ADDIS ABABA, Ethiopia (AFP) — Ethiopia’s dictatorial regime will boost arms production to cut weapons imports and save its dwindling foreign exchange, the tribalist junta leader Meles Zenawi has said.

“Our main objective is to reduce our defence expenditure and its pressure on availability of foreign exchange,” Meles told reporters late Monday, without giving details.

“In order to do that, we have to reduce our imports and improve our exports. The objective is to take care of our defence requirements, primarily in terms of ammunition and partly in terms of armaments.”

Ethiopia currently produces assault rifles, rocket propelled grenades, small arms and hosts an assembly plant to manufacture tanks.

The country’s foreign reserves this month stood at 800 million dollars (598 million euros), down from two billion dollars last year.

The Horn of Africa country has one of the largest armies in Africa and last year increased its defence budget by 50 million dollars to 400 million for “stability reasons.”

Ethiopia’s army is estimated to comprise around 200,000 soldiers and imports arms mainly from China and eastern European countries.

By Yao Graham | The Ghanaian Journal

Ethiopian Emperor Haile Selassie and Ghana’s founder and first President Kwame Nkrumah during the formation of the Organization of African Unity in Addis Ababa. [Getty Images]

While many African leaders have aspired to inherit Nkrumah’s mantle as the visionary and driver of Pan-Africanism and continental unity, writes Yao Graham, a gaping political leadership vacuum remains at the heart of the continent’s collective expression. From an age when there were a number of outstanding African leaders, among whom Nkrumah was preeminent, Graham argues that the African Union’s election of Gaddafi as its leader is a statement of a collective failure of leadership and underlines the crisis in which the Pan-African project is currently mired at the inter-state level. Where, asks Graham, are the African leaders who see opportunities for change in the current crisis, and who are ‘ready to dare and look beyond guaranteeing the sanctity of aid flows?’

In February Ghana’s new President John Atta-Mills announced that Nkrumah’s birthday in September will be observed as Founder’s Day and a national holiday. The long and tortuous national rehabilitation of the man who led the country to independence and remains an inspiration to Africans all over the world had taken yet another important step in the centenary year of his birth.

In the years after Ghana gained independence, Nkrumah’s life and work was dominated by two primary concerns, one international, the other domestic. Internationally Pan-Africanism as a project of political and economic freedom, unity and structural transformation linked to the issue of Africa’s place and voice on the world stage was dominant. Inside Ghana the main issue was the structural transformation of the mono-crop dependent colonial economy bequeathed by the British into a balanced and internally linked one that offered improved and secure livelihoods to Ghanaians. The domestic and international concerns were of course closely linked in Nkrumah’s pronouncements and practice. He hoped that any achievements in Ghana would serve as a model as well as a unit in the economy of a united Africa. Nkrumah was ready to incur the wrath of the major imperialist powers of the day in pursuit of what he believed was in the interest of the African people.

David Rooney concluded his critical biography of Nkrumah with the acknowledgement that ‘His hopes were encapsulated in his ultimate goal of a United Africa in which its rich natural resources would be used for the benefit of all its people and would not be filched from them by foreign financiers and other exploiters. It may take centuries for Nkrumah’s goal to be achieved, but when it is, he will be revered as the leader with the dynamism and intelligent imagination to take the first brave steps’.

From an age when there were a number of outstanding African leaders, among whom Nkrumah was preeminent, the continent currently confronts the worst economic crisis since the Great Depression and a host of other challenges such as the situation in and international political play around Darfur without a rallying figure.

Nkrumah’s leadership and rallying role in African affairs went well beyond his vision and theorising. Importantly it included support for national liberation movements. This support embodied a unity of his Pan-Africanism and commitment to anti-colonial independence as a necessary precondition for the continent’s unity and progress. The activities of the Bureau of African Affairs which oversaw support for national liberation movements and the training of their cadre in Ghana with support from the Soviet bloc and China led to Cold War accusation that Ghana was a base for communist subversion in Africa. Two events however stand out in Nkrumah’s readiness to support the national liberation struggle as well as defend its unity with the Pan-African cause, even when face to face with much more powerful countries. These are the financial aid Ghana gave to newly independent Guinea in 1958 and Ghana’s stance and action in support of Patrice Lumumba’s government during the Congo (DRC) crisis of the early sixties. Developments in the two countries soon after independence offer credence to Cabral’s argument that ’so long as imperialism is in existence an independent African state must be a liberation movement in power, or it will not be independent’.

