Connecting Ethiopia’s smallholder farmers with commercial supply chains

Mirafe Gebriel Marcos

October 2015

Overview of Ethiopia‘s Agriculture Sector

Investable Investment Opportunities

Agenda

2

Agriculture is the backbone of Ethiopia's economy

3

SOURCE: ATA analysis based on data from MOFED Ethiopia, National Economic Accounts Statistics of Ethiopia, 2013; Business landscape, Invest in Ethiopia, 2013; MIT Economic Observatory; World Bank, 4th Ethiopia Economic Update, 2015; and IMF Economic Database

Exports 2012

GDP 2014

Employment 2014

Agriculture

Manufactured goods

Agriculture

Services

Industry

Agriculture

Services

Others

Share of Agriculture in GDP, Exports & Employment Ethiopia’s Progress Since CAADP (2004-2014)

Industry

ACC concept is a natural evolution of crop and other geographically oriented Transformation Agenda initiatives that ATA has been focused on during GTP-I

4

Key features of the GTP-I Transformation Agenda Approach for the ACC initiative

Focused on market needs and clear linkages between inputs, production, processing, value addition, high-value export and domestic markets

Market-orientation linked to production focus

• Interventions spread across different regions in Ethiopia

• Limited geographical overlaps of various interventions constraining the impact through synergies of interventions

Geographical focus but weak coordination

Integration of solutions to more efficiently solve for the commodities (cereals, livestock, horticulture) prioritized by smallholder farmer and GTPII targets

Incorporates mixed cropping system used by smallholders

Focus on individual crops Specific interventions designed for cereals – tef, maize, wheat without including horticulture and livestock

Full set of interventions focused on the same high potential geographies bringing out synergies

Geographic approach with focus on coordinated

• Production focused interventions

with emphasis on seeds, soil, research, extension, crop packages, and irrigation

• Key examples: - Direct Seed Marketing - Rural Financial Service - Tef, Wheat and Maize

packages

Production oriented approach

Rural financial Services

Prior to cluster approach, ATA has been implementing various crop initiatives as a part of the overall GTP-I Transformation Agenda

5

Mai

ze a

llian

ce

Tef

Init

iati

ve

Assessment and analysis of national and global production and market trends on selected commodities/crops

Identify systemic bottlenecks along the value chains

Develop sector strategies and design interventions to address systemic constraints along the Value Chains

Support partners to implement solutions

Overall approach…

Attain national wheat self-sufficiency and increased incomes of smallholder farmers (e.g. interventions to increase production in 62 target woredas)

Increased incomes for 500,000 maize smallholder farmers by effectively linking them to institutional buyers at scale (e.g. 29 Cooperative Unions delivering 30,000 MT to WFP P4P program)

Sustainably increase 2 million tef smallholder farmers’ productivity (e.g. yield increases of over 50% through application of TIRR package)

Tef

Maize

Wheat

Pulses and Oilseeds

Improve smallholder incomes and nutrition as well as soil health through a systematic integration of pulses into the cereal cropping system

Livestock

In early stages – support the MoA to develop Livestock Mater Plan and identify targets as part of the next five year GTPII plan

…translates into specific targets for each value chain Maize Alliance

Tef Initiative

Note: Zones specified are only an indication of potential areas. Woreda level Cluster definition will take place during Phase II

Southwest Amhara (Livestock/Maize/ Rapeseed,)

Eastern Amhara (Chickpea/Tef, Sunflower, Honey)

SNNP Maize Belt (Maize/ Fruits&Veg. /Livestock) Northern SNNP (Wheat/

Fruits&Veg.)

Eastern SNNP (Coffee/

Fruits&Veg./ Honey)

Western Tigray (Sesame/ Livestock)

South Tigray (Barley/ Honey/ Livestock)

2

4

8

13

14

3

Central Oromia (Chickpea/ Tef, Livestock)

Eastern Oromia II (Barley/Pot., Fruits&Veg., Honey)

12

Amhara Sesame Belt (Sesame/Chickpea)

Amhara Barley Belt (Barley/

Potatoes/Livestock)

9

7

Western Oromia (Maize/ Tef, Fruits&Veg.)

Oromia Coffee Belt (Coffee/ Fruits&Veg.,

Honey)

Eastern Oromia I (Wheat/Pot., Fruits&Veg., Honey)

11

10

6

Northern Somali (Livestock/Maize, Shorgum) 15

Central Somali (Tef/Fruits&Veg., Sunflower)

16

Stage 2 ACC

Stage 1 ACC

5

Amhara

Oromia

SNNP

Tigray

Somali

ACCs are spread across Ethiopia’s major geographic regions

6

Value Chain Component

Pri

ori

ty In

terv

en

tio

n A

reas

in S

tage

1 C

lust

ers

• Input credit vouchers

• Output finance initiatives

• Extension package on production and post-harvest handling based on market needs

• FTC strengthening and demonstration enhancement

• Livestock services

• ICT based extension (IVT/SMS)

• Mechanization

• Market information

• Market linkage initiatives

• Commission-based output marketing by cooperatives

• Cooperative storage promotion

• Collection system for cooperatives

• Scaling up post-harvest technology

• Community Based Seed Production

• Seed Multiplication

• Direct Seed Marketing

• EthioSIS based fertilizer package

• Fertilizer supply and distribution

• Crop protection supply / distribution

• Livestock input

• Input Tracking

Priority interventions for most of ACCs build on existing Transformation Agenda initiatives supported by ATA at national and regional level…

