Ethiopian Business Review

It Will Take Many Years for Small Scale Agriculture to Scale up

Khalid Bomba is the CEO of the Agricultural Transformation Agency (ATA), which he has helmed since its establishment in December 2010. In that time, his name has become synonymous with the revitalization process in Ethiopian agriculture. 

His road towards agriculture was not a direct one. A graduate of Swarthmore College in the United States, he also holds a Master’s degree from the London School of Economics. He also spent over ten years working in corporate finance, and on sovereign debt issues at JP Morgan, and at other private sector institutions. He was regional director for African countries at the Global e-Schools and Communities’ Initiative, a UN-ICT Task Force, and finally, senior agricultural development program officer at the Bill and Melinda Gates Foundation, after which he was tasked with establishing and leading the ATA, which was financed by the Ethiopian government as well as institutions like the Bill and Melinda Gates Foundation.

The Agency is tasked with crafting policy instruments to forward agricultural development in the country, based on research analysis, as well as helping to provide support and education for those in the sector, operating as something between a public institution and a private business.

Even though Khalid believes that science should be the ultimate decider of the country’s policy direction, the agriculture sector in Ethiopia still relies on tradition wisdom and methods. However, Khalid argues, with the finalization of the soil map, one of the ATA’s grand projects, agriculture will come around in the next few years. EBR’s Ashenafi Endale sat down with him to find out more.

EBR: What impact has the Agricultural Transformation Agency (ATA) had so far?
Kalid: Sometimes it is difficult to define that, but there are two dimensions. The first is based on the specific outputs that ATA generates. For instance, how many studies do we generate per year and how many of them are actually implemented.
But the most important measure of our impact is the achievements at the farm level. For instance, one of our biggest projects is the Agricultural Commercialization Clusters (ACC) initiative. According to an impact assessment conducted last year, the number of farmers included in this initiative has reached 500,000.

What is the difference between ACC and commercial agriculture?
ACC is a type of commercial farming but is not identical to commercial agriculture. It is a means of consolidating farmers. An ACC unit can have up to 200 small farmers. It is a big commercial farm with 200 farmers working in it. Basically, ACC functions like commercial farming but those small farmers jointly own the output.

Does this mean Ethiopia’s reliance on small scale farming no longer viable?
There is still room for small scale agriculture to produce more, if all small scale farmers are scaled up to model farmer levels. However, it will take many years. Therefore, in order to meet the needs of the country, we need to focus equally on both small scale farming in highland areas and exploit commercialized farming in the lowlands.

How can it be possible to expand commercial farming in lowland areas without the necessary policy?
We need to have a policy that encourages the expansion of agricultural commercialization in Ethiopia and start exploiting the lowland areas, which is where Ethiopia’s major potential lies. At the same time, we can commercialize small scale farming in highland areas.  Small scale farmers do not have to stay at the subsistence level. They can produce a surplus if they are market oriented.

Beside the lack of policy, the government has not been able to attract more investment to the agriculture sector. How it is going to work without these important elements?
Of course, we need to have the right policies and strategies to incentivize farmers to produce more for the market. For example, the tax law doesn’t favor the import of tools that are essential for the modernization of small scale farming. The government already recognizes the need to change that. We are working to provide machinery and irrigation technologies to small scale farmers through tax related incentives.
The other point is the need to fill the gap in transportation, logistics, and storage. These things need investments both from private sector and the public.

The agricultural sector’s share in gross domestic product (GDP) is gradually declining. Does this mean the economy is changing?
The reduction in the share of the agricultural sector in GDP is a sign of a transformation in the economy. If you look at any economy, agriculture gets lower and lower as it transforms. That is a natural process. The decline in the share of agriculture in the GDP does not mean an increase in the development of other sectors. It means agriculture itself is transforming itself, and becoming more efficient.

Which sector should be developed first to ensure economic transformation?
If you look at any country in the world, the way they transformed their economies is by first investing in the agriculture sector. But they also invested in industry and manufacturing at the same time.  Especially in countries like Ethiopia, where the share of agriculture in GDP is around 34Pc, and 80Pct of the population is working in that sector, there has to be a parallel focus on agriculture. It is very difficult for a given economy to ensure sustainable development by only focusing on industry and manufacturing. It is very difficult to accelerate industry and manufacturing without transforming agriculture first.

What basic action should be taken to modernize the agriculture sector?
When we say agriculture should come first, it means it should develop parallel to industry and manufacturing. To transform agriculture, the private sector, including farmers, should take the lead. In the past, there was a tendency to look at everything from the perspective of food security, so the farmer was only considered a beneficiary. The development of the sector was donor driven, when the private sector should have had the leading role.
The government must start perceiving farmers as part of the private sector, who want to make profit. Otherwise, it is difficult to transform agriculture. When the farmer becomes part of the private sector, farmers will favor cultivating commodities the market wants. The farmers will also use the best inputs to maximize profits. In doing so, farmers go beyond satisfying their basic needs.

Identifying where and how the private sector can play a bigger role, especially in the supply chain, is important. We need to incentivize the private sector to invest in the supply chain, without which agriculture cannot be modernized.

Small scale farmers are more interested on producing for themselves. How can we change this?
The mindset of smallholder farmers must be changed from subsistence-oriented to market-oriented production. To do so, we must ensure that the farmer is equipped with information to make decision and maximize profits. The other task is linking the farmer to industries. Learning from beer factories that source malt and barley from farmers living in Assela and Gondar is important. The same should be done for all other agricultural items because such partnerships will cut out the middlemen.