As France stared defeat in the face in Algeria at the hands of the National Liberation Front (FLN) – a prospect made all the more difficult to countenance because of the humiliation inflicted by the Vietnamese in 1954 – it sought to re-package its colonial control by offering its African colonies membership of a French community. All French African colonies, except Guinea under Sekou Toure, agreed to the new colonial package. In an unforgettable act of vindictiveness, the departing French stripped Guinea of anything they could carry, leaving the country on the brink of collapse. Nkrumah stepped in with a £10m loan to help the newly independent country avoid collapse. This was a considerable sum in those days and big sacrifice by a small country like Ghana.

Nkrumah’s brave and sustained but ultimately doomed support for Prime Minister Patrice Lumumba, the unity of Congo and his faith in the UN in the face Western plotting and intrigue marked a high point of his willingness to assume international leadership on African causes. The outcome was also a stark statement of what could not be achieved without a concerted African engagement in the face of powerful external forces. Nkrumah maintained a consistent line during the Congo crisis. He insisted that the country should solve its problems with the support of other African countries within the framework of the UN without the meddling of global powers, especially the NATO bloc. He assumed that the UN framework would give international legitimacy to the African led process. Nkrumah sent troops to support Lumumba using Soviet planes much to the anger of the USA. On 23 September 1960 Nkrumah used the platform of the UN General Assembly to make the case for Congo’s unity, Lumumba’s leadership and for an African solution under UN auspices to the crisis in the Congo. The appeal failed to gain traction, mainly because the UN auspices also provided perfect cover for the US and its NATO allies to carry out their plans in the Congo.

It is now a public fact that even before Congo’s independence on 1 July 1960, the American CIA was getting ready to put its puppets in power. President Dwight Eisenhower issued a national security order for the killing of Prime Minister Lumumba within six weeks of Congo becoming independent. Congo’s fate as a Western plaything in the Cold War was sealed and its long and tragic descent into what it has become today had begun. The gulf between Nkrumah’s intentions and his weakness in the situation was tragically highlighted by how Ghana’s contingent in the UN military force became detached from Nkrumah’s political objectives and acted as accessories to actions against Lumumba.

Nkrumah’s lonely and heroic but ultimately futile stance on the Congo crisis contrasts sharply with the flabby collective African approach on Somalia and Darfur. The former process has lurched from crisis to crisis with ever diminishing credibility and capacity of the transitional government. The situation was further compounded by the readiness of Ethiopia, the host country of the African Union, to act in concert with the Bush administration in pursuit of their particular national interests that converged in Somalia. Old Ethiopian imperial pretensions meshed with Bush’s war on terror. All these fuelled the discrediting, resistance to and delegitimation of the AU’s role in that country.

The Darfur crisis and its escalation around the indictment of Sudan’s President Bashir by the International Criminal Court has provided a grave test for Africa’s collective ability to deal with African issues which are heavily intermeshed with international dimensions and interests. The UN/AU hybrid peacekeeping operation in Darfur (UNAMID) continues to face various difficulties. Joint UN-AU as well as Arab League mediation and peace initiatives do not appear to be making much progress. The indictment of Bashir and the issuing of a warrant for his arrest has further complicated the situation. Having failed to exert a decisive influence on the course of events in Darfur, including on the behaviour of the Sudanese government and the evolution of the ICC’s pursuit of Bashir, the African Union has taken a critical stance towards the implementation of the arrest warrant. As the internationalisation of the Darfur conflict widens, the purchase of the African Union on how it is likely to be resolved shrinks.

