The once-thriving khat trade is unravelling, leaving farmers and exporters trapped between unauthorised checkpoints, rising tax burdens, and a surge in contraband trade.

The leafy stimulant once sustained hundreds of thousands of rural households and generated substantial export revenue. Today, it faces a crisis of shrinking markets, dwindling prices, and a regulatory environment that many in the industry consider hostile to their interests.

A recent Ministry of Trade & Regional Integration (MoTRI) study identified 283 unauthorised checkpoints across the country. Regional and municipal authorities impose additional levies at these roadblocks, leaving exporters hamstrung by rising costs and endless delays. These fees, from 17 Br to 30 Br a kilogram, come on top of formal taxes; they have left traders helpless, complaining that they can no longer compete with the soaring contraband market.

According to Mohammed Abdi, general manager of Biftu Adugna, a major khat exporter to Djibouti, the booming informal market has severely impacted his business. Unauthorised checkpoints and contraband trade have created an uneven playing field, making competition increasingly tricky. He was forced to halt shipments to Somalia due to declining volumes.

The bureaucratic tangle mainly afflicts shipments bound for Somalia, long Ethiopia’s largest khat market, where exports have slowed to a near standstill.

Until recently, Somalia's market absorbed a steady flow of khat shipped from Ethiopia daily. That changed when federal authorities doubled the price threshold to 10 dollars a kilogram. It was meant to bolster revenues, but it yielded a disastrous outcome. Daily shipments to Somalia have plunged by 99.5pc, leaving a trade once measured in thousands of kilograms a day now barely reaching 1,000Kg.

The gap, however, has been filled by illicit traders who skirt the checkpoints and flood Somalia's towns with khat sold well below official prices. As legitimate routes dry up, contraband operations flourish, and regional authorities wrestle for a piece of the trade, the playing field grows irreversibly skewed.

Similar pressures weigh on exports to Djibouti, an important outlet where quality plays a role in determining prices. Second-grade khat fetches eight dollars a kilogram, while top-tier leaves command 10 dollars. But exporters say they factor in the cost of stalled shipments and degrading quality. Transporting a perishable commodity through six checkpoints before reaching Dire Dewa strains the delicate product. The leaves lose their freshness, exporters lose bargaining power, and producers feel the pinch of lower farmgate prices.

Exporters like Anwar Yusuf, general manager of Kulmuye Trading Plc, are unhappy about delays caused by checkpoints and the financial burden of added taxes. His company's shipments face delays at over six checkpoints before reaching Dire Dewa.

"They don't understand the fragile nature of khat," he said.

The financial burden of taxation at these checkpoints is ultimately passed down to the producers, who are forced to accept lower prices for their crops.

For many farmers, the crisis cuts deeper than profit margins or lost market share. In the Hararghe zones, khat has dominated rural livelihoods for generations. With prices squeezed and contraband dealers dictating the terms, growers watch in despair as their incomes shrink.

Jemal Dubaye, a lifelong khat farmer in the east Hararghe Zone, painted a bleak picture of the struggles. Supporting a family of seven on a one-hectare plot, he sold a quintal of khat for 2,000 Br this season, half what he received a year earlier. He struggled to move 1,200Kg of khat at any price.

"I’m at a loss," he told Fortune.

The crisis extends to the West Hararghe Zone, where people like Ashenafi Million, a khat farmer for 20 years, face a similar predicament. He saw the price of khat decline for two years, leaving him to sell bundles of khat for 50 Br, down from 300 Br the previous year. With a family of nine to support, Ashenafi is contemplating giving up khat farming.

"It can no longer sustain me," he said.