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Month: April 2022

The Shocks to Agriculture Require Funding, Response. Now than Later

Posted on by Web Master

Agriculture is a source of livelihood for four-fifths of the population in Ethiopia. However, the sector has faced complex and overlapping threats over the past decade. Since 2019, the country has been responding to the worst desert locust invasion in over a quarter of a century. Although the invasion has subsided, the upsurge decimated crop fields, pasture, and rangelands, increasing the population’s vulnerability to food insecurity and malnutrition.

At the same time, the COVID-19 pandemic and associated prevention guidelines coupled with economic hardships have limited the population’s access to nutritious food, agricultural inputs, services, and employment. Moreover, the conflict in northern Ethiopia has also led to displacement and disrupted agricultural production and markets.

Recently, I travelled to the eastern and southeastern parts of the country. I saw first-hand the impact of the prolonged La Niña-induced drought on the lives and livelihoods of the population. I spoke to desperate communities as they watched their livestock die from lack of pasture, water, and diseases. Crops had failed, and many households relied on humanitarian aid to survive. I saw the same vulnerability in the areas affected by conflict in northern Ethiopia, as many people could not tend to their farms due to insecurity and displacement. Even the recovery registered from past disasters in the affected regions is quickly eroding.

As disasters overlap and their magnitude and impact increase, the population is less able to recover and adapt, hence becoming more vulnerable to future shocks.

Therefore, it is prudent to change our way of thinking, decision-making, and move from a reactive response to disasters to proactively preventing and anticipating them. We need to increase investment in early warning, preparedness, and early action, to save lives and livelihoods and reduce the impact of these disasters. Acting early, before, or on the onset of a disaster has been proven less costly and more effective. However, it calls for flexible funding mechanisms than can allow resources to be available quickly, enabling the rapid procurement and distribution of supplies before the peak of the disaster.

For example, in response to the 2017 drought, the Food & Agriculture Organization of the United Nations (FAO) [of which the author is a representative] implemented an Early Action at the onset of the drought in the Somali region. The Organisation distributed livestock feed and provided animal health services and training to the targeted communities. This intervention shifted the focus from response to prevention and mitigation and, in the process, saved lives and secured livelihoods.

The results of the evaluation survey found that each beneficiary household gained 187 dollars (from investments of 179 dollars) from the Early Action intervention compared to non-beneficiaries. The benefits were derived from avoided losses due to reduced livestock mortality, reduced distress livestock sales, and the benefits of better livestock market prices due to improved animal body conditions and milk production.

As we respond to the current drought enveloped by other disasters, timely funding is critical to make a meaningful response. In January 2022, FAO launched a 53 million dollar drought rapid response and mitigation plan for Ethiopia’s agriculture sector. The emergency intervention activities described in the Plan needed to be implemented from January to June 2022. However, halfway through the implementation period, the agriculture sector has only received 19.5 million dollars from resource partners, leaving a funding gap.

Without adequate and timely funding, we cannot respond to disasters appropriately. We may spread the available resources thinly, not implement planned activities, or deliver the support late and not in line with the seasonal calendars.

As Ethiopia emerges from multiple ongoing emergencies, collective efforts of stakeholders and timely funding and response will therefore be critical for recovery and resilience building.

Inflation Intervention Needs to Ramp Up. Otherwise, Disaster Awaits

Posted on by Web Master

Inflation occurs in most cases when consumption ramps up without an accompanying increase in the production of goods and services. When this happens, prices rise and the currency within the economy is worth less than it was before. The currency essentially will not buy as much as it would before. When a currency is worth less, its exchange rate weakens against a basket of other major currencies. However, this depends on the inflation of other countries as well.

Headline inflation has been in the 30-40pc range in Ethiopia for a while. Everything is increasing in price. Even those goods and services produced locally increase beyond expectation compared to imported goods or domestic goods that require raw material sourced overseas. Combined with political shocks, it could exasperate the economic situation further.

The government needs to intervene, but why?

If it employs a contractionary monetary and fiscal policy by reducing the money supply and lessening deficit financing, the economy may be thrown into a recession because spending will crash. If reserve requirements, which is the amount of money banks are legally required to keep on hand to cover withdrawals, are raised further instead, it kills the dynamism of banks and sends the wrong signal at a time when it is trying to open up.

No less pertinent here is that inflation is also a psychological phenomenon, not just an economic one. There is little the government can do when people expect elevated inflation to occur. This expectation is hard to change unless a significant time passes where there is no above-average inflation.

In the most advanced economies, contradictory monetary policy is likely to be followed, reducing the supply of money by increasing interest rates. Our economy is an interesting one, where banks continue to make profit in an economy with negative loan and deposit interest rates. Additionally, both capital and stock exchange markets have not been established, which are effective tools for controlling inflation.

It is true that even in the United States, inflation is nearing double-digits. This global impact of the rise of inflation, driven by a faster than expected growth in demand and supply shocks induced by the Russia-Ukraine war, requires both policy and regulatory intervention.

As a means of measure, the central bank may increase savings interest rates. But in order to make money, they must lend it at a higher rate. They will have no choice but to increase their rates as well. As a result, fewer people want to borrow money because it costs more to do so while that money accrues at a higher interest rate. So spending drops, prices drop and inflation slows.

The government should also craft crises management economic program with detail priorities to reach some of its development objectives and normalise its spending until major macro variables are balanced. It should exert its effort in stimulating the economy through different incentives, and should revise its plans to lift fuel subsidies.

Another thing it can do is increase reserve requirements on the amount of money banks are legally required to keep on hand. The more money banks are required to hold back, the less they have to lend to consumers. If they have less to lend, consumers will borrow less, which will decrease spending. The reserve requirement has already been doubled last year. This should be extended even higher. The National Bank of Ethiopia (NBE) should also reconsider the continued depreciation of the Birr to increase export revenue. It has never been an effective policy, and it is not going to start now.

A deep economic crisis may be created unless the government intervenes wisely. The rise in the cost of living is unsustainable and is impoverishing the average consumer. Policymakers should rise to the challenge.

