Radar | Jan 25,2020
Exporters of Khat must present contracts with overseas buyers before permitted to send abroad, Gebremeskel Chala, minister of Trade & Regional Integration (MoTRI), decreed.
A growing ‘illicit trade’ alarmed the Minister and his officers to introduce stringent export procedures. A week before the decision to impose strict rules, experts identified hundreds of exporters suspected of practising under-invoicing. It is a misrepresentation of the prices of goods or services designed to transfer additional value between the exporter and buyers overseas. Over-invoicing of exports is one of the most common trade-based methods used to move money.
Since last September, the Minister and his officers have been urging khat exporters to shy away from the practice, threatening to take measures against those failing to comply. Two weeks ago, the authorities revoked the trade licenses of 830 khat exporters following investigations.
Exporters are expected to submit a bill of exchange – a binding order used primarily in international trade – under the new requirements.
"It's necessary to ensure the country is generating foreign currency," said Mesfin Abebe, director of agricultural crop exports and marketing at the Trade Ministry.
Experts warn that this could be a move that will frustrate exporters. Adane Tuffa (PhD), an economist and member of the Agricultural Economics Society of Ethiopia, foresees that strict export procedures might discourage exports.
“This will profoundly affect the foreign currency generation,” he cautioned.
Khat has been among the top-five revenue-generating export commodities since the early 2000s. It accounted for 11pc of the 3.6 billion dollars generated last year. Officials eye 413 million dollars from khat exports this year. A little more than half was met over the first eight months of the fiscal year by close to 1,000 exporters registered at the federal level. The cash crop is among the agricultural commodities that make up 70pc of all export earnings, trailing behind coffee and cut flowers.
Nearly a quarter of khat produced last year was exported to Djibouti and Somalia. Consumers in these countries bought 710,000qtl of khat last year, with almost 80pc going to the latter. Last month, the Ministry doubled the price threshold for khat exports to Somalia to 10 dollars a kilo, while the threshold for exports to Djibouti stands at four dollars less.
This may have pushed Somalia to open its borders to Kenyan exporters six years after it imposed a ban. Kenya's President Uhuru Kenyatta was in Mogadishu last week attending the inauguration of Somalia's new President, Hassan Sheikh Mohamud (HSM), where a deal to resume Khat exports from his country was reached.
Exporters of Khat from Ethiopia are now required to be registered with the Ministry. Mesfin says the Ministry wants to follow up on the exporters' activities more closely. Previously, the National Bank of Ethiopia (NBE) was mandated to issue permits to khat exporters.
Zaid Ali, general manager of Fami Ziyad Muhammed Import-Export Plc, exports since 2004 to Djibouti, Somalia and Australia. Last week, he travelled to Addis Abeba from Dire Dawa to renew his permit. “Although there is a market for Khat, generating foreign currency above the threshold has been challenging,” said Zaid.
Exporters who ship khat to countries other than Djibouti and Somalia must remit at least 35 dollars a kilo.
Khat is popular in East Africa and the Arabian Peninsula, with up to 10 million people consuming it daily. The growing demand for stimulants pushes farmers to turn to grow khat, abandoning grains. A decade ago, 1.7 million farmers were cultivating khat. The number had swelled to 4.1 million last year. Annual harvests have tripled to a little more than three million quintals over the same period, while the area covered by the cash crop jumped by over 200pc to 340,000hct.
“Few exporters are willing to comply with the new procedures,” said Zaid.
His company is one of 300 khat exporters registered in Dire Dawa, a trade hub. Located 509Km east of Addis Abeba, the town is close to two of the major export destinations, as well as the country's primary khat growing areas.
Ethiopia is the leading khat producer, with its southeastern belt covering the majority of khat farms. The Oromia Regional State is the top producer with 1.3 million quintals yearly, followed by the South-Western and Sidama regional states. They each produce 650,000qtl a year.
PUBLISHED ON Jun 11,2022 [ VOL 23 , NO 1154]
Radar | Jan 25,2020
Fortune News | Mar 20,2021
Radar | Oct 10,2020
Fortune News | Dec 19,2020
Radar | Jun 05,2021
Fortune News | Jan 25,2020
Radar | Nov 06,2021
Radar | Jul 24,2021
Fortune News | Dec 25,2021
Radar | Oct 02,2021
July 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
November 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
November 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
October 16 , 2021 . By HAWI DADHI
Residing in a country with no capital market, an organised marketplace for trading se...
The pandemic, armed conflicts and natural disasters have again brought the importance...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country’s most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or tw...
July 2 , 2022
After nearly two years since the civil war broke out in northern Ethiopia, adversarie...
June 25 , 2022
It is not the best of times to be in charge of governance in Ethiopia, whether at the...
June 18 , 2022
Some of Ethiopia's economic policymakers may take solace from realising that inflatio...
June 11 , 2022
The stereotype many people have of parliamentarians is as clueless seat fillers who exist to rubber stamp legislative bi...
PM Abiy Ahmed (PhD) at a Gala Dinner Called for the Awarding of the Félix Houphouët-Boigny Peace Prize
May 6 , 2019
A couple of years ago, I was having a conversation with a friend and mentor who has...
The advertising industry in Ethiopia has come a long way. They are not only getting better and more creat...
Or see contact page