By Eyasu Zekarias

The Ethiopian Coffee and Tea Authority has implemented a ban on Chinese coffee companies from entering into contracts, citing their failure to make payments to coffee exporters and resulting in the loss of foreign currency earnings for the country’s coffee sector.

According to the authority, two companies that were purchasing coffee from Ethiopian exporters and supplying it to the Chinese market had received coffee but had not made the necessary payments. LEBUNNA TRADING DMMC, which had an agreement to supply value-added coffees to China, repeatedly failed to make payments despite multiple requests, causing financial difficulties for exporters and impacting the country’s foreign currency earnings.

Ethiopian coffee has played a significant role in the rapid growth of China’s economy. As a result, both foreign and domestic organizations have shown great interest in engaging with the sector. China’s annual coffee consumption has been growing at an average rate of over 15 percent in the past decade, compared to the global coffee consumption growth rate of 2.2 percent.

In a letter dated February 1, 2024, from the Coffee and Tea Authority to the Ethiopian Coffee Exporters Association, it was revealed that LEBUNNA TRADING DMMC had changed its name to SINOCHAM HEBEI CORPORATION and was still purchasing coffee without making payments. The extent of the financial losses incurred was not disclosed, but the authority stated that it was working with the Minister of Foreign Affairs and the Chinese Embassy in Ethiopia to address the issue.

LEBUNNA, an international company that invested in Ethiopia’s coffee sector in 2014, currently holds over 55 percent of the country’s coffee market share in China.

The second company mentioned in the Ethiopian Coffee and Tea Authority’s complaint is SINOCHAM HEBEI CORPORATION, a large Chinese company managed by the government. SINOCHAM, established 50 years ago, is primarily engaged in chemical ore, iron ore, and material businesses.

The authority, empowered by Decree No. 1051/2009 and Rule No. 433/2011, has the legal authority to monitor and enforce contracts with foreign buyers or exporters and take appropriate action if contractual obligations are not met.

In light of these issues, the authority has instructed the Ethiopian Coffee Exporters Association not to enter into any contracts with organizations that have hindered the country’s foreign currency earnings until the National Bank of Ethiopia resolves the problem.

Ethiopia is the largest coffee producer in Africa and the fifth-largest exporter of Arabica coffee globally. Coffee is a major source of export income, accounting for 30-35 percent of the country’s total export revenue. The country currently has over 400 active coffee exporters.