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

The Coffee Sector in Ethiopia

Assessing Ethiopia’s coffee sector to understand the root causes of its problems and remedial solutions to internal problems. This series discusses the scholarly paper, “Ethiopia’s Coffee Sector: A Bitter or Better Future?” by Nicolas Petit. In the preceding posting, “What Can Be Done To Save Ethiopia’s Coffee Sector? – Part II,” we discussed the world coffee market and its impact on coffee producers. Part I was an introduction.

In the current part, we will have a closer look at Ethiopia’s coffee sector. We will discuss the characteristic features of the coffee sector and the significance of coffee to the national economy.
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Ethiopia is one of the poorest countries in the world with over 45 per cent of its population living below the poverty line of USD1 per day. Agriculture is the primary source of the country’s export earnings, raw materials for industry, and employment. Ethiopia exports a small quantity of vegetables, flowers, oil seeds and agricultural products to the major markets of Europe and the Middle East. Coffee constitutes over 60 per cent the country's export earnings.

In the last couple of decades, the country has adopted a development strategy, commonly known as “agriculture led industrialization.” For such a strategy to succeed in an agrarian economy, it is imperative that any strategy addresses the root causes affecting agriculture simultaneously.

Petit notes, “The causes of poverty include low levels of agricultural technology and rural infrastructure. Recurrent droughts and the degradation of the natural resource base, combined with a highly unstable recent political history, also contribute to the persistence of poverty.

“In general, the variability of growth is mostly a result of the variability in the performance of the agricultural sector (FAO 2006). Agriculture represents about 42 per cent of GDP, with industry and services respectively 11 per cent and 47 per cent. Agriculture is estimated to employ 85 per cent of the economically active population, and continues to be the major source of export earnings and raw materials for industry (OECD 2006).”

Coffee is an important component of the Ethiopian economy. Ethiopia is the birthplace of coffee but the country’s share in the world market is not to a level where it should have. Petit’s study confirms this but suggests that there is still hope:

“Ethiopia is probably the oldest exporter of coffee in the world (ITC 2002). In 2005 it was the sixth largest coffee producer after Brazil, Colombia, Vietnam, Indonesia and India, and the seventh largest exporter worldwide. It is the largest coffee producer and exporter in Africa. Exports in 2005 were 2.43 million bags, a share of 2.82 per cent of world trade in coffee beans (ICO statistical database). The bulk of current Ethiopian exports go to Japan, Germany and Saudi Arabia. There is a high degree of dependence on these three markets, which absorbed 63.3 per cent of Ethiopia’s coffee exports in 2003/2004 (FDRE 2006). Moreover, exports to Japan, Germany and Saudi Arabia have risen in the last 20 years, while exports to the USA have declined (FDRE 2006). 11 The vast majority of coffee is exported in green bean form for roasting in consuming countries. Although the total share of its coffee exports in world trade is small, Ethiopia plays an important role in the ‘global value chain’ because of the fine quality of its coffees (Daviron and Ponte 2005).

“Two coffee species are currently used for commercial purposes: Coffea arabica and Coffea canephora (also known as Robusta). Ethiopia only produces Arabica coffee, which is widely believed to have originated there. Arabica coffee still grows wild in the forests of the south-western part of the country, which remains an important source of genetic resources for the world coffee industry (Gole 2003). Coffee farming systems in Ethiopia are conventionally divided into four categories: forest coffee, semi-forest coffee, garden coffee and semi-modern plantation. Yields are considered to be very low compared to other countries, with estimates of less than 200 kg per ha for forest coffee and around 450–750 kg per ha for semi-modern coffee plantations (FDRE 2003a). Most coffee farmers do not use fertilizers, pesticides or herbicides (LMC 2000).

“Finally, coffee from each significant Ethiopian producing region has a particular taste characteristic and a number of these coffee types are internationally well known. According to the International Trade Centre, ‘Ethiopia produces some of the world’s finest “original” coffees such as Yirgacheffe, Limu and Harar’ (ITC 2002, 299).”

