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Ethiopia’s black-market coffee

Updated: May 21, 2023

Fonte: Compassion international

1. Introduction


According to the 2019 World Bank figures on raw coffee exports (whole-bean), the Federal Democratic Republic of Ethiopia is Africa’s largest and world’s sixth greatest exporter with a market value of around 795,192,000 USD. Coffee constitutes Addis Ababa’s main export commodity, generating close to 30% of its total revenue and supporting the livelihoods of over 25% of its population. The Arabica variety, which dominates the cultivation in the forest areas of the southwestern highlands of the Kaffa and Buno districts, occupies around 400,000 hectares of fertile soil, producing a grand total of almost 200,000 metric ton of coffee every year.


A major share of this organic product is exported in green coffee beans form, a surplus factor that gifts an upper hand to Ethiopian coffee within the international market, because of its added pharmaceutical use. The coffee business operates following the lines of consume less and export more, with the highest quality beans reserved for foreign markets, a much-needed sacrifice of local needs in the name of hard currency and revenue. Some of the key players and buyers in the Ethiopian coffee market include Cooper's Cask Coffee Company, Starbucks Corporation, Nestle SA, Klatch Coffee, and Kalbe International. However, as much as Ethiopian law prohibits the sale of export-quality coffee locally, in recent years the illegal trade has grown into an organised criminal enterprise, providing more profits to licensed coffee exporters than the international market itself.


This paradoxical stalemate may not only escape the restricted state-controlled policy but combine with other weaknesses, such as the protracted conflict in the Tigray region, that could degenerate in something bigger. Something more dangerous that it may appear at glance.


2. The production of coffee money


In In Ethiopia, coffee is produced in forest, semi-forest, garden, and plantation production methods. It is estimated that these different production systems make up about forest (10%), semi-forest (35%), garden coffee (50%), and plantation coffee (5 %) of the total coffee production in the country. Even though the market value of Ethiopian coffee remains unmatched in the continent, the main challenges to its efficiency rates are productivity and profitability. Indeed, 90% of the product is still manufactured by small producers, but although some farmers manage to reach production volumes of 20–22% per hectare, the average national level is only 7.8%, less than half of other major coffee producing countries. Out of the entire revenue generated, local producers only receive 10% of the gains, and Ethiopia loses 40% of its coffee export revenues due to the involvement of so many players and intermediaries in the production process. Not counting the flourishing illicit market of domestic sellers.


In addition to surpassed production techniques, traceability of the product is still a massive issue. Although the high quality of Ethiopian coffee is undisputed, exporters and importers are often incapable in providing information regarding production and marketing processes, including where the coffee is produced and by whom. A pivotal issue that may collide with modern market quality standards. However, things in this matter are gradually improving. The introduction of the Growth and Transformation Plan II, a government’s reform to achieve the goal of generating export-led growth of 13 bn USD by 2025, includes the introduction of coffee traceability and a new marketing system designed to reduce transaction costs. To counter the exhausting and excessive bureaucratic activity as well, the reform aims at generating more opportunities for coffee farmers by enabling them to sell and export coffee directly.

Figure 1 - Ethiopian women farmer drying the beans (source: technoserve.org)

3. The restricting national policy


Since 2008, it has been a criminal offence under Ethiopian law to sell export-quality coffee locally, as the exporting business is tightly controlled by authorities and by the federal government's jurisdiction. Nowadays, the main law in force is the 2017 Coffee Marketing and Quality Control Proclamation, a thirty-three pages declaration that aims at establishing and protecting ‘a sustainable and traceable coffee marketing and quality control system which enables the supply of quality, voluminous and competitive unfrosted and value-added coffee to the global market’ and which ‘it has been found necessary to establish modern, legal and fair alternative coffee transaction system, in order to boost the benefits of coffee producers, transaction actors and the country’. As positively shaped and regulated by Addis Ababa’s harsh line, within the marketing year that ended in July 2021, the country exported 248,312 tons of coffee (valued 907,000,000 USD), 22,523 tons (82,268,924 USD) less than the previous year. Keeping in mind that Ethiopia’s three largest export markets for coffee are Germany, Saudi Arabia, and the United States, the last one being its longstanding ally. As much as COVID-19 may have damaged the exports of goods, theillegal trade in export-standard coffee pouring into the domestic market has considerably contributed to this underperformance. It is not the first episode in Ethiopian history of increasing coffee illicit trade, but which and who are the main factors and accountable individuals behind this slow and painful crash?