In recent years Pan-African structures, institutions and processes have proliferated. The mechanisms of the AU have been undergoing refinement since it took over from the OAU as the premier continental institution. Alongside these phenomena, many African leaders have aspired to inherit Nkrumah’s mantle as the visionary and driver of Pan-Africanism and continental unity. A gaping political leadership vacuum however remains at the heart of the continent’s collective expression.

Earlier this year the AU elected Libyan leader Muammar Gaddafi as chair of the Union. In recent years, he has emerged as the most forthright spokesman for the urgency of creating a United States of Africa. How best and how quickly to move forward to a union of African states was the main item on the agenda of the 2007 AU summit, fittingly held in Accra during Ghana’s 50th year of independence. The debate was inconclusive but the exercise underlined Gaddafi’s stature as a leader of the Unity Now! camp.

The African Union’s election of the unpredictable Gaddafi at this grave moment in history is more a negative than a positive. It is a statement of a collective failure of leadership and underlines the crisis in which the Pan-African project is mired at the inter-state level. His seemingly radical stance on African Unity notwithstanding, the sad truth is that Gaddafi is not the successor to Nkrumah that the continent currently and urgently needs. He does not offer a coherent vision or leadership practice of pan-Africanism in keeping with the needs of the age. These shortcomings are compounded by his unpredictability and histrionics. Some of his views and pronouncements show him up as a man deeply marked by his years as an authoritarian leader. Among his many bizarre acts is his current self-designation as king of Africa’s kings, a reactionary assertion out of tune with the democratic logic on the continent’s national liberation struggles.

The African people want democracy not monarchs. If there is one element of Africa’s post-colonial history that the masses want behind them it is the years of despotism. In Black Star, his deeply sympathetic study of Nkrumah’s life and times, Basil Davidson, who devoted his life to supporting Africa’s national liberation struggles, pointed to the decay of internal party democracy and the gradual ascent of authoritarian use of power in Nkrumah’s Ghana as a key contributor to the erosion of mass support for Nkrumah’s efforts to transform the economy for the benefit of ordinary people. ‘The view for tomorrow is that Nkrumah’s aims were the right ones and their realisation will become increasingly possible as conditions ripen and as other strategists take up further struggles for liberation. These strategists will succeed… in the measure that they undertake and carry through the work of building democratic organisations which become the vehicles of mass participation as well as mass support: movements in which the mass of ordinary people really make, enshrine and uphold the fundamental law of the land’.

The African delegation to the London G20 summit was led not by Gaddafi the chair of the AU but by Ethiopia’s Meles Zenawi, who is chair of NEPAD (New Partnership for Africa’s Development) and a good friend of the West. NEPAD is at best a substructure of the AU and Zenawi’s presence is illustrative of the ease with which many outside Africa are able to pick and choose how to deal with the continent. During the Beijing China Africa Forum the Chinese were able to deal with African countries as individuals while the AU was treated as observer.

Processes of restructuring of global leadership are underway in the international level responses to the unfolding economic crisis. One strand of these is the emergence of the G20 as a key site of global economic leadership, the effective downgrading of the G8. This process mirrors the way in which the old wholly Western quartet of leading powers in the World Trade Organisation (WTO) has been replaced by a new quad of the US, EU, Brazil and India. The seating around the G20 table reflects the power of individual Asian and Latin American economies with South Africa the only African country there as an individual member country. Realistically the most effective way African countries could have optimised their voice would have been through effective prior preparation and definition of positions and South-South diplomacy ahead of the meeting, as well as having a collective representative of their own choosing.

The continent’s response to the global crisis has so far lacked urgency and the sense that this is an opportunity to make a break with some of the discredited policies which have failed to deliver transformative growth over the past couple of decades. The main line in the global fora has been to plead for Africa to be remembered and for the security of aid budgets. As African leaders traipse around international fora, the glaring absence of leaders who see opportunities for change in the current crisis stands in sharp relief.

The current global crisis has validated what critics of neoliberalism have been saying for years. In the last few years the annual Economic Report on Africa (ERA) published by the UN Economic Commission for Africa has been gently putting out its critique of the experience of the neoliberal agenda in Africa. Years of growth had failed to effect either transformation or the much touted poverty reduction. The current crisis had again brought to the fore the fundamental structural problems of Africa’s economies which the recent years of growth had masked, especially in countries exporting oil or benefiting from the commodities boom.

