Introduction

The Government of Rwanda (GOR) has requested IFAD to finance a project for the rehabilitation, development, and diversification of the cash and export sub-sector of the agricultural economy of the country. Tea and coffee are the traditional cash and export crop sub-sector, which has been the driving force of Rwanda economic development, and by far the major source of foreign exchange earnings. The sub-sector is currently critically affected by adverse international market circumstances. Smallholder producers of coffee and tea, in particular, suffer from low prices and lack incentives and resources to rehabilitate their export crops farms which were severely damaged by the 1994 war.

Responding to the Government request, and in accordance with the priorities and the strategic lines of action approved in the COSOP of 2001, IFAD undertook the identification and formulation of the project in late 2001. An in-depth investigation of the tea and coffee markets, and of the potential for improving marketing channels for the Rwanda coffee and tea products was undertaken. This led to the identification of interesting opportunities linked with the Fair Trade (FT) Organizations, and to the possibility of developing special market niches for top quality Arabica coffee and tea of Rwanda origin, and also for organic coffee production. The possibility of associating a Fair Trade organization to a project in Rwanda aimed at developing new coffee and tea production, processing and marketing operations controlled by cooperatives of poor smallholders was also investigated, and the interest of TWIN in the Rwanda project was secured. Among FT organizations, TWIN is a UK registered charity with a strong experience in developing poor farmer cooperative production of coffee, tea, and cocoa of high quality, and in successfully providing access to its associated Fair Trade trading companies (Café-Direct and The-Direct) for the cooperatives supported by TWIN.

The formulation of the Rwanda Smallholder Cash and Export Crop Development Project was finalised in June 2002. The Government of Rwanda was kept fully informed about the project approach and the efforts made to secure TWIN participation as the project Fair Trade Technical Partner and co-financier of the project. GOR identified BADEA (Banque Arabe pour le Développement Économique de l’Afrique) as the co-financier for the project’s industrial infrastructure requirements.

Discussions were held with the Government on several occasions during and after project formulation, leading to the project design presented in this appraisal report. Appraisal was carried out in September 2002. The project attempts to exploit the limited potentialities of the coffee and tea sub-sector to provide a solid and sustainable basis for improving the income of smallholder producers through their full control of the processing and marketing stages, and through access to innovative marketing techniques and channels. In addition, the project supports the identification and development of market opportunities for new cash and export crops by small and medium size enterprises and by cooperatives/associations of poor farmers.