United Nations Development Programme

Proposal for Coffee Platform in Ethiopia

draft

November 2012 Addis Ababa

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1. BACKGROUND

1.1 Background on Piloting National Commodity Platforms

In 2011 UNDP organized a high level global meeting to present a global initiative called Tomorrows Markets (TM). This initiative aims to offer systematic, integrated and wide-reaching support to countries to address critical issues of inclusion, sustainability and competitiveness in key agriculture and other economic sectors, thereby contributing to job creation and transition towards a greener economy. This will be done by supporting enhanced public-private dialogue and collaboration through “platforms” that enable key government ministries and departments, relevant private sector actors in a target sector (from smallholder farmers to large international companies), development agencies and NGOs to come together to define coherent strategies and take concerted and coordinated action. A global knowledge and coordination function will enable transfer of effective approaches, lessons learned across countries and across commodities and will also help linking international and regional investors with new opportunities in specific countries. At the global level, a public-private alliance will be established to support this effort.

In response to this call by UNDP for a global public private alliance, Danida committed support for one pilot National Commodity Platform. This document outlines the pilot which will be for a National Coffee Platform in Ethiopia. The document provides i) the rationale and need for such a Platform ii) what the Platform will aim to accomplish iii) how the Platform will be structured within Ethiopia with the government and relevant stakeholders and iv) how the Platform will perform as a pilot and be aligned and contribute to the global initiative, TM.

As this presents a National Coffee Platform for Ethiopia it is fully based upon the priorities and interests of the national government of Ethiopia which will host and lead the Platform.

1.2 Background on the Coffee Sector in Ethiopia

Ethiopia is the center of origin and diversity of coffee. Coffee plays a pivotal role in the socio-economy of the country. It employs more than 20% of the economically active population and contributes more than 25% of the country's foreign exchange earnings.

Currently, Ethiopia is the leading Arabica coffee producer in Africa, the fifth largest worldwide and the tenth in coffee exports worldwide. The average annual production amounts to about 350,000 tons. The average yield is about 0.71ton/ha. Ethiopian coffee is intrinsically organic and renowned for its superior quality. Small holder farmers account for more than 95% of the total coffee produced in Ethiopia, but still traditional farming systems. In Ethiopia, Coffee is produced under four broad production systems, i.e forest coffee (8-10%), semi forest coffee (30-35), cottage or garden coffee (50-57%) and modern coffee plantation (5%).

The Federal Democratic Republic of Ethiopia’s medium-term development plan, the Growth and Transformation Plan (GTP) which runs from 2010/11 to 2014/15 identifies a number of strategic pillars. These include the strategic outlook to maintain agriculture as the main source of economic growth, as

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well as cross-cutting issues related to environment and climate change. Ethiopia also adopted a low emission climate resilient green economy strategy; known as Climate Resilient Green Economy (CRGE).

One of the strategic directions for the agricultural sector development during GTP period is focusing on the production of high value crops, including coffee. The GTP outlines an increase in coffee production from a 2009/10 level of 341,000 ton in to 831,000 ton in 2014/15 - an over 240% increase. During the same period, the area under production coffee is planned to increase from 462,000 ha to 815,000 ha a170%geographic expansion. Similarly, over this period coffee exports are estimated to increase from 172,210 tons to 600,970 tons and similar to increase export earnings of coffee from $528 million to $2.037 billion, which represents a 380 % growth.

Based on the coffee export data from in 2010/11, the principal export markets for Ethiopian coffee are: Germany (32%), United States of America (12%), Saudi Arabia (11%), Belgium (8%), and Italy (7%) respectively.

Table 1 Coffee production, export volume and value

Year Production (ton)ExportVolume (ton) Value(million USD)

2004/5 159,845 334.52005/6 308,565 153,155 365.82006/7 319,145 176,390 424.12007/8 353,570 170,961 525.42008/9 283,000 133,993 375.82009/10 480,621 172,211 528.32010/11 449,165 196,118 841.62011/12 498,765 N/A N/ASource: Ministry of Trade

The key GTP measures being undertaken to expand the contribution of coffee sector are: conducting continuous awareness creation for actors and stakeholders; strengthening primary market centers; setting an integrated service provision in all eight coffee testing centers; improving marketing through ECX; strengthening market promotion activities, penetrating in new markets and increasing the market share in existing markets; completing market quality control system lay out, and putting in place strong monitoring and support system from federal up to grassroots level.

To mainstream the sustainable production, the strategy places emphasis on scaling up and disseminating best practices and new technologies to boost productivity. Special attention is given to practices that allow better adaptation to climate variability and the expansion of water shade management systems. Strengthening conservation and management of natural resources will be another focal area. However, the strategy clearly notes that such goals will only be realized if the appropriate institutions are strengthened to provide the necessary support services to improve productivity.

2. THE ETHIOPIAN VALUE CHAIN FOR COFFEE

Coffee marketing in Ethiopia comprises the following transaction chain:

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Primary cooperatives: Immediate members are farmers, and are typically geographically organized. Primary cooperatives are somewhat limited in capacity and do not generally access export markets directly.

Secondary cooperatives: These are larger cooperatives consisting of a collection of primary cooperatives. They are engaged directly with export markets for most of Ethiopia’s major brands.

Primary level coffee transaction centres: It is a place where coffee farmers and suppliers transact coffee. They are located near to the coffee farms. Currently there are about 979 primary coffee marketing centres in the country.

Ethiopian Commodity Exchange (ECX): It is the secondary level where coffee transacts in Ethiopia. Currently, ECX warehouses of are located in 8 different parts of the country - The centres are in Dire Dawa, Hawasa, Dilla, Sodo, Bonga, Jima, Bedele and Gimbi. The coffee transactions take place in Addis Ababa.

International coffee market: The third level where Ethiopian coffee transacts is the international market. At this level, exporters sell coffee to foreign importers. In Ethiopia green coffee is only permitted to be exported by Ethiopian Nationals and persons of Ethiopian descent.