Liberalise Financial Sector. The Sky Won’t Fall

Posted on by Web Master

Once again, we hear murmurs of opening up the financial sector to foreign players. The discussion gained traction in the aftermath of Prime Minister Abiy Ahmed’s (PhD) statement during the inauguration of the Commercial Bank of Ethiopia’s (CBE) headquarters a couple of months ago.

Historically, two main arguments have been forwarded against opening the financial sector to the global economy. The first, often touted, is that the country does not have the regulatory capacity to provide proper oversight of foreign banks and the financial instruments they may provide.

There are problems with this view. It confuses liberalisation with deregulation. Both indeed refer to the removal of state restrictions on business but of a very different kind. The former is a relaxation of state controls over capital and trade. In the case of the financial sector, it is the type of reduction in state control that would allow for the entry of non-domestic financial institutions.

But none of this entails that, once allowed entry, the institutions would be able to introduce any financial instrument of their choosing. When they operate in Ethiopia, they have to play under the country’s regulatory environment. Under the current laws, they mostly only can engage in savings and loan services. If they wish to introduce more complex financial instruments that do not yet exist in the country, they have to get the green light from the central bank.

People should rest assured that opening the financial sector will not amount to the introduction of complex products such as derivatives, which were responsible for the 2008 global financial crisis. Significant levels of deregulation need to be taken for Ethiopia’s laughably traditional financial sector to be transformed so radically. If nothing else, this is merely self-flattery because the financial and economic ecosystem is not even nearly developed enough to support a market for such products. If we are talking merely about liberalisation, foreign banks only get to operate services that the central bank already regulates.

Of course, the regulatory environment has to change to accommodate, incentivise and encourage the entry of foreign banks. But this only brings us to the second reason why the conclusion that the Ethiopian authorities lack regulatory capacity is misleading. Frankly speaking, it is not that big a leap compared to the updating of the regulatory regime in the telecom sector. It is underselling the sophistication of Ethiopia’s business and finance community to a ludicrous degree.

I do not say this merely by looking at the situation at home. Here is a good example. Standard Bank, the South African giant, which is also the largest bank in Africa, has expanded its services into Malawi, Mozambique, Tanzania, Uganda and Zimbabwe.

If these countries are confident enough in their regulatory capacity to open up, should we not? We may believe that the likes of Kenya, Nigeria, South Africa and Egypt are ahead of us when it comes to finance, but we cannot even do as well as Zimbabwe and Uganda, which are supposed to be at a similar level of economic development? Let us not sell ourselves so short.

The other arguments against liberalisation are profit expatriation and hot money. Let us deal with the latter first. Hot money is a phenomenon of lack of capital controls, where money enters and exists a country very fluidly. It is not the same as liberalising the financial sector. A simple way to conceptualise this would be to keep in mind is that the entry of foreign banks is largely just FDI, most likely brownfield investments. The only money they can take out is profits, or what counts in the books as owner’s equity if they decide to sell, as long as capital controls remain in place. Here too, rest assured.

But would they not expatriate large amounts of profits in foreign currency?

Sure. But is that not what we want, for investors to get a good return on their investment in Ethiopia so they can keep coming? Again, I will raise the issue of the telecom sector with the recent entry of Safaricom Ethiopia. The hundreds of millions of dollars they paid in license fees and the billions of dollars they have promised to invest over the years are not charity. Or take the brewery industry, where multinational corporations are the major players. It is a two-way relationship. They want to make money over the long-term, just as any bank that would like to enter Ethiopia’s market will be looking to do. It is up to our policymakers and authorities to ensure that jobs are created, the financial sector modernised and that gains to the economy are realised in a mutually beneficial manner.

By all means, let the sector loose.

Even Luddites Can’t Escape the Ugly, Bad, Good of Internet

Posted on by Web Master

I had a rendezvous with a friend last week on a Saturday afternoon. I used the Addis Abeba light rail system, as my friend and I resided on extreme ends of the station’s network.

We agreed to have coffee in her neighbourhood. We had not seen one another in a long time, although we were Facebook friends after the social media platform became available. When we got to talking, she complained a lot about the internet, as she believed it is among the main reasons driving us physically apart. There is also the other problem with social media – the endless elaborate lies, distortions, hoaxes, disinformation and loads of useless small talk.

I agreed with her in our chat, and then I dared to suggest that we continue our talk over Facebook. She went somewhat Luddite after that, and I later pondered what she might have thought about me afterwards. But there were events that led me to sympathise with her.

I headed back to the train station after our meet up. I grabbed my ticket, got on board and surveyed the passengers. A young man next to me was listening to a local FM radio coverage of the English Premier League on his phone. Almost all the other passengers were also buried in their gadgets, face first. I thought about how it was when I was growing up. We had to wait a month, which improved through time to two weeks, just to get a review of the matches.

It seems we have gone from nearly no information at our disposal to a glut of it, following us wherever we go. It was a problem few would have anticipated would happen, that these sci-fi level gadgets would take over our lives the way they have done. And yet, it is hard not to recognise that they are a net positive.

An incident that came to mind was with the same friend who had turned Luddite. Decades ago, we had an appointment to meet and discuss details on the telephone. In those days, housing units having a landline were not many, and she was one of the few who had the luck.

It was almost for a whole weekend that I tried her phone, and yet it kept saying it was busy. What happened was that a technical glitch in the phone lines had absurdly made their line busy. There apparently was no easy way to fix this and, worse still, there was no other conceivable way of reaching her in time short of visiting her at home.

Now that computers and phones, and in some cases watches, have become a huge worldwide series of interconnected networks, a new form of superhighway with our extended selves, communication is no longer an issue for a vast majority of us. This is the case at least in the sense that communication means being able to reach one another. These days, hours cannot be imagined without being online. Yet, it is the good, the bad and the ugly extended self of our offline life that we maintain on the internet.

There are applications that help keep us offline, such as ad blockers. There is even an app called Cloak, which tries to help people avoid those they do not want to meet. Its slogan is, “incognito mode for real life.”

Yet, the irony is that the network effect makes it hard even for the most technology-averse to keep out. The internet is where everybody else is and to disconnect these days means to shut off oneself from the world. Even to preach as a Luddite on the net, one needs to be able to surf it.

