State Minister Accuses Coffee Growers, Exporters of Hoarding

Addis Fortune (Addis Ababa)

Elias Gebresellassie

9 May 2011

Yacob Yala, state minister for MoT, is up in arms over the alleged artificial shortage and exorbitant increases in coffee prices.

In anticipation of future price rises, some exporters have been stockpiling coffee amounting to more than the volumes they are contractually bound to supply to foreign buyers to sell it at a later date, Yacob claimed in a letter to the Ethiopian Coffee Exporters’ Association (ECEA), dated April 29, 2011.

In a bid to clamp down on what the Ministry of Trade (MoT) called hoarding and deliberately not complying with contracts with foreign customers, a new directive was issued by MoT in late April 2011, prescribing penalties for hoarding and deliberate non-compliance with contracts.

“This not only robs the country of hard currency earnings it was supposed to obtain from the sales but has also tarnished the nation’s image and diminished the confidence of foreign buyers,” the state minister wrote in the letter.

The directive, which aims to address misconduct by coffee exporters and hoarding, imposes penalties on those who fail to comply with the Coffee Quality Control and Marketing Proclamation.

Exporters who are discovered to be without foreign supply contracts and store more than 500tn of coffee for more than two months will be banned from buying coffee from the Ethiopian Commodity Exchange (ECX) for three months, according to the directive.

Coffee exporters who are found with stocks bigger than they have entered into contracts for, must sell the surplus by June 7, 2011; failure to do so would ban them from buying coffee from the ECX for between three and six months depending on the size of the stock, the directive read.

If it can be proven that the exporter has insufficient amounts of coffee in stock to fulfil its export contract, it would be allowed an additional month to fulfil its obligation, according to the directive.

If coffee growers and cooperative farmer unions have foreign contracts, they are obliged to export the coffee, even up to one month after the stipulated delivery time, unless in cases of force majeure, the directive stipulated.

Otherwise, National Bank of Ethiopia (NBE) will not recognise their contracts for two months, effectively barring them from exporting their products, according to the directive.

Failing to fulfil these obligations will subject perpetrators to administrative measures and criminal liability.

The government aims to export a little more than 600,000tn of coffee annually by the end of 2014/15. Ethiopia exported 319,647tn in 2009/10, earning it 528.3 million dollars. During the first six months of this fiscal year, coffee exports have earned the country only 320 million dollars.

“The government accuses coffee exporters of hoarding while it should be monitoring the system it has put in place,” a coffee exporter told Fortune on condition of anonymity. “We [exporters] comply with the government’s directives.”

The practice of hoarding persists, according to Amakele Yimam, director of corporate communications at MoT.

“A significant number of coffee exporters and traders have been hoarding and speculating on prices,” he told Fortune.

Members of the ECEA met on Friday, May 6, 2011, to discuss the new directive.

“It was an orientation in the different facets of the directive and its application,” said Getachew Admassu, public relations officer for the association. “We have decided that in the event that our members encounter problems in complying with the directive, ECEA would act as a intermediary between its members and MoT.”

This is not the first time the government has locked horns with coffee exporters and accused them of hoarding and price speculation.

In April 2009, the government suspended the licences of six major exporters: Mullege Plc, Leggese Sherefa, Kemal Abdella International, Seid Yassin Ali, Arsede, and S Sara Coffee.

S Sara Coffee has received the Best Exemplary Coffee Exporter award four times.

The licences of another 88 suppliers were revoked over accusations of developing a monopolistic environment as well as hoarding the country’s principal export commodity and one of the major foreign currency earners.

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