Background of the Agriculture Sector

 Policies & Strategies

Cash Crops

Coffee

Ethiopia is the original home of coffee and the name "coffee" itself was derived from Kaffa, a region where coffee has been and still is a wild crop. The country produces one of the best coffee in the world. Coffee is also the single most important crop of Ethiopia as a provider of foreign exchange. Prior to the coming to power of the defunct military regime, coffee production, processing, and trading were in the hands of the private sector. During the military regime, private farms were nationalized and smallholder coffee producers were neglected. Private entry into coffee export got a high fillip after the declaration of a new market-oriented economic policy by the Transitional Government of Ethiopia (TGE) in 1991. As a result, the number of private coffee exporters has been rapidly increasing and the volume of coffee export has significantly increased.

Coffee remains the single most important export crop, utilizing over 400,000 hectares under cultivation. The volume of coffee exports increase steadily from 100,000 tons in 1995/96 to just over 110,000 tons in 2001/02. Thus, the potential for the private production and processing of coffee is still significant.

Cotton

Cotton is an important fiber crop grown in Ethiopia. Large-scale production, under irrigation, is carried out in the Awash Valley where there are about 50,000 ha. under cotton. Small-scale farmers cultivate around 42,000 ha. of cotton annually. There is a huge potential for expansion of cotton cultivation especially in the Omo-Gibe, Wabi Shebelle, Baro-Akobo, Blue Nile and Tekeze river basins. Cotton production is well integrated into the rest of the economy with a large number of textile and garment factories relaying on domestically produced cotton. Opportunities and processing of cotton in Ethiopia are thus significant.

Tea

Tea was introduced to Ethiopia in the early 1920s with some trials in production. Since 1980, tea has been planted on commercial scale. Currently there are 1,300-1,500 ha. of land under tea. It is also foreseen that the habit of drinking tea in Ethiopia will further develop, while coffee remains the favorite.

Sugarcane and Spices

A considerable opportunity exists for the production of sugar and spices for the domestic as well as for the export market. At present, there are three large-scale sugar estates in the country; two of them in the Awash Basin and one in the Blue Nile Basin. Spice bearing plants are cultivated in the southern and south-western parts of the country. Ethiopia exports sugar and significant quantities of spice extracts.

Oil Seeds

Rape seed, lineseed, groundnut, sunflower, niger seed and cotton seed serve as raw materials for the domestic edible oil industry. The total oil seeds exports for the year 2001/02 were 76 millions kgs at a level of same US $30 million. Favorable agro-ecological conditions exist for introducing coconut for the production and processing of palm oil.

Tobacco

Although the potential is huge, tobacco is presently grown at only two different sites in the country, i.e., Shoa Robit and Blatie. The farms are operated by Addis Ababa Cigarette Factory. The Shoa Robit farm is 80 ha. and the Blatie farm 250 ha. In addition, 350 ha. of land is cultivated by out growers who get extension service from the factory. The yield per hectare at both farms is estimated at 1,000 kg. The factory is not, however, self-sufficient in the supply of tobacco and accordingly imports about 600 tones per year. Thus there is ample opportunity to grow tobacco in the country both for export and supplying the local industry.

Horticultural Development

The agro-climatic conditions of Ethiopia are suitable for the production of different kinds of horticultural crops (fruits, vegetables and flower). The involvement of the private sector is highly encouraged in the production of edible fruits and vegetables such as oranges, bananas, mangos, apple, peach, papaya, avocado, grapes, lemon, carrots, tomato, cabbage, etc.; in the production and marketing of flowers, horticultural seeds and other ornamental crops; and in the establishment of nurseries, storage and preservation facilities for fruits, vegetables and flowers. Floriculture development has recently been booming particularly, in the central highlands attracting both foreign and domestic investors alike because of the high quality flowers grown thanks to the country's suitable and soil fertility.

Livestock Development

The country has fast weight-gaining cattle breeds, abundant area for ranch and good potential for export of live animals and livestock products. The economic benefits from the sector has not, however, been commensurate with its size. The major production constraints that have impaired the exploitation of such a large resource are under nutrition, malnutrition, disease and poor marketing system. To increase the benefits from the livestock sub-sector, the improvement of traditional animal management techniques and the utilization of more efficient and effective methods of livestock farming becomes indispensable.

Hence, private investors are highly encouraged to participate in the areas of commercial breeding, production and processing of meat, milk, eggs and animal feed.

Fisheries

Ethiopia has enormous water bodies known for their abundant fish resources. The annual fresh water fish production potential is estimated to be about 45,000 tons of which only 20 percent is being exploited. Fish production and consumption has tremendous potential for increasing incomes of fish farmers, improving nutrition level of the population and earning foreign exchange through exports. The development of this sector is, however, constrained by lack of cold storage and transport facilities, poor fishing equipment, inadequate processing capacity, etc. The entry of private investment in the production, processing and preserving of fish and fish products and in aquaculture development is, therefore, highly desired.

