In 2013, Banzaid commenced the Papua New Guinea Cash Crop Development Project. The project’s long term goal was improved sustainability for the agricultural production of the coffee growers of the Baiyer Valley. Recently we submitted the final report to the Ministry for Foreign Affairs and Trade (MFAT) on their part in the funding of the project. This article summarises what happened, and the issues faced by the project.
Papua New Guinea is one of the most diverse countries in the world, with over 850 indigenous languages and tribal societies in a population of seven million. As early as 1948, Australian Baptist missionaries had gone into the highlands of Papua New Guinea, and in the 1970s had been part of introducing coffee as a cash crop to the Baiyer valley. However, much of this work was undone when tribal conflicts broke out in the mid-1980’s. Since then coffee growers have struggled to make good returns on their crops. The Baptist Union of Papua New Guinea (BUPNG) had negotiated a peace agreement, and approached Banzaid for help to rebuild the economic situation in the Baiyer Valley.
‘BU Kofi’ was formed and registered in PNG as a social enterprise company owned by the Baptist Union of Papua New Guinea. Proposed funding for the establishment and setup of the company came from three sources: The MFAT Sustainable Development Fund (NZD 698,979); donations from New Zealand Baptist Churches through Banzaid (NZD 100,000); and grants from the Government of Papua New Guinea (PGK 1,000,000 equivalent to NZD 575,000 at the time of budget preparation). As a social enterprise company, the aim was to maximize the returns to village farmers for their crops. Any profits from the company operations would be reinvested in the company, or used in community development programmes in the target districts.
The objectives of BU Kofi were to:
A) Improve the market chain from grower to factory by establishing a trading operation to buy direct from the growers and get the parchment coffee to the factories in Mount Hagen;
B) Support and facilitate the government agriculture extension services to reach the remote areas of the project districts; and
C) Establish a demonstration farm able to provide seedlings of improved coffee varieties to replenish and upgrade the plantation stocks of the growers and to trial additional cash crops that could be introduced to reduce dependence on the single coffee crop.
The project saw 5 years of activity. The first year was taken with the legal processes of setting up the company, recruiting management staff, and building the base for operations in Kumbareta. The second year saw the establishment of the seedling nursery for new coffee seedlings and establishing a place in the market for BU Kofi. It was a learning period for the trading staff, with significant losses in the coffee trading activity. At the end of the two years, we had still only received a quarter of the promised PNG Government Funds. The third year began to show the intended shape of the project, with a successful rice crop on the farming side, a small profit from the trading side, and a second instalment of the PNG Government funds. However, years four and five ran into a succession of obstacles. A drought in the PNG Highland districts impacted both farming and coffee growing. PNG Government funding dried up, halting construction of a rice hulling facility, and limiting trading funds.
What was intended to be a 3-year project, concluding in March 2016, was extended by a further 2 years. This decision was made after discussions with MFAF around the obstacles experienced and the limited progress made. The extension did not grant any further NZ funding but was intended to give the project time to see if they could consolidate the progress made. However, violence around the 2017 PNG national elections forced the suspension of all activity.
Achievements of the project’s three objectives
Year 3 (2015) came closest to achieving objective A. In 2015, 220 tonnes of parchment were traded, with a small profit margin. This result indicated that the concept of improving the market chain should be viable, however the project was overtaken by challenges in the remaining years, and the full extent of hoped for results were not met. Discussions with relevant government organisations during the planning phase of the project showed full support for implementing extension services (objective B). However, through the project we discovered that government services were far more limited than we had anticipated. The seedling nursery was successfully established as part of objective C. However, due to the lack of progress with extension services, there was limited uptake by farmers. Surplus seedlings were sold to another district. Rice was trialled as an option for additional cash crops with limited success due to lack of handling and processing facilities.
All the objectives struggled to reach their full potential due to multiple factors that were mostly beyond the control of management.
Through the project, several political, economic, social and environmental issues worked against success. First, the project failed to receive the full level of promised PNG government support and funding - only 50% of the promised funding was received. This impacted project financial planning from beginning to end. Secondly, the project operated through a difficult time for not only the PNG economy, but also the social environment. There were increased civil disturbances around the 2017 parliamentary elections. This level of inter-communal disunity and violence lead to a suspension of project activity in 2017, and the project has struggled to restart. Environmental circumstances also affected the project’s success, with a drought in 2015/16 that affected the Highland districts.
While these issues were out of management’s control, there were things that could have been done differently to possibly make the project more durable. Firstly, having an overall supervisor with business skills would have encouraged cohesion between the two parts (trading and farm) of the project and would have provided a stronger business drive to the project. Secondly, reliance on the PNG government funding to achieve the objectives was too heavy. The lesson is perhaps not that we should avoid any promises from the Government, but to treat them with caution and not to put too much weight on them until they are actually in hand.
