Coffee Collapse is Leading to Drug Boom in Ethiopia

Posted: 9 December 2003

Failure by the world's biggest coffee companies to address the coffee price collapse is forcing thousands of farmers across Ethiopia into poverty. With few alternatives, many farmers are ripping out their coffee plants and replacing them with chat, a drug banned in the US, said international agency Oxfam today.

Phil Bloomer, Oxfam's Head of Advocacy said, "Coffee prices are lower in real terms than they have been for the last 100 years and it is fast becoming a cash-less cash crop. Coffee companies' half hearted response to the crisis is forcing 25 million coffee farmers over the edge as well as fuelling the production of drug crops around the world."

Ethiopia, like many coffee reliant economies in Latin America and Africa, is on the brink of collapse. In Ethiopia earnings from coffee have dropped from 70% ($330m) of GDP to 35% ($165m) in the space of just five years. Meanwhile, official earnings from chat, an amphetamine like stimulant that is banned in America and several European countries has doubled to almost 13% ($58m).*

Ethiopia has been the home of coffee for over 3000 years but if the coffee crisis continues, Oxfam argues that chat could overtake coffee as Ethiopia's primary export within the space of ten years.

The economic arguments for continuing to grow coffee are unconvincing. In Harrar in eastern Ethiopia, farmers used to sell their coffee for just under $3 a kilo, now they make little more than 86 cents a kilo. As a result, coffee production from this region has dropped by 17% in the space of five years. The alternative is to grow to chat which brings in over $9 a kilo. In Peru, the same is happening. Coffee sells at around 65 cents per pound, while coca, which is processed into cocaine, is around $3 a pound.

Hayder Hassan, a 53-year-old farmer Oxfam works with in Deder said, "Three years ago you could get twice as much for a kilo of coffee as you do today. I still grow some coffee on my land but if the price doesn't improve this whole hillside will soon be covered in chat. We have no factories or any other means to live here. We dream of a better price for coffee, but only the government or god can assist us."

Responsibility for much of the crisis lies at the door of the "Big Four" coffee companies; Sara Lee, Kraft, Nestle and Procter and Gamble. Oxfam has analysed what the "Big Four" coffee roasters have done in 12 months to help solve the global coffee crisis. Taking four key issues, and rating the companies out of 100, Oxfam scores none of them above "failure". Two companies in particular appear not to be taking seriously the human crisis in their supply chain.

Sara Lee—at 27%—performed abysmally. The company has done little to pay coffee farmers better prices, or establish guidelines for buying coffee that ensure farmers are paid a decent price, or help farmers diversify into other crops.

Kraft (38%) performed poorly too, having failed in the past year to buy either Fair Trade coffee or ensure all their coffee meets internationally agreed quality standards. The company did however contribute to social development programs around the world.

Nestle fared marginally better, at 43%, having led the industry in various international meetings and supported the efforts of the International Coffee Organisation (ICO) to solve the crisis, including buying more coffee directly from farmers. But Nestle still refuses to buy Fair Trade coffee.

Procter and Gamble (49%) has led the industry in paying more farmers a decent price and has also helped lobby the US to rejoin the ICO. However, it has too few guidelines on buying coffee that would ensure at least basic standards for farmers.

According to the Ethiopian Government, the collapse in coffee prices has cost the country some $830 million in lost export earnings over the past five years. This revenue could have helped to build the equivalent to 1250 health centres of 2000 primary schools. Ethiopia is the third poorest country in the world and this lost revenue could have helped the government tackle the recent famine and help the country work its way out of poverty.

Visit the Make Trade Fair site for the full Coffee Scorecard. (maketradefair.com)

* Source: Ethiopian Ministry of Trade and Industry