Nkrumah reportedly broke down in tears when confronted with the news that the collapse of cocoa prices had cut the ground from under his plans for the economic transformation of Ghana. In the years since Nkrumah’s overthrow, the cyclical movement of cocoa and gold prices have been the determinant factors in the health of the Ghanaian economy, tempered in recent years by the substantial aid that the country receives. For some years now Ghana has been a model of the type of economy and economic policy that has been proclaimed as the way forward for Africa but which has failed to deliver over a generation and has been exposed as bankrupt by the global crisis.

During the last six or so years of his rule Nkrumah attempted to transform the colonial economy he inherited. Many leaders of his generation – Nyerere in Tanzania, Kaunda in Zambia, and many others – recognised this to be a primary task of post-colonial economic policy. Despite the claims that Nkrumah’s difficulties were because of his socialist policies, the truth is that for a long time he was a good pupil of the dominant economic theories and ideas of his day as purveyed by leading thinkers in the West. His later attempt to learn from the development strategies of the Soviet Union as well as China and Yugoslavia showed a readiness to take risks and try uncharted paths. In retrospect it clear that many mistakes were made and offer rich lessons for today, but he dared.

In the 15 years Nkrumah was in power a leading role for the state in the economy was the norm in both communist countries and the West where Keynesian economics prevailed. The experience of the Soviet Union offered lessons in rapid industrialisation, which India had started learning before Ghana came along. The relative success of import substituting industrialisation in Latin America had made that strategy a respectable one by the time of Ghana’s independence. The Labour party was undertaking extensive nationalisations in Britain when Nkrumah first came to power. Nkrumah’s Pan-Africanism was powered by a grander vision and ambition than the modest European Coal and Steel community, which has flowered into the European Union, but they were united by a recognition of the benefits of regional integration.

Using existing resources, Nkrumah rapidly expanded education, health and infrastructure and aided other newly independent countries such as Guinea. With additional borrowing, industrial and agricultural investments were made. Many of the agro-industrial projects, not all well conceived, were in their infancy when he was overthrown. He inaugurated the Akosombo hydroelectricity dam, the centre piece of the Volta River project, which he saw as powering Ghana’s industrialisation a month before his overthrow. The creation of a local raw material base was not properly scheduled with the new factories that were built in the period before the 1966 coup. By that time the crisis in the international price of cocoa had wrought considerable damage to revenue and growth projections, putting pressure on imports and consumption.

The turn towards the Soviet Union and China was an economic as well as political act. Nkrumah’s anti-imperialism meant that he did not believe he could rely on the West for full support for his transformational project especially given the centrality of African unity with its implication for existing colonial spheres of influence as well as US intrusions into the continent.

One of the key lessons from Ghana’s development experience under Nkrumah is linked directly to his commitment to a pan-African solution to the challenges of under development. Nkrumah’s works are replete with warnings about the limits of what small ‘balkanised’ African countries can do on their own. Faced with the absence of a larger political economic unit he sought to transform the small economy and market of Ghana into an industrialised economy at a fast pace. The post-Cold War global economic framework has made the regional and continental even more key in any serious African project of economic transformation.

Sadly even in the face of the global crisis many African governments are looking only outwards towards their ‘development partners’ rather than exploring the opportunities for deepening regional and continental cooperation and integration. The IMF is offering its pernicious advice that not much needs to change and there seem to be many in African leadership ready to listen. Meantime in the global North, pages are being torn from the rulebooks by which African economies have been run from Washington. The norms which have driven the negotiating positions of the West in fora such as the WTO have been called into question by domestic policies in those countries.

All these offer important opportunities for a new agenda for economic transformation in Africa. Where are the African leaders ready to dare and look beyond guaranteeing the sanctity of aid flows? Wanted: an African ‘leader with the dynamism and intelligent imagination to take the first brave steps’.