A single farmer or akrabi (a private processor and the private equivalent to a cooperative) is only allowed to sell their coffee through the Exchange. Only the four Coffee Cooperative Unions are allowed to bypass the exchange and sell directly to the buyer after having gone through extensive quality controls.

Once the coffee is delivered to an ECX warehouse, the coffee is stripped of its provenance graded by government workers using the Q System and given a region and a marking grade. In general, the grade relates to quality. Warehouse officials are the only persons allowed to taste the coffee until it is bought and paid for.

The details about each coffee are entered into a computer system, and shortly thereafter the coffee is offered on the ECX trading floor. The buyer knows the region of the coffee and the grade assigned by Q Grader officials. A price is agreed upon on the trading floor and the transaction is consummated when the buyer provides proof of sufficient funds. Once a deal has been finalized, the funds are transferred by the ECX from the buyer’s account to the seller’s within 48 hours.

The value chain for cooperatives looks a little different as Ethiopia’s cooperatives can bypass the ECX and sell directly to the buyers. However, the cooperatives and unions struggle with a lack of access to credit, poor negotiating skills, inadequate management in general and difficulties getting the coffee shipped off to the buyers.

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3. SITUATION ANALYSIS

3.1 Coffee market and pricing

Despite positive image of the country as birthplace of coffee, a strong local coffee culture, genetic diversity and easy branding opportunities, diverse agro-ecology and climatic conditions, unique distinct characters of coffee quality, a favorable national agriculture ecosystem for coffee development, the country, however, so far failed to fully capitalize its potential.

Moreover, the coffee sector has had to endure various challenges, including the limited improvement in productivity, low returns for farmers, inconsistency in quality, poor agricultural practices, less attention to the branding of differentiated coffees, none existence of price risk management, long supply chain and related transactional costs from farm to port of discharge and a lack of access to capital at the bottom end of the value chain.

Moreover, coffee producers are exposed to large fluctuations in market price and the impact of unpredictable and uncontrollable supply and demand. After coffee prices hit a near record $3.10 per lb in 2011, they have plunged on expectations of a bumper crop from Brazil, the world's largest coffee producer. Coffee prices are currently selling at $1.8 per lb, but there are forecasts that they can reach $3 per lb over the next two years as a supply deficit appears to be emerging. Though this is a cyclical occurrence common to the coffee market, the collateral impact on farmers is episodically low and unprofitable coffee margins.

The effect of price volatility has been a direct factor in increasing rural poverty in rural communities; up to 85% of coffee farmers have cited coffee price volatility as a leading risk factor for their farms 1. The figure below provides illustrates the price volatility depicting prices contracting by a third and nearly tripling again within a seven year period. The pricing volatility is further exacerbated by the lack of access to finance for farmers in Ethiopia.

At the household level the impact of fluctuating coffee prices has been considerable, leading to forced sales of family assets, the abandonment of coffee farms and urban drift. Such market dynamics are also affecting more traditional and sustainable approaches of coffee cultivation.

Episodic pricing pressures on smallholders lead some to shift away from traditional forest coffee production systems towards more immediately profitable zero-shade systems that can yield higher returns in the short term. However, this is having a profound impact on the degradation of coffee landscapes on longer time scales and farmers' ability to maintain natural assets and stable socio-economic conditions.

Figure 1: Average Prices Paid to Coffee Growers (17kg: G)1

http://www.ruralfinance.org/fileadmin/templates/rflc/documents/1154008228596_Case_9_1____ETHIOPIA.pdf

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International Coffee Council, 2011The Ethiopian government has undertaken a major intervention to address price instability. In 2008, the Ethiopian Coffee Quality Control & Marketing Proclamation No602/2008 established trade practices and set constraints to the roles of market actors. All coffee in Ethiopia is required to be traded by the Ethiopian Commodity Exchange (the ECX). This intervention, supported by the UNDP, has greatly improved in the national trading system with some issues remaining to be addressed.

ECX’s establishment is founded on Proclamation No. 550/2007. This proclamation mandates ECX to develop its own rules for the governance of its various operations. Further, the Ethiopia Commodity Exchange Authority (ECEA) a regulatory body of the ECX was established by Proclamation 551/2007.

The Ethiopian Commodity Exchange Authority has the powers and duties to extend recognition and oversight of Exchange Actors , recognition and oversight of Clearing Institutions (domestic banks or other financial institutions engaged in clearing and settlement of payments), oversight of the Rules of the Exchange and regulation of Exchange-traded contracts, as well as regulation of the conduct of investment advisors, consulting companies, law practices, accounting and audit professionals, as this conduct relates to ECX business. By 2011, the 230,000 tons of coffee was trading annually via the exchange.

3.2 COFFEE BRANDING AND INTELLECTUAL PROPERTY

Over the past 8 years, Ethiopia has taken proactive and aggressive steps to brand and trademark its coffees. These efforts can be traced to 2004 when Ethiopia Intellectual Property Office (EIPO began identifying mechanisms to yield a greater share of retail prices to farmers. At the time, premium Ethiopian brands such as Harar and Sidamo were commanding $24 and $26 per lb, respectively, per lb, with the export earnings at a mere $1.20 per lb and $1.60 per lb, respectively, represent only 5% and 6% of retail price. The share of the retail price consumers paid that reached the farmers was so low, that

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they struggled economically and in cases abandoned some of the world’s finest coffees to grow narcotic plants, which pay more.

EIPO began developing a partnership designed to lead to a greater share for Ethiopia’s coffee growers of the high retail prices fetched by their Harrar, Sidamo and Yirgacheffe coffees. The newly formed Ethiopian Fine Coffee Stakeholder Committee, consisting of cooperatives, private exporters and the EIPO as well as other Government entities moved to achieve wider recognition of the distinctive qualities of these coffees as brands and so position them strategically in the expanding specialty coffee market; while at the same time protecting Ethiopia’s ownership of the names.

