You are currently viewing Roasted Reality: Ethiopia’s coffee faces crux with upcoming EU regulation, endangering livelihoods of millions of farmers

Roasted Reality: Ethiopia’s coffee faces crux with upcoming EU regulation, endangering livelihoods of millions of farmers

The forest coffee originating from western Oromia enjoys a revered reputation among both local and international aficionados of the green bean (Photo: Oromia Coffee Farmers Cooperative Union/Facebook)

By Molla Mitiku @MollaAyenew

Addis Abeba – Ethiopia’s coffee holds an esteemed status as a legendary brew, rooted in the lush highlands of the country. Its history, as intricate and flavorful as its dark roast, spans centuries, serving not only as a cherished cultural icon but also as a driving force behind the nation’s economy.

Central to this esteemed legacy is Ethiopia’s forest coffee. Predating the global proliferation and commercialization of coffee, these wild plants flourished in the dense forests of Ethiopia, laying the foundation for its eventual global significance.

Even today, as coffee cultivation extends far beyond its native lands, Ethiopia’s remaining coffee forests stand as vital repositories of genetic diversity, catering to the discerning palates of Arabica coffee enthusiasts worldwide.

Gizat Worku, general manager at the Ethiopian Coffee Exporters Association (ECEA), underscores the industry’s dependence on the multitude of small-scale farmers who meticulously harvest these extraordinary beans from their wild habitats.

“This reliance deepens the connection to the land and imbues Ethiopian coffee with its unique character,” he articulated. “However, it also engenders vulnerabilities, exposing Ethiopian coffee cultivation and export to a complex array of challenges.”

Gizat explains that factors such as restricted access to essential resources and modern technologies leave farmers vulnerable to weather fluctuations and disease outbreaks, thereby jeopardizing their livelihoods and overall production.

Furthermore, these challenges are compounded by deficiencies in infrastructure, including inadequate transportation networks and processing facilities, according to him. “These infrastructure inadequacies impede efficiency, hinder quality control measures, and ultimately pose a threat to Ethiopian coffee’s capacity to command premium prices in the global market.”

Navigating regulatory compliance in traditional farming

In addition to existing challenges, a new regulatory framework has emerged, presenting significant implications for the Ethiopian coffee industry. This regulatory initiative, introduced by the European Union (EU), a primary market for Ethiopian coffee, mandates stringent requirements.

Enacted by the European Parliament and Council in June 2023, the European Union Deforestation-Free Regulation (EUDR) is slated to become effective on 30 December 2024.

The overarching objective of this regulation is to curtail carbon emissions resulting from EU consumption and production of specified commodities by a minimum of 32 million metric tons annually.

Ethiopia is confronted with a formidable task in meeting the requirements of the EU regulation.”

Gizat Worku, general manager at the Ethiopian Coffee Exporters Association

European lawmakers intend to achieve this objective by compelling the implementation of a system ensuring the traceability of production, processing, and distribution of six agricultural products, including coffee, from exporting countries to the 27-member bloc.

Effective 30 December, 2024, importers operating within the European Union who procure agricultural commodities, such as coffee, from Ethiopian exporters will be mandated to undertake comprehensive due diligence assessments during the supplier selection process.

Non-compliant importers within the EU face penalties of up to 4% of their total annual Union-wide turnover, along with potential confiscation of goods and exclusion for up to 12 months from public procurement processes and access to public funding, encompassing tendering procedures, grants, and concessions.

This development presents adverse implications for the over six million farmers nationwide directly engaged in coffee cultivation, as well as for the over ten million individuals involved in the extensive coffee supply chain, spanning from farmers and intermediaries to exporters and end consumers.

An impact assessment report published in December 2023 regarding the effect of EU regulation on African nations elucidates the challenges associated with the implementation of a traceability system.

Conducted by Desiderio Consultants Ltd., a think tank headquartered in Nairobi, Kenya, specializing in customs and trade-related policies in Africa, this impact assessment report underscores that establishing a traceability system in African countries is not only exceedingly intricate but also necessitates additional investments by exporters, thereby inflating the costs of products in destination markets.

Moreover, the report contends that, given the typical lack of direct engagement between African exporters of agricultural commodities and farmers, reliance on multiple intermediaries further complicates the implementation of these traceability systems.

The report also asserts that requirements such as the development of traceability systems pose significant complexities in implementation, ultimately criticizing European lawmakers for their purported lack of understanding regarding the practical realities on the ground in Africa.

Gizat contends that Ethiopia is confronted with a formidable task in meeting the requirements of the EUDR. He underscores the principal challenge of verifying compliance among the myriad of small-scale farmers engaged in coffee cultivation.

Explaining further, he elucidates, “This verification process, which is likely to involve historical satellite imagery analysis, introduces significant complexity.”

He warns that potential non-compliance could lead to a substantial loss, estimated at 35–40% of Ethiopian coffee exports to EU markets.

While acknowledging the sustainability objectives of these regulations, Gizat argues that the strict requirements present difficulties for Ethiopia’s numerous small-scale farmers who cultivate traditional plots. “Discerning buyers prioritize beans proven to be deforestation-free, thereby exerting pressure on these farmers, who may encounter challenges in meeting the standards due to limited resources.”

Ethiopian officials have also expressed concerns regarding the forthcoming enforcement of the EUDR. Their apprehension stems from the reality that approximately 30% of Ethiopia’s annual coffee exports are destined for EU member countries.

This concern has even prompted them to petition for an extension in the implementation of the EU deforestation-free regulation, citing the challenges encountered by countries such as Ethiopia with fragmented coffee cultivation systems overseen by smallholder farmers.

During a recent meeting convened with delegates from the embassies of the EU Member States, UN agencies, and the World Bank, Semereta Sewasew, the State Minister for Finance, conveyed the government’s anticipation of a favorable response from the EU regarding the requested time extension.

