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ASIC 2014

ETHIOPIAN COFFEE INDUSTRY: Overcoming Difficulties

By Larry Luxner

Ethiopia, the undisputed birthplace of Arabica coffee, hopes better marketing will boost worldwide exports of its quality coffee and improve living standards in one of the poorest countries on Earth.

With over 60 million people, Ethiopia is now the third-most populous nation in Africa after Nigeria and Egypt. Its bustling capital city, Addis Ababa, is home to the Organization of African Unity, and its 435,000 square miles of territory encompass majestic waterfalls, burning deserts and ancient Christian ruins.

But years of Marxist dictatorship and a devastating border conflict with neighboring Eritrea have taken their toll on the country. Even though Ethiopia is no longer Communist or at war with its neighbors, its annual per-capita income of only $120 makes it one of the ten most impoverished nations in the world.

Under leftist leader Mengistu Haile Mariam, who overthrew Emperor Haile Selassie and abolished the monarchy in 1975, Ethiopia bolstered its ties with the Soviet bloc and let its relations with the U.S. deteriorate. Famine ravaged the country in the mid-1980s, resulting in the deaths of an estimated one million people. After the fall of the Mengistu regime in 1991, a transitional government was set up, leading to Ethiopia’s first multiparty general elections in 1995. Since then, the country has enjoyed relative democracy, and most private companies, including coffee exporters, are free to conduct their business without interference from government authorities.

“The outlook is certainly more positive now than it was before,” says Tshanda Kalombo, a U.S. Commerce Department official who specializes in African affairs. “The country is getting a lot of interest from the investment community. Some of that stopped when the conflict began. Before that, Ethiopia was seen as one of the most promising countries in Africa. Then all of a sudden they went to war with Eritrea-sort of a nonsensical conflict-and got lumped together with the basket cases of Africa.”

In mid-December, Ethiopia and Eritrea signed a long-awaited peace treaty, ending two years of bloodshed. Even so, the country’s problems are enormous. According to the World Bank, average life expectancy in Ethiopia is 43 years, and the literacy rate is only 37%.

Despite efforts to diversify its economy, Ethiopia is still highly dependent on agricultural exports. Coffee, which accounts for 65% of the country’s export earnings, has been battered for the past two years not only by the war with Eritrea, but also by low world commodity prices. During two weeks of traveling throughout Ethiopia and neighboring Djibouti, Tea & Coffee Trade Journal spoke with numerous officials-both inside and outside the coffee sector-to get a sense of where the industry is headed. We began with a visit to the Coffee Processing & Warehouse Enterprise, a sprawling factory building which is owned by the government and ranks as the largest single processor of coffee in Ethiopia.

On the day of our visit, workers in a parking lot in front of the processing plant were loading up dozens of trucks with coffee sacks for the long 10-hour trip to the port of Djibouti, 500 miles to the east (see sidebar). Near the entrance was a huge covered area housing three production lines, each with the capacity to process five tons of coffee an hour, and with a storage capacity of 30,000 tons. The machines were operated by men in a meticulously clean control room.

In another, much smaller, room, professional tasters Elias Getahun and Fantu Bezabhe were cupping various varieties of Ethiopian coffees, including Harar, Wollega, Limu and Yirgacheffee, gathered at random from the day’s production.

And in a vast area next to the warehouse, hundreds of women-many of them with colorful shawls wrapped around their heads-sat at long conveyor belts, sorting green coffee beans. “The women start at 8 a.m. and work until 5 p.m. with one hour for lunch,” said company official Tadele Dargie, dressed in a long white lab coat. “They earn about 5 birr a day (roughly 60 cents at current exchange rates), though permanent workers get 500 birr per month ($60.50) on average.”

All told, about 1,000 people work in this huge complex, which processes about 42% of the 120,000 metric tons of coffee Ethiopia exports annually.

According to Tsegaye Berhane, general manager of Ethiopia’s Coffee & Tea Authority, the country has over 400,000 hectares of coffee under cultivation, divided into several main growing areas. The largest of these areas is south and west of Addis Ababa, near the country’s border with Sudan.

Coffee, which has been cultivated in Ethiopia for over 2,000 years, derives its name from the Kaffa region of Ethiopia where the coffee plant is believed to have originated. Known in the Amharic language as buna, the coffee plant was introduced to Yemen by either the Ethiopians or the Persians sometime between 575 and 850 A.D. From there, it was introduced by Yemeni traders to Java (now Indonesia) in 1690, to India in 1700, to Holland in 1706 and to South America-most likely French Guyana-around 1715.

Ethiopia, which had been growing coffee as a commodity crop for the past 500 years, recorded its first export in 1838 via the port of Massawa. In the 19th century, two coffee types were exported as first- and second-grade varieties to London, Marseilles, New York and Trieste: Harari (coffee produced in the Harar region) and Abyssinia (coffee from other areas). Today, Ethiopia ranks as Africa’s No. 3 coffee exporter after Cote d’Ivoire and Uganda.

In 1998, the last year for which accurate export statistics were available, Ethiopia’s top coffee customer was Germany, which purchased 40,011 tons, or 32% of all exports. In second place was Japan (21,173 tons, or 17%), followed by Saudi Arabia (14,393 tons, or 11.5%); United States (11,792 tons, or 9.5%); France (6,184 tons, or 5%) and Belgium (6,102 tons, or 5%). Other countries purchasing smaller amounts of Ethiopian coffee included Italy, Poland, Holland, Denmark, Spain, Hungary and Canada. Figures for 1999 and 2000 are not believed to have changed much since then. “About 65% of our foreign-exchange earnings come from coffee, and one-fourth of the population is engaged in coffee production. It’s very important for the economy,” said Berhane, who has spent 17 of his 42 years with the Coffee & Tea Authority - the last four of them as general manager. “To increase international trade competitiveness, the government has implemented far-reaching economic reforms in the coffee subsector. As a result of various market liberalization measures, the coffee industry has undergone unprecedented changes.”

Nevertheless, during the 1999-2000 season, Ethiopian coffee exports generated $259.2 million in foreign exchange, down from $275.2 million in 1998-99 and $410.8 million in 1997-98.

“This year the international market is down. We’ve also been affected by drought,” explained Berhane, who in November led a 30-member delegation to Sintercafe in Costa Rica-marking the first time Ethiopia has ever participated in this event. “We also haven’t promoted our coffee. We do have very good coffee, and a long history, but we don’t have enough funds. Kenya spends $3 million to $5 million a year on coffee promotion, and in Costa Rica, they promote, they have research, they have funding. Here, it’s different. We are trying to convince the government to give us money. My budget is only $1 million a year.” That’s evident to any visitor to the Coffee & Tea Authority’s 11-story headquarters, where paint is peeling and the elevators haven’t worked for years.

Yilma Yemane Berhan, general manager of Ethio-Coffee and Tea Development and Marketing Pvt. Ltd. Co., says the government ought to allocate more money for coffee promotion overseas. “Ethiopian coffee is well-known for its unique aroma, flavor and acidity. These are characteristics which you don’t find in any other country. This is where Arabica coffee originated,” he said. “Genetically, Ethiopia has the most diversified of coffee types-there are thousands. We have not utilized all of them; we’ve just scratched the surface of our genetic base.”


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