Ethiopia pays attention to China to improve the overall value chain of its own coffee

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[global Times reporter Zhao Jueyu] from Starbucks, an established coffee chain, to Ruixing, an upstart in the industry, and even some convenience stores have posted "selected Arabica Coffee" signs on their doors to show off the quality of their coffee. As we all know, coffee varieties such as Arabica originated from Ethiopia, a highland country in East Africa. At a time when China's coffee consumption market continues to grow in double digits, the Ethiopian government and coffee growers are looking forward to investment and market from China.

Coffee tree originated in southwestern Ethiopia and has since spread to all parts of the world through the Arab world and has become one of the three major drinks in the world. In 2018, Ethiopia produced 426000 tons of coffee and exported nearly 4 million bags, making it the fifth largest coffee producer in the world, according to official figures. Coffee is also Ethiopia's main export, with an annual export value of about US $800 million, accounting for 25% of the country's total export revenue.

But such export earnings are not satisfactory to Ethiopians. An Ethiopian coffee producer told the Global Times: "our coffee is of excellent quality and many well-known international coffee brands use Ethiopian coffee beans. However, due to the backward processing technology, we export a large number of raw coffee beans (unroasted coffee beans), and a lot of profits are taken away by wholesalers and retailers. The data show that the income from the planting and processing of Ethiopian coffee accounts for less than 10% of the income of the industrial chain, and the vast majority of profits are generated in circulation and sales.

In order to improve the entire coffee value chain, Ethiopia began to seek the help of Chinese investors. At the Ethiopia-China Coffee Cooperation Conference recently held in Beijing, Ethiopian Minister of Innovation and Technology Getahong Mecuria announced to people in the coffee industry from China that Ethiopia plans to set up a coffee industrial park. It is hoped that by attracting foreign investment, improve coffee production efficiency, improve processing technology, and increase the added value of exported coffee products.

Although Ethiopia leads coffee production in Africa, the small-farm mode of production has been hindering the expansion and efficiency of coffee production. According to a report from the United States Department of Agriculture, most of Ethiopia's coffee beans are grown by farmers on less than 2 hectares of farmland in their backyard. In addition, growers generally lack the equipment and technology to further process coffee beans.

Abebe Abbatov, director of the Ethiopian Investment Authority, told the Global Times that the coffee industrial park being built in the country is located in Gima in southwestern Ethiopia. It is planned to build an area of 75 hectares and have nine factories. Excellent infrastructure will meet the needs of processed coffee and other foods. The industrial park provides one-stop services, including enterprise registration, product customs clearance, immigration procedures and so on. In the industrial park, the investment will enjoy 10 years of tax benefits, such as reduction of income tax, import equipment tariffs and so on.

Song Wei, an associate researcher at the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, told the Global Times that Ethiopia has built many industrial parks, most of which are aimed at Chinese enterprises and industries. Ethiopia also makes special legislation on industrial parks to ensure preferential tax benefits for industrial parks. However, Song Wei also stressed that the hydropower, roads and other supporting facilities in some industrial parks are not perfect, which has caused some difficulties to enterprises in actual operation.

With regard to Ethiopia's investment environment, Mecuria added that the government is vigorously promoting infrastructure construction, represented by the construction of the Asia-Kyrgyzstan Railway, which is helped by China. In addition, Ethiopia has also signed free trade agreements with many countries in Europe and the United States, allowing enterprises to freely enter European and American markets.

China is not only an important source of investment for the Ethiopian coffee industry, but also the most potential market. China's coffee imports have grown exponentially since 2000, especially between 2015 and 2017, when annual coffee consumption increased from 71000 tons to 150000 tons. Mr Abbatov said Ethiopia was seeking to work with Chinese companies to expand the Chinese market through e-commerce or directly opening stores. Earlier, Ethiopian coffee brand Garden Coffee has announced plans to open about 100 stores in China by 2022.

"to enhance the industrial processing capacity of African countries through capacity cooperation and help them increase the added value of their products is the general direction for Chinese enterprises to'go out'," Song said. But investment in Ethiopia also needs to do a good risk assessment. Understand local labor, environmental protection and other laws and regulations. "judging from the relevant data, Ethiopia's credit system needs to be improved, hidden costs such as personnel training are high, and the upstream and downstream of its industrial chain is not complete, so investing in Ethiopia's coffee industry still needs to think twice," Song added.