7

Access to finance, Organizational support, and Value chain integration

Input supply & distribution

Processing & value addition

Commodity production

Marketing & Export

Aggregation, storage & transport

1

2

3

4

5

9

10

11

14

15

17

18

• Capacity-building for cooperatives, unions and other links

• Contract farming and outgrower scheme promotion, with commercial farms and downstream value chain actors

16

20

21

22

6

7

19

Areas of focus

12

13

23

8

…while for a prioritized set of Clusters, interventions will be tailored for processing & value addition, marketing, exports and enhanced value chain integration

8

Value Chain Component

Ad

dit

ion

al P

rio

rity

Inte

rve

nti

on

Are

as in

Sta

ge 2

Clu

ste

rs

• Foreign exchange availability prioritization

• Guarantee and risk-sharing funds

• Innovation and other investment grants

• SME finance promotion

• Trade finance promotion

• Specialized extension for high-value crops and precision farming

• Market information systems and matching platforms

• Collective branding and marketing support

• Product and marketing development and export promotion related support

• Primary market development

• Storage and aggregation capacity-building

• Cold chain development promotion

• Facilitation of investment in processing, value addition, packaging and other supporting services

• Packaging materials initiative

• Efficient system to supply all necessary inputs for high-input / high output market oriented commodity production

Access to finance, Value chain integration and Business environment enhancement

Input supply & distribution

Processing & value addition

Commodity production

Marketing & Export

2 4

5

9

10

• Business environment enhancements

• SME development and technical support

• Professional association and value chain alliance promotion

12

13

17

18

Aggregation, storage & transport

7

8

11

15

1

• Food safety, quality and traceability standards, capacity-building, certification support and quality assurance

3

15

16

19

Areas of focus

6

Overview of Ethiopia‘s Agriculture Sector

Investable Investment Opportunities

Agenda

9

Ethiopian agriculture is gaining attention from investors around the world

10

A variety of sub-sectors and agribusinesses are taking off, among them fruit & vegetable, poultry, soybean, wheat, cattle, dairy, malt barley, and tef

11

FRUIT & VEGETABLE

WHEAT

DAIRY CATTLE

SOYBEAN POULTRY

TEF MALT BARLEY

Ethiopia has massive potential to serve local & global meat markets

37 4177 91

148

207

1618 15

2434

63

79

27

125

2009/10 2010/11

211

101

2008/9

286

2011/12 2005/6

43 55

2006/7

56

2007/8

Live animal

Meat

Meat & live animals export performance (2005/6-2011/12) Thousand USD

Ethiopia has the largest livestock inventory in Africa and the 10th-largest in the world, but it has not yet realized its potential to serve domestic & export markets

Domestic and international growth are growing, creating more opportunity for Ethiopian supply

While Ethiopia currently has one of the lowest per capita consumptions of red meat in Africa, consumption is expected to grow by 58% by 2020 to over 2 million tonnes.

Domestic market

Demand for beef is rising globally, and specifically in high-potential export markets for Ethiopian products.

Export market

CATTLE

• Large-scale cattle ranching & fattening

• Meat abattoir

• Processed milk powder

Promising business models

Ethiopian Tef is the next superfood & producers are ready to export

13

TEF

Tef, a gluten-free whole grain, outperforms “superfoods” like quinoa on nutritional balance

13

2

11

Fat 6

Protein 14

Fiber 7

Potassium 16% 12%

Calcium 5% 18%

Iron 25% 64%

Vitamin C 0% 147%

B-complex 18% 21%

Tef Quinoa

Tef is superior

Productivity enhancement efforts have paid off, and Ethiopia will have ample tef surplus for export

Projected tef surplus relative to current Millions of MT

2019/20 2017/18

0.5

2015/16

0.1

0.4

Poultry is a fast-emerging sector in Ethiopia POULTRY

The Ethiopian Government has prioritized the poultry sector for increased investment

With a population of nearly 95 million people, Ethiopia presents a large and growing consumption market

• The government wants to multiply current poultry production by over 5 times in the next 5 years

• Investment is the poultry sector has been identified as a priority for the Ethiopian Government, as described in GTPII and the Livestock Master Plan (LMP)

• There is push to move away from the traditional backyard family system (TFP) and intervene towards vertically-integrated and large-scale production

• There is huge potential for export of excess supply as production with intervention (PW) is expected to outstrip consumption by approximately 6 fold for chicken meat and 15 fold for eggs

Rising local beer consumption is driving demand for brewing capacity

Source: Access Capital, Draft Barley strategy, AMF, ERCA Import Data; Barth REPORT 15

5.00

4.40

3.60

3.00

2010 2012 2011 2013

+19% 111

GMF

52 (47%)

Imported

36 (32%)

59 (53%)

Total Malt barley

Locally sourced

16 (14%)

AMF

Beer consumption is growing by 19% p.a.

Beer consumption (million hectoliters) 2014 Malt barley sourcing (‘000 MT)

BGI 2.7 million

Dashen 900,000

Heineken 2.5 million

Raya 700,000

Ethiopia’s brewing capacity is 8.4 million hectoliters, with more breweries entering

But Ethiopia imported ~53% of malt required for beer production in 2014

Diageo 1.6 million

MALT BARLEY

Innovations to help our country grow