Trademarks have, to date, been secured in 28 countries, and Ethiopia is building a network of licensed distributors across the world. That is, Ethiopia is inviting coffee companies, large and small, who cherish Ethiopia’s fine coffees, to sign a licensing agreement and to collaborate directly with Ethiopia on a long-term plan to ensure that the premium Ethiopian coffees are traded with everyone through the value chain benefiting.

These efforts have not always been easy. Trade marking in the United States proved particularly problematic for Yirgacheffe, Harar and Sidamo brands, as the U.S. Patent and Trademark Office stalled on Ethiopia’s application based on an earlier filing by Starbucks for these very names. After a fairly public and uncomfortable battle for Starbucks, the Seattle based retailer relented and agreed to recognize Ethiopia's ownership of the three names, and not to block Ethiopian attempts to win trademarks for them.

3.3 COFFEE SUSTAINABILITY ISSUES

The coffee sector is facing the threat of coffee genetic erosion and production constraints because of the degradation of major ecosystems that have been supporting the coffee farming system for several generations. The climate resilient green economy report documents that Ethiopia is already exposed to elevated climate variability and a series of extreme weather events.

Consequently, climate change will have a profound impact on the coffee sector. The vulnerability of the coffee sector in Ethiopia emanates from dependency on rain-fed farming for the vast majority of coffee produced. Coffee is highly sensitive to fluctuations in rainfall - undesirable weather events have had an acute impact on output.

Unlike Robusta, Arabica coffee is an extremely climate-sensitive crop. It requires between 1200 mm and 2200 mm of rainfall per year and an average annual temperature between 60 and 73 degrees Fahrenheit to prosper. Temperature increases have already begun to create additional strain on coffee smallholders. There is increasing evidence that rising temperatures in coffee landscapes may be one of the most threatening issues facing Ethiopia’s coffee subsector.

The coffee berry borer beetle (Hypothenemus hampei) that has devastated coffee production globally was non-existent in Ethiopia in the late 1960s, but in 2003 researchers reported that the pest was widespread. Research conducted by the Kenya’s International Center of Insect Physiology and Ecology identified that the average minimum temperature required for the beetles' reproduction was about 68 degrees F, and for every 1.8 degrees F increase in temperature, the coffee berry borer became 8.5

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percent more infectious. In the mountainous areas of Ethiopia 68 F was reached in 1984, causing more coffee growing communities to be prone to borer infection.

One approach to mitigating warming climates at the landscape level is to encourage farmers to readopt traditional forest shade production systems. However, despite the benefits offered by traditional shade systems, many smallholders continue to cut down forest trees to increase the amount of solar irradiation to coffee canopies.

It is commonly known amongst smallholders that zero shade farming techniques will result in greater unit area yields compared to traditional shade tree practices. Although this holds true in the short term, yields typically decline after 7-10 years as soils become depleted of nutrients and trees become physiologically stressed and thus more susceptible to pest and disease infection.

Most smallholders do not have access to credit facilities to purchase crop inputs and therefore implement practices that will lead to short term gain. Once the farmland becomes exhausted, smallholders with the ability to secure land rights raze forest areas to secure fertile lands and begin the vicious cycle once again. This is an especially important concern given that government plans to expand the coffee production both by improving productivity and expanding land under coffee.

This highly unsustainable approach is set for failure. Forest areas have become few and far between as a result of agricultural expansion. Protecting what little forestry remains is difficult, as securing suitable land for coffee production is a priority for farmers. Unfortunately, climate-related change is rendering many production areas economically unsuitable for coffee cultivation, making felled forest areas an increasingly popular option for struggling smallholders. Preliminary assessments suggest that wild coffee population will be vanished by year 2018 due to impact of climate change.

4. INTEVENTIONS IN THE ETHIOPIA COFFEE MARKET

4.1 UNDP support for coffee

UNDP supports the development of the agricultural sector by facilitating efforts to link value addition and markets to production. Further, UNDP Ethiopia has successfully supported the Ministry of Agriculture in setting up a testing laboratory for coffee to ensure the quality of coffee. The work on the coffee testing laboratory initiated further discussions and work on creating an overarching National Agricultural Products Quality Infrastructure (NAPQI).

The NAPQI will create a process of up-scaling the quality of the entire value chain for producing and marketing Ethiopian agricultural products. This means that farmers will be able to access the needed information, meet the international quality standards and sell their products more competitively on global and local markets. UNDP’s support, to these initiatives falls within its wider engagement in Ethiopia’s Agricultural Growth Programme (AGP), a multi-donor project that seeks to increase the country’s agricultural productivity.

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UNDP Ethiopia also supported the start-up of Ethiopia Commodity Exchange (ECX), the first commodity exchange in Ethiopia. The commodity exchange serves as a market place where buyers and sellers come together to freely trade products like coffee, assured of quality, delivery and payment. UNDP Ethiopia provided its support through financial support, training and technical advice. As coffee production is linked to a commodity exchange, the creation of ECX has boosted the country’s coffee industry by introducing taste-testers, warehousing, price guarantees and electronic transactions between buyers and sellers. Further, the system has improved overall price transparency and efficiency of transactions.

UNDP is also supporting the Government of Ethiopia’s effort to realize climate resilient green economy

by year 2025 as set in the countries CRGE vision statement. Enhancing and preserving the ecosystem

goods and services is the corner stone to realizing the Ethiopian Climate Resilient Green Economy vision.

Overwhelming majority of the Ethiopian population depends on the ecosystem goods and serves for

food production, traditional medicine, supply of household energy and water supply. Currently two

UNDP projects – sustainable development of protected areas systems (SDPA), and Mainstreaming Agro-

Biodiversity Conservation Into the Farming System of Ethiopia (MAB) are under implementation.

SDPA develops capacity and enabling environments for protected area management, including coffee

forests, through support to creating biosphere reserve. Specifically, in 2011 UNDP partnered in the

creation of two coffee forest biosphere reserves in Kafa and Yayu, located in the southwest region of

Ethiopia.

