Fighting the illicit trade in Ethiopian coffee

2022-05-30

According to the legend of ‘Kaldi and the dancing goats’, Ethiopia is the birthplace of coffee. The country is Africa’s largest coffee exporter, and the fifth-largest globally. Coffee is Ethiopia’s main export commodity, generating close to 30% of its export revenue and supporting livelihoods of over 25% of its population.

The country’s coffee export business operates on the principle of ‘consume less and export more’, with the highest quality coffee beans reserved for the export market to earn revenue in much-needed hard currencies. Since 2008, it’s been a criminal offence under Ethiopian law to sell export-quality coffee locally. Despite this, Ethiopia has not been able to control and prevent the sale of export-standard coffee domestically, and this illegal trade has grown into an organised criminal enterprise.

Exporting coffee from Ethiopia is a tightly controlled business under the federal government's jurisdiction. The main law in force is the 2017 Coffee Marketing and Quality Control Proclamation. Its purpose is to establish ‘a sustainable and traceable coffee marketing and quality control system which enables the supply of quality, voluminous and competitive unfrosted and value-added coffee to the global market.’

However, for the marketing year that ended 31 July 2021, Ethiopia exported 248 312 tonnes of coffee (907,000,000 US$) – 22 523 tonnes (82,268,924 US$) less than the previous year. Cheru Koru, the Ethiopian Coffee and Tea Authority’s director for coffee inspection and marketing, claims that the illegal trade in export-standard coffee on the domestic market has contributed to this decrease. Both licensed exporters and illegal traders sell export-standard coffee on the domestic market.

Ethiopia is Africa’s largest coffee exporter, and the fifth-largest globally

The domestic market is more profitable for licensed coffee exporters than the international market. Exporting coffee involves cumbersome bureaucratic procedures and expenses, such as taxes and costs for transportation, packaging and storage. Authorities and government employees in Addis Ababa are allegedly complicit in the trade, sources tell ENACT, altering the coffee’s documentation so that exporters can sell locally. Illegal traders buy export-standard coffee directly from farmers and producers to sell on the domestic market. These traders work with brokers, middlemen and wholesalers in Addis Ababa, who distribute the coffee to other wholesalers and retailers countrywide.

According to a senior agronomist and coffee farm manager in Limmu who requested anonymity, local and mid-level government officials and police commanders are also involved in the illegal trade. They ensure the transporters avoid customs inspections at checkpoints along routes from Jimma in the west and Sidamo in the south west to Addis Ababa. Alternatively, illegal traders transport coffee at night and use bribery and threats of violence to pass through customs checkpoints. In addition to this corruption and threats of violence, several other factors contribute to the perpetuation of this illegal trade.

Firstly, there’s no consensus on who has the mandate to regulate coffee production and trade – the federal or regional government. The federal government considers coffee to be a natural resource over which it has a constitutional mandate to enact laws. Regional states such as Oromia, the largest coffee-producing region in Ethiopia, do not treat coffee as a natural resource but as a commercial product planted and harvested by farmers, which the laws of a regional state should regulate.

The illegal coffee trade in Ethiopia has grown into an organised criminal enterprise

Currently, the federal government and Oromia regional state have separate and different legislation criminalising the sale of export-standard coffee in domestic markets. This creates confusion about which law is applicable when the crime is committed in regional states. In practice, cases prosecuted based on regional law usually get quashed on appeal by the Federal Supreme Court’s Cassation Bench on the grounds that the federal law should have been applicable. A senior prosecutor at the Oromia Attorney General who requested anonymity said it was unlikely that regional prosecutors would conduct a second trial using federal law.

Even when a regional prosecutor is willing to apply federal law to prosecute a case of illegal coffee trading, it’s likely to be unsuccessful due to procedural and resource issues. Crimes in violation of federal regulations can only be prosecuted by regional high courts, which are in towns and cities that are usually far from coffee-producing districts. In those circumstances, collecting evidence requires time and resources, which are scarce.

Secondly, the laws criminalising the domestic sale of export-standard coffee are self-defeating. At both the regional and federal levels, the applicable laws state that a police or customs officer who identifies or seizes illegal coffee is entitled to a sum of money after the government sells the seized coffee. According to a senior prosecutor in Jimma, who spoke to ENACT on condition of anonymity, this incentive has become the sole driver behind law enforcement agents’ interest in inspecting and seizing unauthorised coffee. Once the illegal coffee has been identified or seized, no one goes after the criminals involved because doing so carries no immediate financial benefit for the law enforcement agents.

Thirdly, as a form of organised crime, the illegal coffee trade involves various people and businesses along a complex chain. A senior prosecutor with the Oromia Attorney General, who requested anonymity, said the investigation and prosecution of cases involving organised criminal groups and public officials were often discontinued for political reasons.

Authorities and government employees in Addis Ababa are allegedly complicit in the trade

Fourthly, according to the coffee farm manager, coffee is generally sold to local consumers at a price around six times higher than the farm price, making it profitable for exporters to sell the coffee on the domestic market. It is also a lucrative business for illegal traders who can still make a profit after bribing customs inspectors and government officials and paying off middlemen and brokers.

Ethiopia could fight the illicit coffee trade more effectively by clarifying the jurisdictional confusion between the federal and regional law enforcement organs. This could prevent criminals from benefiting from this legal lacuna and avoiding criminal liability. Furthermore, replacing the current incentive-based crime-control approach that rewards law enforcement for merely seizing illegal coffee with a system that also requires catching criminals could reduce the illicit trade in export-standard coffee

Tadesse Simie Metekia, Senior Researcher, ENACT Project, ISS Addis Ababa

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