In former centuries the country was the breadbasket for its neighbours. In recent decades, however, erratic rainfall, erosion and land degradation from centuries of less sustainable farming methods and deforestation have taken their toll.
Population density per square kilometre has climbed from 17 people/km² in 1950 to 59 in 2000 and could reach 157 by 2050, according to UN figures. Plots are often tiny and some perceive land tenure as insecure. Subsistence farming and husbandry no longer sustain. Even in good years, millions of people need food relief, while hard years can double or triple the numbers for emergency and relief food.
The government, supported by a wide range of bilateral and international agencies, has built good systems for early detection of problems, and regional storage and local distribution of food. But droughts such as the current one cause devastation.
Responses to the crisis include diversifying Ethiopia’s economy, new emphasis on commercial agriculture, improving land management and ambitious attempts to restore damaged landscapes and replant forests. Even in drought years, most of Ethiopia is still green and the land’s huge overall agricultural potential is not diminished, as can be seen from its soaring production of food and export crops.
Farming is still central to the livelihoods and income of most of the population and has huge potential, so it remains at the core of growth plans in the government’s current five-year Growth and Transformation Plan (GTP).
It foresees more high-value crops with focus on areas with potential for high productivity, large-scale commercial agriculture and commercialisation of smallholder farming.
Even under the base-case scenario, the national target is for agriculture and allied industries to grow by 8.6% a year until 2014/15. This includes increases in crop productivity, doubling in flower exports to 5.9bn stems, tripling of farming extension services to reach 14.6m beneficiaries, coffee exports nearly doubling to 600,970 tonnes and meat exports climbing tenfold to 111,000 metric tonnes. Ethiopia offers 18 major agro-ecological zones, including cool, high altitudes, hot rainforests, savanna and deserts, and 146 crops are currently grown.
Its biggest cash crop is still coffee. In September 2011, the Ministry of Trade and Industry said the value of coffee exports in 2010/11 rose 38% to $841.7m, through exports of 196,188 tonnes of coffee.
Helaway Tadesse, Senior Vice-President at Zemen Bank, added that world coffee prices were up some 40%.
The US Department of Agriculture ranks Ethiopia as the world’s sixth-biggest coffee exporter for the 2010/2011 crop year with 4,400 bags of coffee (264,000 kg). Coffee accounted for 30% of the country’s total exports, down from 65% a decade ago because of prices and increase in other exports.
Other export and cash crops include oil seeds, whose 2010/11 exports fell 9.5% to $323.9m; and a leafy narcotic called khat, which is popular in the export markets of Djibouti, Somalia and Yemen, and saw revenues up 14% to $238.4m as overseas users munched their way through 40,973 tonnes. Other agricultural products are cereals, pulses, meat, hides and skins; the farming of cotton, tobacco, sugar cane, tea, spices and horticultural crops is increasing.
Major cereals grown include teff (the staple which many Ethiopians use to make their favourite injera pancakes), barley, wheat, maize and sorghum.
Oil crops include sesame, groundnut, rape and linseed and pulses include peanuts, beans, peas, chickpeas, lentils, haricot beans and others. Horticultural exports include cut flowers, fruits and vegetables such as snow peas, mangetout, peppers, asparagus, herbs, mango, citrus and avocado.
Ethiopia has Africa’s biggest livestock herds, with one recent report indicating 43m cattle, 31m sheep and 27m goats. It also produces 43,700 tonnes of honey and 3,600 tonnes of beeswax.
The Ministry of Agriculture, Water and Rural Development has targeted 35 commodities for further commercial development. These include cereals and pulses as well as new staples such as rice and a range of cash crops including fruits, vegetables, oil seeds, coffee, tea – and new arrivals palm oil, rubber and cotton.
In 2008, France’s Castel, which runs Ethiopia’s main BGI brewery, started planting 750,000 vines on a 125ha farm which will produce 800,000 bottles of wine, of which half is for export. It also built a winery and vinification facilities and hopes one day to compete with South Africa’s wines.
There is potential to expand honey, spices, jatropha and other biofuel plants production. Agro industries such as sugar and food processing, leather, textiles and clothing have been targeted. Government support also includes building roads and other infrastructure and loans to priority projects from the Development Bank of Ethiopia.
Incentives for investors are mainly aimed at growing crops for export. They include three to seven years of income tax holidays, some duty-free imports of capital equipment, no water charges for bore holes and other sources, leases up to 45 years at fixed prices (for instance set for 10 years and then subject to limited increases) and no restrictions on the use of land for particular crops or purposes.
According to research, commercial agriculture yields can be two to three times those of traditional farming as it uses more inputs including fertiliser, irrigation and better farming methods.
