Agro-industry: Crucial for Ethiopia's Economic Development

Ethiopia has set the right direction and strategy for the development of agro-industry both in and outside of the industrial parks.

By Solomon Dibaba (The Ethiopian Herald)

It is a common knowledge that Ethiopia is a country in which the livelihood of 85 percent of its population depends on agriculture. The sector has always been the pace setter of the country’s economy. It is therefore natural that developing agro-industry has become a top priority agenda of the nation.

The development of agro-industry can effectively set the transition from the export of raw agricultural products to value added, processed and standardized quality agricultural products for the global market targeting at increased national foreign exchange earnings.

Ethiopia is indeed endowed with more favorable agro-climatic ecology which enables it to produce a variety of crops either for food or as raw material inputs for various industries.

Traditional Ethiopian agricultural export products include: coffee, livestock products such as skins and hides, leather, live animals and meat as well as oil seeds and pulses, fruits, vegetables and flowers, textiles, natural gum, spices and mineral products. Some figures speak for themselves. An estimated 65% of the country’s coffee is naturally dried before export. When it comes to livestock, Ethiopia is the world’s tenth largest livestock producer and the biggest exporter of livestock in Africa.

As recent report indicate, nation’s livestock resources are estimated to be approximately 57.83 million cattle, of which 55.38 per cent of them are female. It has also 28.89 million sheep, 29.7 million goats, 1.23 million camels, 60.51 million poultry, 10.37 million equine and 5.9 million bee colonies.

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Ethiopia presently offers the global market a wide range of processed and semi-processed hides and skins. Some of the products, such as Ethiopian highland sheepskin, are renowned for their quality and natural characteristics. The export of finished leather and leather products such as leather garments, footwear, gloves, bags and other leather articles are also showing remarkable increments.

Ethiopia produces a variety of organic oil seeds and pulses which are also used for grading in international markets. Sesame, Niger seeds, linseeds, sunflower, ground nuts, rape seeds, castor oil seeds, pumpkin seeds, haricot beans, pea beans, horse beans, chick peas, beans and lentils are all exported to countries of the EU, Asia, the Gulf States and neighboring African countries.

Natural gums used for industrial and pharmaceutical purposes are also among the major agriculture related export items.

Tea, Fruits, vegetables and flowers are also exported to international markets. Major vegetable export products include: lettuce, potatoes, green beans, okra, melons, white and red onions, shallots, cabbages, leeks, beetroots, carrots, green chilies and tomatoes.

Among the main exportable fruits are oranges, mandarin grapefruits, mangoes, guavas, lemons and limes. Cut flower and vegetable production are fast growing export businesses, and Ethiopia is a center of diversity for a variety of flowering plants. The volume of export of these products is growing and showing great promise. Main cut flower exports include: statice, alliums, roses and carnations.

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Agro-processing prospects become manifold when potential is exploited along the life cycle of the commodity. For example, maize flour or maize starch processing provides maize germs; gluten, feed and other byproducts that can be further processed or marketed. Similarly, in livestock based products, processing can be made of meat, bone, hide, skin and wool.

As the largest agriculture based sector, agro-industry or more commonly agro-processing, in Ethiopia is dominated by the food and beverages industry. In addition to the size of the sector becoming significant, its growth trend predicts nation’s future opportunities.

Even by regional standards, Ethiopia can confidently enjoy a comparative advantage by exporting value added agro-industrial products to neighboring countries.

Food importing countries like Sudan, South Sudan, Somalia and Djibouti mainly drive regional market for processed goods. For instance, some 60% of food consumption in Somalia is imported. Ethiopia earned 300 million USD from Somalia, 93 million USD from Sudan and 75 million from Djibouti from export of semi and processed foods earned in 2013.

Overall, the regional market offers even greater shares and there is room to improve export performances to the East African region.

As for the international market, Ethiopia has many bilateral and other trade agreements which makes the country one of an interesting investment destinations.

Ethiopia remains therefore a pertinent choice for agro-industry and agro-processing investments along with the value chain.

According to Ethiopian Investment Commission (EIC), over 11,000 foreign investors and joint venture (local with foreign) were registered to invest in agro processing in Ethiopia between 1994 to July 2015, though less than half of them have set up business in the country.

Despite the viable advantages the country can enjoy in accelerating the development of agro-industries through the formation of agro-industrial parks, there are quite a few challenges that the sector is expected to face at the take off stage.

The availability both in quality and quantity of raw materials for the agro-industrial parks is of crucial importance for the smooth development of the sector. It is difficult to assume that the few private and state farms can fully provide these raw resources. It is also impossible to depend only on the products from patches of farmlands owned by local farmers.

Indeed, the current farming development in the nation is not in a position to support the aspired manufacturing and industrial transformation at the moment. To end this, the government has set an ambitious target in its second Growth and Transformation Plan (GTP-II) to modernize the agricultural sector and to be in a position to provide input so as to support the agro-processing and manufacturing sectors.

Although there is a potential in Ethiopia for producing organic raw materials for agro-industrial parks, the processing of strong coordination and networking among stakeholders involved in the development of agro-industries can take some time as a viable strategy needs to be put in place through mainstreaming the task of supporting agro-industrial parks from different angles.

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Ensuring adequate financial resources, particularly for those local investors who wish to join the parks is an important factor that needs to be addressed.

Setting up a viable environmental protection projects in close proximity with the parks require concerted efforts of not only responsible stakes in the economy but also a meaningful and reward based cooperation from residents in adjacent communities. This requires a continuous and well targeted effort.

Major stakeholders in the sector include the Ministry of Agriculture, Export Promotion Agency, Ethiopian Standards, Conformity Assessment Agency, Industrial Parks Development Agency, Agricultural Research Institutes

Export of agro-industrial finished products in the global market entails fulfillment of international export standards for food and food related items including codex alimentarius. The certification of export commodities from the agro-industrial parks and other farms is a major pre-condition for qualifying for good market prices at the global markets.

Despite the above mentioned advantages and challenges, there is a bright future for the development of agro-industries in the country. The sector can easily absorb huge amount of labor force and can play a decisive role in import substitution for various industries like beverage and textiles.

Ethiopia has set the right direction and strategy for the development of agro-industry both in and outside of the industrial parks. Over the coming two years of GTP II, meeting targets in the plan is of crucial importance for the uninterrupted economic growth of the country.

Source: The Ethiopian Herald
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