A Perfect Storm for Developing Countries

Posted on by Web Master

Through no fault of their own, developing countries face a perfect storm of famine, political upheaval, and debt crises. Russia’s invasion of Ukraine and the Western-led sanctions it triggered are partly to blame, as are COVID-19 lockdowns in advanced economies, which deprived poor countries of vital tourism and export revenue.

Millions of lives are now at risk, but mitigation is possible. It should start at this month’s spring meetings of the International Monetary Fund (IMF) and the World Bank.

Policymakers have much to address – starting with spiralling food prices. The Russia-Ukraine conflict, involving countries that between them supply 29pc of the world’s wheat, has contributed to a 67pc increase in wheat prices since the beginning of this year. Export bans imposed by other wheat producers are also fueling price increases, as is a fertiliser shortage because of reduced supplies from Belarus and Russia.

Unsurprisingly, famine is spreading. The first countries to be hit are those that were in desperate straits prior to Russia’s invasion, including Afghanistan, the Democratic Republic of the Congo, Ethiopia, Nigeria, Pakistan, Sudan, South Sudan, Syria, Venezuela, and Yemen. Rapidly joining them are countries that rely on imported grain and were already facing acute food insecurity, such as Djibouti, Lesotho, Mozambique, Burundi, Madagascar, El Salvador, Lebanon, Honduras, Eswatini, Guatemala, and Namibia.

United Nations World Food Programme Executive Director David Beasley recently issued a stark warning: “If you think we’ve got hell on earth now, you just get ready. If we neglect northern Africa, northern Africa’s coming to Europe. If we neglect the Middle East, [the] Middle East is coming to Europe.”

Rising food prices and hunger will make riots and political upheaval more likely. Even before the Ukraine war began, people had been plunged into crisis in Afghanistan, Ethiopia, Somalia, Yemen, Myanmar and the Syrian refugee camps. In March, large-scale protests erupted in countries including Cameroon, India, Pakistan, Sri Lanka, and Spain.

Governments that can take preventive action are already doing so. Egypt, for example, which imports around 80pc of its wheat from Russia and Ukraine, recently introduced a price cap to counter the soaring price of unsubsidised bread (the government already subsidises bread for most of the population). The government also announced an economic aid package totalling 130 million Egyptian pounds (seven million dollars). These measures were made possible by assistance from the IMF and Saudi Arabia. But many countries have yet to receive such help.

Failure to cooperate is driving famine and conflict. Astonishingly, global stocks of rice, wheat, and maize, the world’s three major staples, are apparently at historic highs. Even stocks of wheat, the commodity most affected by the Ukraine war, are “well above levels during the 2007-08 food-price crisis,” while estimates suggest that about three-quarters of Russian and Ukrainian wheat exports had already been delivered before the invasion.

A serious debt crisis is also developing as many low-income countries, stretched to their limit by COVID-19, are hit by higher food and fuel prices, lower tourism revenues, reduced access to international capital markets, trade and supply-chain disruptions, depressed remittances, and a historic surge in refugee flows. Developing-country debt has soared to a 50-year high, at about 250pc of government revenues. About 60pc of countries that were eligible for the pandemic-related G20 Debt Service Suspension Initiative (DSSI) are experiencing or at high risk of debt distress.

Moreover, slower global growth and rising inflation, together with tighter financial conditions in richer countries, are spurring capital outflows from developing economies, forcing them to devalue their currencies and increase interest rates. As World Bank President David Malpass recently noted, “never have so many countries experienced a recession at once.” Malpass added that advanced economies’ stimulus policies have helped to make matters worse by fueling price rises and increasing inequality around the world.

Finding a genuinely global solution to these problems is now vital. In past debt crises, rich countries have used the IMF and World Bank to push the adjustment burden onto developing economies, arguing that they must undertake reforms before receiving assistance. But the most potent forces buffeting indebted low-income economies today are global and beyond their control – and IMF and World Bank member countries must pool resources and cooperate to address them.

The good news is that powerful shareholders in these institutions have proven capable of collective action. Last August, for example, they agreed to a new 650 billion dollar allocation of special drawing rights (SDRs, the IMF’s reserve asset).

But, because SDRs are distributed according to countries’ IMF quotas, most of the allocation went to the largest economies. Worse still, major IMF and World Bank shareholders have failed to channel resources to where they are most needed. Instead, to limit their possible exposure to any losses, they keep insisting on conditions that prevent rapid deployment. This approach also threatens to hinder the IMF’s new Resilience & Sustainability Trust and the World Bank Group’s emergency financing.

A far bolder collective approach is now required. The United States, China, Japan, the European Union, and the United Kingdom depend on global security and prosperity. They must work together to prevent famine, conflict, and a developing-country debt crisis that will tip the world into recession. They can prevent famine by acting in concert to calm global wheat and other grain markets and take measures to keep exports flowing. They can reduce the risk of conflict by not hobbling emergency IMF and World Bank assistance with conditionality. And they can build on the DSSI by creating a debt-restructuring mechanism in which they all participate.

Two core elements are crucial to managing today’s developing-country crisis. Powerful countries must refrain from beggar-thy-neighbour trade, fiscal, and monetary policies that wreak havoc on developing economies. And they must use their combined resources in the IMF and the World Bank to act quickly and unconditionally to avert disaster.

The challenges facing poorer countries are unprecedented. And that means the cooperative response from richer economies must be, too.

This Inflation’s Demand-Driven, Persistent

Posted on by Web Master

Commentators have generally offered two arguments about advanced economies’ performance since COVID-19 struck, only one of which can be true. The first is that the economic rebound has been surprisingly rapid, outpacing what forecasters expected and setting this recovery apart from the aftermath of previous recessions.

The second argument is that inflation has reached its recent heights because of unexpected supply-side developments, including supply-chain issues like semiconductor shortages, an unexpectedly persistent shift from services to goods consumption, a lag in people’s return to the workforce, and the persistence of the virus.

The first argument is more likely to be true than the second. Strong real (inflation-adjusted) GDP growth suggests that economic activity has not been significantly hampered by supply issues, and that the recent inflation is mostly driven by demand. Moreover, there is reason to expect demand to remain very strong, which means that inflation will persist.

