By Hadra Ahmed
Published on January 29, 2012
January 30, 2012
Ethiopia’s flagship export item,
coffee, has fallen into a troubling state of affairs after the nation’s
exporters have failed to pack out even one fourth of the quantity expected to
be sold in this fiscal year.
Only
a little over 20pc of the 270,000tn of coffee that federal authorities had
planned for export in the current fiscal year has been shipped out, despite two
quarters’ time already having passed, industry sources disclosed to Fortune.
Alarmed
by such a drastic shortfall compared to the export target, Kebede Chane,
minister of Trade (MoT), and Yacob Yala, state minister, called an urgent
meeting with leaders of the Ethiopian Coffee Exporters Association on Thursday
afternoon, January 26, 2012, held inside the Ministry’s meeting hall on Tito
street, also attended by Elleni G. Madhin (PhD), chief executive officer of the
Ethiopia Commodity Exchange (ECX).
“The
meeting aimed to smooth the process of coffee exports as well as suppliers,” Abdurrahman
Seid, assistant public relations manager at the Trade Ministry, confirmed to
Fortune.
Two
deputy directors from the Ethiopian Commodities Authority and National Bank of
Ethiopia (NBE) as well as heads of trade bureaus from Oromia and Southern
regional states were in attendance at the meeting, which was concluded with no
deal reached with exporters, sources disclosed to Fortune.
It
was a meeting compounded by tense conversation and heated argument between
federal government officials and leaders of the coffee industry, according to
those who attended the meeting. They could not reach an agreement over the real
reason behind the momentous drop in export volumes.
Recent
developments in the industry are blamed by industry observers for the decline
in exports. Turmoil in the industry, following an allegation by federal
authorities, last year, that some exporters were storing more than 500tn of
coffee for more than two months without supplying foreign contracts, thus,
banning them from buying coffee at the ECX, heralded a rather troubling year.
The
Ministry had banned a total of 41 exporters in October 2011 for allegedly
hoarding coffee meant for export, followed by an additional 57 exporters, who
were suspended from trade for three to six months.
Another
decision by the Ministry to compel exporters to ship coffee in a containerised
fashion had caused more commotion in the industry. The Ministry took such an
unexpected decision, in the absence of silo facilities to handle the transfer
of coffee from the containers, both at the Port of Djibouti and at ports in
countries where buyers are located, several exporters alleged.
“You
can do that with exporters in Kenya or Rwanda, where there are few varieties of
coffee,” said a major coffee exporter. “In Ethiopia, with over two dozen coffee
varieties, trying to tell buyers to set up silos for all of these [varieties]
is either too naïve or simply being stubborn.”
Officials
at the Ministry of Trade were forced to retreat from their imposition, thus
allowing exporters to ship their coffee in the previous fashion.
The
latest controversy, however, has something to do with price disparities between
what the international market offers in New York (2.20 dollars per kilogram)
and what exporters are asked for at the ECX (over 2.40 dollars).
“Who
would be crazy enough to buy at a higher price here and export at a loss?”
wondered an exporter.
A
state-owned enterprise with its own coffee estate at Lemu has been exporting
for 2.40 dollars per kilogram but without being required to buy coffee from the
Exchange whose trading floor is inside Alsam Cheleleka Building, on Chad
Street, near Mexico Square.
Officials
of the Ministry have blamed leaders of the industry for fuelling controversies
through private newspapers, an allegation that angered those who regrouped for
an informal chat at the Hilton, immediately after the end of the meeting with
the ministers at 6:00pm.
The
meeting with the authorities, where a 20 plus-page white paper was distributed
on how to expedite coffee exports, took almost four hours.
“We
have not agreed on the causes of the drop in exports or what should be done to
change the situation,” a board member of the association told Fortune.
Coffee
accounts for the largest quantity and value of any traded commodity on the
Exchange floor. It made up 47pc of the volume and 74pc of the value, during
2010/11, the Exchange’s performance report disclosed.
Having
no deal in sight will no doubt harm the nation’s effort to meet its total
export revenue target of four billion dollars for the current fiscal year.
Coffee is expected to cover 30pc of this target.
Ethiopia
earned 314 million dollars in the past six months from exporting coffee, lower
by 6.28 per cent then the same period last year, according to the six-month
report by the Ethiopian Revenues & Customs Authority (ERCA).
Ethiopia
exported 196,118tn of coffee worth 841.7 million dollars in 2010/11,
representing more than half of the 370,569tn of total production in the
country.