A Broken Value Chain: Why Ethiopia Imports Livestock Products While it Ranks First in Africa in Resources?

Ethiopia is among the few countries in African as well as in the world known for its livestock resources. Yet, many companies such as the Ethiopian Airlines as well as big international hotels like the Sheraton and Hilton struggle to find sustainable, reliable and proceeded animal products locally. They import these products in bulk supply from countries as far as Brazil. Poor genetic potential of the livestock resources, insufficient animal feed, disease and poor management practices account for what prevent the country from making fair benefit from its resource potential.  In addition, there is weakly developed relationship among actors in the supply chain. Limited national capacity to improve productivity and take what is produced to the market further exacerbates the problem. EBR’s Samson Hailu explores the challenges facing the sector as well as attempts being made to increase efficiency.

Ethiopia is known to have one of the largest livestock populations; in fact, it ranks first in Africa and tenth in the world. Livestock contributes close to 20Pct of the Growth Domestic Product (GDP) and 40Pct to the gross value of annual agricultural output. Despite this, the country is trailing far behind in meeting the growing local demand for basic and processed animal products. 

Companies such as Ethiopian Airlines and several international hotels in the country find it difficult to get sustainable, reliable, and locally-produced processed animal products. This forces them to import the products by spending millions of dollars every year from the country’s foreign currency reserve. 

The Ethiopian Airlines Catering Department imports close to 90Pct of food items from Germany, Brazil and Argentina. These imported food items consist of processed meat and chicken as well as dairy products, such as milk and cheese. 

 “Ethiopian Airlines uses 2,000Kg of chicken cube that is imported from Brazil through Dubai every day to satisfy its customers’ needs,” says Mulualem Geremew, Procurement and Supply Chain Manager of the Catering Department. 

Hotels face a similar challenge. Major hotels, like the Sheraton and Hilton, depend on imported processed animal products to feed their clients. The challenge is far worse for mid-level hotels, which have lower financial resources than larger hotels. “It is very difficult to cope with this problem since we have no capacity to import those animal products from abroad,” says Senait Dimitri, General Manager of Dimitri Hotel, a three-star hotel on CMC Road. “When there is no domestic supply, we just stopped preparing and rendering some kinds of food items to our customers.” 

Local businesses face these troubles in spite of the fact that the country has 53.9 million cattle, which includes 12.4 million dairy cattle. As of 2013, the sheep and goat population in Ethiopia was roughly 25.5 million and 24.06 million, respectively, according to a Central Statistical Agency (CSA) survey. The total poultry population, including cocks, cockerels, pullets, laying hens, non-laying hens and chicks, is estimated to be about 50.38 million. 

Some experts argue that it will be a long time before the livestock population benefits the country.  Mekonnen Tesfaye (PhD), a livestock expert who worked at the International Livestock Research Institute, says there are many problems facing livestock in Ethiopia: “Little has been done to increase the poor genetic potential of livestock in the country. Insufficient access to proper animal feed, animal diseases and poor management practices are also common constraints that drag the country from benefiting from its livestock resources.” 

These problems are illustrated by milk production. In Ethiopia, average milk production from cows is about 1.5 litres per cow, per day during a lactation period of 180-210 days.  This is well below the international benchmarks: some cross-bred cows in Ethiopia produce an average of 10 litters a day per cow. 

Similar issues exist when it comes to egg production as well. Research conducted at Haramaya University has indicated that the average annual egg production of a native chicken is 40 eggs under farmers’ management. Yet, under experimental conditions, the level of production is about 99 eggs per hen annually. 

Globally, the use of conventional livestock breeding techniques has been largely responsible for the increases in yield of livestock products in recent decades. In Africa too, crossbreeding has resulted in improvements in production of milk and meat, especially when supplemented with adequate management. Livestock breeding techniques, such as artificial insemination, became widely used in Ethiopia roughly six decades ago, but with little success. The latest CSA’s livestock survey, which declares that 98Pct of the total livestock in the country are local breeds, indicates the low level of breeding techniques used in Ethiopian livestock farming. 

