion of a post-racial society. It is based on the myth that 1994 symbolized a tabula rasa – a blank page. But 25 years later, the past haunts us.

Mural depicting 1st election in new South Africa, 1994 opposite Parliament, Cape Town, Western Cape (Photo by Hoberman Collection/UIG via Getty Images)

In our public life, we often find ourselves in a rinse-and-repeat cycle in which an offensive action is followed by public uproar and reactive debates. In this polarizing space, the spotlight remains on rabid racists, leaving implicit and internalized anti-black racism unchecked – both of which affect most South Africans.

Political entrepreneurs – understanding the wounds we carry as a nation – capitalize on the moments of uproar by playing on these incidents. What happens in the context of the misuse of our racialized experiences is that well-meaning citizens opt to shun any references to race in order to maintain respectability. This tempts us to see race talk as unproductive rhetoric, and not as a useful language to name our experiences with one another in this country.

In our public life, talk about the past has similarly been weaponised. Our history is either denied or it is deployed to delegitimize, to silence, and to condone the inexcusable. But it is exactly in this moment that we need more robust and critical engagement with our histories and their effects in the present – not less.

When we actually grapple with the historical records, the findings are chequered. History refuses to simply serve as a pass or a trump card. It is far too unruly and intricate to merely be functional. History demands to be reckoned with as a way of understanding the processes that led to the present. A more accurate way of understanding it is as an unfinished story. It has no end and it implicates us all.

A way we can begin to participate in the unfolding of our history is to infuse non-racialism with substance. We need a larger project that rigorously surfaces our experiences at the coalface of the color line. Scholars in the social sciences and the humanities as well as fiction writers have no doubt begun this theorising labor, and their work has to make its way into the mainstream. The process of naming the thousands of experiences we have with each other can begin to inform our imagination about what it means to simultaneously be inclusive, rooted in Africa and released from Europe’s orbit.

The project of naming our experiences for ourselves is an act of power. In fact, the true might of colonialism and apartheid lay not in their arsenal but in their ability to name us, define our borders, to codify our laws, and thus, frame our self-imagination.

In this moment, as South Africa reaches the quarter of a century mark, it is imperative that we take a fresh look at the past. Not merely as a story of victory, but as an incomplete struggle. At 25, all South Africans need to join the struggle, knowing that aluta continua and that the country we inherited in

1994 is ours to continually liberate.

We are part of the same cast of characters in history’s production of South Africa, and we are on the stage now.

Dr Sebabatso Manoeli is a historian and non-profit professional. She serves as an Innovation Director at the DG Murray Trust. Previously, she was a History Lecturer at the University of Oxford, and at Stanford University’s Montag Center for Overseas Studies. She consulted for the African Union Commission’s Department of Political Affairs and the Centre for the Study of Violence and Reconciliation on transitional justice, as well as the African Peer Review Mechanism.

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Investment

To Increase Productivity Corporate Africa Needs To Look For Problems

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Productivity is calculated by dividing each country’s GDP by the average number of hours worked annually by all employed citizens. In my opinion, country productivity simply means the financial evidence for problems solved by business communities over a period of time.

According to a 2018 report by the Organisation for Economic Co-operation and Development, businesses in the African continent are among the lowest ranked when it comes to productivity.

This means corporate Africa needs to solve problems that matter. In each firm, the chief executive officer is the chief problem solver for customers and the firm.

In every enterprise, problems are resolved at a different level. The man at the gate solves the problem of parking and watches out for thieves and intruders.

The chief operating officer solves the problems of disorder and inefficiency. The ability of a leader to recognize that everybody in any enterprise has the capability to solve a problem makes the business system efficient and productive.

When a leader believes he is the only one who can solve all problems at every level of an organization, it only wastes the corporate potential. Everybody in an organization has the potential to solve challenges.

Problems are facts of every business because we live in an imperfect world. For winning enterprises, tests are stepping-stones to maturity and productivity.

There are two perspectives to a problem that will put firms in the winning mode.

READ MORE | Businesses Of The Future: 20 New Wealth Creators On The African Continent

It is important to be reminded that an outstanding person is the one who resolves an outstanding problem.

Can you think of an outstanding billionaire who didn’t resolve an outstanding problem? I believe there is none.

I think a team’s attitude should be focussed on solving an outstanding issue for all humanity.

That is what Larry Page and his team have done by creating Google. They solved the global problem of searching for information at the click of a mouse.

Secondly, problem-solving is the quickest route to leadership. In every society, people fall into two categories of problems; those who create them and those that solve them. As an entrepreneur, you will be rewarded based the degree of problems you solve, not the ones you create.

As a team member, when you solve a problem beyond your current job description, you are likely ready for a promotion.

Thirdly, the capacity of the entrepreneur is more important than the size of the problem. The problem is the self-image of the person. This means an entrepreneur will not take on activities on the outside that he or she is not capable of on the inside.

These three attitudes mentioned above are important for any firm to create a winning team. Let me quickly say that it is only effective when a business leader helps his or her associates and team members develop this attitude.

READ MORE | African Countries Should Rethink How They Use E-government Platforms

When they express these attitudes, they solve challenges with you in the enterprise. Don’t be caught by the ‘Moses syndrome’, because you cannot solve every problem in your enterprise by yourself.

Problem-solving is first an attitude and then a technical skill. Now let me share with you a few technical skills that are applicable to problem-solving.

The first step would be to erect a business thermometer to identify the issue. Focus on vital aspects such as finance, sales, marketing, customer satisfaction, employee performances, and turnover rate.

You need to look for an anomaly in the vital signs before you can identify the threat and knock it off.

Secondly, prioritize the problem and identify the most important and urgent of them and attend to it. The problem can be important, important and urgent, or urgent and unimportant.

READ MORE | Deals, Dollars and Developments On The African Continent

You must be able to place it in the appropriate category. You will need to dig around the it to define the real issue. If the sales are poor and it is an important and urgent concern on your priority list, the next thing is to dig around it and define the elements of the problem, both internal and external.

Thereafter, select a project team to solve the contingency.

Whether it is to be solved in two hours, two days, two months or two years, call the project team and give them responsibilities within a space of time to solve it.

Finally, select the best solution and create a policy. Look at all recommended solutions to the problem and select the best that suits it. Evaluate the solution appropriately and set up a policy that can guide against the recurring of the problem in the future.

-Victor Mamora

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