Ethiopia: New coffee directive sets strict minimum price

Prioritizes regulation of under invoicing, contract defaults

By Birhanu Fikade

The Reporter

January 4, 2020

The Ethiopian Coffee and Tea Authority has issued a new directive to regulate exportable coffees' minimum price on the grounds of the global weighted average, The Reporter has learnt.

The new directive termed: “Export Coffee Contract Administration” will determine the minimum selling price of coffees through everyday price analysis that involves both the Authority and the National Bank of Ethiopia (NBE).

Heiru Nuru, director of Market Information and Regulation Directorate with the Ethiopian Coffee and Tea Authority, told The Reporter that the directive which solely seeks to abate illegal transactions done through under invoicing and contracts defaults, will also weight the trends of global coffee prices on a daily basis. Hence, the global weighted average will be the benchmark used to set out the minimum prices so that exporters should adhere to the set of minimum prices. Selling coffee below the minimum price is now a punishable offense.

According to the director, those who fail to comply with directive shall receive penalties depending on the degree and occurrences. A first time offense will produce a written warning. When that same offender manipulates and breaks the law for the second time, they will receive a one year ban from performing any coffee related business undertakings. A third time offense produces a complete ban from the sector and will result in criminal charges.

However, the ultimate objective of the directive is to prevent under invoicing and contract defaults that keep hampering the performance of the coffee export sector.

According to Adugna Debella (PhD), general director of the Authority, the new directive takes effect from January 10, 2020 and sanctions exporters to report within 24 hours of completing a deal stating the volume, value and the graded quality of coffee, the sellers have agreed to deliver to the buyer. Once the contract is concluded, the coffee is expected to be shipped out within 90 days and the value shall be deposited in the coffers of NBE. This way both defaulters and under invoicing will be checked, he says.

Previously, some 80 market offenders have received serious warnings and 16 were banned from the export lane. Out of those suspects, a few have ended up criminally charged, Neiru said.

In a related news, a new national coffee brand is about to be unveiled during the International Coffee Conference and Exhibition that will be attended by 1,500 participants including 500 foreign coffee buyers, roasters, experts and the like. At the venue, a coffee park will feature Ethiopia’s coffee culture and biodiversity. It is thought that Ethiopia is home to some 6,000 coffee species. Coffee is claimed to provide a livelihood to some 30 percent out of the total population and represent some 35 percent of Ethiopia's export.