Tuesday, January 12, 2016

RUGASIRA ON COFFEE, CHOCOLATE AND EXPORTING TO THE WEST

 I prefer to seat upstairs at the Good African Coffee shop. But Andrew Rugasira had other ideas. We sat downstairs with a display of Good African’s various offerings as a backdrop to our conversation.

Rugasira is launching a line of chocolates to complement his company’s line of coffees, which project started a decade ago and took him from the foot hills of the Rwenzori Mountains to Buckingham palace to the rarefied heights of high finance in the business capitals of the world.

The whole grind is chronicled in his book “A Good African Story”. He assured me that more harrowing tales will be told in the sequel.

The new chocolate, Good African in its three flavours – dark chocolate (Orange pieces), milk chocolate and milk chocolate (hazel nut crunch) will be in supermarkets near you on January 10th.

But our discussion veered away from this his newest pet project to the wider issues of what it takes to export to foreign markets, for which his experience has been painfully compressed into the last decade.

"Boosting exports is a pertinent subject at this time. The shilling lost almost 20 percent of its value in 2015 partly because while we seem to be exporting more and more by volume every year our receipts are not keeping step and in fact are falling back...

The Uganda Coffee Development Authority (UCDA) last week reported that despite the fact that we exported 10,000 bags more in the period December 2014 to November 2015 we made sh24b less!
Contrast this with Germany, which exported 11.9m bags in 2011/12 more coffee than all of Africa, which did 10m bags; Germany earned $3.6b and Africa? $2b!

Which brings us around to Rugasira’s experience and what he thinks this country needs to do to climb out of this vicious cycle.

Rugasira will employ for his cocoa project much of the same production processes he used for coffee, employing small holder farmers who have been helped to improve their productivity through better farming and post-harvest practices.

But on a macro level he thinks, “Government should have an industrial policy that allow infant industry’s to survive early stages of production. Within it would have access to credit, technology, skilling of staff, export promotion support, protective measures for these industries in the domestic markets, that’s how these other countries did it.”

He says governments too should not be afraid to attempt to pick winners, everybody does it.

“There is no country in the world that has no had problems picking winners. The notion that you can only pick winners and not lose money is a fallacy. Speak to any private equity firm and they will tell you that for every 13 firms they pick only one succeeds, but that one so far outweigh the losses that it makes economic sense,” he argues.

In between sips of his latte Rugasira said the barriers to entry in to western markets requires sustained, deliberate and systematic government help and there is no running away from that.

However in launching his chocolate he notes that the market has changed from when he first attempted to establish a presence on the shelves of the western supermarkets.

“Africa with a population of two billion and one billion potential consumers is becoming a massive market in itself. Exporting now is not so much about a European market but it is also a pan African market with significant purchasing power in some of these geographies,” he says...

And also the Ugandan market has changed with many more outlets from which to distribute, but also that the consumers are now more impulsive in their habits.

“We estimate the market for chocolate to be between $7 to $10m a year, there is a lot of potential here,” he thinks.

But going back to the subject of how government can help some of our industries extend their reach abroad, Rugasira is in no doubt that the commitment will have to made sooner than later.

He rues the fact that right now interventions have been politicised  “The pressure of jobs for our young people is so intense that government is going to have be absolutely intentional and committed to making whatever investments it has to make to address that issue. It is absolutely unsustainable as it is now.”


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