(Yao Graham, an activist and writer, is the head of Third World Network Africa, a pan-African research and advocacy organization based in Accra, Ghana.)

By Jason McLure | Bloomberg

Ethiopia’s dictatorial regime may prosecute six of the country’s largest coffee exporters after the government said they have been hoarding beans bound for export, Prime Minister dictator Meles Zenawi said.

The government shut the exporters’ warehouses last month and suspended their licenses after accusing them of illegally stockpiling coffee and selling export-grade coffee on domestic markets. Some exporters were holding beans in anticipation of a currency devaluation, Eleni Gabre-Madhin, chief executive officer of the Ethiopian Commodity Exchange, said last month.

“I would not be surprised if some of them were to be taken to court,” Meles said in a press conference yesterday in Addis Ababa.

Coffee is Ethiopia’s largest export, accounting for 35 percent of the country’s export earnings last year. Stockpiling by exporters has “put pressure on the country’s foreign currency reserves,” the agriculture ministry said in a statement March 30.

Ethiopia’s agriculture ministry warned on March 30 that it had also taken unspecified “similar measures” against 88 other coffee exporters, of about 120 in the country involved in the business.

The prime minister said the 88 exporters wouldn’t face prosecution “whatever shortcomings they have had” in the past and that he expected they would learn from the crackdown on the other six exporters.

State-Owned Enterprise

Following the seizures, state-owned Ethiopian Grain Trade Enterprise said earlier this month it would begin exporting coffee from the country, Africa’s largest producer of the beans.

Meles said yesterday that the state-run grain importer had entered the market because the remaining private coffee exporters might not have the capacity to export Ethiopia’s coffee crop.

“The preference will be to the private sector actors,” he said. “There is no intention to establish a public monopoly in any of the agricultural markets.”

Ethiopia’s coffee exports have declined more than 10 percent to 76,674 metric tons in the first eight months of the fiscal year that began in July, compared with the same period a year earlier, according to trade ministry statistics.

The nation’s coffee export income has fallen to half the government’s target amid a decline in world prices and a ban on Ethiopian beans in Japan. Japan, which purchased about 20 percent of Ethiopia’s coffee shipments in 2007, banned imports last year after finding elevated residues of pesticide in a shipment of the beans.

Auction System

Ethiopia’s trade minister said the residues probably came from bagging coffee in sacks that had previously held chemicals and that the government has corrected the problem. Gabre-Madhin also said a change this year from a state-run auction system to an open-pit commodity exchange for trading beans temporarily interrupted supplies.

The government devalued the birr against the dollar in January in an attempt to build foreign currency reserves. One dollar buys 11.18 birr, compared with about 9.5 a year ago.

By Wondwossen Mezlekia

An internal feud between Ethiopian private exporters and the government caught the media spotlight recently but, as usual, limited journalism coverage derailed the attention off the fundamental issues.

On March 25, 2009, the government seized 17,000 tons of coffee beans from six exporters, and revoked their licenses. The government is now considering selling the seized stocks itself on the international market. The licenses of additional 88 independent traders had also been cancelled for failing to heed the authorities.

This happened after Prime Minister Meles Zenawi accused some coffee exporters in January of having been reluctant to sell stocks through the Ethiopian Commodity Exchange (ECX). He warned them of conspiring and disturbing the integrity of the ECX system by supplying and then buying back their own coffees to sell coffee meant for export on the domestic market, threatening to “cut off one of their hands” if they did not behave.

The exporters deny these accusations.

When the media picked and wagged a thread, the news spilled over to global markets and sent a shockwave across the specialty coffee community. Some importers of specialty coffees got worried that the new coffee law may put an end to direct sourcing of beans and severely impacted the already scant traceability of Ethiopia’s coffee beans.

In all this, the farmers’ voice is drowned out and their concerns left unnoticed.

As it happens, the recent development in Ethiopia’s coffee sector has more ramifications to the national economy than on the specialty coffee industry. Importers and roasters interviewed for this report confirmed that their sourcing is unaffected while the feud continues.