The Meat, Milk Saga

Ethiopia’s livestock population is far greater than that of Kenya, which has a livestock population of 38.2 million. Yet, the annual per capita consumption of meat in Kenya stood at 16.1Kg, which is nearly double the 8.4Kg Ethiopians consume. Mekonnen says this is due to a low livestock off-take rate, which measures the proportion of animals that are sold or consumed annually.

Anual per capita mean consumption kgAccording to some estimates, the maximum off-take rate for cattle stood at 9Pct, while the maximum-off-take rate for sheep and goats in Ethiopia is estimated at 33Pct and 36Pct, respectively. 

“This problem is mostly created by the attitude of farmers and pastoralists that are also engaged in animal husbandry, since they only sell their livestock when they need the money,” says Taddesse Sori, livestock expert at the Ministry of Agriculture. Most farmers and pastoralists in Ethiopia do not consider the livestock trade a profitable endeavour and ignore husbandry practices that could increase their livestock’s market value,” Mekonnen adds. “Instead they prefer to keep the animals for further breeding.” 

Livestock TypePopulationNumber of SalesNumber of SlaughtersNumber of Deaths*
Cattle 53,990,061 5,755,743 338,150 3,663,778
Sheep 25,489,204 5,989,600 3,077,367 4,181,292
Goats 24 ,060,792 4,021,701 1,771,527 3,974,817
Poultry 50,377,142 12,502,991 13,529,922 -

The 2013 CSA survey found that half of the sheep and goat population over the age of two are kept for breeding purpose each year. This decreases the number of animals sold in the market. Another study conducted by the International Livestock Research Institute states that from the estimated 10 million cattle in the pastoral areas, only 800,000 are suitable for market sale because of their age.

Another factor contributing to the weak supply of livestock to the local market is the informal trade of live animals across the borders of neighbouring states. A study conducted by USAID states that informal trade may account for up to 75Pct of the 675,874 head of live animals that Ethiopia exported in 2012/13. 

Because of this, most abattoirs in Ethiopia are operating below their installed capacity. This limits the amount of meat they can produce for the domestic and export markets, according to Zeleke Mengiste, former manager of Elfora Agro-Industries PLC, which has engaged in supplying live animals and processed meat and chicken since 1997. Reducing the informal trade by half means abattoirs will have 253,453 more animals to process and produce meat. 

Livestock value chains, which have developed over the years into a series of complex constituents involving various actors, add to the problem. “There are no sustained relationships among actors that include producers, collectors, small private and cooperative fatteners and various middlemen, within the value chain,” says Efrem Desalegn, managing director of Addis Ababa Abattoirs Enterprise. Most relationships are casual and change often to suit the situation and the actors. Although value chain relationships work best when they are on a strict business basis, such relationships in Ethiopia are hard to find. 

The newly-ratified proclamation to govern the livestock trade is expected to ease such challenges in the near future, according to Taddesse. The law, which was unanimously approved by the Parliament two months ago, introduces an auction market to drive out middlemen from the livestock trade. The new proclamation also establishes a two-tier livestock market, primary and secondary, and puts a restriction on any transaction of livestock outside of these markets.

Similarly, dairy producers and downstream actors in the value chains face many challenges in getting milk to market. Just like the livestock market, the dairy value chain has a variety of actors. This lengthy chain creates a lag in the supply of raw milk to processors. In addition, only 5Pct of the milk produced in Ethiopia is sold in commercial markets, which forces processors to operate at 50-60Pct of their capacity, according to Ministry of Agriculture. These factors contribute to the fundamental disparity in the supply and demand of milk in the country.  

Chicken

Traditional production system accounts for close to 76Pct of the total poultry production in the country. This production system is characterised by insufficient levels of coordination, little or no specialisation and vertical-integration results in low productivity. Insufficient feed and diseases are the main factors contributing to reduced chicken productivity, subsequently discouraging chicken producers, according to Taddesse. 

Type of PoultryNumber%
All Poultry 50,377,142  
Cocks 5,190,884 10.3
Cockerels 2,687,894 5.34
Pullets 4,863,762 9.65
Non-Laying Hens 1,525,680 3.03
Chicks 19,602,682 38.91
Laying Hens 16,506,239 32.77

Mortality in local birds results mainly from disease and predators. Research conducted by the International Food Policy Research Institute in 2012 indicated that disease accounted for 62Pct of total poultry mortality, while 11Pct of deaths were caused by predators. Newcastle disease, a contagious bird disease affecting many domestic and wild avian species, is identified as the major killer in the traditional system while other diseases, including a number of internal and external parasites, contribute to the loss. The incidence of Newcastle disease is widespread during the rainy season. It often wipes out the whole chicken population when it strikes. In fact, it was found that poultry production drops by 50Pct during rainy seasons.