While the need and the relevance of this project was well demonstrated, it is struggling for survival. The context of Papua New Guinea is a difficult environment for project operation. While this can be discouraging, it only emphasises the need. This report marks the end of New Zealand funding for the project. However, BUPNG have declared their intention to work with the facilities that have been established and the remaining available funds and attempt to continue operations as a coffee trading company for the benefit of the Baiyer Valley community. Banzaid is committed to maintaining the partnership and will continue to work with the BUPNG to support the progress of the project. The most challenging issues for continuation will be the ongoing political, social and economic issues of the country of PNG. We continue to pray for the BUPNG in their commitment to serving their people.
pdf A more detailed report can be downloaded here. (649 KB)
For all practical purposes the project has been dormant over the last year. PNG went through a period of drought (the drought has since ended, but it did slow down all agricultural activity); the national economic situation is in a very bad place, and so they have failed to get any further instalments of funds from the PNG government; key staff members left; national elections in the middle of the year resulted in a period of increased political violence and disruption.
National elections in PNG around the middle of the year saw a period of violence, corruption, vote rigging and manipulation. “Last year Transparency International ranked PNG as one of the most corrupt countries in the world, putting it at 136th among 176. The nation has seven million people and 850 different language groups, and has been marred by decades of tribal conflict and instability, and endemic corruption among politicians and officials.” (Guardian report, 30 June 2017). The level of violence was such that the decision was made to suspend all trading activity until things settled down again.
Banzaid met with the Executive Leadership Team of the Baptist Union of PNG. They made the decision that despite the current situation, the BU Kofi Trading should continue operation. They see this as a significant issue of sustainability for BUPNG and for their wider community services. The proposal is to focus just on the trading activity, and work to trade the company into profit. Remaining funds and assets will be conserved, and used to this end. The arrangement would be to use these funds as trading capital, with the aim that all ongoing costs have to be met from trading profits.
The aim is to prove in the coming period that this business activity is financially viable, manageable and supports the farmers to get best value for their crop.
For the plans going forward, Banzaid has remitted to BUPNG NZ$20,000 as the balance of our original commitment to the project. In the 2018 year we will complete an assessment of the project and final reporting for the New Zealand Aid Programme.
pdf Download the Banzaid 2017 Annual Report here. (3.75 MB)
Rice is gaining prominence at meal times in Papua New Guinea. Though not a traditional food, many families are now making rice part of their staple diet. In 2003, almost 90% of the urban population of Papua New Guinea, and 25% of the rural population, were eating rice on a daily basis, and those numbers seem to be rising.
Papua New Guinea relies heavily on rice imports to meet the needs of its population, and here lies a great opportunity for impoverished farmers in the Baiyer Valley; working in partnership with the Baptist Union of Papua New Guinea, Banzaid is teaching local farmers how to grow rice as an extra source of food for their families and communities, and as a way of diversifying their cash crops and improving their economic situation.
In recent months we have established demonstration fields in the Baiyer Valley to show local farmers best practices for growing rice. Working with a rice specialist from the Christian Leaders Training College (CLTC), the demonstration fields were prepared, and rice nurseries were set up, so farmers could learn about effective rice planting methods.
We have been greatly encouraged by the enthusiasm and interest shown by local farmers towards growing rice. Thanks to your support we will be able to supply 70 farmers with rice seeds for free, and in early November they will begin to sow their fields. From half a kilogram of seeds, a farmer should be able to produce 21 kilograms of milled rice – what a fantastic return!
In addition, your support is allowing us to provide a tractor and plough, and construct a milling shed, to help farmers prepare their fields and mill their rice. Come March next year, farmers will begin to harvest their rice. We will purchase their rice off them for onward sale, to ensure they get a good result for their hard work.
In addition to rice, we have planted 214 hybrid orange trees in the area, and will soon plant other varieties of citrus fruit. We have also set up a nursery for new coffee trees, which farmers will be able to buy off us to start to replace some of their trees that have passed their best production period (see pictures of seedlings below).
The coffee buying season is coming to an end. Since the season began in May we have traded around NZD $260,000 worth of parchment coffee. The local staff we have worked with have done well, and have gained valuable experience in buying and trading coffee. We had hoped to make a profit from our coffee trading but, for various reasons, it looks likely that we made a slight loss. Lessons have been learnt however, and we are optimistic that we will see great results next year.
Visit our Facebook page for more pictures of the project!
Thank you for your support for this project. Your support enables us to get funds from the New Zealand Aid Programme and from the Government of Papua New Guinea. Please tell others about this project, and encourage them to donate to support us. Donations can be made through our online Donations Page
 The Food and Agriculture Organisation of the United Nations, Nutrition Country Profile, 2003.
Papua New Guinea (PNG), officially the Independent State of Papua New Guinea occupies the eastern half of the island of New Guinea and numerous offshore islands (the western portion of the island is occupied by the Indonesian provinces of Papua and West Irian). It is located in Melanesia, in the south-western Pacific Ocean. The capital is Port Moresby. It is one of the most diverse countries on Earth, with over 850 indigenous languages and at least as many traditional societies, in a population of just over seven million. It is also one of the most rural, with only 18 per cent of its people living in urban centres. The country is also one of the world's least explored, culturally and geographically, and many undiscovered species of plants and animals are thought to exist in the interior of Papua New Guinea.
