Political Connections Shield Illicit Coffee Traders in Ethiopia, Study Alleges

A new study of southwest Ethiopia’s coffee sector alleges that politically connected traders benefit from selective law enforcement, fragmented regulation, and weak accountability, allowing illicit shipments to evade sanctions while smallholder farmers face mounting economic and land pressures. The report, published by the Rift Valley Institute (RVI) as part of the Ethiopia Peace Research Facility’s Knowledge for Peace series, examines the political economy of production and trade across the Kaffa, Bench-Sheko, and Sheka zones of the Southwest Ethiopia Peoples’ Region. Written by Dubale Gebeyehu Genbezo and drawing on 47 in-depth interviews, the study argues that corruption and informal power networks have become deeply embedded in sector governance, influencing land allocation, licensing, trade enforcement, and export market access. “Corruption in the context of the Kaffa–Bench-Sheko–Sheka belt is on another dimension. That is, it functions as a mode of governance, not an aberration,” the study states. The research describes a system in which some regional and lower-level government officials straddle the line between regulating the trade and personally benefiting from private investments in it. Anonymous sources further alleged that politically connected actors have leveraged judicial and security institutions to retrieve confiscated illegal coffee shipments and shield traders from legal penalties. These findings emerge as Ethiopia’s coffee industry continues to serve as a critical economic engine, generating 3 billion U.S. dollars in export earnings during the 2025/26 fiscal year. Meanwhile, the U.S. Department of Agriculture forecasts national production at 12.10 million 60-kilogram bags for the current marketing year. However, the report cautions that entrenched corruption and fragmented institutional frameworks threaten to undermine these gains and distort who benefits from the sector’s returns. A central weakness identified in the study is the overlapping responsibilities among federal, regional, zonal, and district authorities. Institutions handling coffee policy, quality inspection, taxation, transportation, and security operate with intersecting mandates and little coordination. This structural ambiguity increases transaction costs for producers and cooperatives while giving politically connected actors room to negotiate preferential treatment. “Rather than forming a coherent hierarchy, these entities often function as semiautonomous centres of authority with overlapping mandates and competing priorities. The absence of a single, authoritative coordinating institution produces structural ambiguity, with successive governments maximizing surplus extraction through trade regulation rather than institutional streamlining,” the report warns. The research also scrutinizes a regional task force established to combat illicit trading. While intended to curb smuggling, the task force has allegedly contributed to the expansion of black-market channels through selective enforcement, uneven sanctions, and informal negotiations. “In this context, illicit trade does not exist outside the state. Rather, it is mediated through fragmented and politicized state institutions,” the authors note, adding that frequent regulatory changes further erode trust in official rules. The shift toward direct coffee sourcing has similarly altered power dynamics. Vertical integration—introduced to improve market access by allowing eligible exporters to bypass the Ethiopian Commodity Exchange (ECX)—has instead disadvantaged some cooperative unions while opening pathways for market concentration and regulatory arbitrage. Furthermore, agricultural land allocation is a prominent source of conflict. Interviews with farmers, local administrators, and civil society representatives highlighted cases where investment licenses facilitated the displacement of communities from ancestral lands without adequate consultation, due process, or fair compensation. The report notes that forested landscapes used for shade-grown coffee receive little direct financial support or ecosystem compensation for local communities, even as agricultural expansion elsewhere enjoys fiscal backing. Vulnerable groups, including the Manjja and Majang communities as well as women farmers, face acute barriers to land ownership, cooperative participation, and agricultural services. The study questions whether cooperative structures and ethical-trade certification schemes consistently deliver intended benefits. Certification premiums meant to support community development are reportedly captured in some cases by cooperative leaders or intermediaries, mirroring supply-chain inequalities. Smallholders, constrained by limited access to formal credit, often rely on advance payments or loans from traders; when harvests or prices fall short, farmers risk losing control of their land or becoming trapped in restrictive repayment terms. Finally, the report warns that upcoming international mandates, such as the European Union’s Deforestation Regulation, could impose severe cost burdens on smallholders who must trace coffee back to specific production plots using geolocation data. Without public investment in traceability infrastructure and technical assistance, smallholders and forest-conserving cooperatives risk being priced out of key European markets. To mitigate these risks, the study recommends establishing a statutory regional coffee governance council to clarify institutional responsibilities and fast-tracking the long-delayed opening of the National Coffee Museum in Bonga as a hub for research and community benefit.