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“For over a year now, the conflict in Ethiopia has been devastating, and has affected millions. Across the country, people have been displaced, reported as missing, left in dire need of emergency aid, and killed. Last November, this culminated in the Ethiopian government declaring a six-month nationwide state of emergency, which ended prematurely in early 2022.

This state of emergency saw the introduction of roadblocks, curfews, heightened security checks, and militarised takeovers in certain parts of the country. But what does this mean for the country’s coffee sector?

If civil war in Ethiopia worsens, continued disruption understandably has the potential to significantly affect the country’s coffee industry. Furthermore, considering that coffee accounts for over 30% of the country’s total exports, any disturbance to the supply chain could be detrimental to Ethiopia’s overall income.

To learn more about how the conflict might affect the country’s coffee industry, I spoke to three coffee professionals – two of which are based in Addis Ababa.

Civil war in Ethiopia has been ongoing for over a year, but what are its root causes?

The situation is complex, but the war stems from tension between current running Prime Minister Abiy Ahmed and the Tigray People’s Liberation Front (TPLF). On 6 May 2021, the Ethiopian government designated the TPLF as a terrorist organisation.

The TPLF, meanwhile, identifies as a left-wing armed liberation movement, representing the Tigrayan people and the centuries of marginalisation they have experienced at the hands of previous governments. It is not globally recognised as a terrorist organisation (by countries such as the US for instance).

After defeating the country’s Marxist government in 1991, the TPLF formed a coalition and ruled the country for over 20 years. However, when Abiy Ahmed took office in 2018, his party attempted to defund the TPLF. This caused the group to retreat to the northern region of Tigray.

Tensions reached boiling point between the TPLF and Abiy Ahmed’s government in September 2020. After national elections were cancelled due to Covid-19, the TPLF requested that the National Election Board of Ethiopia organise a regional election for Tigray, but this was denied.

The Tigray region defied these orders and held the election anyway, further straining the relationship between the TPLF and the government.

In November 2020, it was reported that the TPLF attacked a federal military base. This was the first of many ongoing attacks between the two parties.

The majority of the conflict has been taking place in the Tigray region, which has been catastrophic for the region’s population.

Cydney Ross is the Ethiopia Country Manager for green coffee trader Tropiq.

“The conflict has displaced an estimated 2.2 million people in Ethiopia,” she says. “Many have fled to refugee camps within Ethiopia and in neighbouring countries.”

In mid-November 2021, the BBC reported that at least 400,000 people were threatened by famine in Tigray. This number has likely increased as the civil unrest has continued.

Will Corby is the Head of Coffee for Pact Coffee, a roaster based in London, UK.

“There are reports of people who are of Tigrayan descent being rounded up across the country and disappearing overnight, which is a very worrying situation,” he says.

In addition to this, there has been evidence of unlawful killings, sexual violence, and torture from both the TPLF and the Ethiopian government’s militia – leaving parts of the Tigray region in turmoil.

Lawyers representing Tigrayan citizens have also filed complaints of human rights violations against the Ethiopian government. In response, for the first time ever, the African Union’s human rights commission has said it will investigate the Ethiopian military.

And while Abiy Ahmed made statements in early February about peacefully resolving the conflict, progress seems to have been somewhat stifled.

In recent months, reports of the conflict spilling over into the neighbouring northeastern Afar and northwestern Amhara regions are becoming more common. Furthermore, a number of violent attacks on Eritrean refugees took place in late February.

There’s no doubt that the current situation affects the safety of the Ethiopian people. However, it is also potentially disastrous for Ethiopia’s economy.

On 2 November 2021, US President Joe Biden ordered that Ethiopia be removed from the African Growth and Opportunity Act (AGOA) after rising reports of conflict.

“This is usually the first sign that a nation is putting pressure on a country to prevent or slow down conflict, and move towards negotiations or resolutions,” Will explains.

While removal from the AGOA has no adverse impact on exports from Ethiopia to the USA, any potential limitations on Ethiopia’s trade systems could have an impact on its coffee industry.

“Coffee is the biggest driver of foreign currency in Ethiopia,” Cydney tells me. “The war has been expensive and the country needs foreign currency to sustain its economic growth.”

However, Cydney notes that at present, the civil war has had little effect on both production and exports – mainly for geographical reasons.

“The majority of the conflict is in the north of the country, and fortunately most of the coffee-growing areas are in the southwest,” she says.

Kenean Dukamo is the export manager for Ethiopian green coffee producer and exporter Daye Bensa. He confirms that the conflict has not yet affected the process of harvesting coffee.

“Daye Bensa focuses mainly on the Sidamo region,” Kenean says. “The coffee harvest took place as normal there.”

However, Cydney highlights that restrictions from the government’s declared state of emergency have slowed down the supply chain. She says that this has led to shortages for some exporters, the effects of which won’t be realised further down the supply chain for some time.

Cydney says: “As coffee is often harvested in the morning, aggregated in the afternoon, and delivered at night, the 8pm curfew in the Oromia region made it nearly impossible for trucks delivering cherries to make it to stations.

“Even though these restrictions were eventually lifted, we are still forecasting a shortage of washed coffees because of the curfew.”

Furthermore, financial restrictions imposed by the government have been making life significantly harder for not just coffee producers, but the entire population.

