2014

KAHAWA YETU BUSINESS

MODEL
Proposal for Funding Presented To Uwezo
Fund in Nairobi Kenya.
By Simon Wainaina

10/03/2014

INTRODUCTION/BACKGROUND.
Coffee was first planted in Kenya at Bura in Taita Hills in 1893 and
thereafter, grown at Kibwezi, under irrigation in 1900, and at
Kikuyu near Nairobi in 1904.
At that time, there was no statutory control, in terms of crop
husbandry, production, processing, grading and marketing. The
marketing of coffee was handled by individuals and through
rudimentary institutions between 1900 and 1933. In the 1930's,
following the Devonshire White Paper Report of 1923, the Colonial
Government allowed controlled planting of coffee outside the
European settled areas in Kisii and Meru in particular.
On request by coffee farmers, the colonial government enacted the
Coffee Industry Ordinance in 1932, and established Coffee Board (CB)
in January 1933. The Ordinance was re-enacted in 1934 and amended
severally later. The role of Coffee Board was regulatory and
promotion, that is, licensing, inspectorate and promotion.
The Uwezo Fund is a youth and womens fund which has its genesis in
the pledge His Excellency the President made to allocate the Kshs. 6
billion that was meant for the presidential run-off to youth and
women groups. Its objectives are:

To expand access to finance through grants and credit to

promote youth and women businesses and enterprises at the
constituency level, thereby enhancing economic growth towards
the realization of the goals of Vision 2030;
To generate gainful self-employment for Kenyan youth and
women;
To model an alternative framework in funding community driven
development.

The Uwezo Fund which provides youth and women access to grants and
interest-free loans, as well as mentorship opportunities to enable
them take advantage of the 30% government procurement preference for
youth, women and persons with disabilities through its Capacity
Building Programme.
In view of the above, our strategy will promote sales of local
coffee to domestic market, create income for Youth, Women and people
with disability and promote the National Strategy of vision 2030.
Our services are unique and have long development strategy when
supported by Uwezo fund as we propose in this plan.
2

ORGANISATION OF THE PROPOSAL

This is a request for strategic partnership in

a sustainable,

innovative and profitable business concept developed by a consortium

of

two

firms-

Caffe

Del

Duca

Ltd

and

Solaita

Industries.

The

initiative seeks to expand Kenyan youths investment opportunities

while

promoting

consumption

of

Kenyan

coffee.

The

proposal

is

organised as follows:
-Highlights of the consortium administrative,
operations, and technical capacity
-Nature of problems to be addressed
-Proposal Details
-Significance of the Initiative
-Implementation, Monitoring and Evaluation

HIGHLIGHTS OF THE CONSORTIUM CAPACITIES

Caffe Del Duca has celebrated a number of milestones in the five
years of its operations in the coffee sector. Our team under the
leadership of Gunther has been a key stakeholder in deliberations,
decision making and actions on coffee farming in Kenya, Ethiopia,
Uganda and South Africa. The team has participated in various
fruitful consultations and has been offering guidance in various
projects.
The firm has been able to turn around the fortunes of over 2,000
farmers in large coffee estates and small holder coffee farmers.
Remarkable success has been achieved in the Lukolole and Namasoli
Farmers Cooperative Societies in Western Kenya which have given a
model which can be replicated among East African coffee farmers.
In 2010 the firm acquired coffee roaster, pod machine and the silos
to have a final product and Caffe Del Duca started roasting and
packaging its own espresso. This has gone a long way in entrenching
3

the firm in the coffee value chain as well as giving it the ability
to have a say on the quality of its brands of espresso. The firm has
added several blend of espresso such as the chilli blend. Caffe Del
Duca has also pioneered in packaging Khat (Miraa) with its product
Chami Warrior expected to boost clean miraa farming in Meru. The
product is sold and taken similarly to a coffee espresso and uses
the same pod machine. The firm is also the first in the region to
produce and package Baobab coffee caffeine free with omega 3 & 4.
The Baobab seeds are purchased from Machakos women groups.
The

firm

has

introduced

(importing

and

fabricating)

