Coffee Crisis:Big Business Losses, Street Vendors Gain
Coffee, the mainstay of the Ethiopian economy, is bringing some gloom to the big businesses and some boom to the lowly ones, such as street vendors.
Sibhat Hailay, 25, from Hawzien, Tigray, came to Addis Abeba nine months ago, after quitting school in sixth grade. He started selling cheap shoes and clothes for women by the road side around Megenagna.
Five months into this business, the profits continued to be so small that he could hardly keep up with his expenses. In around April, he learned than selling coffee would bring him more profits. By way of a trial, he invested 300 Br in five kilos.
“It is incomparable,” Sibhat says, when considering the new business against the old one.
Several vendors like Sibhat have turned to coffee, over the past months, and are reaping the rewards – selling a kilo for an average of 65 Br.
Last Wednesday, Sibhat was left with only 10kgs, having sold 20 of the 30kgs he had bought the day before.
For the 57-year-old Molash Maru, a pensioner, the reduction in the price of coffee has come as a relief, with many others, including teff, seeming expensive. She lives alone and the cheaper coffee has kept her warm during the cold rainy season, she says.
For Misika Kassim, 25 and a mother of one, the low price has meant spending less to make more. She makes and sells coffee, tea and doughnuts on the streets.
A year ago, when she was not in the business, she heard that people like her bought a kilo of coffee for 90 Br and sold a cup for 2.50. Now the price of a kilo has come tumbling down to around 60 Br, but the price per cup has retained its price.
“I didn’t hesitate in starting to make coffee,” Misika says.
It has, however, not been the same everywhere. The bigger traders are complaining of large losses. Saada Mussie, a retailer in Merkato, now has more sales but less profit. She says she gets most of the coffee she sells from farmers in Jimma, 346kms from Addis Abeba, which she says is of better quality than what she could get from traders around Addis Abeba.
“It is cheaper and of better quality; two birds with one stone,” she says.
Most wholesalers get their supplies from the Ethiopian Commodities Exchange (ECX), but some traders feel that there is too much coffee at too low a price. The situation has been complicated by coffee that comes into the market through illegal channels, according to some that talked to Fortune.
An exporter, who complained about poor business, said that the market was suffering from low prices in the international market, as well as smuggling to Somalia and Sudan.
“The current situation is making our job very difficult,” he said.
Ethiopia has exported more quantitatively compared to earlier years, according to Abenet Bekele, Chief Strategy Officer at the ECX, but the earnings have declined.
“The profit we made is too low,” he said.
The overall coffee production, in 2012/13, has declined as well, according to data from the Ministry of Agriculture (MoA). This low production has, ironically, also been the cause for the surplus in the market. The year saw a total production of 339,141tns, down from 498,767tns, in 2011/12.
“The larger part of the total production is not fit for export. That is why there is an excess in the local market,” says Kebede Lakew, a public relations officer with the MoA.
Anticipating an export total of 253,859tns for 1.038 billion dollars, the country actually only managed to export 171,290tns, during the last 11 months of 2012/13. The earnings were also down to 653.83 million dollars. The current figures show that there is a visible, periodical decline in coffee export earnings. This is especially true in comparison to 2010, when the country’s overall coffee earnings reached two billion dollars.
“What is ugly with Ethiopia’s coffee market is that it is dependent on the international market. We can in no way change the situation,” complains Abenet, who attributes all the problems to the decline of the international market.
Sibhat, however, disagrees.
“I have no idea about what the coffee export decline means to the country’s economy,” he says.
He only knows that it has created a means for him to earn money to survive.
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