News Analysis: Ethiopian Khat exporters navigate strict pre-licensing requirements amidst call for oversight, increased revenue

Last week, the Ministry of Trade and Regional Integration recently introduced new pre-license requirements for businesses involved in khat exports (Photo: Nairobi News)

Addis Abeba – In a bid to improve oversight and increase export earnings, exporters of khat in Ethiopia are now mandated to undergo a rigorous registration process. This includes entering into a compulsory agreement with the government, which enforces the use of transport vehicles equipped with GPS trackers to enable efficient tracking of the Khat during transportation.

The Ministry of Trade and Regional Integration recently introduced new pre-license requirements for businesses involved in khat exports. A circular explaining the contents of these requirements was sent last week to eight regional governments and two city administrations.

In addition to possessing a tracked vehicle with a GPS tracker, new exporters must commit to shipping a minimum of 100 metric tons of khat annually in order to be registered. For experienced exporters, an alternative criterion applies. They must provide documentation confirming the shipment of at least 100 metric tons in the previous fiscal year or the generation of $500,000 in foreign currency as export revenue.

An anonymous manager of a khat exporting company in Dire Dawa revealed to Addis Standard that achieving an annual revenue of at least $500,000 can pose challenges due to various domestic factors. “Economic conditions, government regulations, and market dynamics significantly impact the ability of exporters to successfully ship khat,” he said.

According to him, exporters might have to consider embracing alternative strategies or exploring fresh opportunities in order to supplement their export earnings. This could entail targeting diverse customer segments, expanding product ranges, or providing value-added services.

Another exporter of khat, residing in the East Hararghe Zone of the Oromia Region, revealed to Addis Standard that last year numerous khat exporting businesses faced difficulties in shipping the product due to a decrease in production. “Because of such factors, newly-established exporters cannot rival those that have a well-established presence in the market.”

Under the newly implemented pre-licensing requirements, exporters will also be obliged to refrain from engaging in the khat business domestically. Furthermore, they will be expected to submit documentation proving they are not listed as delinquent while operating as khat exporters.

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The circular distributed last week mandates that khat exporters must possess or lease a concrete warehouse with a minimum size requirement of 100 square meters.

Signed by Gebremeskel Chala, Minister of Trade and Regional Integration, the circular states that these pre-licensing requirements are crucial for implementing operational reforms aimed at enhancing the export revenue derived from this particular cash crop.

These new requirements apply to exporters who have renewed their operations during the current fiscal year, as well as those intending to enter the khat export industry. The re-registration period for exporters will take place until 25 November, 2023. Failure to renew licenses within the specified timeframe and fulfill the necessary criteria will lead to the revocation of Khat export licenses for exporters.

The Khat exporter from East Hararghe Zone says the timeframe allotted for registration is inadequate for numerous agencies because the registration process is intricate and time-consuming. “Exporters are obliged to collect and submit a wide range of documents, complete forms, and potentially attend in-person appointments,” he explained. “Given the extent of these requirements, a lengthier registration period is imperative to accommodate all companies.”

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In the past, Khat used to be one of the top five commodities in terms of export earnings in Ethiopia. However, the revenue generated from this cash crop has witnessed a significant decline, dropping from over $400 million a decade ago to $248 million last year.

During a recent press briefing, Minister Gebremeskel emphasized the importance of the pre-license requirements in ensuring fair benefits for farmers involved in the trading sector. According to him, these requirements are vital in preventing the infiltration of illegal traders into the system and promoting the participation of legitimate traders.

The ministry reports that there are currently nearly 5,000 registered Khat exporters in Ethiopia, although less than 500 are actively engaged in the industry. AS

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