coffee

processing machines which have had an impact on small holder coffee

farmers. One of the most revolutionary products is the pulper that
runs without water.
The firm has also been able to penetrate Malindi espresso market and
is going a step further by opening a chain of coffee shops under the
brand name Jahazi.
The firm has also formed a strategic partnership with Khaki youth
Group from whom it sources packaging bags.
Solaita Industries is an indigenous firm which has vast experience
in

offering

services

including

agronomy,

capacity

building

and

business startup management. Solaita has started operating various

coffee shops aiming to lower the price of coffee and ensure more
Kenyans enjoy a cup of the famed Kenyan coffee. Solaita is operating
coffee shops in Pangani and Westlands under Jahazi Coffee Shop.

NATURE OF ISSUES TO BE ADDRESSED

The initiative was conceived on the background of a number of
issues. First issue is evidenced by past statistics from Kenya
National Bureau of Statistics report in 20071 which indicated that
three out of five businesses fail within the first few months of
operation. Secondly there is lack of differentiation among the
start-ups which the youths are engaged in with or without the
support of Youth Fund or other financial institutions. Studies by
Bowen,

M.,

Morara,

M.,

&

Mureithi,

M.

(2009) 2

Nekesa-Simiyu3,

Maisiba and Gongera4 found that a large proportion of Kenyan youths

are engaged in similar business mainly dealing in retail and small
scale farming. This lack of differentiation and lack of innovation
eats

into

profit

margins

and

stunts

growth

prospects

of

such

businesses.
Various reports assessing the Youth Fund impact have found high
default rates (40% default rate as of 2010) on the loans advanced to
the youths5. This is largely due to lack of shared vision and poor

Kenya National Bureau of Statistics (2007).Economic Survey, 2006. Nairobi:

Government printer.
2
Bowen, M., Morara, M., & Mureithi, M. (2009). Management of business challenges
among small and micro enterprises in Nairobi-Kenya. KCA journal of business
management, 2(1).
1

Nekesa-Simiyu, F. S. (2013). The Types of Small Businesses and the Communication

Strategies Employed By Entrepreneurs in Eldoret Town, Kenya. Journal of Emerging
Trends in Economics and Management Sciences (JETEMS), 4(2), 243-252.
3

Maisiba, F. M., & Gongera E. G. (2013). The Role of Youth Enterprise Development
Fund (YEDF) in Job Creation: A Case of Dagoretti Constituency, Nairobi County,
Kenya. Research Journal of Finance and Accounting, 4(12), 131-140.
4

Njoroge H., (2010) Heavy loans default rate rocks youth, women funds, May 13
Business Daily available at http://www.businessdailyafrica.com/CorporateNews/Heavy-loans-default-rate-rocks-youth-women-funds/-/539550/917232//13hy6jwz/-/index.html
5

investment choices which lead to lack of enough cash flows to

sustain business and ensure repayment of the loans 6.
It is from this background that this initiative is proposed aiming
to provide the youths with a viable, profitable and sustainable
business model that will address the issues highlighted.

PROPOSAL DETAILS
Intended Goals of the Initiative
The main goal of the proposed initiative is to offer youths a viable
investment product.

Objectives of the Initiative

The proposed initiative seeks to achieve the following objectives:
1. To train over 100 youths groups (at least 1,000 members) in
establishing and running of coffee shops.
2. To finance the establishment and running 100 model coffee shops
with at least 1 in each 47 counties. Each coffee shop projected to
cost Kshs. 400,000 in Central Business Districts of major towns and
Kshs. 150, 000 in other towns.
3. To finance the establishment and running of 50 mini bakeries at
least 1 in each county. Projected cost is Kshs. 250,000.
4. To finance purchase of a van for mobile coffee dispensing and
deliveries at a cost of Kshs. 5 million.

Gachathi, S., (2010) Factors influencing implementation of projects in Kenya:

the case of projects funded by National Youth Enterprise Developement Fund in
Westlands constituency, UoN MA Project available at
http://erepository.uonbi.ac.ke:8080/handle/123456789/4057
6

5. To purchase a pick up (Kshs.5 million) for Solaita Industries to

enable it reach out to coffee farmers and offer business advisory
services to the youth beneficiaries countrywide.

