Ethiopia May Prosecute Coffee Exporters

Ethiopia is considering legal action against coffee exporters who withheld beans from the market in response to unfavorable market conditions, causing a drop in the country's revenue. Officials are hoping prosecution of a few big exporters will send a warning signal.

Ethiopian President Meles Zenawi, (file photo)Ethiopia's Prime Minister Meles Zenawi says six of the country's largest coffee exporters could be prosecuted for what he called 'hoarding' beans.

"I only know of six companies who have legal issues, and I would not be surprised if some of them will be taken to court," Mr. Zenawi said.

Ethiopian authorities say stockpiling is contributing to an already severe foreign exchange shortage and they recently revoked the licenses of six big coffee exporters and closed their warehouses. They turned over sale of the beans to a state-owned commodity exchange.

Ethiopia is the world's sixth-largest coffee producer, and the biggest in Africa. But income from exporting the beans has fallen sharply during the past year. Analysts say the drop is due to a poor harvest, weak world prices and a ban on Ethiopian imports by the country's biggest customer, Japan.

Prime Minister Meles said Monday he had warned the largest producers months ago that withholding beans from the market constituted an attempt to 'sabotage' the economy. He told reporters prosecuting the big exporters is intended as a lesson for smaller players in the market.

"The government is not pursuing the case in the hopes that the steps taken against these six companies will be an adequate signal to the rest of the actors in the sector to behave in accordance with the law," Mr. Zenawi said.

Government officials had earlier attempted to reassure markets, saying there is no plan to nationalize the coffee industry. Communications Minister Bereket Simon said last week the state would act only as a market regulator.

Trade Ministry statistics indicate Ethiopia's coffee exports declined by more than 10 percent in the first eight months of the current fiscal year, compared to the same period last year. Coffee accounts for about $500 million a year in foreign exchange earnings or close to half the nation's total export revenue.

Industry sources say the United States buys about five percent of Ethiopia's coffee exports, or roughly 65 million kilograms a year. Japan had imported approximately five times more than the United States before the ban was imposed, after traces of insecticide were discovered in some bags of Ethiopian coffee.