The largest union of coffee cooperatives in Burundi has just opened its own processing plant inside the country. This has been made possible with Belgian funding, specifically an investment of 214,000 dollars by Kampani, an investment fund. This is the first investment for Kampani, which was set up last year by the King Baudouin Foundation, Vredeseilanden, Trias, Alterfin, SIDI, Louvain Cooperation, Boerenbond and other organisations.
Kampani is a so-called social impact investment fund, whose aim is to encourage entrepreneurship in agriculture. Focused on Africa, Asia and Latin America, Kampani has adopted a pioneering approach to combating poverty and promoting development. It is neither a traditional company nor a traditional philanthropic organisation. According to Wouter Vandersypen, CEO of Kampani, his organisation sits at the midpoint on the spectrum between on the one hand charities which give donations or subsidies and seek exclusively a social return, and on the other hand companies whose primary aim is a financial return. “Between these two extremes there are social enterprises, which do generate a revenue stream but whose primary driver is the benefit for society.”
© Teddy Mazina
Financing the 'missing middle'
According to Vandersypen there is a major gap in financing available to the agro-food sector in developing countries. “Many grower cooperatives are too small for the big players and too large for micro-financing. As a result they do not have sufficient access to patient investment capital.” This is precisely the type of financing that Kampani provides.
The Horamama factory, a so-called dry mill run by Burundian coffee cooperative COCOCA, meets these criteria. In this factory coffee beans are prepared – a process which includes removing the husk – and stored for export. Before this investment was made, the growers were dependent on third parties to carry out this process.
The factory of Horamama Coffee Dry Mill in Burundi
Horamama is the keystone in the COCOCA cooperative’s vertical integration. All the other parts of the process, such as production and processing from coffee cherry to coffee bean, are already being managed by the growers in the cooperative. Vertical integration will improve the traceability and quality control of the coffee. Finally, the added value that results from hulling the beans will remain within the group of growers. COCOCA’s CEO, Ernest Ndumurara, concludes “the investment by Kampani is making COCOCA stronger on a number of levels: a significantly better service to its members, but also as an actor in the market.”
Fully fairtrade certified, COCOCA has so far brought together 33 cooperatives of Burundian coffee growers, with 27,000 producers in all, responsible for 11 per cent of coffee production nationally. It is the first cooperation in Burundi to own its own dry mill. The growers are also financing a large proportion of the investment, which will amount to 500,000 dollars over a period of three years – almost half being provided by Kampani. The annual operating costs are estimated to be a further 200,000 dollars.
“In Burundi there are 600,000 families making a living from coffee”, says Alex Tack from Alterfin, co-shareholder and portfolio manager for Kampani. “So this is a key sector. The growers produce high quality Arabica coffee beans, but they usually do so on very small plots of land. Life is not easy for them. The development of the cooperatives, vertical integration and the Horamama factory should change this.”
“I see the new Horamama factory as belonging to me”, says Marie-Goreth Nzeyimana, a coffee grower and member of a cooperative. “I own part of the capital. From now on, my coffee will be processed there while I am present. This means I will not have to waste time and money on long journeys. I will be close to my production. That is an important benefit for me.” Another grower, Diomède Ntunzwenimana, shares her enthusiasm: “We are happy because everyone wins from this. Now our coffee will be processed in our own Kayanza province. The most important benefit for me is that I will be able to monitor the production process from cherry to coffee. I can monitor the quality of my own coffee.”
Kampani, the strength of collaborations
As Kampani’s operational partner, Alterfin carried out the due diligence. Alterfin has also been pre-financing harvests for several years, with a guarantee from the King Baudouin Foundation, and it will continue to do this.
This initial investment has been made with the help of the King Baudouin Foundation, which has been directly supporting coffee producers in Burundi for many years and alerted Kampani to the potential for an investment. It also pays the premium for providing insurance against political risk. The Dutch social investment fund ICCO Agro Business Booster has been brought in as co-investor alongside Kampani to spread the risk and benefit from its operational presence in Burundi.
Technical assistance has in turn been provided by Broederlijk Delen, an organisation which has been supporting COCOCA for many years and has brought the cooperative to the point where it can take this next step in its development.
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