Implementation Strategy
This initiative is tailored along the same premise as the AgriVijana loan product being offered by YEDF in partnership with Amiran
Kenya. The initiative seeks to assist youths start coffee shops all
over Kenya.
Youth

groups

or

individuals

qualifying

initiative will be required to identify

for

funding

under

this

an ideal location and

premise where to set up the coffee shop. They will further be

required to brand the premise to acceptable standards set by Solaita
and Caffe Del Duca as is with the M-Pesa model.
There are two probable arrangements which can be pursued to meet the
objectives of this initiative. In the first approach UWEZO Fund will
provide Caffe Del Duca with funds to the tune of Kshs.26m or an LOC
to import the 100 La Piccola Cecilia Group 2 coffee makers from
Italy, inclusive of spares. Caffe Del Duca will then sell the
machines to youth groups with proceeds going to Uwezo accounts.
UWEZO can also support the venture by lobbying for removal of import
duty for the machines to reduce cost of ownership.
In the second approach Caffe Del Duca will undertake to import the
machines and UWEZO will provide loans (amounting to Kshs. 260,000
inclusive spares, import duty and VAT per machine plus the set up
cost ranging from 150,000 to 400,000 depending on the location of
the identified site) to the interested youth groups who will then
pick up the machines from CDD.

Instead of the youths getting cash, Caffe Del Duca will sell them
coffee

brewing

machines

which

can

make

excellent

cappuccino,

espresso and long coffee at subsidised prices ranging from Kshs.

55,000 to Kshs 260,000 inclusive of spares (Attached Catalogue
Appendix I). The machines have a life of 7 years (84 months). This
is in comparison with the available models in the market with the
cheapest costing Kshs. 500,000. Caffe Del Duca will be supplying the
coffee pods (sachets) at Kshs. 25 + VAT each. Therefore making a cup
of espresso/cappuccino will cost approximately Kshs. 50 as 100 ml of
locally sourced milk will cost Kshs. 10. This will enable the
entrepreneurs to sell one cup at Kshs. 80-150 and be assured of at
least 45% gross profit and a margin of at least 30% as the operation
costs are low.
The coffee shops will be sourcing its accompaniments (cakes) from
the women groups doing baking as well as coffee farmers who have
intercropped the coffee crops with suitable crops such as sweet
potatoes, bananas and arrowroots.

Significance of the Initiative

The

initiative

in

promoting

local

consumption

will

facilitate

setting up of coffee shops all over Kenya. According to the Eastern

Africa Fine Coffees Association (EAFCA), a regional industry outfit,
Kenya produced 49,300 metric tonnes of coffee in 2012, but consumed
only 3,000 tonnes (includes imported finished products). The trend
is in comparison with Ethiopians, whose support for the sector is
evident

in

coffee

consumption

patterns.

In

same

year

Ethiopia

consumed about 50 per cent of the coffee produced locally. Ethiopia

produced 270,000 tonnes of coffee and consumed 135,000 tonnes, a
trend attributed to the countrys history where coffee has been a
cultural beverage. Local consumption is beneficial as it increases
incomes and also creates employment opportunities along the value
8

chain. Local consumption also helps in stabilising coffee prices as

well as raising the demand for such coffee. Caffe Del Ducas and
Solaitas focus will be assisting and supporting youth groups in
setting up coffee shops which will be able to craft the perfect cup
for

each

customer

and

providing

comfortable,

friendly

and

enjoyable setting. Under the proposed initiative we will support

youthful entrepreneurs for our country to enjoy quality time through
things that enrich life and contribute to a healthy lifestyle.
The coffee shop will be sourcing its accompaniments (cakes) from the
women

groups

doing

baking

as

well

as

coffee

farmers

who

have

intercropped the coffee crops with suitable crops such as sweet

potatoes, bananas and arrowroots. This will assure the farmers
another source of income. Youths will also be employed as they will
be involved in value addition activities in making of banana/cassava
crisps as well as sweet potatoes cakes which will have a guaranteed
market.
The coffee shop is a key ingredient in any modern society as it
offers a forum for citizens to exchange views and transform their
society. The coffee shops will offer Kenyans a chance to meet and
exchange ideas on issues touching on their lives. This will go a
long way in transforming the Kenyan society into a modern society
where dialogue and exchange of ideas is entrenched.
The coffee shop experience apart from being a source of income for
the youth entrepreneurs will also offer a social gathering place
where Kenyans will exchange ideas on the social,

economic and

political happenings. This will aid in the transformation of the

society in to a model civilised nation. The coffee shops will enable
ordinary mwananchi to sample and enjoy cups of coffee of the famed
Kenyan premium grade.