On the input side, there are gaps, from fertilizers and seeds to agrochemicals. This should also be handled by the private sector. The private sector should become involved in the seed multiplying and supply business. In doing so, the farmer can access productive improved seeds.
With regards to fertilizer, ATA recently finalized the preparation of a national soil map, which will provide information to every Ethiopian farmer about what type of fertilizer he/she should use. To this end, OCP SA, a Moroccan fertilizer producer, is building a factory in Dire Dawa at a cost of USD3.7 billion. It will be one of the biggest fertilizer industries in Africa.

Producing and supplying multiple fertilizer treatments across the country based on the soil map seems costly and unaffordable for small scale farmers.
It can be very costly at an individual level. But we are preparing the maps at Woreda and Kebele levels. If the majority of farms in that particular Woreda are acidic or alkaline, or needs more magnesium or sulfur, the remedy is supplied accordingly in larger volumes. Compared to supplying each recommendation for each farmer in the country, this is less costly. But the soil map will be interpreted at the Woreda level. In this way, the right fertilizer volume can be supplied for farmers at Woreda the level. Gradually, when the system gets more efficient, we can go down to Kebele and individual farmer levels. 

How do you evaluate the efficiency of the country’s agricultural extension program?
Ethiopia has the biggest agricultural extension system in the world on a per capita basis. But when it comes to efficiency, the system has not improved much. There are many things that should be done and must be improved in the extension system. One of them is the use of Information and Communications Technology to ensure extension workers have the most update information in a timely manner.
The other issue is incentivizing the extension workers, so they can put more energy, time and extra effort into developing their skills. There should be additional incentive packages beyond just salary, to encourage extension workers to fully support the farmer and achieve more production.

Farmers access finance mainly from Micro Finance Institutions, which are not in a position to help farmers purchase more agricultural inputs. Do you think there is a need to establish an agricultural bank in Ethiopia?
The question of establishing an agricultural bank is critical. But it needs a lot of study to decide the bank model. Many countries have established agricultural banks to ensure access to finance and provide loans to the agricultural sector. Unfortunately in Ethiopia, the amount of finance supplied to the agriculture sector is very low compared to its contribution to the GDP. An agricultural bank is one of the many ways to improve agricultural financing.

Unlike small scale farmers, those engaged in large scale commercial farming enjoy more privileges when it comes to accessing finance. But after they receive huge loans from the Development Bank of Ethiopia, many commercial farmers fail to meet expectations. What are the major factors for this?
A lot of projects in Ethiopia, not only commercial farming, but also in other sectors, tend to fail because of weak management and lack of accountability. There is no efficient system that can ensure projects are on the right track. The failure to regularly follow-up on projects is costing the country.

The few financially capable small scale farmers tend to invest in other sectors instead of agriculture. Why is that?
In principle those model farmers and financially able farmers should expand their farms and production, or invest in supply chain, or provide mechanization and irrigation services for other farmers. They should help other farmers to produce up to three times a year, rather than just once. However, there are no policy or incentive mechanisms to keep model farmers on that track. They prefer to invest in other areas, like buying land in big cities or engaging in other businesses. Those model farmers are critical to the transformation of the agricultural sector, because they have the skills, the drive and most importantly the capital. We should incentivize these farmers to benefit most from them.

There are experts who argue that Ethiopia should introduce a more relaxed law that allows the use of Genetically Modified Organisms (GMO) in order to boost productivity in the agriculture sector.

This is a very sensitive and contentious issue. There are issues on both sides of the argument. When it comes to the use of GMO crops, such as cotton for the textile industry, it is important to raise productivity. But there are experts who argue that GMOs are dangerous and must be completely banned.
I am on the side of science. I would say that we have to look at the science which gives us an indication of where and how to use GMO crops.  The science should be given to the policy makers. The policy makers need to educate the public. The public needs to be aware of why and how the GMO policy is made.

There are many factors that hinder to farming in the lowland areas. Has ATA done enough work to study the lowland areas?
Initially, ATA was created to focus on highlands because most small scale farmers are concentrated in these areas. Gradually, we realize that the lowland areas have great potential, especially for large scale wheat production. We have already started working with the Ethiopian Institute of Agricultural Research (EIAR) and the Ministry of Agriculture and Fishery to generate more ideas and knowledge regarding lowland agriculture. ATA will deliver more on this, but the EIAR and the Ministry have already been studying lowland areas for a long time. EIAR, in particular, has a number of ideas, technologies and approaches that can support investors.

ATA only works on crop agriculture, although livestock accounts for over 20Pct of agricultural output. Is it safe to say ATA has overlooked the pastoralist community?
This is a very fair criticism. Currently, ATA has started working with the World Bank in pastoral areas. The project is still at the design phase at the moment. We have been asked to take the leadership role, particularly regarding commercialization of production in pastoralist areas. Soon we will start working on the pastoralist area, equally as highland parts of the country.

ATA usually recruits employees based on merit instead of political affiliation like many of government institutions do.  Why do you follow a different strategy?
ATA is a technical organization that focuses only on delivery. We hire completely on merit and in a transparent manner. The recommendations provided by ATA are based on science, data and evidence. There is no politics in the recommendations we provide.


8th Year • May.16 - Jun.15 2019 • No. 74




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