The Ethiopian government and the United Nations Industrial Development Organisation (UNIDO) have joined forces to improve the coffee value chain’s efficiency. As part of the collaboration, Ethiopia’s Ministry of Agriculture and UNIDO signed a €10 million (circa $9.9m) cooperation agreement on 31 October to facilitate the provision of credit to coffee value chain players, according to the state-owned Fana Broadcasting Corporate (FBC).

The agreement was signed by Oumer Hussein, Ethiopian Minister of Agriculture, and Aurelia Patrizia Calabro, UNIDO representative in Ethiopia.

Hussein pointed out that financial constraints are a major obstacle for Ethiopian coffee exporters, suppliers and producers. He stressed that the technical and financial cooperation agreement signed with the agency will alleviate the problem and increase efficiency in the coffee value chain.

Meanwhile, Calabro said that the collaboration will help identify and support stakeholders involved in investing in coffee.

Adugna Debela, Director General of the Ethiopian Coffee and Tea Authority, said the project is a partnership model that reduces the risk of investment in the Ethiopian coffee sector. According to him, the project will primarily benefit coffee producers, suppliers and exporters. It will also play an important role in increasing the quantity, quality and price of coffee by providing access to low-interest loans.

Among Ethiopia’s key development partners are China and Italy, as well as the African Development Bank (AfDB), the European Investment Bank (EIB), the European Union (EU), the Food and Agriculture Organisation of the United Nations (FAO), the International Fund for Agricultural Development (IFAD), the International Finance Corporation (IFC), the United Nations Development Programme (UNDP) and the World Bank (WB).

Ethiopia is a key hub for China’s Belt and Road Initiative, a programme that aims to expand Chinese influence by financing and building infrastructure in developing countries. The director of the Ethiopian Coffee Culture Centre in Beijing, Yuan Wei, promised to bring Ethiopian coffee to China’s high-end market through the initiative.

However, China has recently cut back on lending due to its economic slowdown and some evidence of mounting bad debts from the liberal lending programme.

Ethiopia has about 400 Chinese construction and manufacturing projects worth over $4 billion and an estimated total debt of $13.7 billion, the second highest in Africa after Angola. The East African country has been classified by JPMorgan Chase & Co as “carrying high repayment risk and under threat of reserve depletion by the end of 2023”. Ethiopia and other African countries that rely heavily on China for loans at cheaper rates may be forced to seek help from the International Monetary Fund and World Bank, which typically restrict commercial loans and require Chinese lenders to discuss with Western lenders about restructuring.

With shallow local markets, and thin policy and market buffers, Africa is going to need all the help they can get to smooth out the macro shocks which are buffeting them.

China’s reticence in debt restructuring and softening of its lending terms is bound to heighten vulnerabilities at these frontier economies.

Aninda Mitra, Macro and Investment Strategist, BNY Mellon Investment Management,Singapore (source: Bloomberg)

These concerns, hopefully, will be addressed in future discussions between the Ethiopian government and UNIDO.

The country of origin of Arabica coffee, Ethiopia is known worldwide for its high coffee quality, variety of flavours and aroma, which increases the global demand for this commodity.

According to the Ethiopian Coffee and Tea Authority, the East African country generated a record US$1.4 billion in coffee exports in the 2021/2022 fiscal year, which ended on 7 July 2022.

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UNIDO is the specialised agency of the United Nations that promotes sustainable industrial and economic development. UNIDO supports countries to industrialise in ways that promote digital and green transformation and accelerate progress towards the Sustainable Development Goals.

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