“This extension would provide Ethiopia with adequate time for preparation and offer reassurance to Ethiopian coffee buyers in the EU until the country aligns with the compliance measures stipulated by the EUDR,” she affirmed.

A recent increase in Houthi assaults on vessels traversing the Red Sea has posed a new threat, resulting in the stranding of approximately 30,000 quintals of Ethiopian export coffee at ports in Djibouti (Photo: ESLSE)

In an interview with Addis Standard, Shafi Umer, deputy director of the Ethiopian Coffee and Tea Authority, acknowledges a significant challenge the impending EU regulation with its stringent deadline poses. Nonetheless, he asserts that the government remains steadfast in its commitment to meeting the deadline set for 2025.

According to the deputy director, this endeavor is guided by a comprehensive action plan devised by the Authority in collaboration with the European Union, the United Nations Development Programme (UNDP), and other stakeholders.

At the onset of February 2024, the Authority, in conjunction with the Ministries of Finance and Agriculture, unveiled a three-year national action plan aimed at implementing compliance measures pertaining to the EUDR.

Furthermore, the Authority entered into a landmark agreement aimed at ensuring compliance with EU regulations and preserving access to the lucrative European market.

This partnership brings together JDE Peet’s, a global leader in pure-play coffee and tea, and Enveritas, a respected geospatial analysis firm renowned for its efforts in enhancing verification accuracy and efficiency.

“The collaboration seeks to harness their collective expertise to promote deforestation-free coffee production throughout Ethiopia,” explains Shafi.

Recognizing the challenges encountered by smallholder farmers and the imminent risks posed by climate change, the deputy director underscores the necessity for a holistic strategy extending beyond mere compliance with the EUDR.

He delineates a trajectory toward a more sustainable future, emphasizing the imperative of empowering smallholder farmers.

“Through the provision of modern techniques such as disease-resistant crops and enhanced post-harvest practices, the government endeavors to substantially enhance both yield and bean quality,” elucidates Shafi.

The annual coffee production in Ethiopia is estimated at 5.5 million quintals. Despite its prominence as a leading African coffee-producing nation, Ethiopia faces the challenge of relatively low yields per hectare, averaging 7.3 quintals.

“This significantly impacts millions of hardworking coffee farmers, whose earnings from this yield barely cover basic needs,” Gizat remarked.

In contrast, Gizat pointed out that other African countries achieve yields triple that amount, exceeding 24 quintals per hectare.

“This substantial disparity undermines Ethiopia’s competitiveness in the global coffee market’s volume-oriented dynamics,” he further contended.

Shafi underscores the significance of enhancing infrastructure.

“Investments in a dependable transportation network, improved storage facilities, and streamlined logistics can effectively reduce delivery times and mitigate product spoilage,” he asserted. “The Authority advocates for a program offering technical support and training to smallholder farmers to ensure their adherence to the EUDR, thus ensuring ongoing access to the profitable European market.”

Despite continued efforts, Gizat warns that progress may be gradual.

He advocates for a more comprehensive approach, which entails the rejuvenation or substitution of aging coffee trees, offering the potential to double production and fully realize Ethiopia’s coffee capacity.

“There exists a necessity for a multi-faceted strategy,” Gizat underscores. “This encompasses diversifying export markets and initiating targeted marketing campaigns that highlight Ethiopia’s distinctive coffee heritage.”

Stormy Seas

Ethiopia’s coffee exports already encountered a notable setback in 2023, with major importers such as Germany reducing purchases by 60% and the United States decreasing theirs by 73% compared to 2022.

The overall export revenue derived from green beans is also exhibiting a downward trend.

Two years ago, Ethiopia achieved a record-breaking $1.4 billion in revenue from coffee exports, an accomplishment praised by officials as “unprecedented” since the country began exporting coffee globally.

However, in the last fiscal year, revenue from green bean exports declined to $1.3 billion.

Gizat suggests that “this decline may be linked to rising coffee prices and logistical challenges, though other factors could also be at play.”

There is a need for a holistic strategy extending beyond mere compliance with the EUDR.”

Shafi Umer, deputy director of the Ethiopian Coffee and Tea Authority

In the past, the Authority has been actively advocating for Ethiopian coffee on an international platform, surpassing mere promotional activities, according to Shafi. “But collaborative endeavors involving the government, private sector, and international organizations are needed for charting a more prosperous future.”

However, Gizaw contends that “these endeavors necessitate further reinforcement,” concurrently affirming the commitment of the Ethiopian Coffee Exporters Association to continue in its endeavors aimed at securing new markets.

A new threat has emerged, exacerbating the existing challenges, as Houthi attacks on vessels have escalated, obstructing the Red Sea—a critical global shipping route responsible for 12% of global trade volume and 30% of global container shipping volume.

Consequently, Ethiopian coffee exporters are grappling with extended waiting periods, lasting several months, to transport their products abroad, while some exporters are contemplating a transition to Kenya’s Mombasa port as a potential solution.

Reports indicate that the recent attacks in the Red Sea area have resulted in approximately 30,000 quintals of coffee being stranded at Djibouti ports.

Last week, the Ethiopian Shipping and Logistics Service Enterprise disclosed the challenges it confronts in its cargo operations as a consequence of the ongoing security crisis in the Red Sea.

The company stated that this crisis is “significantly impacting the country’s import and export activities.”

In an official statement, the state-owned enterprise emphasized that “major shipping companies have reduced their visits to the region, with some suspending operations entirely” due to the precarious conditions prevailing in the Red Sea.

“This situation has led to logistical challenges concerning both the time and expenses associated with shipments to and from Ethiopia,” the statement further explained. AS

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