4. The messiest Ethiopian legislation


A Since the ratification of the 1994 constitution, the Ethiopian government has struggled in implementing a fragmented core of legislative and administrative measures due to its extreme and non-conciliatory political compositions. The country’s main representative system is held together by a coalition of ethnical parties whose actions and initiatives are not regulated directly by the constitution but are subjected to a shared system of checks and balances which remain somehow external to the main jurisdictional structure. These little authority gaps in between sections and centers of power produce an incoherent output that is best represented by a non-uniformed legislation which differs from one region to another. The arbitrary application of the Proclamation is indeed a practical example of this congenital weakness. For instance, in case of illegal sale of export-standard coffee in domestic markets, the federal government and Oromia state (highest coffee producer region of all) have different criminalization laws and different punishments. This creates confusion for law enforcers when the crime is committed as cases prosecuted using regional law usually get overturned on appeal by the Federal Supreme Court’s Cassation Bench because the federal law should have been applied on first place. However, such cases barely reach that step since regional prosecutors very rarely conduct a second trial using federal law and if he/she is willing to use the recommended path, the case is unlikely to succeed due to procedural and resource issues. As a matter of fact, crimes that violate federal regulations can only be prosecuted by regional high courts located in towns far from coffee-producing districts. In those circumstances, collecting evidence requires time and lots of resources, something which is materially complicated to do.

Figure 2 - The Federal Supreme Court of Ethiopia (source: Ethiopia Insight)

5. Criminals or rational traders?


Illegal traders buy export-standard coffee directly from producers just to resell it on the domestic market. These traders work with brokers, intermediaries, and wholesalers in the capital, who distribute the coffee to other peers countrywide. For licensed coffee exporters, selling green beans to the local market is more profitable than the international one. Exporting coffee involves overwhelming bureaucratic procedures and expenses, such as taxes and costs for transportation, packaging and storage, something which the inner market does not require. When poured in domestic market, the coffee is generally sold at a price of around six times higher than the farm price. A lucrative business for illegal traders who can still make a profit after bribing customs inspectors and officials. As evidence, some sources allege that government employees in Addis Ababa are complicit in the illegal trade, altering and fixing documentation so that exporters can sell locally without incurring in severe violations. The involvement of local government officials and police officers speeds up the illicit process and produce a profitable criminal income share for all its peers. These functionaries ensure the transporters avoid customs inspections at checkpoints along controlled routes during daylight travels and smugglers transport coffee at night, using bribery and threats of violence to pass through the very same spot.

Figure 3 - Ethiopian smuggler (source: Los Angeles Times)

6. Conclusions


To crush the resistance of illicit trade is no easy task for both international and national authorities. Controlling the flow of illegal goods and merchandise, from suppliers to consumers, in some nations is nearly impossible due to geographicalandsocialconstrains which hinder security procedures. The implementation of criminal laws and severe punishments lacking authority profile at the very source is insufficient and it is an unprofitable solution that cannot perform if deficient of power traction behind accountable institutions. The symptoms of governmental ineffectiveness in Ethiopia can be documented in all domains and yet national authorities seem to postpone any major reform due to a “genetic” inability to conciliate ethnical tensions in-between political parties and fronts. However, in some crucial circumstances, such as the country’s economy depending on coffee exports, a simple clarification of the jurisdictional confusion between the federal and regional law enforcement organs may be sufficient to solve the ultimate riddle. This refining act could prevent criminals from benefiting from this lawful void and dodging criminal liability for their actions. By replacing the current incentive-based crime-control approach that rewards law enforcement for merely seizing illegal coffee with a scheme that also requires catching criminalsand offenders could drastically reduce the illicit trade in export-standard goods and guarantee a continuous and profitable flow of Ethiopia’s finest Arabica beans.


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