Ambassador Xavier Marchal, Head of the European Union Delegation to Ethiopia addressed the Ethiopian Coffee Industry Forum on 21 February 2011 held at the Ghion Hotel in Addis Ababa (21/02/2011)
I am both privileged and thrilled to have been given the possibility to say a few words at this forum.
Privileged, because I see this as recognition of the support the EU has provided to the coffee sector in Ethiopia over the last 30 years.
Thrilled, for a number of reasons, some of them quite personal: I am the son of a former coffee grower from Eastern DRC; my background is agricultural engineering; I am a diplomat and therefore neutral and in a comfortable position to offer support and advice. How exciting also it is to speak about coffee in the country in which it originated!
I will divide my presentation in three parts: 1) the role of the EU in support to the coffee sector, 2) how we in the EU see the current situation as regards coffee and Ethiopia, 3) elements regarding challenges and the future.
The role of the EU in support of the coffee sector of Ethiopia
The EU has supported the coffee sector in Ethiopia since 1977. We are proud of this. The main goal has been to assist the sector to realize its potential, as well as to assist smallholder farmers, who produce nearly 95% of Ethiopia’s coffee, to be better off and to get a fair profit share. More than 130 million euros have been dedicated to this.
We have covered the whole coffee value chain, included extension, research, coffee nursery development, forest coffee conservation, marketing and quality improvement.
The support provided to the extension services has played a significant role in increasing production and productivity. Specific landraces and diseases tolerant varieties have been successfully promoted.
The landrace development programme has produced and released 11 varieties with local quality profile, higher yields and resistance to diseases for Hararghe (4), SNNPR (3) and Wollega (4).
Dry and wet processing techniques have improved resulting in a better quality marketable coffee.
Nurseries established are having positive impact on the availability of new and necessary planting material.
We have contributed to the nomination and registration of Yayu (Geba Dogi) and Kafa (Boginda-Yeba) Coffee Forest Biosphere Reserves as UNESCO natural heritage sites. This will have an impact in terms of sustainable management and conservation of the coffee natural forest.
The EU is also supporting the maintenance of coffee biodiversity, through participatory forest management in several locations in South West Ethiopia.
The EU is now supporting the Exchange Commodity Board, the Quality and Standards Authority and the Ministry of Agriculture in the area of market information system and to enhance the quality and standards of exportable commodities.
When Development Commissioner Piebalgs visited Ethiopia on 31 January, the Government showed interest in further EU support to the coffee sector and industry.
The current situation as regards coffee and Ethiopia
One cannot escape key facts on coffee, making Ethiopia unique.
Employment first. Coffee sustains the livelihood for over 15 million people in Ethiopia. It is labour intensive, and provides important income from casual labour for many additional poor rural people.
Coffee is vital to the cultural and socio-economic life of Ethiopia.
Economics comes second. The Ethiopian economy is highly dependent on coffee as it contributes more than 25% of the country's foreign exchange earnings. No other product has matched this.
There are four types of production system in Ethiopia: forest coffee, semi-forest coffee, garden coffee and plantation coffee.Most importantly, about 95% of the coffee produced is organic.
Ethiopia is the largest coffee producer in Africa. Official statistics for 2009/2010 indicate that the total area covered by coffee under private peasant holding is about 400,000 hectares, with a total production of 265,000 tons of coffee.
Ethiopia is of particular interest to the world because it is the birthplace of the Arabica coffee tree, Coffea arabica. This is a formidable asset, and a wide avenue for inherent quality and high specificity.
Export and trade are essential. Ethiopia is probably the oldest exporter of coffee in the world.
In 2009 it was the 6th largest coffee producer and the 10th largest exporter worldwide. 40% of the coffee production from Ethiopia is exported, mainly to Japan, Germany and Saudi Arabia.
In 2009/2010 Ethiopia secured 2 billion US$ export revenue, of which coffee generated 528 million US$ (26.4%).
Ethiopia for long had a traditional coffee auction system which was replaced by a modern automated transaction system under the Exchange Commodity Board, known as ECX, as of August 2008.
The shift from the traditional coffee auction to ECX has brought a fundamental change in the trading system, one of historic proportion.
Coffee trade largely dominates the ECX, with nearly 80% of commodities traded in the platform ( the rest is constituted by sesame, 15%, white pea beans, 4.1%, maize, 1.l1%, and wheat ,0.01%).
Now let us look at the future.
Challenges of the future
The Growth and Transformation Plan has inevitably placed coffee development very high on its agenda. It targets to nearly double acreage, production and export from a 2010 baseline by the end of the GTP period in 2015.
This is a quantum leap forward, which can only be achieved if all elements and assets of the coffee industry of Ethiopia are maximised.
But to fully capture world markets, and live to her “obligations” and "legacy" of being the birthplace of coffee, Ethiopia needs of course to do much more than increase production and productivity.
Consumers around the world want to know who has produced the coffee they drink, and they want to be sure that the producer gets a fair price. Their suppliers must satisfy them. And Ethiopia needs to respond to this new equation, and carefully monitor the pulse rate of consumers of her brown gold around the world.
This is called traceability, meaning knowing all the way down to the producer where the coffee you drinks comes from. Combined with this, modern consumers tend to increasingly focus on quality and relationships than on price.
While Ethiopia's share in the world trade of coffee is small (less than 2%), Ethiopia can play an important role in the ‘global value chain’ because of the unique specificity of its coffee, and the real possibility to occupy a comfortable position in the niche of speciality coffee.
I think that in this respect, Ethiopia could probably do more to capture the real value of this commodity.
A transparent and efficient exchange market system should promote competition, a level playing field for all operators, to the benefit of everyone in the value chain.
But the bulk trade system currently practiced could potentially undermine direct trade relationships with speciality coffee buyers from which Ethiopia could benefit more in the future.
ECX, a superb and well oiled machine - I attended the "1000 days, one billion USD, zero default" event on 11 February – could extend its services so as to fully accommodate those realities of the modern ages, or facilitate the establishment of a parallel market. I am certain there are several manners in which this can be done, and I understand that this is being considered.
Finally, the production side may need constant further improvements, and that can be achieved when the value chain generates fair share for all actors.
I would like to conclude by making public what is still a secret. EU High Representative Baroness Ashton has asked all delegations to contribute with something specific to each country we have a Delegation in, to decorate the future building of the newly born European External Action Service in Brussels. We have established a committee in my Delegation, which with unanimity have decided that our contribution must be a three-dimensional representation of an Ethiopian coffee ceremony.
I think that this will be good testimony of a truly Ethiopian tradition, and also of EU deep commitment to support the Ethiopian coffee industry.