To be sure, inflationary pressures reflect both supply and demand factors, the exact combination of which is unknowable. But when considering the economy as a whole, it is implausible that all the individual supply stories would add up to the generalised inflation we have seen. It is far more likely that the increase in demand exceeds what the economy can produce, leading to higher prices.

By definition, price growth equals the growth of nominal output minus the growth of real output (with a small difference due to compounding). Over the course of 2021, US real GDP grew by 5.5pc, nominal GDP grew by around 11.5pc, and GDP price growth thus came in at around 5.9pc. For the OECD as a whole, real GDP growth was slightly lower, at 4.9pc, and nominal GDP growth was 10.4pc, yielding 5.2pc GDP price inflation.

Recall that policymakers largely protected or increased disposable personal income at a time when consumption possibilities were constrained (through most of 2020). If one considers these excess savings alongside the persistence of low-interest rates through most of 2021, a rising stock market, pent-up demand, and additional fiscal support, the magnitude of the increase in nominal GDP is not particularly surprising. In the United States, discretionary fiscal stimulus totalled two trillion dollars in the 2021 calendar year, but nominal GDP was only 1.6 trillion dollars higher than it was in 2019. If anything, the surprise is that nominal spending was so constrained, and that saving rates remained so elevated.

What about real GDP?

Here, we need to remember that all the supply-side stories are different ways of saying that real output was constrained. According to one common story, consumption shifted from services to goods, and, because goods production is less responsive to market changes (more “inelastic”), it could not expand quickly enough. Another story is that labour supply was constrained by the pandemic and the policy response (owing to weaknesses in labour supply in the US, and to reductions in hours worked in Europe). And still other stories focus on particular markets, like the reduction in microchip production or the snarling of US ports.

The problem with these accounts is not that they are false; it is that they miss the most important story in economies that have also experienced surprisingly strong real GDP growth. Major economies have enjoyed faster recoveries than they did in the wake of the global financial crisis. In fact, the recovery in most countries was more V-shaped than anything we have seen in decades. Growth in 2021 greatly outpaced what forecasters had expected at the end of 2020, when forecasters were already optimistic about COVID-19 being eliminated.

Overall, the US economy grew 1.6pc annually from the end of 2019 to the end of 2021, which is only slightly lower than previous estimates of the economy’s potential. That is an amazing accomplishment considering all the headwinds that have reduced potential GDP: lower immigration, premature deaths, reduced capital formation, and the hysteresis associated with high unemployment.

The point is not that there are no supply-chain issues. Ships really have piled up at ports, and manufacturers really are holding up production for lack of microchips. But this is not necessarily evidence of an adverse change in supply. If we gave every household millions of dollars, that, too, would lead to pileups at ports and overloaded manufacturers. The fact that quantities are up so much – judging by the volume at ports and the level of global microchip production, not to mention the real GDP figures – suggests that our problem is not mainly reduced supply but increased demand.

Looking ahead, there are some reasons to expect demand to cool, but these will need to be weighed in the balance. Fiscal support is indeed winding down everywhere. Interest rates are starting to rise in the US and the United Kingdom, and will increase later this year in Europe as well. And equity markets have recently fallen back sharply.

But households still have substantial excess savings, and the overall stance of monetary policy remains accommodative, suggesting that demand will continue to be strong. Moreover, with Russia’s war in Ukraine, there is now a genuinely large supply shock boosting inflation in the form of higher oil and gas prices (especially in Europe). Combine that with the increase in short-run inflationary expectations, and we should expect high inflation to stay with us for some time.

Growing Speciality Coffee Market Promises Sweet Prospects

Posted on by Web Master

Habtamu Bogale is a farmer who takes a great sense of pride in knowing “every inch” of the thick highland forests of Keffa. It is hard to challenge, for he grew up in Keffa Zone, South Western Regional State, where he and his peers spent their youth watching parents grow coffee.

The legend of coffee is in Habtamu and his friends’ favour. Their native land birthed the word “coffee”, which first entered the English lexicon in 1582, from the Dutch Koffie. The Dutch got the word from the Turkish “Kahveh”, who copied it from the Arabic “Qahwah”. It was the Arab traders (perhaps slaves) who borrowed the word from Kaffa, earning the area the reputation as the “cradle of coffee.” It is easier for Habtamu to relate to the legend of coffee; a goatherd over a millennium ago discovered the cherries after his animals chewed a few and began acting unnaturally active. The boy was tempted to share the goats’ elation and tried a few of the bitter cherries himself.

The idiom that “legend remains victorious in spite of history” echoes in Keffa, one of the country’s leading coffee-producing areas. The cherries are an indispensable source of income to thousands of households that depend on coffee to support their livelihoods. Habtamu’s parents had a living growing the cash crop on more than 30hct of land. As an adult, he followed in their footsteps and began farming coffee on 10hct of his own.

Still, Habtamu was crestfallen to find productivity on his farm low. The quality of coffee he grows was also not up to par.

“I remember the fruitless efforts I put into those years,” the 47-year-old farmer reflects.

For centuries, farmers like Habtamu have harvested coffee cherries from their backyard and the surrounding forests in Keffa Zone. But, they could only sell their hard-earned crops to local traders for domestic consumption at low prices. An estimated 15 million people in Ethiopia depend on coffee farming and trade to make a living.

“I used to sell a kilogram of coffee for less than five Birr,” Habtamu recalled.

It was hard to give up easily, though. Habtamu, his wife, and their five children depend on the farm. Unfazed, he continued to search for options.

Four years ago, he found what he was looking for. The cooperative he is a member of began sourcing coffee from farmers in the area and processing the crop using new and uncommon methods experts describe as “honey-processed coffee.” The red and ripe coffee cherries are picked and sorted before their skins and pulps are removed like other types of coffee, but mechanically. They are dried without washing off the sticky-sweet mucilage, hence honey-processed. The remaining amount of mucilage gives the coffee bean’s colour and character.

Honey-processed beans are stored without water, with less fermentation occurring, and not as much of the sugar in the bean is converted to acid. The beans are dry-milled to remove the parchment layers, sorted, graded, bagged, and shipped.