To understand the underlying reasons for the private exporters’ frustrations and the government’s heavy-handed actions, one needs to look at the history of coffee in Ethiopia and what changed in recent years.

Political Crop

Ethiopia, the birthplace of coffee, is the sixth largest coffee producer and the seventh largest exporter worldwide. It is the largest coffee producer and exporter in Africa. Exports between March 2008 and February 2009 were 2,679,155 bags of coffee beans, a share of 2.73 percent in global coffee trade.

The fine quality of its coffees and the distinctive features of the sector, including its genetic resources, abundance of wild coffee trees, and the organic coffee production, earned Ethiopia a unique place in the global coffee marketplace.

Coffee is the backbone of Ethiopia’s economy. In the 2007/2008, coffee export fetched more than 525 million dollars, accounting for about 60 percent of the country’s hard currency earnings. Moreover, coffee provides an important source of income for a large portion of the population and is an important source of tax revenue to the government.

Coffee holds a strong political significance in Ethiopia because of its tremendous importance in the economy and its political purposes for the regime. The ruling party ensures the centralized collection and controlling of foreign currency in order to stay in power.

Currently, the government is strapped; its foreign currency reserve is at its lowest level of $850 million, enough to cover only a month’s imports. The foreign exchange shortage was exacerbated by declines in global coffee prices, poor harvest, and contraction of sales following the loss of Japan’s market due to the ban imposed in May 2008 by Japan after finding “abnormally high” pesticide residues in a shipment of the beans.

Under these circumstances, coffee can be extremely appealing to the government.

The Ethiopian Commodity Exchange (ECX)

The Ethiopian Commodity Exchange (ECX), a government owned central trading system, meant primarily for grains, began trading coffee in December 2008. Launched in May 2008, the trading platform was set up to replace the murky auction system often abused by market participants.

During the ECX rollout, which happened to coincide with the global economic turmoil where domestic and global prices were sharply rising, there was severe shortage of grains flowing through the exchange.

Although it is authorized to trade in both spot and futures contracts, ECX announced in April 2008 that it intends to start off with only spot contracts for immediate delivery (as a strategic driver of the ultimate futures trading) and impose compulsory delivery of grains.

In August 2008, the government swiftly enacted a new coffee law in order to provide ECX with the necessary legal framework that would enable it, among others, to impose compulsory delivery of coffees. This law requires all coffees to be traded through the ECX – the only outlet to international markets.

The New Coffee Law

The new coffee law, as some call it, is believed to be what sparked the outcry among private exporters in Ethiopia and the specialty coffee community. Outside Ethiopia, there is confusion on whether or not the law prohibits direct sourcing of single origin coffees.

The law, formally known as the Coffee Quality Control and Marketing Proclamation (No. 602/2008*, declares all coffee trade “shall take place in lawful coffee transaction centers.”

More specifically, Article 10(1) reads:

“Any person involved in the roasting and grinding of coffee for selling shall purchase the coffee for such purpose only from auction centers, the Ethiopia Commodity Exchange or wholesalers.”

But Article 11 appears to be leaving room for direct sourcing:

“Any coffee producer shall: 1/ without prejudice to Article 6(1) of this Proclamation, have the right to directly export coffee from his own farm, only after submitting the same to the coffee quality liquoring and inspection center for grading before and after processing for export; and 2/ sell coffee by product in auction centers or the Ethiopia Commodity Exchange only upon examination and approval of the coffee quality liquoring and inspection center.”

This provision makes it easier for coffee farmers’ cooperatives and marketing unions to transact with importers directly. Some of the cooperatives and unions that are reasonably equipped and well positioned to handle export orders will hopefully reap the benefits of direct marketing.

Meanwhile, farmers that are not organized in cooperatives, which constitute the majority of the farming community, are disadvantaged, as dealing with importers from thousands of miles away would be challenging, if not impossible. However, importers do have the option and abilities to initiate and enter into contracts with all producers and access their favorite coffee origins by establishing direct relationships with producers. This approach helps the poor farmers dig themselves out of the traps of poverty and eternal exploitation.

