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Coffee Farms: Kenya’s New Suburban Haven

November 4, 2011

Animate visual of Tatu City. Source: Tatucity.com

More and more foreign companies are realizing the investment potential of emerging markets. One company,

Renaissance Partners, an investment bank and business advisory firm,  is taking full advantage.  The company is one of the several partners investing in the conversion of a 2,400 acre coffee farm near Nairobi, Kenya into a gated suburb named Tatu City. The company boasts that the future community will be able to house up to 62,000 people and create “thousands” of local jobs. In addition, the community will bring modern amenities such as electricity and water lines to the surrounding area. The success of the project has influenced Renaissance to invest in other real estate projects in Ghana, Nigeria, Senegal and Rwanda. Renaissance is also taking on an even larger project in Congo, which will spread over 6,400 acres.

Despite the obvious benefits, Tatu City has also produced some concern. One problem, seemingly overlooked, is the fate of the coffee farm workers whose jobs will surely disappear after construction begins. In a recent article by the Financial Times, vice-president of Renaissance Partners, Josphat Kinyua, claims that building real estate will be a better use of the land as a result of the farms strategic location near a highway leading to Nairobi center. By changing the land into real estate, the value of the land will be ten times its current share price.

There’s no doubt that converting the area into real estate will be more economically beneficial, however, the plan seems to disregard the fate of locals whose livelihood may greatly depend on their continued work at the farm. Renaissance reassures that the coffee farm will remain in business until the community actually begins development, though it is still unclear what will happen to farmers after this begins. Will they be trained and employed by Tatu City or will they be left on their own to find new employment? Perhaps a program can be developed by investors to either train farmers for work in the city or to find farming opportunities elsewhere.

Kenyan coffee farm

There is also concern for the fate of coffee companies dependent on this land for business. Vava Angwenyi of Vava Coffee is dependent on this land to produce coffee for export. She pleads that as a result of this loss, “We fear that five years from now Kenya may not be producing enough coffee for export.” The problem with blaming foreign investment alone is that the coffee industry has been dwindling over the last 50 years in Kenya. As such, it’s a bit much to put blame on these investments as the cause of coffee’s decline. In fact, Mr. Kinyua suggests that governments take a more active role in investment policy and introduce a law which will require companies to compensate for any arable land used.

At this point, the fate of this particular coffee farm seems to be sealed. However, in order to protect arable land in Kenya, the government may need to introduce policies regarding how land is used. Only 8 percent of Kenya is usable for farming and if Kenya wishes to continue its agriculture sector, it must take more protective measures for this land. Tatu City will be the first of many privately-planned communities in sub-Saharan Africa. As more companies realize the investment potential in Africa, there is sure to be a rise in foreign investment over the upcoming years. It is for this reason that it is especially important that sub-Saharan African governments reform their land usage policies in order to ensure that they can reap the benefits of investment while not jeopardizing other viable sectors. If done correctly, this may accomplish what foreign investment did for both China and India in stimulating massive economic growth.

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6 Comments leave one →
  1. Frans Kuipers permalink
    November 6, 2011 8:21 am

    A difficult issue well presented. All change has consequences.

  2. November 6, 2011 2:25 pm

    Hi Elizabeth,

    Good article. It is encouraging to see that you have a keen interest in the continent’s agriculture and/or property sector. However, for a publication whose positioning is “the leading source of information about the diverse new world of private sector international development, from innovative philanthropy models to microfinance, and from social entrepreneurship to public-private partnerships.” , I believe you should have done a little bit of more research before publishing your piece. It is good to read widely and quote already published articles, but it is also important to countercheck some of these facts. Some notable misrepresentation are:

    1. The investor in Tatu City is Renaissance Partners and not Renaissance Capital. The latter is the investment bank under the Renaissance Group

    2. With a potential population of 62,000, it will be impossible for Tatu City to be considered a gated community; the master-plan clearly demonstrates this. Its unique positioning is the detailed and well thought out planning and the fact that it will be financed and built by the private sector for public use.

    3. The proprietors of Tatu City remain the largest coffee farmers in East and Central Africa, and 2nd largest millers 2nd to the government of Kenya, with 7,000 of the acquired 10,000 acres under coffee plantation. The making of the City does not impact on the jobs of the employees at the coffee farm in any way.

    4. It would be useful for you to look into the economics of coffee in Africa and specifically Kenya over the past two decades. Look at the export trends, putting extra attention on markets and revenues. This will help you derive the best opportunity cost for Kenya.

    I hope this feedback will be useful for this and your future posts.

    • November 9, 2011 4:40 pm

      Firstly, thank you for your comments.

      To Ms. Randa, thank you for clarifying the investor of Tatu City. I had seen in several sources Renaissance Capital listed as the investor but after further research I see that you are correct. I’ve fixed this in my post.

      Also, you bring up a very interesting point about the size of the coffee farm Tatu City is being built on and its impact on farmers. I’ve gathered my information from an article published by the Financial Times which doesn’t mention this fact; however, if you are correct, this would help alleviate some of my concerns for the fate of the low-skilled workers at the farm. If you can send me more information on this I would love to look through it.

  3. January 3, 2013 10:11 am

    I would like to use your photo of the coffee plantation in some educational resources I am developing for the charity Comic Relief in the UK. The resources, for children 7 – 18 will be free for teachers to use and download from our website. Could you let me know if using the photo is possible and if so how you want it attributed.
    many thanks
    Kate

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