This is the 5th and final part of the series that has been running for over four weeks. The series assesses Ethiopia’s coffee sector to understand the root causes of its problems and to point out remedial solutions based on the scholarly paper, “Ethiopia’s Coffee Sector: A Bitter or Better Future?” by Nicolas Petit.
In Part IV, we’ve discussed domestic coffee market reforms, constraints, and their impacts on the coffee sector. We’ve also discussed prospects for Ethiopia’s coffee. This current part points out what is being done and what can – and should – be done in order to revitalize the coffee sector in Ethiopia.
My heartfelt thanks goes to my dearest friend who brought the paper to my attention. I am equally grateful of the generosity of Nicolas Petit and Blackwell Publishing Ltd for granting me access and permission to use the paper according to their terms of use.
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So, What Can Be Done?
In Ethiopia, coffee is more important to the farmers than it is for the government or exporters. That is why addressing the problems facing the sector becomes very crucial. With out being too simplistic, take only two measures and the sector will revive.
Correct The Incoherent and Confused Government Policies
Of late, donors require developing countries to produce a development strategy document, known as Poverty Reduction Strategy Paper (PRSP), as a pre-requisite for financial aid. [In theory, governments in developing countries are granted financial injection for economic developments "only" when they provide evidence of their spendings, thus the requirement for strategic plans.] Since 1991, the government of Ethiopia has produced two such PRSPs, namely, the Sustainable Development and Poverty Reduction Program (SDPRP), for the period 2000–2005 and a draft of the second generation PRSP, called the Plan for Accelerated and Sustained Development to End Poverty (PASDEP), for the period 2006–2010. In both cases, the government’s touted Agriculture Development Led Industrialization (ADLI) is the driving force.
As Nicolas Petit notes, ADLI is a strategy “whereby the development of agriculture is to support industrialization by providing a market and a source of raw materials and capital accumulation. In particular, the ADLI strategy underlines the potential scope of the domestic market and the important role it could play for growth of both agriculture and industry. It also gives recognition to the critical role of exports in terms of growth of both income and foreign exchange (FDRE 2000). “
Nevertheless, the government’s ADLI and its supporting plans of implementation seem to be incoherent and sometimes working against the coffee industry. From Petit’s study I deduce two major stumbling blocks in the government policy with respect to the coffee industry:
1) Coffee lacks the attention it deserves
Ironically, coffee is not one of the commodities explored in the ADLI as a promising venture, wherein to invest on a value added process. Petit notes:
“…despite the importance of coffee for economic development (with these interlinkages in mind) and for poverty reduction, there are hardly any discussions of coffee in either document except for some references to the decline in coffee prices and the rhetoric of diversification.24 … Both documents emphasize diversification into horticulture (including cut-flowers), oilseeds, pulses, vegetables and fruits, as well as tourism, textiles and garments or leather products. Various difficulties associated with diversification by coffee farmers have already been indicated, and PASDEP acknowledges that ‘despite its volatility, coffee will probably continue to be the country’s major export commodity during the medium term’ (FDRE 2005, 114). However, there are no policy measures proposed to improve returns to coffee.”
According to Petit, this lack of attention to the coffee sector might have come with the aid package:
“One explanation for the lack of attention to coffee in the different PRSPs, hence their lack of investment plans, might be the common tensions between donors and governments in drafting PRSPs which, while promoted as exemplifying ‘country ownership’ of development policy, have to adhere to the neoliberal structures of the international financial institutions.25 According to Gibbon (2003), since the late 1990s, (‘traditional’) agricultural commodity exports have occupied an increasingly residual role in the concerns of development agencies, which now emphasize diversification into ‘non-traditional’, high-value agricultural and fishery export commodities (yet another example of the ‘one size fits all’ thinking of aid agencies evident in a wide range of fields?). “
2) The coffee development & marketing plan contradicts the “diversification’ policy outlined in the PRSPs
As Petit explains:
“[The coffee development & marketing] plans [prepared in accordance with the ADLI strategy)] aim at transforming household farming from ‘subsistence’ to ‘market-oriented’ (commodity) production, stimulating productivity, growth and international competitiveness (FDRE 2003b).27 … The plan calls for increased production and productivity, and improvement in coffee quality and processing, and envisages a major shift to washed coffee to realize significant premiums prices in the world market. Plans are also proposed to improve the efficiency of the current marketing system together with activities to enhance international promotion of Ethiopian coffees (FDRE 2003a). The ambitious targets – new coffee plantings on 463,021 ha, and average annual production of 70,000 tons of organic coffee, 200,000 tons of sun-dried coffee and 150,000 tons of washed coffee – contrast with the rhetoric of diversification found in the different PRSPs in what seems like a recipe for incoherence and confusion.