The law abolishes the old practices by some exporters of handholding coffee bags from farm gate to export. Now, they will have to compete with other exporters if they need to buy specific bag of cherries supplied by suppliers or “akrabis.”

In this respect, the Coffee Quality Control and Marketing Proclamation and ECX call for segregation of duty at all levels of the value chain. It appears, though, the government is now in violation of this noble code of ethics.

Conflict of Interest

The present-day domestic marketing chain in Ethiopia is as old as the export trade itself. The bean passes through numerous market participants before arriving at the central auction centers: collectors or “sebsabis” collect the beans at local stations from rural merchants or farmers and sell it to suppliers or “akrabis”; akrabis deliver the coffee en masse to the auction centers; private exporters or local distributors buy from auction centers. Suppliers and exporters are not allowed to bypass the auctions and exchange directly.

With the introduction of the new exchange system the auction centers are replaced by the ECX, while all other participants continue to function as is, but with one fundamental change: transparency. The previous auction system was marred with loopholes that seem to have allowed some exporters holding dual licenses to purchase back their own coffee in the auctions, thereby enjoying too much control over coffee prices. Supposedly, ECX’ introduction of rules of trading, warehousing, payments and delivery, and business conduct principles will seal off those loopholes. This seems to have upset a few exporters and fired back at by the government accusing them of engaging in conflict of interest.

But the government’s reactions were even more troubling. It not only confiscated coffee beans from the exporters but also tasked the state owned Ethiopian Grain Trade Enterprise (EGTE) with exporting of coffee.

This measure throws privatization and domestic market liberalization out in the window.

Ethiopia’s coffee market has always been a relatively private business, with the exception of limited government interventions to enforce quality standards, etc. This was true even during the days of the communist regime that “nationalized” almost every sector in the nation.

EGTE’s slated assignment marks a detrimental precedence in the nation’s history. The government’s engagement in exporting beans produced by smallholder families while it controls almost all means of production in the country, including the distribution of farm inputs, capital, and the land, is inconsistent with principles of a free market system.

Drowned Out Voices

As usual, when those up in the value chain fight, in this case the government and private exporters, it is the farmers that suffer most. In Ethiopia, smallholder farmers produce about 95 per cent of the nation’s total coffee production and these farmers rely on the sale of their cherries for their families’ mere survival.

For generations, Ethiopian coffee farmers have been at the mercy of their marauders. In the long and inefficient marketing chain, each participant marks up their prices weighing down the burden on the farmers’ shoulders. Ethiopian farmers receive barely a small fraction of the value their produce is worth, currently around 40 percent of export prices, much less than the 70 percent that their counterparts in Central and South America receive.

A transparent and efficient exchange market system nurtures competition and benefits everyone in the value chain, from bean to cup. Farmers producing the finest quality coffee can get rewarded for their hard work as well as suppliers and exporters whose innovation and smart marketing skills pay off.

But, if given the choice, farmers in Ethiopia would choose direct marketing over a chain of licensees that add little value to the product. To that effect, ECX would be more beneficial to the farmers if its processes support and facilitate for more farmer-importer relationships.

Looking Ahead

The role of a centralized modern commodity exchange is indispensable for developing economies, such as Ethiopia.

The country’s coffee sector is highly dependent on international prices and the export is affected by the structure and workings of the world coffee market. The market participants need to understand that Ethiopia is competing with countries that have the abilities and the will to easily adopt innovative low-cost production and marketing systems.

The current bickering and prejudice will only affect coffee quality, weaken the country’s brands, deter potential importers, and put the sector at risk. The government needs to exercise restraint, listen to and address the concerns of all participants, from farmers to importers. Its obligation to protect the farmers from exploitation includes itself as well. Replacing private exporters by EGTE won’t lessen the burden on poor farmers.

The interests of all participants can be better served if the market functions, in the words from ECX’ mission statement, “based on continuous learning, fairness, and commitment to excellence.”

By Jonathan Tepperman | NEWSWEEK

Few people outside Ethiopia have ever heard of Birtukan Mideksa. And that’s just how the government wants it. Since December, Birtukan has been kept in solitary confinement, one of hundreds of political prisoners there. Her apparent crime? Organizing a democratic challenge to the increasingly iron-fisted rule of Prime Minister Meles Zenawi.