More than 64,000 smallholder farmers in Keffa harvested 3,713qtl of coffee on 600hct of land during the last harvest season. It was part of the 250,000qtl of coffee harvested on 23,000hct in the Southern region last year. Keffa Zone was part of the Southern Regional State until last year, and before it was integrated into the newly-constituted South-Western Regional State through a plebiscite.

The southern regional state trails behind the Oromia Regional State, where farmers produced 2.2 million quintals of the cash crop on 240,000hct over the same period. The 5.8 million quintals produced countrywide placed Ethiopia as the fifth-largest coffee producer globally, following Brazil, Vietnam, Colombia and Indonesia. It exports around 35pc of the coffee harvested annually; approximately 2.5 million quintals shipped abroad last year, generating 854 million dollars. Export revenues have registered at nearly 750 million dollars thus far, a kilogram of coffee fetching 3.4 dollars on average.

Ethiopian coffee farmers receive a fraction of this value. Many blame the long supply chains and the heavy involvement of intermediaries.

Jema Haji (PhD) is an agricultural economist who lectured at Haromaya University for 35 years. He says higher market prices for speciality coffee do not necessarily mean that farmers are getting the income they deserve.

“Most farmers earn less than a cent a cup,” said Jema.

The expert, who has researched the coffee market, observed that only a tiny proportion of Ethiopia’s beans are sold as exclusive, speciality coffees from a specific location.

“There is a need to expand initiatives that guarantee a better minimum price for the farmers,” he said.

Farmers and suppliers transact near coffee farms, and in various markets, centres numbered 980. Last year, Habtamu supplied 50qtl of coffee to Michetie Cooperative at 25 Br a kilo (0.48 dollars in the exchange rate last week). He earned 125,000 Br, a tidy sum compared to what he used to make in the days when wholesalers were his only buyers.

This year, Habtamu and many farmers in his village supplied the same amount to the Cooperative; he saw his earnings shoot up 12pc to 140,000 Br as prices had increased by three Birr a kilo. The gains have been a relief for Habtamu and his family.

Unlike many other coffee farmers in Ethiopia, Habtamu and 350 of his peers in Keffa Zone directly sell the red forest coffee cherries they collect to a nearby market centre, where the cherries are processed, and the farmers are paid upfront. They no longer worry about storing and drying the cherries on top of earning better pay.

Established in 1999, Michetie Cooperative has 371 farmers as its members. It began to prepare coffee using the honey processing method in 2018. It contrasts the dry and washed processing methods farmers widely use across the country. Dry processing is the simplest and least expensive method, accounting for around 60pc of all processing.

With more procedures than the dry method, washed processing is widely used in places with sufficient freshwater supplies. The quality of coffee produced by this method is also superior to that of the dry process. Semi-washed processing is the other method gaining momentum in Ethiopia. Similar to washed processing, farmers remove the outer skin of the bean. However, the mucilage remains on the parchment until sun-dried and removed. Coffee processed through these three techniques account for almost all exports.

However, honey processing has been gaining popularity in Keffa and a few other places in Latin American countries such as Costa Rica, Brazil and Panama. Costa Rica, in particular, has popularised the method.

Last year, Michetie Cooperative exported 1,800kg of honey-processed coffee through the Kaffa Forest Coffee Farmers’ Cooperative Union.

“The Union enters into a contract based on the market price,” said Abebe Magnecho, the Union’s general manager. “One kilo of [honey] coffee brings eight dollars.”

Attempts to ship another 2,400kg of coffee to Germany and Japan were unsuccessful due to the pandemic, according to Tegege Tadesse, general manager of the Cooperative. His cooperative is one of three under the Union that had been actively engaged in preparing honey-processed coffee last year. They earned close to 100,000 dollars each.

This raised farmers’ earnings like Habtamu, who received 25,000 Br in dividends from Michetie Cooperative last year. Cooperatives distribute 70pc of their annual profits to farmers as dividends.

Abebe says with sales and a more reliable market, producers are motivated to produce higher volumes of this type of coffee. A little over 14tn of speciality coffee was exported over the first eight months of the year; a tiny fraction of the more than 200,000tn of speciality coffee was exported.

The global speciality coffee market was valued at 35.8 billion dollars in 2018, according to a report by Adroit Market Research, the US-based global business analytics and consulting company. Revenues are projected to grow at 13.3pc annually, and the value of this market is forecasted to reach 83.5 billion dollars in three years.

Although honey-processed coffee is a speciality and little-known among consumers, many coffee shops and roasters in Europe and North America are trying to carve a slice in this niche market. Happy Goat Coffee, a Canada-based roaster and retailer operating 10 outlets, is among the speciality roasters buying from the Union. Last year, the company bought 80qtl of honey-processed coffee.

The efforts have also garnered the attention of development agencies such as GIZ. The German cooperative agency has provided technical assistance to farmers organised under four cooperatives in the Keffa Zone, including the grading and certification of honey-processed coffee. The agency supplied farmers with equipment and provided training to promote the new product through sample cupping and access to international coffee events, according to Raffael Fondacci, project manager of GIZ’s Partnerships for Forests (P4F) project.

It is a project launched five years ago to encourage farmers to protect the forest through programs that can benefit them from the ecosystems. The first phase lasted three years after 1.82 million dollars was spent. The project includes the promotion of wild coffee.

Long before it became Ethiopia’s major export commodity, coffee grew naturally in the dense forests of southern Ethiopia. Forest and semi-forest categories account for an estimated 45pc of total production, though much of the volume is still sold as commercial-grade coffee, earning low prices.

A kilo of certified wild coffee is sold for five dollars on the international market, 1.5 dollars higher than the average price for commercial coffee.

Despite enjoying high demand internationally in speciality coffee, the bulk of Ethiopian forest coffee is not certified, and the varieties are not specifically branded, which impedes exports and depresses revenues. Industry observers argue that creating a premium market for different and high-quality varieties of wild coffee can bolster the industry and play an essential role in the economy. GIZ’s project was launched partly to address such crucial structural challenges, including low quality, absence of traceability and certification, and poor branding and marketing, according to Fondacci.

