IFC, Absa Group offer $60 million trade finance facility to coffee merchant Volcafe to grow its East African operations
IFC, a member of the World Bank Group, and Absa Group Limited, a South African-based bank, will provide an up to $60 million commodity trade finance facility to Volcafe, a global green coffee merchant, to strengthen the company's operations in East Africa, supporting tens of thousands of coffee farmers in the region.
The financing will provide working capital to facilitate the purchase of coffee cherries – the fruit from which coffee beans are extracted – from smallholder farmers and local traders, as well as the processing, storage, and transport of coffee to export ports.
East Africa is a coffee-growing hub, accounting for over 80 percent of the continent's production and 10 percent of the global total. An estimated five million smallholder farmers rely on the industry for jobs and livelihoods in the region. However, many smallholder farmers lack access to relevant financial support, and crop production is impacted by the unpredictable effects of climate change.
The one-year facility, with the participation of up to $30 million each from Absa and IFC, will allow Volcafe to provide more than 75,000 farmers with access to the market. The facility will also support trainings on sustainable production techniques and good agronomy practices that can improve crop resilience and profitability, through the long-running Volcafe Way program.
"Volcafe is truly excited by this chance to work with partners like IFC and Absa as we continue to develop the tremendous potential of East Africa's coffee sector," said Melvin Wenger Weber, Volcafe Chief Financial Officer. "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."
In addition to the purchase of coffee cherries, the facility will also permit Volcafe to purchase green coffee beans from established auction systems.
"Agriculture is a major source of jobs in East Africa, and coffee is a major contributor to those livelihoods," said Sérgio Pimenta, IFC Vice President for Africa. "We are pleased to work with Absa and Volcafe to ensure that farmers across the region have opportunities to realize the potential of their industry."
"We are delighted to announce our partnership with Volcafe and the International Finance Corporation in this significant East African US$60 million structured working capital coffee transaction," said Tshimbi Ntuli, Director of Structured Trade and Commodity Finance, Absa Regional Operations at Absa Corporate and Investment Banking. "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."
As part of the agreement, Volcafe is aligning its operations with IFC's Performance Standards. To meet standards on biodiversity and natural resource management, Volcafe has partnered with The Biodiversity Consultancy, a global provider of strategic, technical and policy services for biodiversity management, and performed a biodiversity risk assessment in its arabica and robusta supply chains.