In the past year alone, Meles’s ruling party has rigged elections, effectively banned independent human-rights groups, passed a draconian press law and shrugged off calls for an investigation into alleged atrocities in the restive Ogaden region. Yet in the same period, his country has become one of the largest recipients of U.S. aid in sub-Saharan Africa, getting a cool $1 billion in 2008. The Bush administration claimed that Ethiopia was the linch-pin of its regional counterterrorism strategy and a vital beacon of stability. But the evidence increasingly suggests Washington isn’t getting what it pays for, and is supporting a brutal dictator in the process. Candidate Obama pledged to strengthen democracy in Africa; if he’s serious, this is a good place to start.

America’s warm relations with Ethiopia date to the days after 9/11, when the country’s Christian-dominated government came to be seen as a natural U.S. ally in a region targeted by Islamic extremists. After disputed elections in 2005, however, Meles—once hailed by President Bill Clinton as part of a promising “new generation” of African leaders—began clamping down on dissent.
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Yet Washington tolerated his lapses because it needed his help fighting Qaeda-linked Islamists in next-door Somalia. In December 2006, Ethiopia’s U.S.-trained Army duly invaded its neighbor, ousting the radical Islamic Courts Union government there. But the adventure hasn’t worked out as planned. No sooner had the ICU been toppled than an even more radical group, Al-Shabab, sprang up to fight the invaders. And although Seyoum Mesfin, Ethiopia’s foreign minister, recently told NEWSWEEK that the Islamists have been militarily “shattered,” they now control much of the country’s south and have tightened links with Al Qaeda. Meanwhile, the Ethiopian troops have pulled out, and the country they left behind has been thoroughly devastated. Two years of fighting forced about 3.4 million Somalis, some 40 percent of the population, from their homes. Yet only a few high-ranking terrorists were eliminated, and Russell Howard, a retired general and senior fellow at the Pentagon’s Joint Special Operations University, says the occupation only “empowered” the radicals.

Such failures—and Ethiopia’s growing repression—suggest Washington should rethink the relationship. Just what Ethiopia offers the United States today is unclear. Addis Ababa has contributed troops to U.N. peacekeeping forces in Darfur and Burundi and plays a large role in shaping the policies of the African Union. But this shouldn’t earn it unquestioning U.S. support.

To reset ties, the United States should push Ethiopia to democratize. And it must urge it to reconcile with its archnemesis, Eritrea. Resolving the conflict between the two states is key to addressing a whole range of threats to U.S. interests. Tiny Eritrea won independence from Addis Ababa in 1993, but the two countries fought a 1998–2000 border war and relations have remained hostile ever since, in part because Ethiopia, with tacit U.S. support, has ignored an international ruling that redrew their border. Too weak to challenge Ethiopia directly, Eritrea has funneled support to its enemy’s enemies—including Al-Shabab and its America-hating foreign fighters. Eritrea also recently instigated a border conflict with Djibouti, home to an important U.S. military base.

Washington should thus push Ethiopia and Eritrea to make amends; better relations would mean an end to their proxy war in Somalia, which has helped turn that state into a Qaeda haven. Should it choose to use it, the United States has plenty of leverage. Most U.S. spending on Ethiopia goes for health and food aid, which aren’t easy to cut. But the Obama administration could make military aid and weapons sales contingent on Meles’s improving his behavior. The House of Representatives passed a bill in 2007 to do just that, but the measure died in the Senate without White House support.

Much will now depend on the man Obama has nominated for the State Department’s top Africa job, Johnnie Carson. Carson’s record is promising: while ambassador to Kenya from 1999 to 2003, he helped persuade longtime President Daniel Arap Moi to step down, clearing the way for multiparty elections. Should he bring similar pressure to bear on Washington’s new African ally, Birtukan, Ethiopia’s other political prisoners, Africans throughout the Horn and America itself would all benefit.

(With Jason Mclure in Addis Ababa)