UNDP have further supported these two reserves through workshops and awareness campaigns to local

stakeholders and national policy makers. For the local stakeholders this activity serves to sustain and

harness continued local support. For national policy makers, workshops and awareness campaigns

serve to illustrate these two reserves as a pilot which can be replicated nationally.

The MAB project is targeting coffee, teff, durum wheat, and enset and their wild population for conservation and sustainable production. The project aims at create a favorable policy environment to enhance the functioning of the coffee market system, to promote the conservation of the landscape and related traditional production methods. The Yayu coffee forest landscape is the geographic focus during the project period.

Extension packages are being developed for mainstreaming coffee conservation into the production system and a value chain approach is applied towards the development of a market system. Key stakeholders include coffee producers, processors, traders and support service providers, researchers and regulators, and are being mobilized to ensure an effective system is put in place to incent the

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conservation and sustainable use of coffee biodiversity in Ethiopia. Best practices derived from this pilot action will be scaled-up countrywide level. Moreover, the development of ecosystem service will be piloted. In particular, given the fact that the coffee ecosystem has a significant reservoir for carbon, access to carbon market to generate revenue that motivates conservation of forest coffee is being facilitated.

5. The PROPOSED INTERVENTION

5.1. The Need for National Commodity Platforms

Coffee accounts for over 25% of the Ethiopia’s exports, and is necessarily a strategic priority for the government. Ethiopia’s coffee sector has significant competitive advantages, which include a historical cache as the home of coffee, organic farming techniques consistent with socially conscious retailers and consumers, favourable climatic conditions, and vast supply of a commodity that can command a rich niche premium.

Nevertheless, the Ethiopia coffee sector’s share in the premium revenues earned by retailers has historically been limited. In recent years, some efforts have been undertaken by government to begin global enforcement of intellectual property rights for major Ethiopian coffee types. This can be considered a first step, and continued branding and marketing can secure higher retailer prices, and coordinated efforts throughout the Ethiopian value chain can help local actors all the way to the smallholder to participate in the profits.

There have been efforts to coordinate branding/marketing/intellectual property activities in Ethiopia. One example is the Ethiopian Fine Coffee Stakeholders Committee; while the Committee has had its success it lacks the full weight of government support in its steering and implementation. The Prime Minister’s office also houses an export promotion committee for all commodities; it lacks a singular focus on coffee and with it necessary inclusiveness of all national coffee stakeholders.

Thus there are two national priorities in the coffee sector which the Government would like a National Coffee Platform to support. These are i) development of a robust branding, marketing and intellectual property right enforcement of premium Ethiopian brands in the export market and ii) ensure that coffee production continue in a responsible and sustainable manner.

A National Coffee Platform can contribute to improved branding, marketing and intellectual property of coffee from Ethiopia. A National Coffee Platform, with key government actors at the table, can facilitate the establishment of minimum quality standards for branding, national marketing strategies that factor regional and specialty characteristics, and a singular brand message to the buying community. This will include looking at branding issues pertaining to ‘quality’, ‘satisfaction’, and ‘standards’.

Environmental sustainability of coffee production is vital from both a land resource perspective and a branding and marketing view. Premium coffee consumers have grown increasingly attentive to the environmental impact of the goods and services they produce. As the short-lived conflict between Starbucks and Ethiopia illustrated, these consumers demonstrate their values with their pocketbooks.

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Therefore, it is critical that premium branding and marketing be accompanied with enhanced adaptation of best practices for responsible and sustainable coffee production methods.

Another priority for the coffee sector is ensuring that a higher proportion of Ethiopia’s premium export coffee is enjoyed by the export value chain and particularly the most vulnerable actor – the small holder.

The Platform will not provide the solutions and address all of these issues. However, as a powerful and neutral mechanism to convene stakeholders it can facilitate discussions around these complex issues to identify key issues and formulate joint action planning to resolve them.

5.2. Definition of a Platform

A national platform can be defined as a forum consisting of multi-stakeholder groups, operated at the national level and lead and chaired by government. A platform develops concrete actions to mitigate the negative impacts of production of coffee at a systemic level. It offers coordination, analysis and advisory services regarding priority areas of the coffee sector. National platforms aim to become the main national coordination mechanism to incorporate specific actions into public policies, with specific actions implemented through a coordinated and participative process.

The main purpose of the platform is to contribute to the establishment and development of a model for the branding and intellectual property support of the coffee commodity that is responsible and sustainable in terms of the environment, food safety, workers’ safety, and community livelihoods. The main characteristics of a platform are:

Creation of a venue for defining sustainability priorities for a coffee sector, and for developing national pre-competitive support strategies to achieve sustainability.

Serve as a tool to resolve conflicts of interest bringing supply chain members into dialogue to discuss diverse thematic areas.

Connects corporate partners to government policy and planning and directly to producers. A mechanism to organize and advance multiple and fragmented efforts to promote

sustainability to scale. Exchange information, best practices and lessons between on the ground projects in a given

country Identify priority needs of a commodity supply chain Support formulation of joint action plans coordinating public and private sector investment.

See Annex 2 for further descriptions of National Commodity Platforms

The Platform should not be expected to provide direct technical assistance to resolve sustainability issues. If there are sufficient budgetary resources additional capacity building and policy reform activities can be added as a complementary project.

The sustainability and life expectancy of the Platform will depend on country need. This project has been designed to support the establishment and operation of the Platform for two years. Two years has been selected as it should be sufficient time to demonstrate how to operate a Platform, the value of the Platform and to begin to institutionalize the Platform within the government and stakeholders. It also will provide time to mobilize further resources to continue technical support for Platform operations.

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5.3. Goals of National Platform The goal of the national coffee platform is to strengthen the sustainable coffee sector in Ethiopia.

Government priorities for the coffee sector to which the Platform can contribute to include:

IncreasingThe PCU will be supported by UNDP CO and also UNDP’s Green Commodities Facility, which will provide quality assurance based on international best practice.

