What Can Be Done To Save Ethiopia’s Coffee Sector? – Part I

Assessment of Ethiopia’s coffee sector to understand root causes of its problems and discuss remedial solutions to internal problems. This series will discuss the scholarly paper, “Ethiopia’s Coffee Sector: A Bitter or Better Future?” by Nicolas Petit.

By Wondwossen Mezlekia

The documentary film, Black Gold and the public dispute between Ethiopia, the birthplace of coffee, and the multinational coffee chain, Starbucks over coffee trademarks have helped publicize the state of Ethiopia’s economy, which is dependent on coffee trade. As a result, the paradox of Ethiopia’s poverty amid unmatched resources the country is blessed with and while supplying some of the best coffees to the multi-billion dollar industry has become the center of attention.

Many development experts and analysts in the field offer explanations to the problems facing Ethiopia and other coffee growing nations within the context of international trade. Several factors including lack of mechanisms to equate supply and demand of commodity coffees have contributed to the suppression of prices. The global trade is skewed against coffee growers with multinational companies setting current and future prices at exchange markets.

To counter the growing trade imbalance in a market often characterized as a buyers’ market – one where producers have little say in determining trade agreements, social investment initiatives, such as Fair Trade movements are offering alternative market based solutions. Development agencies and non-profit charities spend millions of dollars in various projects aimed at augmenting the efforts by developing countries in their struggle to navigate through the uncontrolled market order. The rush to rescue the families dependent on coffee for their livelihoods, thus vulnerable to crisis, seems to be lacking the level of coordination and comprehensive strategies that could address the root causes of the problem.

A comprehensive strategy based on a clear understanding of historic and existing situations peculiar to a given country does not only help to design measurable action plans but also provide the framework for intervention by external forces without duplicating efforts. The basis for sound strategic planning and thereby execution of accurate diagnosis of the problem depends on availability of information.

Like many developing countries, in Ethiopia, scarcity of information and lack of in-depth studies in the coffee sector has long been a major bottleneck. This is changing, thanks to Nicolas Petit’s groundbreaking work “Ethiopia’s Coffee Sector: A Bitter or Better Future?” Journal and Blackwell Publishing published Petit’s scholarly articls, which is protected by copyright, this month on the Journal of Agrarian Change, Vol. 7 No. 2, April 2007, pp. 225–263.
The author analyzes Ethiopia’s coffee sector offering a glimpse at the root causes at various levels in the value chain. The objective of the study is “to identify what can be done to improve the performance/competitiveness of Ethiopia’s coffee sector so as to offer a better future (if any) for the national economy and those who depend on coffee for their livelihoods.”

According to Petit, the outcome of this study is of significant importance for both Ethiopia and the world at large, because:

“With a share of less than 3 per cent of the global market for coffee, the country relies on the crop for a high proportion of its export earnings. Indeed, coffee is the backbone of the Ethiopian economy, contributing 41 per cent of total foreign exchange earnings in 2005 (IMF 2006). Furthermore, the crop plays a central role in sustaining the livelihoods of more than one million coffee growing households and an estimated 15 million people in total (LMC 2000).
Secondly, the country presents a number of distinctive features and plays an important role in the world coffee market because of its unique and world-renowned coffees.”

Ethiopia has been known as a mono-crop economy for its high dependence on a single product – coffee – for its foreign exchange earnings. Despite the touted changes in policies by the government to diversify the export sector, the findings by Petit indicate that Ethiopia is, and will continue to be (at least in the foreseeable future), dependent on coffee as its major generator of much-needed hard currency. The fate of the crop is detrimental to the national economy; therefore, predicting the future of Ethiopia’s coffee and understanding what should be done to save the economy is an urgent matter.

That is why I think Petit’s study is timely and commendable for its extraordinary implications.

The objective of the study is “to identify what can be done to improve the performance/competitiveness of Ethiopia’s coffee sector so as to offer a better future (if any) for the national economy and those who depend on coffee for their livelihoods.”

In the coming weeks, I will discuss this study with extensive quotations from the paper. By doing so, I hope to open a forum for public dialogue with the objective of addressing both external and internal factors affecting the lives of the millions of families dependent on the crop to make their livings.

I am very grateful for Nicolas Petit, author, and Journal and Blackwell Publishing for granting me access and permission to use the document for allowable purposes as indicated under the terms of use.

The definitive version of the paper is available at www.blackwell-synergy.com

Please contact me at poorfarmer@gmail.com should you need a copy of the document in PDF format for use according to Terms & Conditions set by Journal and Blackwell Publishing.
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Abstract

“Coffee, Ethiopia’s largest export crop, is the backbone of the Ethiopian economy. The Ethiopian coffee sector is highly dependent on international prices and affected by the structure and workings of the world coffee market. In this context, this paper seeks to identify what can be done in Ethiopia to improve the performance of the sector so as to yield benefits for the government and the estimated 15 million people dependent on coffee in the country. The paper argues that despite a limited room for manoeuvre, Ethiopia has not yet fully exploited its position as the producer of some of the best coffees in the world. A number of competitive advantages may still be seized if quality and consistency are guaranteed. In order to maximize this potential, and on the basis of a critical analysis of government policies and donor interventions in the sector, a number of recommendations are made.”

Outline

“The first part of the article identifies key international constraints presented by the structure and workings of the world coffee market. The second part provides an overview of coffee production, processing and marketing in Ethiopia, and notes some of their distinctive features. The third then considers the impact of the coffee crisis and domestic coffee market reforms in Ethiopia. The last part focuses on Ethiopia’s prospects in an apparently bitter future: what is being done and what could be done? After identifying constraints and opportunities at the national level, I present a critical analysis of current government policies and donor interventions. Finally, some policy recommendations are proposed.”
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Source: Journal and Blackwell Publishing
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.