“Although the plan displays a good understanding of constraints and opportunities, it is wishful thinking to believe that all the activities proposed could be implemented given pressures on scarce financial resources currently available for coffee development in Ethiopia. According to Scanagri, ‘what is needed is a coffee sector policy which seeks to narrow down the large set of activities listed in the plan to the set which, using the available resources, is likely to be most cost-effective in raising earnings from the export of coffee and improving the livelihood of coffee farmers’ (2005, 36; emphasis in original). In short, the plan clearly lacks prioritization. Moreover, increasing volume and selling higher quantities without first properly investigating and addressing quality and marketing opportunities is inherently mistaken. Finally, implementing the coffee plan is also constrained by major organizational problems in the MoARD. In addition to the various restructurings of recent years, there is virtually no link between the coffee development department (CTSDD) and the coffee marketing department (CTSCMD), which is essential. At present, it is not known if funding has been made available for the different activities proposed in the plan, nor what has been achieved so far.”
Correct The Flaws of, and Effectively Coordinate, Donor Interventions to Assist Coffee Producers
Currently, several donors fund various coffee development projects in Ethiopia. Many of the projects are aimed at increasing post-harvest efficiency, organization of cooperatives, improved marketing institutions, product differentiation, private sector development, etc. Petit explains the nature of these projects and points areas needing urgent reconsideration as follows:
1) Together with the dominance of narratives about diversification in the PRSP (above), donors’ thinking about, and assistance to, coffee are closely related to the prevailing global orthodoxy of economic liberalization: a minimal economic role for the state, an enhanced role for the market, increased space for the private sector as the new engine of modernization, and so on. In this framework, previous interventions such as supply management schemes have been replaced by new initiatives like market-based ‘price risk management’ (PRM) instruments pushed by World Bank economists, together with a ‘post-Washington consensus’ focus on Private Sector Development (PSD) and Private Public Partnership (PPP) initiatives (Gibbon 2003). Doubtless to say, the current portfolio of coffee-related projects in Ethiopia reflects this; for example, the IFAD Agricultural Marketing Improvement Programme is closely related to PRM initiatives, proposing a warehouse receipt system for grain marketing and the forward coffee auction to reduce the risks faced by marketing intermediaries (IFAD 2004). In similar fashion, the German GTZ has recently established various PPP projects in Ethiopia, including a scheme for sustainable coffee production and marketing in the Bonga Forest that brings together giant agro-food corporations like Kraft Foods and the Amber Corporation with two coffee unions as local ‘partners’. While it is too soon to assess the impact of such projects in Ethiopia, we can note Gibbon’s observation that ‘limitations associated with the use of PRM in relation to developing country agro-commodities have been widely noted without this having dampened enthusiasm for them to any noticeable degree’ (2003, 10).
2) Most donor reports on the weaknesses of the current coffee marketing structure are based on ‘New Institutional Economics’ (NIE) analyses in which a certain conception of economic efficiency provides the benchmark (IFPRI 2003, for example). While there is clearly much scope to improve the current coffee marketing structure for the benefit of farmers, other factors need to be taken into account. According to Love (2001, 2002), understanding the contemporary marketing structure of coffee in Ethiopia entails sensitivity to political and historical antecedents. The current marketing structure and its institutions are better explained by a political economy approach in which power and control are the markers, and which can better identify constraints on reform. Bates similarly stresses the failure of NIE to take into account ‘the allocation of political power in society and the impact of the political system on the structure and performance of economic institutions’ (Bates 1995, 44).
3) Some projects currently under implementation deserve particular attention for their potential benefits. For example, the Coffee Improvement Programme IV funded by the European Commission (EC) and its landrace development programme could bring enormous benefit to the coffee sector if successful.28 Another interesting example is the Agricultural Cooperatives in Ethiopia (ACE) project funded by USAID and considered one of the ‘success stories’ of donor interventions in the Ethiopian coffee industry.29 The project has benefited close to 180,000 small-scale coffee producers from 154 primary cooperatives federated into the four coffee unions of Ethiopia. Most recent estimates show that, following the government decision to allow cooperatives to bypass the auction, direct exports of differentiated coffee by the unions increased from US$0.27 million in 2001 to US$31.9 million in 2005. Moreover, in 2004, the unions paid out US$1.63 million in dividends above initial buying prices to cooperative members, and the trend is strongly upward (Dempsey 2006). In addition, in the case of fair trade in the Oromiya Region, Grundy (2005) found that besides second payments to farmers, there are considerable additional benefits which contribute in different ways to improving coffee farmers’ livelihoods. These include the provision of savings and credit services, direct investment in local services (schools, water and sanitation, health clinics) and support to cooperatives…There is also an initiative concerning trademarks and licensing activities to enable poor growers to secure a greater share of the retail price of coffee, although its impact in Ethiopia is not yet known.