Apiculture

The flora of Ethiopia is very heterogeneous and has rich endemic element. In 2001/02 a total of 4,601,806 hives is estimated to be found in rural and urban areas of the country. From this total hives, 4,395,596 (96%) are traditional hives, 195,944 are intermediate hives, and the remaining 10,266 are modern hives. Ethiopia is the first honey producing country in Africa, and the fourth bee wax producing country in the world after China, Mexico and Turkey. Present studies show that, under modern management, the traditional yield of 5 kg of honey per hive in one harvesting season can be improved to 15-20 kg. Such a vast and untapped potential could be a favorable area of activity for investors.

Commercial Forestry

At the turn of this century, the forest cover of Ethiopia was over 40 percent. However, the forest resources are being depleted unabated at a very fast rate. The deforestation rate is estimated to be about 175,000 ha. per annum. The most recent estimations indicate that only 3.5 percent of Ethiopia's land area is now under forest cover. This awful situation has adverse effects on agriculture, energy and construction. An estimated three million hectares of natural forest presently remains in 58 areas designated as National Forest Priority Areas (NFPA). Out of these, 13 areas are administered under integrated management systems, with about 80,000 hectares of industrial forest having been established for limited sustainable exploitation. To reverse the dangerous trend of the current deforestation rate and at the same time maximize the use of the resource, undertaking a sound forest development and utilization programme that includes private investors becomes imperative. In this regard, some of the investment opportunities in the sub sector are:

The production and marketing of gums and incense;

Industrial plantation, eg. timber;

The production of Neem tree and Pyrithrium as sources of raw materials for plant protection chemicals;

The establishment of integrated forest-based industries such as pulp and paper, particle board, chipwood etc., based on plantations of eucalyptus, pine and incense; and

The establishment of rubber plantations and the production of ornamental tree seedlings and shrubs.

Agriculture Business

Fertilizers

Fertilizer is an input to which a relatively large number of farmers have access in the country. The consumption of fertilizers, where the food crop producing smallholder farmer is the major consumer, has reached a level of 279,600 MT in 2001. In 2000/01, the average fertilizer use is about 25 kg/ha and only 25% of the farmers in the country use fertilizers.

On the other hand, much of the land and particularly the high potential cereal production area has been traditionally cultivated since time immemorial and, hence, has been exposed to severe loss of fertility. Intensification of the crop production systems in this and other potential areas necessitates, among other things, a greater and more efficient use of different types of fertilizers.

Ethiopia does not produce mineral fertilizers. However, some initiatives are being taken to produce these chemicals based on the country's natural resource endowments. To this effect, a techno-economic feasibility study for putting up a single super phosphate (SSP) plant, (20 percent P2 O5) and an identification study for a coal-phosphate fertilizer complex project have been conducted. The Calub Gas Project is expected to produce considerable amount of fertilizer. Thus, there is a vast area of investment opportunity for foreign investors to participate in the production of fertilizers.

Agrochemicals

Agricultural pests are always serious threats to crop production in Ethiopia. Although no systematic loss assessment studies have been done, the annual pre-and post harvest losses are estimated to be at least 30% or equivalent to two million tons of grain.

At present, chemical application is one of the available pest control mechanism in the country. Pesticides required to control migratory pests like desert locust, quella birds, army worms, etc. are estimated at about 500,000 lts per year. The demand for pesticides to be used for non-migratory pests, for sprayers and other safety equipment such as goggles, gloves etc. are also high.

Hence, once again, potential investors are welcome to participate in the supply of different kinds of plant protection chemicals and equipment.

Agricultural Machineries and Farm Implements

The use of modern tractors, combine harvesters and related heavy machineries is still very limited in Ethiopia. The Nazareth Tractor Factory, with its limited capacity, is the only company that assembles tractors in the country. On the other hand, a rising trend in the import of tractors and harvesters is being observed as of recent years. Small-scale farmers on their part are looking more into the use of small mechanically-powered equipment both for crop production and post-harvest activities. Thus, great opportunities lie in the assembly manufacture and distribution of agricultural heavy machineries as well as of small-powered equipment such as irrigation pumps, sprayers, mowers, bailers, shellers, threshers, flour mills, powered fishing boats, etc.

Furthermore, agricultural hand tools and traditional ploughs still constitute the major means of agricultural production by Ethiopian farmers. Artisanal production, the main supplier of hand tools and implements, is showing a declining trend mainly due to shortage and rising cost of raw materials. The current industrial production of these implements is believed to be far below the present and future needs of farmers. Consequently, the manufacture, for instance, of improved agricultural tools and implements is very much encouraged.