Greater coordination between public and private partners on branding and marketing various national coffee varieties as premium product in the global market, with sustainability, quality assurance and premium pricing.

Align public and private partners on intellectual property efforts and standards Generate positive changes through planned and coordinated efforts, dealing in particular with

policies and planning by public and private sector decision makers; Connect and align policy makers, exporters, producers, and intermediary actors to discuss how

to more fairly distribute the premium pricing from the retailer to local actors in the value chain Document and share best practices with respect to responsible and sustainable production

techniques.

As such the objectives of the Platform are the following:

(i) Strengthened coordination and advocacy for sustainable coffee (ii) Improve priority areas in the coffee sector, such as:

a. Branding, marketing and intellectual property efforts for exported coffeeb. Up-scaling and replication of successful experiences in Ethiopia of more productive, high

quality, sustainable and climate resilient coffee production (iii) Lessons from the Ethiopia Coffee Platform contribute to the global knowledge on National

Commodity Platforms and improve functioning of UNDP’s global initiative Tomorrows Markets

5.4. Outcomes and Activities

Outcome 1 Establishment and Operations of the Ethiopia Coffee Platform

Output 1.1 – Government awareness raised on the concept of a National Platform and governance structure agreed

The project will assist in establishing the Platform Steering Committee composing of institutions and representatives as requested by the Minister of Trade (designated Chairman of the Platform). The international platform advisor and platform coordinator will inform and train the members in the concepts and dynamics of a National Commodity Platform. As understanding increases the shape and

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focus of the Platform will evolve. Once the SC is comfortable the Coordinator will advance with the subsequent outputs.

Output 1.2 - Platform stakeholders identified and invited to participate in the Platform

Output 1.3 - Code of Conduct drafted for national cocoa platform

A draft document of this code of conduct will be prepared with the Steering Committee. Once the Platform is operational the CoC will be shared with the Platform Plenary participants to ensure an all-inclusive process before any final document is agreed upon.

Output 1.4 - Platform plenary sessions functional

The heart of the national coffee platform will consist of plenary sessions where all representatives of the coffee sector participate, from farmer coops and exporters to buyers and policy makers. In most cases, platforms normally plan for at least three plenary meetings per year, estimating one plenary session every four months. The dates for each plenary meeting are set at the end of the previous plenary session, as the last point in the agenda. The plenary sessions consist of discussions regarding presentations given by the Steering Committee, the Task Forces and other invited individuals. The plenary events function as a dialogue between the partnership platform participants to review sustainability issues, agree on overall vision and strategy for the sector, identify key priorities and define and agree on solutions and initial interventions needed. It also facilitates information exchange, lesson learning and coordination between on the ground projects.

Output 1.5 - Platform Task Forces functional

The platform working groups will be formed by the participants of the Plenary Assembly in order to develop recommendations on specific barriers to sustainability. They will be formed by representatives of the entities participating in the platform. The working groups will be convened at least once a month by the project coordinator. The Task Forces will nominate leaders, who, together with the project coordinator, will manage the agenda, the convening, and will moderate the work group sessions. The group leaders can suggest the organization of specific events that assist in specific subject analysis. Task Forces may be supported by professional facilitation provided by the project.

It is proposed to start with only up to three Task Forces in the first year to see how they work. The government has proposed these would focus on branding, marketing and IP; sustainable production practices; and value chain analysis will be established. Additional working groups will be identified as appropriate by the Platform members. These might cover issues such as; extension and access to finance. The basic operation and sequencing of the working groups will be as follows:

Document and define specific problems; Suggest activities of the Joint Action Work Plan to solve the problems per subject-matter; Facilitate the formulation of Joint Action Work Plan; Identifying key roles, responsibilities and interventions to be undertaken to implement the Joint

Action Work Plan Inform, during the plenary sessions, about the progresses of the discussion about specific issues.

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Output 1.6 - Technical Studies prepared to support Platform decision making

Select technical studies may be commissioned to provide supporting data to assist with decision making and consensus building. For example value chain studies to identify how to improve value share of coffee prices to small producers.

Output 1.7 - M&E system functioning

Develop key indicators of success for the Platform operations Generate key baseline data for each indicators Continuously review all action plan components to track challenges and bottlenecks in order to

make modifications if needed Review progress on indicators on an bi-annual basis and report to the SC and donor

Output 1.8: Communication Strategy developed to report on progress and support feedback loop

Defining the different audiences and their communication needs; Define the most appropriate tools and activities to communicate the key messages. Preparation of key communication products eg summary of project, summary of progress Disseminate the communication documents both nationally and internationally

Outcome 2 Lessons from the Ethiopia Coffee Platform contribute to global knowledge on National Commodity Platforms

Output 2.1 - Lessons shared with Ethiopia from other pilot commodity platforms

This will be through international advisors training stakeholders in-country and through taking Steering Committee members on a study tour to an existing national commodity platform. This will likely by either in Costa Rica on pineapple or Indonesia on palm oil.

Output 2.2 – Lessons from the Ethiopia Platform contribute to global knowledge on Platforms

The project will capture lessons from the set up and operation of this Platform and feed them into global dialogues and knowledge in order to more effectively set up Platforms in other countries. This may include speaking at global conferences, knowledge products and support of a global alliance for the global UNDP initiative Tomorrows Markets.

Output 2.3 - Partnerships between the coffee platform and key global industry sector companies and associations are strengthened

The project will develop partnerships with the major multi-national coffee buyers and encourage them to participate in the platform to form effective public private partnerships for improving production and export of Ethiopian coffee. This will build on the partnerships UNDP’s Green Commodities Facility already has with several key coffee companies.

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Steering Committee (SC) / National Platform

Task Force A

Platform Coordination Unit (PCU)

Role

Task Force B

Ensures institutionalization of platform outputs, and appoints Coordinator

Coordination and Technical advisory to platform participants, supervise output based consultancies

Develop baseline and recommendations

Output 2.4 – Additional Resource Mobilization

The project will reach out in the second year to donors, presenting advances of the Platform, to generate additional funds for continued operations of the Platform for a third year.

