Coffee cooperatives and cross-border side-sales in the Eastern Democratic Republic of Congo: two sides of the same coin

Abstract

Abstract In the Eastern DRC, coffee farmers combine the different sales outlets available to them. Cooperative members sell coffee to the cooperatives they belong to as well as to informal markets, which include a channel of illegal cross-border smuggling. In this conflict affected region, the informal cross-border markets persist irrespective of the presence of cooperatives. This paper seeks to understand the motivating factors of the side-selling behavior of coffee cooperative members. We study the coffee production and sales of 339 cooperative members in the region and use a double hurdle model to understand which farm characteristics relate to the side-selling behavior. The omnipresence of side-selling in the cooperatives suggest that the unstable political and economic environment is conducive to this co-existence of informal trade and cooperative membership. Side-selling seems a deliberate strategy by the farmers that is tolerated by the cooperatives. The results suggest that farmers who are in a more precarious situation are more inclined to engage with informal markets. This is further underscored by the effect of food insecurity and lack of credit. Hence, the informal market is a safety net that allows immediate payment of coffee in contrast to cooperatives that are more formally organized.