In December 2021, the country’s inflation rate rose to the highest level seen in a decade – a staggering 35%. This naturally led to food costs increasing by some 41.6%, including meat, fish, vegetables, and coffee.

“The increased cost of living is one of the reasons why the cherry price significantly jumped this year,” Cydney says. “There has been a 70% to 100% increase in the price of cherry per kilogram.”

Higher prices, as well as national banks imposing daily withdrawal limits and freezing collateral-based loans, made it extremely difficult for some producers to trade coffee.

Furthermore, from late November until early January, many exporters had no access to their loans. Typically, during this period, most washed coffee is harvested and then processed.

Because loan access was restricted, a huge amount of coffee was not harvested, and stayed on the trees or was subsequently converted from washed to natural out of necessity. The estimates are that this could decrease the overall quality of Ethiopian washed coffee for this harvest.

“As a result, you need a lot of cash in order to purchase cherries, and producers often rely on financing from banks to produce coffee,” Kenean adds. “The Ethiopian government lifted restrictions on freezing loans for bigger exporters and producer organisations, but there are still some limitations. It’s not as flexible as it used to be.”

Exporters have also faced a number of other, more recent issues. In January, a new directive from the Ethiopian government drastically reduced the amount of foreign currency exporters could use from export sales. Instead of 50%, exporters can now only use 20% to 25% of their foreign currency, making it impossible to ship for contracts that they had signed back In November and December.

In addition, regulation from the National Bank of Ethiopia has forced many exporters to mix lower-grade coffee into higher-grade contracts to limit losses.

Despite the escalating conflict in Ethiopia, coffee exports are continuing as normal thus far. Bloomberg reported in November 2021 that exports amounted to 86,000 tonnes during the three months to October. This was a 77% increase on estimates from the Ethiopia Tea and Coffee Authority.

“We received the latest six-month report from the Ethiopian Coffee and Tea Authority stating exports amounted to 150,000 tonnes over the past six months,” Kenean tells me. “This has generated over US $600 million.”

However, it’s unknown whether there could be long-term repercussions for Ethiopia’s coffee industry. Previous examples of civil unrest in other coffee-producing countries have seen a ripple effect that was felt more in the medium and long-term.

For example, in April 2021, a planned tax reform in Colombia led to a series of protests that caused several road and port blockages throughout May and June. The protests occurred during the middle of the country’s coffee harvest, leaving some producers holding coffee on farms for up to two months.

Furthermore, research on the ongoing conflict in Burundi found that exposure to “individual-level violence” resulted in lower coffee production volumes.

Since gaining independence in 1962, Burundi has been prone to civil unrest – resulting in at least over a million people being displaced and hundreds of thousands of deaths.

A study published in the African Journal of Agricultural and Resource Economics concluded that Burundian households which experienced conflict violence were up to 18% less likely to grow coffee. This was the case even as long as four years after the conflict had taken place.

“If there is a shortage of Ethiopian coffees, or a disruption to the supply chain, there would certainly be increased coffee prices all across the supply chain,” Cydney tells me.

However, it’s important to note that the civil unrest in Ethiopia is a uniquely complex situation. This makes it difficult to predict its effects on the country’s coffee industry and the wider market.

For now, the immediate economic impact of the civil war continues to be the most noticeable.

“It was nearly impossible for co-operatives and smaller exporters to access bank loans this season,” Cydney explains. “There is simply not enough cash available to support all the players in the coffee export market.

“It will be difficult for commercial coffee exporters to remain competitive in the global market this year.”

For roasters and green coffee buyers, navigating how to support Ethiopian coffee farmers can be challenging.

“When reports of war crimes in the Tigray region were emerging, I approached Pact’s board and expressed my concerns over our existing commitments to purchase Ethiopian coffee,” Will says.

“From my position, I didn’t feel like it was the best thing to do at the time,” he continues. “I was concerned that the income generated from coffee sales could be used by the government to fund the ongoing conflict.”

The BBC reported in August 2021 that Ethiopia’s military expenditure would hit over US $500 million by the end of the year. It’s safe to assume that this figure will steadily increase as the conflict continues.

However, Will also notes that there would be negative consequences for producers if green coffee buyers were to cancel their purchases.

“There are millions of people who rely on coffee for their income, so to retract all purchases of Ethiopian coffee would be exceptionally damaging to these people and the country’s economy as a whole.

“Unlike most coffee-producing countries we work with, Pact doesn’t have fixed long-term relationships with specific Ethiopian farmers,” he tells me. “However, for roasters who do, it can be challenging.”

Cydney emphasises that continuing to purchase Ethiopian coffee is vital to keep the industry moving forward.

“Coffee supports the livelihoods of approximately 25 million people in Ethiopia and any decline in market demand could potentially lead to an economic recession or even higher inflation,” she says.

The conflict in Ethiopia is a continuing source of major uncertainty for the entire country, not just its coffee sector. However, considering coffee exports are a key component of the Ethiopian economy, it’s important that the wider coffee industry continues to raise awareness and show its support.

If you work directly with a partner in Ethiopia, the best thing to do is ask whether or not the conflict is affecting them. If it is, ask how you can help. It may be as simple as a little more patience at a difficult time, but it can go a long way.”

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