Ethiopia Coffee Farm

ETHIOPIA’S COFFEE EXPORT LAWS DRIVE LOCAL SALES UNDERGROUND

Coffee is Ethiopia’s most important export, delivering hard currency the country needs for its reserves to purchase foreign goods.

According to the Observatory for Economic Complexity OEC, Ethiopia, coffee exports accounted for 24.6% of the country’s total exports in 2020. The country is the largest exporter of coffee in Africa by value and is known worldwide for its unique taste and quality.

Export Destinations 2020 Web
Export Destinations for Ethiopia Coffee. Source OEC

However, an article in ENACT Africa tells a different story about the vibrant demand in the domestic market for home-grown coffee being suppressed by byzantine laws designed to force Ethiopians to drink inferior coffee while all the good stuff goes abroad.

In fact, however, more and more quality coffee is finding its way onto the domestic market via organised crime and local smugglers.

The question that was difficult to answer at first was why farmers would want to sell to local buyers when surely the export market would be more lucrative. But that is not necessarily the case. When you consider the bureaucracy and paperwork involved in exporting coffee and then add in taxes, transport, packaging and export compliance, the farmer might choose to sell locally and avoid the problem, associated costs, and delay.

According to a senior agronomist and coffee farm manager in Limmu who requested anonymity, local and mid-level government officials and police commanders are also involved in the illegal trade.

ENACT Africa

The Ethiopian government considers coffee a natural resource and stipulates that all high-quality coffee must be exported. Therefore, a farmer cannot decide for himself whether to sell it on the local market. But as we have already explained, the export procedure is bureaucratic and expensive, so farmers come away empty-handed. Some resort to the black market, where illegal traders pay a reasonable price without going through the regular channels.

The illegal traders do what illegal traders are good at. They smuggle the goods across the borders at night with bribes or threats of violence.

The authorities are paralysed by their laws in their efforts to stop this practice. Ethiopia functions much like the United States, with federal and regional laws. The first conflict revolves around the government’s definition of coffee as a natural resource. Many regions do not see it that way and define coffee as a commercial product (which, in reality, it is).

So if a crime committed in a region is to be prosecuted, it should first decide whether to apply federal law. But applying federal law at the local level requires resources and introduces additional complexity that makes convictions unlikely. 

When coffee is seized, the officer or customs official receives a reward. After that, however, there is no incentive to continue the investigation, so criminals can see this as a cost of doing business and act with relative impunity.

And when the authorities do take action against known criminals in the gangs, the investigations are often dropped because the politicians reach into the pockets of the gang leaders.

Ethiopia could revise its export procedures and conflicting internal laws to create a functioning and dynamic market. Ethiopians should be proud to enjoy their own coffee. The government could reduce the cost of exports and allow a quota for domestic consumption, which would remove much of the financial motivation for the dodgy traders. Unfortunately, this also seems to disadvantage the politicians who profit from the illicit trade.

Author

  • Nick 2017 500X500 1

    organisation:

    Nick Baskett is the editor in Chief at Bartalks. He holds a diploma from the Financial Times as a Non Executive Director and works as a consultant across multiple industries. Nick has owned multiple businesses, including an award-winning restaurant and coffee shop in North Macedonia.

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