The efforts have provided better opportunities for farmers like Tamiru Tadesse, 41, a father of six.

Last year, Tamiru sold 1,113kg of wild coffee at 25 Br a kilo to Michetie Cooperative. He earned close to 28,000 Br. He sold more than double the volume at 28 Br a kilo this year, netting over 67,000 Br. He also received 5,000 Br in dividends from the Cooperative.

Last year, Michetie Cooperative supplied 592qtl of washed and 14,000qtl of unwashed wild coffee to the Keffa Forest Coffee Farmers’ Cooperative Union. Keffa is among the five unions exporting directly through the vertical integration model introduced three years ago by the Ethiopian Coffee & Tea Authority, allowing exporters to source coffee directly from suppliers and farmers.

Until recently, the model did not apply to honey-processed coffee, according to Molla Demisse, director of agro-processing at the Authority. Exporters received the nod to ship four types of certified coffee, including honey-processed coffee, last October, Molla disclosed.

“It was due to the growing interest,” he told Fortune.

Teppi Coffee Producer Farmers’ Cooperatives Union is among those that have directly been exporting wild coffee. It has been exporting an average of 180qtl annually, according to Solomon Tilahun, general manager of Teppi.

Over the last two years, Keffa and Teppi unions produced 4,545tn and exported 3,672tn of certified forest coffee, fetching close to 20 million dollars.

The numbers are expected to grow with the vertical integration model. Though the Authority had been experimenting with it since 2017, vertical integration took off over the past year. Half of the 850 million dollars worth of coffee shipped abroad last year was sourced through the new model. Yet, a lack of technical assistance hinders farmers, cooperatives, and unions from exporting more. Raffael attributed farmers’ lack of awareness has discouraged these cooperatives and unions from embracing the scheme.

“Initially, the plan was to introduce the honey-processed coffee to six unions,” he told Fortune. “Only two unions were willing to embrace the project.”

Still, the progress is encouraging. Income from honey-processed coffee has enabled Habtamu to employ intercropping to grow tea on two hectares adjacent to his coffee farm.

“I’m no longer engaged in ordinary farming,” said Habtamu.

Walking on Eggshells: Poultry Farms Grapple for Survival

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Not much noise was coming from the six pullet barns as expected from such places. Five remained empty; four employees stood nearby the only barn housing chicken coops, readying to feed the fowl.

A few feet away, a casually dressed man observed their work. Calmly. It was Dendin Debabu, a general manager of the poultry farm for the past 15 years. In his tenure at Alema Koudjis, in Bishoftu town, 61Km southeast of Addis Abeba, he has seen many ups and downs.

Dendin could not recall when nearly all the barns were as empty.

The farm was alive with the clucking of tens of thousands of chickens and workers rushing to and fro. Things were uncharacteristically quiet last week. Part of the reason behind the empty coops is a shortage of parent stock. All large-scale poultry farms are dependent on parent stock, mainly imported from Europe and elsewhere in Africa.

Nonetheless, things were not as desperate for a farm run by Alema Koudjis Plc, one of the oldest and largest of its kind in the country. Developed on a 5,000sqm plot, it is a joint venture established nearly a decade ago by Alema Farms and De Heus Animal Nutrition Company, a Dutch firm.

Alema Farms itself has been in business for 25 years, incorporated by Alemayehu Amdemariam and Lemma Asfaw. The company runs 12 farms and can breed more than a million layer and broiler chickens each year.

The joint venture in Bishoftu operates with a workforce of 650 and boasts around half a billion Birr in capital. The six pullet barns on the premises can house up to 16,000 chickens each.

Alema used to import parent stock, such as Lohmann Brown Chickens – among the most valued commercial laying chickens globally – from Germany twice a year. Forex shortages have impeded the farm from importing the fowl.

“We’re not importing parent stock,” said Dendin.

This year, the farm is dependent on 500 male and 600 female parent stock chickens it imported almost a year and a half ago for 6,600 dollars. The breed has egg and meat productivity five times higher than indigenous chicken.

The farm’s troubles, however, go far deeper than the forex shortages.

Alema lost 30,000 broiler and layer chickens two months ago to fowl cholera, a contagious, bacterial bird disease. It is responsible for the deaths of one million chickens in Ethiopia every year.

It was a blow to Dendin and his staff, who were eager to capitalise on the Easter holiday market. Alema had no chicken to sell for the holiday.

Last Christmas was different. The farm supplied the market with 10,000 broiler chickens, weighing up to two kilograms, for 150 Br a head. But the loss of 30,000 chickens could not have come at a worse time when the farm was struggling to recover from the COVID-19 pandemic and the losses it faced from the subsequent drop in demand.

Alema is not the only poultry farm in hot water.

Two-dozen large-scale poultry farms were registered with the federal trade registry. The Ministry of Agriculture is responsible for issuing certificates of competency to large farms, while regional and zonal agricultural bureaus give them to medium and small producers.

However, less than 10 are in business, and many are unable to use more than 40pc of capacity. Last year, the 14 large-scale poultry farms reported over 123 million Br losses due to the changing economic and market conditions.

Of the total losses, day-old chicks accounted for the largest share at 103 million Br. Broiler and partner chickens caused around six million Birr losses, while another 2.6 million Br was lost on pullets, fertilised eggs and unfertilised eggs.

Many commercial farmers have resorted to disposing of chicks to avoid further losses on feeding costs. Around three million chickens have been disposed of thus far.

Neither are smaller poultry farms immune to the difficulties. Most are dependent on larger farms to supply “exotic” chickens brought in from abroad.

Established three years ago in Dire Dawa, Tahen Poultry & Business Centre is one such farm.

When Samuel Estifanos established Tahen Poultry four years ago with half a million Birr in capital, he planned to upgrade the poultry farm to the large scale within five years. He hired 12 to run his farm and bought 2,000 exotic day-old chicks from large-scale farms such as Alema and Elfora Agro-Industries, the latter a subsidiary of Midroc Investment Group. He managed to breed and sell up to 50,000 layer and broiler chickens within six months.

However, it was a fleeting success.

Samuel’s dreams were squashed shortly after the supply of exotic breeds from large firms dried up. It shut down less than a year after it was opened.

