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Towards a sustainable coffee value chain in Madagascar

Today is International Coffee Day. A good reason to reflect upon where our coffee comes from and if farmers receive a fair price. One of the countries where coffee comes from is Madagascar. ICCO supports projects in this country to make the coffee value chain sustainable. In this way, farmers in the coffee value chain can have a sustainable livelihood.    

Towards a sustainable coffee value chain in Madagascar

Developing a sustainable coffee value chain

ICCO supports projects in Madagascar through the company Sangany. Sangany was created in July 2015 by Agribusiness Booster (an enterprise of ICCO) and HERi Africa GmbH. Sangany purchases coffee directly from smallholders and farmers’ organizations. Its objective is to develop a sustainable coffee chain in order to improve the livelihoods of 100.000 small coffee producers. It does so by stimulating quality at farmers’ level by linking the purchase price to the quality of green coffee. Sangany has created over 50 permanent and 200 seasonal jobs, of which many are for women.

Coffee harvest increases

This month the coffee harvest takes place in Madagascar. One year after the creation of Sangany, the company aims at selling 1.000 tons of green coffee to the domestic market. In 2015, the first year in which Sangany was active, 350 tons of green coffee has been sold. It is important to increase the harvest, as it is an important source of income for the smallholders. The final goal is to enter the international market and to handle over 4.000 tons in 2020. To upscale its activities, Sangany recently obtained a loan from the Common Fund of Commodities.

The use of modern techniques

Sangany supports plant nurseries to produce high quality seedlings and promotes the use of adapted modern equipment, such as depulping machines. A database and mobile network (using GPS coordinates) is created for planning, monitoring and traceability of the suppliers of coffee. The mobile network also serves for direct communication with producers on daily prices. Secure payment is offered through local microfinance institutes and Mobile Money systems.

Development of coffee chain since liberalization 1990’s

Since the liberalization of Madagascar in the 1990’s, the coffee chain in Madagascar has changed into a disorganized chain with a lot of bargaining and trickery. Negotiations are rarely balanced, leading to widespread suspicion and a downward spiral to low prices and low quality. As a result, the coffee production has progressively declined over the last decades, affecting the small farmers in the beginning of the coffee chain. That is why ICCO, through Agribusiness Booster and Sangany, felt the need to support those smallholders.  Sangany’s main challenge in the coming years will be to be competitive with the predominant informal sector in Madagascar, which for instance does not pay the 20% VAT.