5.5 Institutional Arrangements for the National Coffee Platform

The proposed platform is envisaged to have four bodies - the Platform Steering Committee, Platform Plenary group, Platform Taskforces and the Platform Coordination Unit.

Figure 2:

The Chairman of the Platform has been agreed with the government to be the Minister of Trade. This is highly advantageous as brings a high level of government ownership and leadership to the Platform.

Steering CommitteeThe Steering Committee will help shape the Platform, its initial agenda (and task forces) and invitees for the Plenary. At the initial stage, the Platform Steering Committee for the national platform is to be composed of policy makers, UNDP and regulatory institutions:

The Office of the Prime Minister – As coffee is such a strategic commodity in terms of exports, sustainable livelihoods, and employments, it is a priority are for the government and support at the highest levels is critical.

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Ethiopian Intellectual Property Office – Has served as the focal point for intellectual property of Ethiopian brands for the past decade.

Ministry of Trade - Has a national mandate in export of coffee.

Ethiopian Coffee Exporters’ Association -ECEA members accounted for 90% of the country’s total coffee exports in 2009/2010.

Ethiopia Commodity Exchange Authority - EXCA is the principal regulatory authority over coffee sales and the mandated authority for the marketing system across producers, buyers, sellers and intermediaries.

This group will permit the government to engage in operating a National Platform in a careful and

cautious manner. The institutions can start sharing ideas and plans for the operation of the Platform.

Once the Platform is fully operational the composition of the SC may change.

Platform Plenary

The Plenary sessions will be open to all coffee stakeholders and will aim to be inclusive. These Plenary

sessions will be opportunities for the SC and TFs to make presentations and socialize new ideas across

the sector. The Plenaries will provide time and space to allow participants to express their views and

share experiences.

Task Forces

The platforms task forces consist of members of the National Platform that focus on a particular

technical objective that has been identified as a national priority. The task forces will convene to

address the priorities and deliverables set by the steering committee, document and define specific

problems related to the deliverables (i.e. baseline assessment), elaborate work plans for completing

taskforce deliverables in a timely manner and inform steering committee and Plenary on progress made

on achieving the specific objectives identified by the national platform.

It is proposed to start in the first year with upto three Task Forces. The government has proposed the

following three thematic areas:

- Branding, marketing and intellectual property

- Sustainable production practices

- Value chain analysis

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Once these are operational and successful additional Task Forces may be created.

Coordination Unit

The Platform Coordination Unit Coordination provides technical advisory services to support organize

and facilitate Platform operations, partnership building, conflict resolution, supervision of technical

studies, M&E and communications. The PCU will be supported by UNDP CO and also UNDP’s Green

Commodities Facility, which will provide quality assurance based on international best practice.

Coordination with IDH

The UNDP supported National Commodity Platform will operate in a distinct space and complement the work of the IDH coffee programme in Ethiopia. IDH and its corporate partners will focus on training and building capacity of coffee farmers in the field to become certified. IDH will reach up to local government but will not focus on national government and policy. On the other hand the UNDP supported National Platform will only focus on engaging stakeholders in national level dialogue in order to improve the national enabling environment for improved supply chains. This Platform project will not work directly on the ground with farmers. So there is no anticipated overlap of duplication between the UNDP and IDH coffee support. Furthermore UNDP and IDH have committed to cooperating and finding alignment and mutual benefit for the country from their respective initiatives in the coffee sector. Further on the ground consultations will be undertaken between them once their respective programmes are under implementation.

Thematically there is also some interesting complementarity. IDH is working with the large global coffee buyers to increase certified coffee in Ethiopia. This is challenging because of the trading and supply chains dynamic in the country. The majority of coffee passes through the commodity exchange and hence loses its identification of origin. IDH is exploring ways to overcome this key challenge and increasing traceability of coffee through supply chains in Ethiopia. The Platform has been requested by government to assist with national branding, marketing and intellectual property for premium coffees. This too will require improved traceability and so is compatible with what companies have tasked IDH to support. One can envision IDH and its partners on the working group which the Platform will set up on branding, marketing and intellectual property. As the Platform already has senior level government buy in this will be a valuable space and opportunity for IDH to share ideas with government counterparts and identify options for overcoming the supply chain challenges.

The details of collaboration and participation in the Platform will need to wait until project implementation as the government has made it clear it will only agree to establish the Platform if it is done in a slow and cautious manner. Only once operational with a small group of institutions will the government consider inviting others such as IDH onto it.

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6. Indicators and Milestones

Indicators

Indicators to measure the success of the pilot Platform are key. They are also challenging and one of the elements of Platforms with which the piloting phase around the world is grappling. This pilot project will help the global commodities team explore and elaborate solid feasible SMART indicators for Platforms.

At this stage the following indicators are proposed to be established for monitoring. They are at three levels: i) stakeholders in the platform, ii) country/platform level results and iii) benefits to the supply chains. They will focus around the following expected results.

Measurable targets of these indicators may include:

- Number of platform meetings (plenary)- Number of participants at the plenary meetings- Number of task forces established- Number of participants in each task force- Identification of joint priorities between stakeholders who have not previously worked together- Recommendations from the Platform for improvements to national policies- Companies investment more funds in sustainable coffee production and purchase from Ethiopia

Milestones

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- Establish platform coordination unit (coordinator, assistant, advisors) within the Ministry of Trade – Month 1

- Establish steering committee and governance structure of the Platform – Month 3- Stakeholder mapping – Month 4- Produce draft Code of Conduct for Platform – Month 5- Launch Platform Plenary – Month 6- Establishment of working groups – Month 7- 2nd Platform Plenary meeting – Month 9- 3rd Platform Plenary meeting – Month 12- Review of progress and lessons learned document - Month 12- Identification and consensus on priorities, problems and possible solutions – Month 12- Identification of Joint Priorities through the continued operation of Platform and Working

Groups – Month 12-18- Formulation of Joint Investment Action Plan for Platform participants – Month 18- Review of progress and lessons learned document - Month 24- Recommendations from the Platform for improvements to national policies – Month 24- Implementation of Joint Investment Action Plan – Month 18-36- Sustainability and Exit Strategy for Platform – Month 30

7 Team and Budget

Platform Coordination Unit (PCU)

The Platform Coordination Unit (PCU), which will direct and coordinate activities, provide overall administrative functions and be responsible for reporting. The PCU will consist of

- 1 full time platform coordinator - 2 part time facilitators- 1 administrative assistant

These would be supported by global level experts as follows:

- 1 international Platform technical advisor and knowledge manager - 1 communications specialist

The PCU will be supported by UNDP CO which will administer the project and ensure day to day progress and UNDP’s Green Commodities Facility, which will provide quality assurance based on international best practice of National Platforms.

