Miller Magazine Issue: 128 August 2020

EthIopIa 78 MILLER / August 2020 With about 109 million people, Ethiopia is the sec- ond-most populous nation in Africa after Nigeria. Ethiopia is one of the top performing economies in Sub-Saharan Africa. Ethiopia’s location gives it strategic dominance as a jumping off point in the Horn of Africa, close to the Middle East and its markets. Over the last decade, Ethiopia has had one of the fast- est-growing economies in the world, with an average an- nual growth rate of 14%. In 2019, Ethiopia’s real Gross Domestic Product (GDP) expanded by nine percent, and growth is expected to fall to 6.3 % in 2020 due to Covid-19, according to the World Bank. Factors of pro- duction in Ethiopia such as land, labor, and energy costs are low relative to African and other global markets. Agriculture is an engine of the Ethiopian economy, em- ploying 80% of the total population, contributing 39% to GDP, and generating 90% of its foreign currency from exports. Ethiopia’s agricultural exports are primarily un- processed commodities, including coffee, oilseeds, puls- es, live plants, and cut flowers. Ethiopia possesses a wide range of agroecological zones, arable land, and access to labor, which allow for a wide range of agricultural sys- tems. In Africa, Ethiopia is a major producer of coffee and barley. Additionally, among African countries, Ethio- pian production ranks second in sorghum, third in maize, third in wheat, and fourth in coarse grains. Finally, Ethi- opia maintains the largest number of livestock in Africa. Chinese companies, supported by Chinese export trade and project finance agencies, are active in Ethiopia and pursue projects in the infrastructure and textile sectors. Indian and Saudi Arabian firms are mainly involved in the agricultural sector. Many Indian companies have also begun to invest in the government-sponsored industrial textile parks. Dutch companies play a prominent role in the floricultural industry and Turkish companies are in- creasingly engaged in manufacturing, particularly textiles and garments, as well as in construction. Agriculture is the mainstay of the economy. The ag- riculture sector plays a central role in the life and liveli- hood of most Ethiopians. The Ethiopian Government has formulated a series of policies, strategies and programs to promote agricultural development to achieve food and nutrition security and build resilience. The govern- ment has developed second Growth and Transformation Plan (GTP II) for the period 2016-2020. The overarching objective GTP II is the realization of Ethiopia’s vision of becoming a middle-income country by 2025. In GTP II, the agriculture sector is considered as one of the major sector driving growth. The plan under this sector focused on improving agricultural production and productivity and commercialization; reduce degradation of natural resources and improve its productivity; reduce vulnera- bility to disaster and build disaster mitigation capacity via ensuring food security. Overall, the economic reform plan sets out required strategic interventions to boost agricultural productivity and modernization of agriculture in the next 10 years. The reform’s success in supporting Ethiopia’s econom- ic growth in part depends on the development of the agro-processing sector (e.g. processed food, beverages, and livestock products – meat, milk, and eggs), as well as the textile/apparel and leather industries. Agro-pro- cessed products, such as chicken, cheese, butter, eggs, biscuits, bread, juice, etc. will supply the domestic mar- ket. Some of Ethiopia's cash crops show potential for growth and offer possible investment opportunities in areas such as coffee, oilseeds, pulses, fruits and vegeta- bles, honey, cut flowers, tea, and spices. Most of these crops are exported to generate foreign exchange. In the future, the government intends to work with the pri- vate sector to develop the capacity to process some of these commodities, like fruits and vegetables, in order to add value and capture higher export prices. To meet its agro-processing objectives, the government is building Integrated Agro-Industrial Parks (IAIP) in four pilot ar- eas: Amhara, Oromia, SNNP, and Tigray regional states. The four industrial parks are situated in strategic loca- tions throughout Ethiopia and were selected based on the area’s agricultural potential, infrastructure facilities (water, electricity, etc.), and regional market potential. The government aims to boost exports and trade through $1 billion of annual investment in agro-processing indus- trial parks to make Ethiopia a top manufacturing hub on the continent. Commodities intended for processing include coffee, sorghum, maize, sesame, horticulture, meat and dairy, and cereals, among others. The IAIPs will include compa- nies that export value-added agricultural products as well as those producing products for domestic consumption. Major agriculture processing potential includes cattle fattening and processing, chicken production and pro- cessing, livestock feed manufacturing, wheat-based food production (e.g. pasta, biscuits), sesame processing (e.g. tahini), soybean crushing (e.g. soybean oil and feed), sugar production and processing, juice and dairy manu- facturing, as well as garments and leather goods. As the economy grows and the population expands, consumer demand for certain types of foods is expected to increase. In particular, demand for cooking oil, sugar, meat, eggs, dairy products, wheat-based products, such as pasta and bread, alcoholic and non-alcoholic beverag- es, are forecast to climb upward. The increased produc- tion coming from existing and anticipated investments in the local agro-processing sector, as well as imports, are expected to help satisfy this growing demand. The expected growth from these agriculture-related industries offers numerous opportunities for agricultural input sales, such as tractors and harvesters, farm trucks, fertilizer, irrigation equipment, grain handling systems,