4) A major flaw in donor interventions is illustrated by lack of coordination between them, leading to problems of duplication of activities or incoherent interventions in the same areas. Most aid organizations have a very limited knowledge (if any) of interventions in the coffee sector other than their own programmes and projects. This is potentially detrimental, as many projects concern the same type of activities. For example, many donors involved in various product differentiation strategies (in particular, organic or fair trade coffees) are increasingly working with the popular coffee unions with very similar activities.30"”
Nicolas Petit’s Conclusion and Recommendations (as is)
“Despite the rhetoric of diversification, coffee will probably remain Ethiopia’s most valuable export for some time. Therefore interventions in the coffee sector in the short and medium term remain of critical importance for both producers and the government. Ethiopian coffees occupy a special place in the world coffee industry and different analysts agree that there is no deficit in demand provided that quality and consistency are guaranteed (Westlake 1998; Scanagri 2005; Kotecha 1999). The path to ‘success’ lies in exploiting the unique aspects of Ethiopian coffee which, combined with improvements in harvest and post harvest practices, for example, can supply consistently high quality coffee and maintain or increase its competitiveness on the world market. How might this be achieved?
“First, and fundamentally, a more adequate analytical framework is required, with consideration of some key methodological issues. Even though some may appear simplistic or self-evident, they are often neglected in current analysis. For example, a detailed understanding of the structure and workings of the world coffee market is essential to identify constraints (‘coffee crisis’, asymmetrical character of power in the ‘global coffee value chain’) and opportunities (‘what the market wants’ rather than what Ethiopia wants to sell). Again, if the poverty reduction impact of any strategy is a central concern, which coffee farmers are interventions designed to support? Farmers are not homogeneous, but differentiated by inter alia landholding/farm size, sources of income, and different responses to hazards, as illustrated earlier. Of key importance is that wage employment is often the principal source of income for the poorest coffee farmers. The effects of coffee development interventions for rural labour markets are thus a key consideration for poverty reduction. A final instance is that the importance of systematically linking the coffee sector with broader economic development issues should not be overlooked. In particular, the role of agriculture, and agricultural commodity exports, in economic development remains subject to debate, with competing views on the role of the state in facilitating needed structural changes (UNCTAD 1998).
“Responding to various constraints may also require an enhanced role for the state in contrast to the neo-liberal mantra of deregulatory and market-based approaches. We noted the importance of regulation with regard to maintaining – and improving – coffee quality, and regulation for environmental protection is also urgently needed. State support is similarly required to improve infrastructure, extension services, access to finance and credit, and research, all of which are urgently needed. At the same time, the government needs to prioritize activities in accordance with the scarce resources available and identify a cost-effective coffee sector ‘policy’ based on ‘what the (export) market wants’. This suggests a clear focus on quality rather than quantity as the priority. A coherent (and durable) government structure for regulating and promoting the coffee sector would be beneficial. In particular, such a coherent structure would connect and align much more effectively the activities of the coffee development and marketing departments of the MoARD.
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The definitive version of the paper is available at www.blackwell-synergy.com. Should you need a copy of the paper for use according to Journal and Blackwell Publishing’s Terms & Conditions, you may contact me at poorfarmer@gmail.com.
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Source: Journal of Agrarian Change, Vol. 7 No. 2, April 2007, pp. 225–263.© 2007 The Author.
Journal compilation © 2007 Blackwell Publishing Ltd, Henry Bernstein and Terence J. Byres.
Nicolas Petit, 75, Avenue de l’université, 1050 Bruxelles, Belgique. e-mail: npetit13@hotmail.com
This article is based on a dissertation submitted at the School of Oriental and African Studies, Department of Development Studies, in September 2006. I am grateful to Sergio Giorgi for his support and Surendra Kotecha for his encouragement, insight and constructive criticism during work on the dissertation. Henry Bernstein gave detailed comments on various drafts of this paper, which were extremely helpful in revising it. The usual caveats apply.
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