Traditional poultry production systems in Ethiopia are not business-oriented; rather, they are designed for satisfying household consumption. According to a Ministry of Agriculture estimate, only 20.2Pct of the total poultry population is sold in this market. “This affects the supply of chickens in the market,” according to agricultural experts. 

In the small-scale poultry production system, however, most of the problems observed in the traditional system are not present; rather, different constraints arise. “Lack of finance is the major hindrance for my business,” Ayele Teka, who runs a poultry farm near Debre Zeit, told EBR. “I wanted to increase the number of exotic chicken breeds to 1,000, but due to lack of finance I am struggling.” 

Most small‐scale poultry farms that supply to the Addis Ababa market are located around Debre Zeit or just outside of Addis Ababa. Flock sizes vary from 20 to 1,000.  According to Ayele, who established the farm with an initial capital of 42,000 Birr, additional finance is required to feed and protect the birds from diseases.

Unlike traditional and small-scale production systems, large-scale commercial systems in Ethiopia are highly intensive, involving, on average, 10,000 birds or more, kept indoors. This system heavily depends on imported exotic breeds that require intensive inputs such as feed, housing, health, and modern management systems. However, this system only accounts for less than five percent of the national poultry population, according to CSA’s survey. This system is characterized by a higher level of productivity where poultry production is entirely market‐oriented to meet the large poultry demand in major cities. ELFORA, Alema, Genesis and eight other farms are the major large‐scale poultry enterprises in Ethiopia, whose combined annual production is roughly two million chickens. 

Taking Animal Products to the Next Level

The country’s capacity to process the portion of the livestock products that reaches the market is also minimal. The number of companies engaged in processing animal products demonstrates the low level government and private sector participation in the livestock industry. Despite its low level of participation, however, the private sector constitutes an important part of the livestock sector. Currently, there are over 22 medium- and large-scale dairy processing companies in Ethiopia, with nine of them operating in Addis Ababa and the rest in other major regional cities.

Imported meat and diary products (in millions USD)Aside from the large-scale poultry producers and suppliers, there are about 12,000 small-scale poultry farms operating in the sector. Yet most of the companies already engaged in the sector add little value to the product because they have limited capacity, according to the managing director of Addis Ababa Abattoirs Enterprise. This shows that the participation of the private sector across the livestock value chain is minimal.

The limited capacity of most companies arises from the difficulty of managing processing plants, which requires a lot of capital and skilled human resources. 

The managing director of Addis Ababa Abattoirs Enterprise told EBR about the steps he and his staff are taking to establish an export standard abattoir and meat processing factory around Hanna Mariam in Addis Ababa. Partly financed by the French government, the total cost of the project is around two billion birr, though it was estimated at the beginning to be half that amount. The new facility is expected to increase the Enterprise’s daily slaughtering capacity to 14,000 cattle, sheep and goats from the current 1,500. Furthermore, the facility will have a state-of-the-art automated meat processing plant, which can meet the demands of companies’ like Ethiopian Airlines. With such investment requirements, experts and industry players say the low level of investment from both the government and the private sector is not surprising. “Since the big hotels and companies in the country have relatively better financial backup, it is wise for them to extend their arms and solve this problem themselves” Zeleke advised. 

Mulualem from Ethiopian Airlines sees this strategy more as a necessary move than just expanding the Airlines’ area of operation. “It is essential to expand our business in order to produce and process these items by ourselves,” he says. “Perhaps this will be a reality after the Airlines finalize its strategy of diversifying its aviation group into seven profit centres, including the In-Flight Catering Service. This seems essential, since the airlines cater 200 daily flights.” 

Mulalem’s vision is also shared by Senait: “I am considering establishing a farm with an animal product processing plant in the near future.” She says that “without these, it is really difficult to survive in this business.”


2nd Year . July 2014 . No.16


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