The majority of the population live in traditional societies and practise subsistence-farming agriculture. These societies have some explicit acknowledgement within the nation's constitutional framework. The PNG Constitution expresses the wish for traditional villages and communities to remain as viable units of Papua New Guinean society, and for active steps to be taken in their preservation.
The population of Papua New Guinea is one of the most heterogeneous in the world. Papua New Guinea has several thousand separate communities, most with only a few hundred people. The largest portion of the population lives in fertile highlands valleys that were unknown to the outside world until the 1930s. Divided by language, customs, and tradition, until recently some of these were unaware of the existence of neighbouring groups only a few kilometres away. Some have engaged in low-scale tribal conflict with their neighbours for millennia.
Approximately 96% of the population is Christian. The churches with the largest number of members are the Roman Catholic Church, the Evangelical Lutheran Church, the United Church, the Seventh Day Adventist church, and the Anglican Church. The major churches are all under indigenous leadership, although a large number of foreign missionaries continue to work in the remote areas of the country.
Most Papua New Guineans continue to adhere strongly to a traditional social structure, which has its roots in village life.
The country's geography is diverse and, in places, extremely rugged. A spine of mountains runs the length of the island of New Guinea, forming a populous highlands region. Dense rainforest can be found in the lowlands and coastal areas. This terrain has made it difficult for the country to develop transportation infrastructure. In some areas, planes are the only mode of transport.
Papua New Guinea is rich in natural resources, including minerals, oil, gas, timber, and fish, and produces a variety of commercial agricultural products. The economy generally can be separated into an informal sector centred on subsistence agriculture and a formal sector centred on resources. Approximately 75% of the country's population relies primarily on the subsistence economy.
Papua New Guinea is richly endowed with gold, copper, oil, natural gas, and other minerals. The minerals, timber, and fish sectors are dominated by foreign investors. In 2006 minerals and oil export receipts accounted for 82% of GDP and continue to account for over 60% of GDP. Government revenues and foreign exchange earnings depend heavily on mineral and oil exports.
Agriculture currently accounts for 32% of GDP and supports more than 75% of the population. Cash crops ranked by value are coffee, oil, cocoa, copra, tea, rubber, and sugar. Papua New Guinea has an active tuna industry, but much of the catch is made by boats of other nations fishing in Papua New Guinea waters under license.
After being colonised by the three external powers since 1884, Papua New Guinea gained its independence from Australia on 16 September 1975.
• Land area: 462,840 sq. km..
• Cities: Capital--Port Moresby (307, 643). Other cities--Lae (190,178), Mt. Hagen (39,003).
• Major language: English, Tok Pisin, Hiri Motu
• Life expectancy: 61 years (men), 66 years (women) (UN)
• Monetary unit: 1 kina = 100 toea
• Main exports: Gold, petroleum, copper, coffee, palm oil, logs
• GNI per capita: US $1,300 (World Bank, 2010) The UN Human Development Index ranks PNG 153 in the world. Bangladesh is ranked 146, and New Zealand is ranked 5.
The ads have been out there—invest in Mighty River Power! Banzaid is offering an investment also, but it's of a different sort. We're inviting you to invest in the coffee growers of the Baiyer Valley in Papua New Guinea. It's a high risk investment, with no loyalty bonuses and absolutely no chance of on-selling to the Australians!
The investment is in BU Kofi Company Ltd. The company has been set up by Banzaid and the Baptist Union of PNG in response to a need; the coffee growers of the Baiyer Valley are not getting a fair deal for their crop.
Our research shows that we can do better. We can pay the growers a fair trade price for their parchment coffee, sort and grade it, transport it to Mount Hagen, pay for processing into green bean, and still make a profit on our on-sale to the national PNG coffee markets.
We're not talking micro-enterprise, but the establishment of an SME (small to medium size enterprise) business. A sizeable capital investment is required to set the business on a strong trading foundation, with the aim being a self-sustaining business that will have a lasting and positive impact in the community.
The trading income of the company will pay for training and advisory services for the farmers, and support a demonstration farm which will research alternative crops to help reduce susceptibility to fluctuations in the international prices of coffee.
BU Kofi Company Ltd will be a company with a 'triple bottom line': a viable business enterprise with positive community and environmental impacts. Our undertaking with our partner, the Baptist Union of PNG, is that all profits from the venture will go back into community health and education services that reach the people of the Baiyer Valley.
Any work in Papua New Guinea carries a high level of risk. The country is politically unstable, and a level of civil disorder and violence is ever present. This project is rebuilding services destroyed by 10 years of clan fighting. The Baptist Union has worked hard to build a peace settlement, however, and there is a strong desire in the community to see this work.
Banzaid is asking our supporters for $100,000 over the next three years. This will be matched by $700,000 from the New Zealand Aid Programme and $575,000 from the Government of Papua New Guinea. We believe that this is an exciting and positive project, and one that will be a good investment for your money!