Ethiopian State Grain Firm Dips into Coffee Export Trade
27 April, 2009
Fortune - The Ethiopian Grain Trade Enterprise (EGTE) signed its first agreement to sell 12,000Qtls of coffee to a Germany based company more than a week ago, officials of the enterprise disclosed.
The agreement, signed on April 14, 2009, makes the German company the first buyer of EGTE's coffee; the latter has finalized preparations for the first shipment of coffee to Germany in May.
The state owned enterprise penetrated the coffee export business for the first time in its half a century history a couple of months ago.
It has already bought more than 42,000Qtls of coffee through open auction at the Ethiopian Commodity Exchange (ECX).
The idea of becoming involved in the coffee export business was floated during Business Process Reengineering (BPR) of the enterprise, according to its officials. The assessment proved that the enterprise has both the infrastructure and manpower to handle export trade of coffee, in addition to the export of pulses, oil seeds and other agricultural products, which the enterprise has been known for over the past 50 years.
"We have the experience both in the domestic and international markets, with the manpower and the infrastructure to do the business," Beru Lede, deputy General Manager of the enterprise, told Fortune.
Nevertheless, perhaps because it has started at a time when the government has taken stern action against major coffee exporters and suppliers, accusing them of hoarding export standard coffee, there has been criticism that the enterprise's move is a government ploy to enter the coffee business. But senior government officials argue that this strategy is a result of concern for the void in the coffee export business created due to the action taken against the major actors.
"The enterprise has entered the coffee market for one simple reason; there is concern that the capability to process the coffee exports of the remaining several actors in the market may not be adequate to push the coffee through the system quickly enough," Prime Minister Meles Zenawi said at a press conference more than a week ago.
Though the preference would be to handle the trade through private sector actors, if there are bottlenecks created, the government would try to beef it up through the Grain Trade Enterprise, according to Meles.
"But there is no intention of establishing a public monopoly in any of the agricultural markets because we know that it doesn't work," the Prime Minister emphasized.
The coffee the EGTE bought at the ECX is from the stock the government has taken over from the stores of the six major exporters, knowledgeable sources disclosed.
People engaged in the coffee export business, however, see EGTE's coming to the scene as potential competition.
"The move is contrary to the principle of free market; it was a practice apparent in the military regime through the Coffee Market (Buna Gebeya), a coffee exporter who requested not to be named told Fortune. "It complicates the competition field."
The absence of equal power between the state and private enterprises makes it difficult for the latter to compete fairly, the exporter added.
With its head office on Beyene Aba Sebsib Avenue (Debre-Zeit Road), the EGTE has 11 branches and 40 trade centres and warehouses throughout the country, with a combined storage capacity of eight million quintals. The enterprise has a 1,700 strong permanent workforce in all its branches and sales points.
The business the enterprise was engaged in before exporting the commodity include transporting the coffee to the processing facilities it runs in different parts of the country for pulping and cleaning the coffee to meet the country's quality and grade requirements, as well as the buyers' needs.
The enterprise is eyeing markets in Europe, America, Middle East and Asia. Its general manager, Brehane Hailu, was recently in Atlanta, US, to participate in a coffee fair held there and to source for potential customers.
The enterprise has in stock pulped and fermented coffee - which is washed to remove its sticky mucilage - otherwise known as "washed coffee" from Yirga Chefe and Sidama Areas of the Southern Nation, Nationalities and People Regional State, as well as "Sun Dried" coffee that is dried, hulled, cleaned and stored as red cherry coffee from Jimma and Nekemte of the Oromia Regional State. These are in stock ready to be transported to any interested buyer.
Over the past 50 years, EGTE has been active in the buying and selling of grains, and for more than a year now, it has become a responsible government arm for the stabilization of the domestic grain market.
It is accountable to the Ministry of Agriculture and Rural Development (MoARD) and is run by a board chaired by Ali Suleiman, commissioner of the Federal Ethics and Anti-Corruption Commission.
EGTE owns 39 new and additional used heavy trucks to transport commodities to customers' facilities, or to and from the port, in the case of export and import transactions. The enterprise operates with 105 million Br of fully paid up capital injected by the government as seed money; its annual turnover is currently about 500 million Br. The turnover does not include the over 250 million dollars the government spent over the past more than a year to buy close to 800,000tn of wheat from the international market, mainly East Europe, to stabilize the local market through subsidized imports.
Ethiopia earned close to 175 million dollars in the first six months of the 2008/2009 fiscal year from the export of 59,188tn of coffee, which is 61.2pc of the plan (285 million dollars). Compared to the previous year's performance of the same period, the coffee export this year increased by 14pc in volume and 21pc in earnings, according to data from the Ministry of Trade and Industry.