Rwandan coffee is produced by smallholder farmers, processed at coffee mills, and then exported. Because exporters sell processed coffee that can be “cup tested,” they have more information on quality than farmers selling coffee “cherries,” which may allow exporters to exploit their position. This, as well as export consolidation by multinational corporations (MNCs), gives exporters a reputation of being economically and politically dominant. While value chain (VC) governance studies suggest that exporters can play outsized roles in VCs, little research focuses on the structure of commodity exporters in Africa. Research is needed to better understand exporter engagement with other VC actors–including government—and how MNC and Rwandan exporters differ. This can inform sectoral coordination activities and policies on coffee pricing, quality control, and marketing, which in turn influence the sector’s sustainability. This study focuses on two questions: (1): How do different types of exporters influence the coffee VC, and how are they influenced by it? (2) How do exporters view themselves in relationship to other VC actors? To address these questions, we conducted semi-structured interviews with 25 of the 69 exporters registered in Rwanda. We coded interviews, using theory from VC governance and new institutional economics to analyze themes.
Results/Conclusions
Findings suggest that there are different coordination approaches between local and MNC exporters, and that these relate to how they influence and are influenced by the VC. Exporters differ in their purchasing and sale approaches, level of vertical integration, and risk management capabilities. MNCs are perceived to influence the VC via consolidation, vertical integration, and government pressure. Their scale allows MNCs to overcome transaction costs that stymie local companies, including farmer side selling, investor fraud, and buyer hold up. However, they face high operating costs and a regulatory environment they see as unfavorable. Rwandan exporters are more critical of MNCs than government regulators, seeing themselves as vulnerable and in need of government support. Local firms have trouble accessing financing, finding buyers, and overcoming contracting problems. They perceive that MNCs have better access to buyers and financing, giving them an advantage. This dynamic creates a situation in which Rwandan exporters look to government for protection, while MNCs try to further consolidate exports to protect themselves from unfavorable policies. Increased consolidation is a threat to Rwandan sovereignty of its coffee VC, however counteracting it while supporting the sector’s sustainability requires careful coordination between government, local and MNC exporters, and other VC actors.