At the national level, there will be benefits from expansion in

coffee exports and increasing foreign exchange earnings. The coffee
sector will generally grow to expand the countries gross domestic
product (GDP) through increasing employment and incomes in the
coffee and other sectors of the economy. Caffe Del Duca & Solaita
believes

that

increased

local

consumption

competition

for

the

specialty Kenyan coffee will go up. Increased local consumption up

to 10% is projected to raise and stabilise the fluctuating coffee
prices. Projections show that 10% local consumption will generate
the same amount generated by exporting 90 % of our coffee (currently
17 billion).

UWEZO can also help promote local consumption

by

lobbying to have duty increased on imported coffee.

Sample Model Coffee Shop: Jahazi

The

idea

behind

Jahazi

Coffe

Shops

is

to

have

coffee

shop

available to the masses at prices they can afford. The first shop
officially opened on 05/01/2014.
I came up with the idea to open the first coffee shops in Pangani
shopping centre and Westlands, Nairobi that will offer coffee and
cupcakes deliveries to the offices in the environs at a price lower
than any other coffee shop in Nairobi. Jahazi sells a cup of the
finest

Kenya

coffee

(Espressos,

Americano,

and

Cappuccinos)

at

between Kshs. 50 and Kshs. 150 (take aways).

Jahazi plans to expand into more "kawaida mwananchi" areas in the
next 12 months. The entrepreneurs are planning to have the offerings
on board a food truck which will be moving around Nairobi and its
environs in different days, thus bringing coffee and cakes closer to
people, whilst promoting local coffee consumption.
A well run coffee shop (selling 45 cups of coffee ONLY per day at
between Kshs 60 and Kshs. 100) is projected to have a payback period
of less than 20 months at most (startup cost of Kshs. 200,000 and

10

Kshs. 80,000 per month overheads(cost of coffee machine, pods &

milk, wages, rent, electricity, depreciation etc)

11

Appendices
Appendix I: Caffe Del Duca Catalogue

Dimensions (HxWxD)
Weight
Voltage
Power Consumption
Tank
Price

Dimensions (HxWxD)
Weight
Voltage
Power Consumption
Tank
Price

30.5 x 21 x 29 cm
9 Kg
230 V / 50 Hz - 120 V / 60 HZ
1200 W
3 l
Kshs. 55,000 + VAT

42 x 29.5 x 45 cm
18.5 lbs (19.5 Kg steel
version)
230 V / 50 Hz - 120 V / 60 HZ
2200 W
5 l
Kshs. 160,000 + VAT

Dimensions (HxWxD)
Weight
Voltage
Power Consumption
Tank
Price

COFFEE POD EACH AT KSH 30 + VAT

12

42 x 52.5 x 45 cm
28 Kg
230 V / 50 Hz - 120 V / 60 HZ
2900 W
9 l
Kshs. 220,000 + VAT

Budget Proposal

No. Item
1.

2.

3.

4.
5.

6.

Purchase and
maintenance of
Coffee Dispensing
Machine (incl.
spares)
Capacity building &
Training 100 Youth
Groups at one group
per County.
Establishment of
coffee shops in 47
Counties at 1 per
County.
Establish mini
bakeries at least1
per County.
Purchase of a van
for mobile coffee
dispensing and
deliveries
Purchase a pick up
for Solaita
Industries to
enable it reach out
to coffee farmers &
Capacity building

No.of
Units

Unit Cost
(KES)

Total

100

260,000

26,000,000

1000

15,000

15,000,000

100

300,000

30,000,000

50

250,000

12,500,000

5,000,000

5,000,000

5,000,000

5,000,000

Grand Total 93,500,000

13