Project Costs will include: Salaries, Workshops, Local Travel for participants (coops/farmers), Communication products, International travel, Technical Studies, Office space, Computers, Communication budgets, Venue rental and food.

See budget table for full breakdown.

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Annex INSTITUTIONAL ACTORS IN THE COFFEE SECTORS

Currently, various government organizations, the private sector and civil society organization are involved in the value chain of the coffee sector in Ethiopia.

Ethiopian Coffee Exporters’ Association

Formed in 1969, ECEA’s mandate is to promote Ethiopian coffee in the world market. At present the Association has 97 active members who work together with the Government and amongst themselves in resolving issues and finding solutions for emerging problems. ECEA members accounted for 90% of the country’s total coffee exports in 2009/2010.

Ministry of Trade

The Ministry of Trade’s principle objective is to promote the expansion of trade. Specifically, it undertakes these activities:

Create conditions for the promotion and development of the Country’s export trade; Strengthen the Country’s foreign trade relations and, without prejudice to the provisions of the

relevant laws on treaty making procedures, negotiate and implement agreements on trade as well as port and transit services;

Maintain efficient marketing system and fair trade practices to promote and develop the domestic trade;

Provide business registration, licensing and regulatory services in accordance with the relevant laws;

Undertake studies relating to basic commodities and services that have to be under price-control and, upon approval by the Council of Ministers, follow up the implementation of the same;

Cause the expansion of quality and standardization services; Encourage the establishment of chambers of commerce

The directorate responsible for agricultural commodity export promotion and regulation has the role and responsibility to:

Collect, organize, analyze and disseminate data on agricultural commodities supplied to the Ethiopia Commodity Exchange from different regions.

Collect, organize, analyze and disseminate data on agricultural commodities marketed through the Ethiopia Commodity Exchange on the bases of their origin, type, grade and volume.

Undertake regulatory activities as per the provisions of proclamations issued on the marketing of agricultural commodities.

Issue dispatch vouchers for agricultural commodities traded at the Ethiopia Commodity Exchange before they are transported from the ECX warehouses to the premises of exporters who have purchased the commodities.

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Control illegal movement of agricultural commodities through check points located at different entry points of the city of Addis Ababa

Issue ICO certificate of origin for every consignment of coffee exported upon delivery of the necessary documents.

Obtain from Reuter daily international coffee prices at the New York auction and disseminate information to users.

Identify avenues for illegal trade in agricultural commodities and design and implement appropriate control strategy.

Control the movement of agricultural commodities destined for local consumption to ensure their delivery by wholesalers to their legal destinations.

Formulate and also make necessary amendments to guidelines for the implementation of proclamations and regulations issued on the marketing of agricultural commodities.

Undertake awareness raising programs on proclamations, regulations and guidelines issued on the marketing of agricultural commodities.

Ethiopia Commodity Exchange Authority

A newly established institution, the principle purpose of ECXA is to transform the country’s agriculture to market oriented production system. ECXA is mandated to create an efficient, transparent, and orderly marketing system that serves the needs of buyers, sellers, and intermediaries, and promote increased market participation of Ethiopian small scale producers.

Ethiopia Intellectual Property Office

Objectives are to:

Protect intellectual property Create an information system and provide service to users Develop and submit policy and legislation proposal to the Government on IP. Render advisory service on intellectual property matter and undertake popularization activities

to create awareness among the general public. Support and strengthen inventors, authors and musician associations and other similar societies Establish relation with foreign national, regional and international intellectual property offices

and other relevant institutions.

Ministry of Agriculture

Under this Ministry, there are three State Ministers - Disaster Prevention, and Natural Resources Conservation and Development. The following executive organs and public enterprises are accountable to the MoARD: The Cooperatives Commission; the Ethiopian Institute of Agricultural Research; the Institute of Biological Diversity Conservation; the National Veterinary Institute; the Ethiopian Seeds Enterprise; and the Ethiopian Grain Trade Enterprise.MoARD has the following powers and duties, among others:

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To promote the expansion of rapid and sustainable agricultural and rural development To prepare land-use and administration policy as well as draft laws on the conservation and

utilization of forest and to follow up and coordinate their implementation, To encourage and assist the provision of agricultural extension services to peasants and

pastoralists To facilitate the provision of credit facilities to peasants and pastoralists in cooperation with the

concerned organs To provide comprehensive support to private investors engaged in the agricultural sector To monitor events affecting agricultural development and to set up an early-warning system To undertake the following with a view to enhancing market-led agricultural development and

creating efficient agricultural inputs and products marketing system Closely monitor market signals, in particular those of international markets, and provide

peasants, pastoralists and investors with comprehensive, up-to-date and accurate information to enable them identify those agricultural products which they can produce at competitive price and quality

Conduct demand forecast studies for major agricultural products and inputs and disseminate the results thereof to the concerned parties

Devise ways and means of promoting the domestic and export agricultural products’ market

Promote the establishment and expansion of agricultural products market centers in cooperation with the concerned organs

Office of Prime Minister The Prime Minister’s office has established an export coordinating committee which provides an overall guidance to the export sectors and other sectors involved in export and export related activities. The committee is chaired by the Prime Minister and members on dawn from different Ministries and agencies.

