Finnfund, a Finnish development finance company, provides a EUR 2.5 million secured loan to Africado, a Tanzanian avocado producer. Sustainable avocado farming is a viable alternative for Tanzania’s Kilimanjaro region farmers whose livelihoods have been shaken by the plunging price of coffee.
The price of coffee has fallen sharply in recent years primarily due to expanded production in Brazil and Vietnam. The impact is felt also in Tanzania’s Kilimanjaro region where coffee farming has long been an important source of livelihood. Now local farmers are urgently seeking alternative crops
Africado was established in 2007 as Tanzania’s first commercial and international grade producer of avocados. The company farms 137 hectares around the Kilimanjaro area and contracts other commercial and local small holder farmers. They are specialized in Hass variety, which are exported primarily to the EU.
Avocado farming provides the company’s employees and contract farmers with higher and more secured income than coffee production.
With the help of the new financing, Africado has started to expand and develop its operations. For instance, the company is aiming to extend its avocado plantations and the operation of the present packing department. Furthermore, the company intends to diversify e.g. to other avocado varieties and nuts.
“Finnfund’s funding of Africado has enabled Africado to pursue new investment opportunities. In expanding production areas and with the introduction of new avocado cultivars Africado will have a sustainable business to the economic benefit of the local community in terms of employment and development and nationally e.g. in terms of increasing export earnings,” says James Parsons, CEO of Africado.
Avocados have been widely grown for domestic household consumption in gardens and small farms within Kilimanjaro for more than 100 years since it was introduced by the Germans. The humid tropical climate in the area provide ideal growing conditions where avocados flourish naturally but a lack of markets and knowledge of commercial varieties has meant that avocado production has provided no economic value.
Commercial production only started in 2007, when Africado introduced Hass to Kilimanjaro at its own orchards after which the company has worked closely with local smallholders, distributing avocado seedlings, training about good agricultural practices and providing market access.
The outgrower program currently encompasses around 2000 local farmers, creating employment and income to thousands of people in the area. The company has, for instance, received an international GlobalGAP certification for safe and sustainable agricultural practices. In 2016, its outgrower programme also became G.A.P. Award winner as the second African company.
With new development operations it is expected that the number of jobs may double and provide employment particularly for women. From the point of view of the Siha district and of the whole of Tanzania, Africado promotes responsible agricultural and employment practices, and generate export income, strengthening the balance of current payments of the country.
“We want to support the growth of Africado as well as strengthen the development of the whole area. It is important to promote responsible farming methods of avocados and other crops. With the help of Africado, the smallholders also get an important sales channel and opportunity to export their products,” says Jari Matero, Senior Investment Manager, Head of Agri and Forestry portfolio.
Agriculture is one of Finnfund’s focal areas because developing countries greatly need agricultural production but also because the sector has great potential. Most African farmers are smallholders, many of them producing low-value crops for personal and local consumption. The processing and sales of the crop forward are often difficult. Therefore, the responsible developing of agriculture and of food production is from the point of view of the sustainable development in the key position.
Finnfund: Sustainable agriculture