Absa partnering with development finance agency to help East African coffee farmers

15th May 2024 By: Rebecca Campbell - Creamer Media Senior Deputy Editor

Absa partnering with development finance agency to help East African coffee farmers

Photo by: Bloomberg

South African banking group Absa and the International Finance Corporation (IFC – part of the World Bank group) will jointly provide a commodity trade finance facility, worth up to $60-million, to a leading global green coffee merchant, Volcafe. This facility will strengthen Volcafe’s operations in East Africa and support thousands of coffee farmers in that region, by providing working capital for the purchase of coffee cherries (the fruit from which the coffee beans are extracted) from small-scale farmers and local traders, and of green coffee beans from established auction systems, as well as for the processing, storage and transport of coffee to export harbours.

“We are delighted to announce our partnership with Volcafe and the [IFC] in this significant East African $60-million structured working capital coffee transaction,” enthused Absa Corporate and Investment Banking regional operations structured trade and commodity FD Tshimbi Ntuli. “This collaboration showcases our capabilities as a pan-African bank to work closely with development finance institutions that share our strategic vision of supporting Africa’s growth and development. We are committed to being customer-centric and constantly evolving to meet the evolving needs of our clients.”

“Agriculture is a major source of jobs in East Africa, and coffee is a major contributor to those livelihoods,” highlighted IFC VP: Africa Sérgio Pimenta. “We are pleased to work with Absa and Volcafe to ensure that farmers across the region have opportunities to realise the potential of their industry.”

Absa and the IFC are each contributing $30-million to the finance facility, which has a term of one year. This funding will enable Volcafe to provide market access to 75 000 farmers. It will also support the provision of training in sustainable production techniques and good agronomy practices, under the well-established Volcafe Way programme, which can improve profitability and crop resilience.  

As part of this financing agreement, Volcafe is bringing its operations into alignment with the IFC’s performance standards. These include biodiversity and natural resource management standards, and to meet these Volcafe has partnered with global biodiversity strategic, technical and policy management company The Biodiversity Consultancy.

“Volcafe is truly excited by this chance to work with partners like [the] IFC and Absa as we continue to develop the tremendous potential of East Africa’s coffee sector,” affirmed Volcafe CFO Melvin Wenger Weber. “With this new facility, we will be able to engage more directly with tens of thousands of coffee farmers while bringing their produce to even more markets.”

East Africa accounts for 80% of the coffee produced in Africa and 10% of total global production, making it a major coffee hub. Some five-million smallholder farmers in the region are dependent on coffee for their livelihoods. But many of them lack access to financial support that is relevant to them. Further, crop production can be affected by the unpredictable effects of climate change.