The White-Box of Ethiopian Agriculture

The agricultural sector remains our Achilles heel, nonetheless, we remain convinced that agricultural-based development remains the only source of hope for Ethiopia.” This statement was made by the late Prime Minister Meles Zenawi, who described the irony facing Ethiopia’s agricultural sector, in a nutshell, a decade ago. The direction was what the ruling party, Ethiopian Peoples’ Revolutionary Democratic Front (EPRDF), has been implementing for the last 23 years. The party has been stressing that the development of the country lies in transforming the rural economy in general and agriculture in particular. 

This policy direction, however, according to critics and some experts, comes with the subsequent failure of the nation’s economic policy makers to understand the real conditions of small scale farmers in the country. The critics argue that, the subsistence production system in Ethiopia is performing low because peasants have small and often fragmented land and use primitive technologies. The motives of peasants are also geared towards fulfilling household consumption needs rather than producing for a market. 

Agriculture 43.2 42 45.6 43.9 42.9
Industry 13 13 10.7 11.5 12.4
Services 45.1 46.1 44.4 45.1 45.2

The ruling party believes that constraints in supply of selected seed, fertilizer and technologies that could boost agricultural output affect the growth of farming and focusing on small scale farming will increase growth. However, with the presence of over 7 million hectares of arable land currently unutilized, it would have made sense for the government to give due emphasis to commercial farming. This would have given the chance to increase production at least by 60Pct. However, as the late Prime Minister once said “almost all agricultural policy and strategies in the country are based on small scale farmers”. Despite their differences, both experts and policy makers agree that the movement of the entire economy is highly dependent on what is happening in agriculture. 

Sectoral growth rate of ethiopian economy (pct)“In Ethiopia’s context, sustainable development means transformation of the economy from one that is largely dominated by agriculture to manufacturing,” said Daregut Tadesse (PhD), an agricultural economist at Bahir Dar University. “Since the contribution of agriculture to the economy is dominant in terms of employment and wealth creation, its role in transforming the economy is vital,” the economist argues. Indeed, any change in the agriculture directly or indirectly affects the welfare of Ethiopians since the sector directly supports 85Pct of the population, constitutes 42.9Pct of Gross Domestic Product (GDP), and 60Pct of export value. In addition, close to 16Pct of the public expenditures are also committed to the agriculture.

As a result the overall ambition of the government to transfer the economy from one dominated by agriculture to laying the foundation for industrialization, hence join the club of the lower level middle income countries by 2025, it is now investing hugely in Agriculture. Thus, bringing up the productivity of most average farmers to attain the targeted 8.6 Pct average yearly growth was the main strategic direction set by the government during the Growth and Transformation Plan (GTP) period which will end in 2015. 

To the delight of the nation’s policy makers, crop production showed a 12.57Pct and 7.4Pct growth rate in 2010/11 and 2011/12, respectively. However, the third year performance stood at 5.8Pct which was an enormous lag from the ambitious projection of an 8.6Pct growth rate.

This partially led the economy and the agricultural sector to grow by 10Pct and seven percent, respectively, during the last three GTP periods. Accordingly any deficit in agricultural productivity, envisioned to scale the total national production up to 361 million quintals by 2015, jeopardizes the planned growth rate of the economy. 

The problem

For experts and critics the reasons for the production lag are more technical than lack of leadership. They stress that input supply, which is a crucial part of the agricultural productivity, has been stumbling and there is no clear line of duties and obligations within different institutions. “The Agricultural production process requires synchronization of government agencies and other institutions in the sector”, Maru Belay, an agricultural business consultant told EBR. Since this did not exist previously, most farmers struggle to get improved seeds and fertilisers on time. The institutional system within the sector, which includes agricultural input suppliers, agricultural research institutes, regional agricultural bureaus, the Agricultural Transformation Agency (ATA) and the Ministry of Agriculture, remains baffling. This is also supported by research conducted by the International Food Policy Research Institute (IFPRI) and Ethiopian Development Research Institute (EDRI) in 2011. According to the research, improved seed supply in Ethiopia is subject to at least three unique constraints - contestable property rights relating to the improvement of cultivated varieties, absent institutions in the market for improved cultivars and information asymmetries in the exchange of seed between buyers and sellers. 