In Petit’s paper, it becomes evident that one of the reasons why most policies and development intervention approaches fail is in the fundamental assumption that coffee farmers are homogeneous, which in turn leads to a one-fits-all prescription.

Petit argues, “farmers are affected differently and deploy different coping strategies in response to falling coffee incomes, whether occasioned by declining international prices or other factors. Evidently this has implications for the consideration of policies such as upgrading, typically conceived as applicable to a notional ‘average’ small farmer household.

“Literature on coffee in Ethiopia – whether from government sources or within the coffee industry, or in reports from NGOs like Oxfam or donor agencies like UNDP – typically gives the impression that Ethiopian coffee ‘smallholders’ are a homogeneous group of farmers (who are thus similarly affected by the ‘coffee crisis’). While there are no systematic studies or data of rural differentiation, some useful glimpses are available from an unlikely source, namely an unusually precise ‘livelihood’ analysis in SNNPR conducted for the United States Agency for International Development (USAID 2005).”

He concludes, “‘coffee farmers’ should be seen as differentiated in various ways.”

Some in the current government argue that, all things considered, the current local marketing system is doing fine for a backward sector. Well, with all its potentials for drastic improvement, overhauling the coffee marketing system may be of low urgency as long as the other factors affecting the sector are addressed well and in a coordinated fashion.

Petit describes the contemporary marketing chain as “From Growers to Export”:

“Market participants are numerous and include smallholder coffee farmers or state farms, primary collectors (‘sebsabies’), suppliers (‘akrabies’), processors, service cooperatives, unions, exporters and various government institutions (see Table 3 for details). Many participants are required to have specific licences for their respective functions; for example, sebsabies have to sell to akrabies, akrabies deliver their coffee to the auction but are not permitted to export it, and exporters are only permitted to buy coffee from the auction (LMC 2003). Normally, all Ethiopian coffee should pass through auction centres. However, since 2001, cooperatives and to a lesser extent private investors have been granted permission to by-pass coffee auctions, opening the way for direct export sales (Dempsey 2006).

“Deliveries which do not meet export standards are rejected and redirected for the domestic market. Ethiopia, along with Brazil, is one of the only producing countries with a strong coffee-drinking culture. A large proportion of coffee consumption in Ethiopia occurs on-farm, which makes levels of consumption difficult to assess (LMC 2003). The ICO estimate for local consumption in 2005 was 1.83 million (60 kg) bags, i.e. more than 40 per cent of production (ICO statistical database).”

The major factor affecting coffee farming and farmers is the commodity’s high dependence on world trade and international prices. But reforming the domestic marketing system is of equal importance.

Petit’s research summarizes the Ethiopian coffee sector and pinpoints to its problems.

“The Ethiopian coffee sector is characterized by a number of distinctive features of which the most important include the following.

1) Ethiopian coffee is an important source of coffee genetic resources as the country is the centre of origin and diversification of Arabica coffee. Wild coffee still grows in different areas of Ethiopia and forest or semi-forest coffees constitute an important part of the country’s production.

2) Domestic consumption represents more than 40 per cent of coffee production. There is a long and strong tradition of coffee drinking, and the famous coffee ceremony is an integral part of the Ethiopian culture.

3) A variety of distinctively flavoured beans produced in different regions (coffee types such as Harar, Limu or Yirgacheffe) are recognized internationally and marketed in blend or as 100 per cent Ethiopian products at high premiums.

4) Smallholders represent 95 per cent of total production in a low input–low output system making Ethiopian coffee production naturally ‘organic’. Finally, coffee should be considered as a very ‘political crop’ because of its tremendous importance in the Ethiopian economy.

“What Ethiopia shares with other producer countries, of course, is that it is highly dependent on international prices and affected by the structure and workings of the world coffee market. According to the United Nations Development Programme (UNDP), ‘what happens in international coffee markets has a profound bearing on Ethiopia’s prospects for achieving the Millennium Development Goals’ (2005, 140). I turn next to consider domestic coffee marketing reform, and export performance in the context of changes in the global coffee market outlined earlier.”

We will continue evaluating the needs for domestic coffee market reform and other related issues in the next part of the series.
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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.