Commercial farming is growing in importance and includes some giant projects. According to the Ethiopia Macroeconomic Handbook 2010 of research and investment advisory firm Access Capital: “From a foreign investor’s perspective, Ethiopia’s land allocations for commercial agriculture stand out for their large size, wide scope and low price.”
The government aims to transfer nearly 3.3m ha land to commercial farming investors in a transparent and accountable manner, according to the GTP. This is 18% of the total 18m ha under cultivation, or 4% of the total 74m ha which could reportedly be cultivated. By comparison, the country’s plans to achieve zero carbon emissions by 2025 will include reforesting 15m ha of land.
According to Access Capital, land prices in 2009 were around birr 25 (then $3) per ha in Benishangul Gumuz regional state varying up to birr 125 ($10) in Oromia. This year, annual rentals of between birr 30 ($1.70) and birr 158/ha were recorded, compared to an African average lease price of $350-$800/ha.
Comparative figures from property specialist Frank Knight LLP (The Wealth Report 2011) show farmland in the UK averaging $22,000/ha, Brazil $300-$6,000/ha, depending on type, and Ukraine from $150-$350.
Foreign interest in Ethiopian farmland has surged as world food prices have soared, with commercial investors and Middle Eastern governments keen to secure food sources.
A specialised directorate has been set up to supervise land allocations to foreign investors, usually on a ‘use it or lose it’ basis, with monthly performance evaluation to try to avoid land speculation. The directorate administers commercial schemes including a national land bank and transfer database, models lease terms and contracts, and supervises and limits third-party land transfers by commercial developers.
It was also expected to introduce a lease-price system that will take into account economic factors, including access to markets and export points. This could increase land prices dramatically, particularly for plots close to Addis Ababa.
Three regional states (SNNPR, Gambella and Benishangul) transferred more than 1.7m ha of land to the new directorate.
Large foreign allocations
There have been some large allocations. India’s Karuturi Global started with flower farms and was allocated and cultivated an 11,700 ha farm for maize and vegetables. It was then allocated 300,000 ha in Gambella for palm oil, rice and sugar cane but in May 2011 Bloomberg reported this had been scaled back to 100,000 ha.
In May 2010, India’s Ruchi Soya Industries received 25,000 ha in Gambella for soya and later another 25,000 ha for biofuel seeds.
Other projects listed include: Shapoorji Pallonji, 50,000 ha for biofuel; BHO Agro plc, 27,000 ha for biofuel seeds; China’s Hunan Dafengyuan Agriculture Co, 25,000 ha for sugar cane; Spentex Industries Ltd of India, 25,000 ha for cotton; Vedanta Harvest PVH, 15,000 ha for tea, biofuel and industrial chemical production; and Romton Agri Plc, 10,000 ha for tomato farming. Another three agreements to take on leases total 140,000 ha. Other investors include Chinese, British, Turkish, Egyptian, South Korean, Nigerians and nationals of several other Middle East countries.
One of the first giant new farms to start producing was Saudi Star Agricultural Development. In 2009, King Abdullah of Saudi Arabia held a ceremony to receive the first rice from its $100m Ethiopian farm.
The Saudi group of investors started with 10,000 ha for wheat, maize and rice but has been acquiring more farms quickly and hopes to spend $2bn getting up to 500,000 ha. Saudi Arabia is reported to be among governments providing low-cost loans for investors to acquire land.
Low land prices in parts of Africa, including Ethiopia, attract international agribusinesses, investment banks, hedge funds, commodity traders, sovereign wealth funds and pension funds, as well as individuals and family investors.
The marketing of agricultural produce is also changing. The Ethiopian Commodity Exchange (ECX), launched in 2008 is transforming trade in the country’s major commodities coffee, sesame and white peabeans into a fair and accessible process with open outcry trading on a floor in Addis Ababa. Prices are disseminated widely to farmers and farmers associations, including through sms services and datafeeds.
It has also brought reliable grading and delivery across the country with 16 regional warehouses and capacity for 200,000 tonnes. Dynamic CEO Dr Eleni Gabre-Madhin proudly points to a record of zero defaults while trading over $1bn worth of commodities in the first 1,000 days. She is also proud that cooperatives, representing 4.2m small farmers, make up 12% of participation in trading.
If you drive through the country, you can still see people using scythes and winnowing fans, with oxen threshing the corn, but as Ethiopian agriculture emerges from biblical patterns, food production is set to soar.
Giant tractors moving under satellite control across the landscape, trading floors and screens, and huge computer-controlled greenhouses covering up to 20 ha for fresh vegetables that are chilled, packed and heading to the airport within hours of leaving the field may be replacing the home-bound cattle and shepherd pipes of tradition.