Expected production of grain crop for private holdingsResearch conducted on smallholder farmers in Amhara and Oromia regional states also found that half of the farmers surveyed for the study reported that fertilizer arrives after planting most of the time, while 32Pct reported underweight bags, 25Pct complained of poor quality and almost 40Pct reported that their planting was delayed by fertilizer problems. In addition, the expected impact of agricultural extension services, which is one of the institutional support services that has a central role to play in the transformation process, remains unclear partly due to the near absence of any rigorous impact evaluation. 

The ruling party, however, preferred to focus on the leadership issues mainly. Since strong and committed leadership is a big part of the equation, when convening at Bahir Dar, seat of the Amhara Region, in April 2013, for the 9th organizational conference of EPRDF, the issue became the hotspot. Key figures in the ruling party even tried to account the top leadership of the agricultural sector in which Tefera Derebew, minister for agriculture sits at the top. Drawing from past experience, most eyes were on the outcome of the convention since it has wide reaching impacts.  Judging from the announcement made by Samia Zekaria, director general of the Central Statistical Agency (CSA) last month who revealed the results of the much expected sample survey of crop production forecast for 2013/14 fiscal year, the outcome of the conference particularly in agriculture is positive.

Area in hectares 11,210,501 11,503,249 11,822,786 12,086,603 12,282,929 12,372,663
Production in quintals 171,167,405 180,758,896 203,485,288 218,570,429 231,288,471 254,203,518
Yield (quintals / hectares) 15.3 15.7 17.2 18.1 18.8 20.5

Based on the survey, CSA projected a 9.7Pct growth rate in crop production by small scale farmers. The survey also showed that about 254 million quintal of yield is expected from a little more than 12 million hectares of land, a 23 million quintals increase from last year’s produce on almost the same amount of land covered by crops.

Where does the growth come from?

The survey, which is the fifth of its type to present quantitative information regarding crop production in Ethiopia, revelled that the area of land increased only by 0.73Pct or 89,734 hectares compared with 2012/13. The number farmers engaged in the sector was also more or less the same compared with the previous year. So what type of change occurred besides the favourable weather condition? 

A couple of months after the conference the administration of Hailemariam Desalegn established a command post that will be chaired by the Prime Minister himself to coordinate the activities executed by different government institutions. All of the top government officials responsible for the sector became a member of the command post in order to bring the action implemented by different institutions towards one goal. Most officials agree that the achievement comes with a commitment from higher government officials. “We learned that coordination and collaboration for a specific goal has many advantages, Dagnachew Beyene (PhD), Agricultural Extension Directorate director at MoA explained to EBR. Through serious follow-ups from the top officials, the MoA managed to supply close to two million quintals of fertilizers for close to 12 million farmers on time. Since access to credit for farmers was limited in some parts of the country, the administration of Hailemariam Desalegn through MoA issued a directive in May 2013, which allows credit sales of agricultural inputs through microfinance institutions.

Agriculture in EthiopiaThese circumvent the previous trend where different regions follow their own approaches to sell agricultural inputs to the farmers. The directive also resolved the quality issue by creating a  quality control mechanism. Adaptation of modern technologies has never been like last year, according to Tarekegne Tsegi, Public Relation Bureau head at MoA. The level of technology adaptation by farmers reached close to 80Pct last year, which is much better than the previous year’s figure of 30Pct. This was achieved through extensive intervention programs provided on a house-to-house basis. Extension workers practiced more on horizontal peer experience sharing through 1 into 5 target farmer arrangements. 

The combined result of these was an increase of productivity by 9.44Pct per hectare. This combined with the little increase of total land cultivated has resulted in the over all increase of production in the year by 9.7Pct. 

The temporary relief

Since food expenditures in Ethiopia constitute a lion’s share of household expenditures, agricultural output growth has a positive impact on food prices in the short run and ultimately helps to tame inflation. In the recent past, the quick rise in food price, particularly, the price of cereals has put huge pressure on consumers since food inflation rate contributes 60Pct of the year-on-year inflation. The rise in food prices has been 54.1Pct in 2009, 6.4Pct in 2010, 3.4Pct in 2011, 36.9Pct in 2012 and stands at 13.2Pct in 2013. Although the determinants of inflation in Ethiopia vary across sectors, increment in agricultural production will have a positive effect on food prices since more supply leads to lower prices. 