Environmental Protection Authority

the objectives of the Authority are to ensure that all matters pertaining to the country's social and economic development activities are carried out in a manner that will protect the welfare of human beings as well as sustainably protect, develop and utilize the resource bases on which they depend for survival. The powers and responsibilities of the EPA include the following among others:

To coordinate measures to ensure that the environmental objectives provided under the constitution and the basic principles set out by Environmental Policy of Ethiopia are realized

To prepare, review and update the preparation of environmental policies, strategies and laws in consultation with the competent agencies, other concerned organs and the public at large and upon approval, monitor and enforce their implementation

To establish a system for environmental impact assessment of public and private projects, as well as social and economic development policies, strategies, laws and programs

5.5. Private Sector Actors More than 120 Ethiopian coffee exporters are participating in processing and exporting coffee to all destination of the world. Among these exporters 95% are private companies 5 are coffee growing

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farmers’ cooperative unions and two are government enterprises. Based on the actual coffee export performance of Ethiopia in 2010/11 Germany (32%), United States of America (12%), Saudi Arabia (11%), Belgium (8%), and Italy (7%) are the major top 5 coffee export destinations for Ethiopia.

Agricultural Transformation Agency

The mandate of the ATA is to address systemic bottlenecks in the agriculture sector by supporting and enhancing the capability of the Ministry of Agriculture and other public, private and non-governmental implementing partners. It does this by:

Leading problem solving efforts to facilitate identification of solutions to address systemic bottlenecks in priority areas.

Supporting implementation of identified solutions in high priority areas by providing project management, capability building, technical assistance and knowledge sharing to implementing partners

Enhancing linkages and coordination among agricultural stakeholders in high priority areas to reach agreed upon milestones and objectives that transform the agriculture sector and lead to middle income country status.

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Annex Standard Platform Objectives and Structure

Platform Goal and Objectives

Specific areas for intervention will be determined by the actors participating in the platform and depending on the country or commodity needs. The overarching goal and objectives are as follows:

Goal:To secure sustainable supply and enhance a country’s competitiveness based on improved environmental and social performance within an agricultural supply chain.

Overall objective:To institutionalize best practices within the country’s governance and supply chains

Specific objectives:

The deliverables of a National Commodity Platform can include:

1) National Strategy for responsible production and trade of the targeted commodity(includes actions of government, private sector, producers and buyers)

2) Case studies of how leading businesses can play an important role in the transformation of commodity value chains

3) Capacity building program (on both cooperative and government level)4) Policy reform recommendations (e.g. review legislation for land use planning, ecosystem

maintenance, vocational training system, fiscal policy instruments, purchasing policies of buyers).

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Structure and Operation of a National Platform

National Platforms are hosted and led by the national government. For example, in Costa Rica the National Platform for the Responsible Production and Trade of Pineapple is hosted by the Vice-Presidency of the Republic and co-directed by the Minister of Agriculture and the Minister of Environment, and in Indonesia the Vice Minister of Agriculture is launching a National Palm Oil Platform in collaboration with industry partners. State or provincial level Platforms can also be established according to the country’s circumstances.

All cooperatives, organisations, institutions and companies with a stake in a particular commodity supply chain are invited to participate. In order to be inclusive, particularly of small producers, no fees are applied. Funding (public and private) for Platform operation is expected for the duration of the first 3 years of the Platform, after which the government is expected to take over the leadership of the Platform and continue the multi-stakeholder dialogue.

Decisions are made in a manner that optimizes and balances democratic means with the ability to move forward, and are based on rules decided by Platform members. While there is no formal obligation for members to implement any recommendations made, the expectation is that the ownership, trust and alignment created between members throughout the platform process will generate a commitment from the participants to follow through with implementation. Platforms offer an opportunity for increased participation, but they are not a substitute for law-making; decisions pertaining to policy and legislation can be made as recommendations by the Platform members to government for consideration.

National platform staff, supported by UNDP, will coordinate, facilitate and provide technical advice. They will be responsible for keeping participants and relevant stakeholders informed about decisions and how the dialogue process is advancing in relation to the Platform objectives.

National platforms are based on the following principles: neutral, empowerment and social inclusion, multi-stakeholder, strong facilitation, and conflict resolution.

Members

Based on the objectives of a Platform, a wide range of strategic partners will be invited to participate.

Public Sector Public sector institutions (eg Ministry of Agriculture, Environment, Labor, Trade,

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Education etc) Local government from Mayor to village Chief

Private Sector Buyers, manufacturers, traders, retailers Private organizations that represent the producers’ interests such as industry

associations, chambers of commerce, labor unions, cooperatives, international commodity organizations

Banking or financial entities that provide financing for production of the selected commodity

UN related entities IFAD, FAO, UNICEF, ILO, UNESCO, UN REDD IFC and WB

NGOs/CBOs NGOs (international and domestic) involved in the sector in either support or watchdog roles

Certification schemes and commodity roundtables Research institutions and organizations that have developed studies on the impacts

of the selected commodity production Community organizations from the production landscapes

Donors Donor governments

The success of a platform relies heavily on key partner participation, building on existing initiatives (eg trade and industry associations, roundtables, certification programs and international commodity organizations) and their continuing work towards building sustainable commodity supply chains and markets.

Meetings - Plenary and task forces

Plenary meetings where representatives of each of the involved sectors participate are held every quarter. All members are invited to Plenary and are expected to attend for consistency. The plenary sessions consist of presentations given by different stakeholders and institutions related to issues discussed during task force meetings and that have a direct relation to defining a model for responsible production and trade. They are an opportunity for stakeholders to voice opinions and reach consensus on key issues.

Task forces are smaller committees formed by Platform members who have expertise or a specific mandate regarding a particular issue, e.g. water management. They are convened regularly and report back to the plenary. Taskforces are set up to actively address issues raised in the plenary. In order to aid efficiency, membership is solely for experts in the given area.

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