Now, Samuel’s business is limited to distributing eggs collected from farmers. His company sells up to 10,000 eggs a day.

All commercial parent stocks are brought into the country. Cobb500, Ross 308 and Hubbard are the most common breeds adapted in Ethiopia, while Bovans Brown, ISA Brown, Lohmann Brown and TETRA-SL are the popular commercial layer breeds.

under the wing of the Ethiopian Poultry Producers & Processors Association

The Ethiopian Institute of Agricultural Research (EIAR), a federal agency researching the poultry industry, validates imported stocks. The research the Institute conducts includes studies on genetic improvement by evaluating imported layer, broiler, and dual-purpose chickens.

Poultry research in Ethiopia goes back to the early 1950s, when the Jimma Agricultural & Technical School opened its doors at the former Alemaya College of Agriculture, now Haromaya University.

Other public universities and the International Livestock Research Institute (ILRI) are also researching the poultry industry. Their experts primarily focus on providing technology to increase productivity on poultry farms.

Established in 1955, Debre Zeit Agricultural Research Center is among the oldest institutions conducting studies on imported parent-stock chicken breeds. Red-barred, Lohmann Dual, and Novo Coluor are among the six breeds under evaluation since 2017.

There is a need to increase the low productivity of indigenous chicken species through interbreeding, according to Alemayu Gutata, director of Debre Zeit Agricultural Research Center.

Domestic breeds account for more than 90pc of the country’s chicken population, while the remaining are exotic and hybrid breeds. The latest survey from the Ethiopian Statistics Service estimates the population at 59.5 million.

Domestic breeds produce fewer eggs and offer less meat than their imported counterparts. At Alema, a single exotic hen lays up to 320 eggs a year. It is over five times the average for local breeds.

Data obtained from the Ministry of Agriculture (MoA) reveals that 47.9tn of poultry meat and 2.5 billion eggs are produced annually. Per capita egg and chicken meat consumption stands at 57 and 2.85Kg. It is among the lowest in the world. Average annual per capita global consumption sits near 161 eggs and 63Kg of chicken meat.

Brazil and India lead the way in production. Last year, the South American giant produced 14.5 million tonnes of chicken meat, while India offered 114 billion eggs to the market. South Africa is the top producer of chicken meat and eggs in Sub-Saharan Africa, accounting for 55pc of the continent’s annual production.

Despite the growth, the commercial poultry industry is yet to be able to satisfy the ever-increasing demand for poultry and poultry products. Close to 85pc of supplies come from traditional poultry production systems.

Poultry farmers face ballooning prices for feed inputs, putting many out of business.

The chicken feed consists of more than 14 ingredients, of which vitamin premix and polyunsaturated fatty acids are indispensable. The latter is mainly found in soybeans, which have spiked by 700 Br from 2,000 Br a quintal.

Mama’s Poultry Farm, established as a small enterprise in Bishoftu five years ago with 50,000 Br capital, is among those struggling to keep up with rising costs for feed. Although the farm has been breeding layer and broiler chickens for the last five years, its managers say the rising expenditures have become unbearable.

Chicken feed is classified into conventional and unconventional varieties. Conventional feed is consumed by animals only. This includes alfalfa (Medicago sativa), a herb-rich. The plant is among some of the most widely-grown forage crops globally.

It is estimated that alfalfa covers nearly 532,000sqkm of land in Ethiopia.

Unconventional feed is prepared from wheat, maize, and soya beans – primarily used as food for human consumption.

There is fierce competition for conventional feed among poultry farmers, observed Alemayu of the Debre Zeit Research Centre. Large-scale farms like Alema import premixed concentrated chicken feed.

Dendin says the cost of running a poultry farm is rising. The farm spends 20 million Br a month to buy chicken feed.

It imports a fifth of its feed demand, mostly from the Netherlands and France, while it also sources from the local market to fill the gap. Wheat, maize and soybean are the primary grains to prepare the feed. The farm sources the crops from cooperative unions.

On top of the growing expenses for feed, Dendin has to deal with a dearth of vaccinations, especially necessary for large-scale farms, where vast numbers of chickens are packed closely together. Alema imports 15 types of chicken vaccines, mainly from France. However, it has been more than three years since the company sourced the jabs from Europe.

“We’ve been importing small quantities of vaccines from South Africa,” said Dendin. “But the volume is far from the company’s demand.”

The National Veterinary Institute (NVI), established in 1964, is the sole producer of poultry vaccines in Ethiopia. Though its laboratories churn out nine varieties of poultry vaccines, the Institute falls short of expectations from meeting demands.

Officials are well aware of the predicaments the poultry farms face.

Tsigereda Fekadu serves as a director of poultry development at the Agricultural Ministry. She and her colleagues are trying to help the industry with a proposed tax break made six months ago to the Ministry of Finance.

“The government is trying its best to deal with the problems,” she told Fortune.

The Director disclosed that the Ministry had granted large-scale farms permits to export broiler chickens as an alternative to earning foreign currency.

One of the companies benefiting from the decision is Alema, which began exporting to Somalia three years ago. It sent 30,000 one-day-old chicks annually, accounting for most of the 46,000 shipped abroad two years ago. Some 24.3tn of eggs were also exported over the same period.

Tsigereda alludes to a 10-year strategic plan approved a month ago as a long-term response to address the industry’s woes. It entails bolstered support to the private sector to double chicken meat production to 106,000tn over the coming decade and push egg production to 5.5 billion a year.

However, this might be a case of too little too late for poultry farms.

Dendin and his staff were ready last week to feed what few chickens they had left on their farm. If things continue the way they are, it will not be long before the company is forced to downsize its workforce further. Or close its doors. Time is ticking.

Tyranny of Employers, Landlords

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It is no secret that many become wealthy from the exploitation of labour. Capitalists, which we know as employers, make excess profits but do not even pay their employees the salary they deserve. It is the grand thesis of Marx, and underpins his famous manifesto.

It is true what they say, “success breeds more success.” For these people, wealth breeds more wealth. Unfortunately, it comes at the expense of the less fortunate employees. Nonetheless, those at the bottom of the wealth and income ladder seem to be more generous and sharing than the rich. But not all affluent people are the same; there are many that give back to their communities.