Anual average inflation rateAt the moment food availability has significantly increased. This is expected to improve the overall food security conditions at the household level. Prices of cereals declined compared with previous months in most markets including Addis Ababa, but are generally still well above average. Wholesale prices of maize, wheat, white sorghum and teff declined in January 2014 in most monitored markets with the bulk of the “meher” season harvest increasing supplies. In Addis Ababa wholesale market, prices of maize, sorghum and teff declined by 15, 6 and 7Pct, respectively, while the price of wheat remained generally stable due to strong demand.

Nevertheless, many studies conducted in the field suggest that rising food prices in Ethiopia has been the result of monetary policy misalignment and the balance of payment problems. Sharp increases in fuel prices have contributed to this in a significant way. Based on simple market assessment, experts predict that the current slowdown observed in food prices will only be a short term phenomenon. “One way or another, the price decline will remain until the bulk of agricultural output begins to disappear from the market, a macroeconomist and lecturer at the Addis Ababa University who conducted substantial research in the area told EBR. Drawing from past experience, according to the macroeconomist, this process only takes five to six months. The prices of cereals in most urban markets showed a decline in January 2014 when compared with the prices of last November and December. Before January, cereal prices skyrocketed because there was little leftover from the previous harvesting season. The argument which is shared by the agricultural economist at Bahir Dar University does hold water when one compares the current prices with last year’s figures. 

Advancement or apocalypse

What will happen if the nation manages to increase the agricultural production by small scale farmers to 361 million quintals by 2015? Agriculture is a key driver of Ethiopia’s long-term growth and food security. However, many doubt that the nation will benefit from these yield improvements through increased income from agricultural production and allowing farmers to diversify their land allocation towards other higher-value crops due to policy inflexibility. To attain this level, critics advised that the principal goal of agricultural policy in Ethiopia should be designed to achieve the highest possible rate of farm output growth. After achieving this, the goals need to be changed to attain self-sufficiency in food production. Once that is achieved the policy needs to be changed again to provide off-farm employment for farmers and rural people. 

Policy flexibility will improve the current agricultural production environment, which leaves farmers especially in the northern part of the country underpowered because of traditional and religious practices and cultural taboos. A study conducted by Yezihalem Tesfa in 2011 entitled “Critical Factors Hampering Agricultural Productivity in Ethiopia: The Case of Northern Ethiopian Farmers,” tried to describe the problem in a nutshell by saying that among the thirty days of a month farmers spent ten to fifteen days for religious and cultural practices. The study also discovered that most farmers have assumed and even accepted food aid as the only, or in many cases the most efficient, means of addressing food security. The study further states that these and many other factors weaken agricultural growth and reduce the labour absorption capacity of farming in Ethiopia. 

Many ask for a magic policy that will combat the root causes of the underperformance of agriculture in Ethiopia. This calls for significant policy flexibility and changes of various types on factors that hinder the overall agricultural productivity. 

Growth of crop productionThe government, on the other hand, believes that it is on the right track. Policy makers stress that increased productivity of cereals reduces real cereal prices and raises rural incomes. This will contribute to reducing poverty, especially amongst the poorest households in rural Ethiopia. Since the government founded the rationales of economic growth on the maximum utilization of initial resource inputs at the hands of small scale farmers, achieving the target set in GTP in the agriculture sector will indirectly induce the gross shift from agriculture to manufacturing.   

On the contrary, experts argue that low agricultural commodity prices due to production increments pose significant problems for small scale farmers and other agents in the food supply chains who risk losing their productive investments if price falls occur. In this case, farmers who have already planted their crops will be the most affected. “Poor smallholders with lack of access to credit may have difficulty financing the crucial inputs needed to plant again and stay in business”, the agricultural economist at Bahir Dar University explained to EBR. Most experts EBR approached agree that policy responses for such price volatility are mainly ad hoc in nature that some decisions were taken hastily, and that measures were somewhat inconsistent and largely uncoordinated at the international level. 

This time, however, the Ethiopian government seems to be ready for such a catastrophe. Through the Ethiopian Grain Trade Enterprise, whose purpose is to purchase and sell agricultural commodities both to local wholesalers and the export market, the government is planning to purchase crops worth of nine billion birr to stabilize the market and protect small scale farmers from price volatility. Yet, macroeconomists caution the government since such policies might erode the financial capacity of the nation.

2nd Year . February 2014 . No.12


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