I have worked as a salesperson before. Sometimes, an employee’s salary depends on sales that came in and might be late but never early. However, the fact that a product is sold or not is irrelevant to an employee’s salary as it is the owner’s problem to tackle. When I say this, I am not talking about commission-based sales. As per a contract, an employee is supposed to get paid at the end of the month whether business is slow or booming.

But many of us tolerate our salaries not coming in on time even though we have pressing issues and bills to pay. At times, that is the only thing we can do, and as a result, everything else has to wait, leaving our landlords angry.

Why is it that an established firm with a decent profit margin finds it hard to pay salary on time?

While they have money to spend on maintaining the status of the employees at the higher echelon, they forget to attend to the basic needs of the less fortunate employees at the bottom of the chain.

Given the economic system we have, all people have to rely on is a salary. Some tell me that they make less than four thousand Birr a month, and yet pay five thousand Birr for rent.

“How do you even live?” is my usual retort.

What will be the motivation to work if all our salary is going to rent or a single bill we have to pay?

We wake up every day and head to work because our life depends on it but we neither get motivated nor excited by it. Why is it that the same organisation that pays salaries late does not pay ahead of time when business is good? It is because they have very little incentives to care about their employees.

On the other spectrum, we have landlords who keep pushing the bar for rent every few months either because a street nearby has been paved or other houses in the neighbourhood are renting out for higher sums. Even though there is currently a moratorium on rent hikes and tenant evictions in Addis Abeba, landlords are paying little heed.

For instance, a friend of mine lived in a two-bedroom apartment with her sister and she used to pay around seven thousand Birr. The rate had remained unchanged for four years. A few weeks ago, her landlord suddenly dropped the bomb and doubled the rent.

Credit should be given where it is due. The landlord has made any rate hikes for years, which is more than what could be said for other property owners in the city. But to double the rent in one fell swoop, especially when the cost of living is spiralling out of control, comes as a shock. It could be that the landlord is trying to overcompensate for lost time or maybe the inflation is getting on his nerves too.

We do not always see landlords as people having financial problems but greedy without a thought for their fellow citizens. At the end of the day, we have to be considerate, think about one another and treat people how we want to be treated.

From the Pressure of Tragedy, Coal Can become Diamond

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Since my father’s passing, my health has been deteriorating. I was grieving deeply and unable to have proper sleep. I went without food for days. It felt like all my senses had disappeared. I did not feel hunger, thrust or get tired. I lived like this for over three months. I weakened mentally, physically, and emotionally.

Recently, I went to a hospital abroad to check the reason for my persistent chest pain that started the day of my father’s sudden passing. I have been diagnosed with broken heart syndrome, aka stress cardiomyopathy, which is caused by extreme anxiety or stress that disrupts the heart’s proper function of pumping blood.

This reversible condition can be fatal in rare cases if the stress level is not managed. The doctor told me to take matters into my hands and take myself out of the emotional distress. He said good health is a decision away and that I am the one who can help myself. Letting myself suffer is no different than slow and intentional suicide. Somehow, his advice made a lot of sense. He was kind enough to tell me his losses and pains and how he overcame them by deciding to move forward no matter how dreadful and unbearable life got.

Taking his advice, I learned that life is potentially meaningful and tolerable under any conditions, even those which are most miserable beyond comprehension. I have discovered that we all have the potential within ourselves to decide to get better despite the awful conditions we are passing through in life.

Within ourselves resides the ability to thoughtfully turn life’s painful aspects into something constructive, making every day count. Resilience is the progressive realisation of a worthy ideal where a person knows what to do at times of crisis and joyful times and how to handle things in any given situation.

In the face of tragedy and given our human potential, we possess the ability to turn suffering into a higher goal and give greater meaning to life and death. Finding a reason and purpose to live for is where the progress starts. Life is not how much we have to live by but what we have to live for; having the means but not the meaning in life leaves us hollow.

After encountering the tragic passing of my father and friend, I have rediscovered the meaning of life. Like everyone who died, my father left without taking anything from his hard work, money, or property, leaving it all behind. I am proud of my father, who has never been concerned about money.

“Instead of accumulating wealth that we do not get to take in death, why not create fulfilling experiences and share it with others,” he used to say.

Knowing what we live for and what we should do for the time we have in this world gives our life purpose. As for me, among other things, I live for my fiancé, who is my friend and inspiration. I found being there for others to make their lives better by consistently dedicating my incomes and life experiences gives me fulfilment; it gives my life noble meaning.

The will and mental readiness to move forward in any tragic circumstance is the much-needed therapy we can give ourselves. Feeding our soul with self-encouragement and endurance helps us think clearer and live better for a greater cause.

As the saying goes, consistency creates habits and our habits shape our life. After all, we cannot control what happens to us, but we always control how we react to it. As painful as it sounds in life, we shall learn that an ending is always followed up with a new beginning. Until we begin crossing the bridges of happiness, sadness, and everything in between, we cannot begin to explore our full potential.

Whether we choose to move on or stay behind stuck in life’s traumas and tragedies, life goes on, leaving the choice to us. Decisions, at times, do not come easy. We have to dare to experience pain, sorrow, disappointment, and setback and still have the courage to move on. It takes a disciplined mind, prayer, and the willingness to let tragedies strengthen our weakness.

As a diamond is a lump of coal until it passes through pressure that gives it the sparkle and allure, so are we. We often cannot change a situation that causes our suffering, but we can still choose our attitude and bring a different outcome to help us recover. If we have the will, even the most hopeless situation that we cannot change may push us to rise above the challenges in our way.

TENT SPACE

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Vendors on the streets pop up every holiday season to take advantage of consumers’ higher likelihood to spend. It does not always have a positive effect nonetheless, one of them being increasing pedestrian inconvenience. This tent for a vendor in Megenagna is, for instance, taking up half of the walkway.

AT EXTREME ENDS

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In the streets of the capital, not many holidays pass without something strange taking place. This curious sight in the Shola Market is one good example. One end of a rope is tied to the rim of a car’s tyre. The other end is used to secure a sheep and is tied to its horns.