PARTNERSHIP

For

promoting Agribusiness investment in Ethiopia

Dejene Tezera

Chief of Unit
Agribusiness development Branch , UNIDO
July 2015
Milan
1
 Content
• Introduction: Importance and challenges of Agribusiness in
Ethiopia
• Simplified value chain of Agro-industries in Ethiopia
• Approach for linking small holder farmers to
industries/market
• Partnership Country Program, Italian Cooperation UNIDO
and GOE
• ODA for larger flows of investment in agribusiness in Ethiopia
practical example of Italian cooperation and UNIDO
contribution to the GTP II
 Agriculture and Agro-industries
in Ethiopia
Agriculture and agro-industry was/is driver of the Ethiopian economy
• More than 80% of the population
• More than 41% of the GDP
• 85% of the export

Agro-industry
• The main sector of the industry I the country
• Ca 3.4 % GDP (manufacturing ca 4%)
• Most of the factories work < 65% their capacity
• The main constraint --supply of raw material Q &Q
• Very weak backward linkage
Result:-
• Huge amt of processed food imported (700 million USD palm oil)
 Importance of Agro-Industry for development
1
Countries Agricultu Agribusines Ratio (ab/agr)
Human Development Index - HDI re %GDP s´ % GDP*
0,9
South Africa 4 16 4.00
United States
0,8 Nigeria 42 16 0.38
Côte d’Ivoire 28 26 0.93
0,7 Mostly Urbanized
countries Ethiopia 56 30 0.54
0,6 Uganda 41 23 0.56
Kenya 26 23 0.88
0,5
Zimbabwe 18 21 1.17
0,433 Higher correlation for low HDI countries
0,4 Cameroon 40 17 0.43
Ghana 44 19 0.43
0,3
Ethiopia Tanzania 32 21 0.66
Mostly Agriculture-
0,2 based countries USA 1 13 13.00
Brazil 8 30 3.75
0,1
Agribusiness-to-Agriculture Ratio
0
0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0

Source of data: Jaffee et al (2003) and Human Development Statistics

• The (AGRB/AGR) is becoming a proxy for measuring
the development of a country. HDI

4
 In-efficient Agro-food value chain (simplified)

Add value

Distribution
Centre
Retail

Consumers
Value Adding Agro-logistics
Centres

Collection
Centres
Collection
Points Export markets

Farmers No aggregation Distant with poor

5 to 10 actors in
points infrastructure
developing countries

Capture value
 Developed Agro-food value chain (more efficient )

Add value

Distribution
Centre
RTC Retail
Rural
Transformation

Consumers
Centers

Value Adding Agro-logistics

Centres

Collection
Centres
Collection
Points Export markets

Farmers Industry closer to big Common facilities reduced

Collection centers
urban centers investment
closer to farmers

Capture value
 Simplified Ethiopian Cereals Supply Chain
Primary Collection Wholesale Retail Industry
Production and
assembling

Smallholder farmers Traders Traders (wholesalers) Retailers at the cities Grain mills
State Farms Cooperatives
Private commercial farms Brokers
Area – 9.03 million Ha Assemblers
Volume – 13.7 million tons (district and Woreda
No. of Actors – 10.9 million level)

Volume 4%
72% 26% 26%
Margin 22%
81% 3.4% 2.0% 5.1%

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 Challenges

• disorganized and fragmented land holding (less than 0.5 ha per

family).
• Weak infrastructure (>50% of industries In and around Addis)
• limited support services to the farmers by the private sector
• Organized system to link the ‘farm gate to the food plate’ still
being developed
• Implication of the above:- 65 million farmers not currently
linked to the industry (supply driven agricultural system)

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Inclusive and Sustainable Industrial Development (ISID)
 Partnership Country Program (PCP)
• UNIDO operationalizes its ISID mandate through PCPs
• ISID requires larger resources than any one entity can provide
- collective actions and partnerships needed
• Catalyzes development partners to provide necessary support,
knowledge and financial resources.
• UNIDO brings actors together and coordinates partnership,
under leadership and ownership of host government
 Features of the PCPs
• Strong country ownership ( alignment with
government strategy)
• Partnership (alignment with strategies of the Partners
and programs )
• Concentration/ Focus (selected number of priority
sectors and address fewer critical constraints)
• Robust management structure (M&E ) through
Platform for coordination of the stakeholders (DPS,
DFIs, PS, MLO , CS, etc..)

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 PCP

CP /IP
Scaling-up
best
program practices
Project
identif’n implem’n Investment

Project development Implementation Investment

UNIDO resources UNIDO’s and donors’ 30-400 million USD
30-50 K resources; 1-5 million
30 K PA Joint project 1 million US • Mobilized capital of 1 million $
development (Edible 78 MSE clustered and but need 20-30 million USD
oil value chain) upgraded • Negotiation with IFC

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PCP Pilot Countries

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 Why Ethiopia
Clear Industrial development strategy
GTP II

Vision to become MIC by 2025 Industry leading the transformation

Prepared : Manufacturing sector -- 4% to 18% of

• Industrial development strategy the GDP
• Road map
• Upgrading
• Institutional set-up
• Enterprise cultivation 65,000 SMEs
• Industrial Zones development
Established National Industrial
Development Council (NIDC) for
Create 780,000 Jobs
coordination.
 Why Ethiopia?
- High Real Economic Growth Rate (9.4%) over the past five years
(2010-2014)

- Addis Ababa 3rd in Emerging Cities Outlook over the next 10 to 20

years ( behind 1st Jakarta, 2nd Manila) (infrastructure, security & political
stability, healthcare, income disparity, environmental conservation, the number of new
businesses, ease of arranging a letter of credit.)

- Population：91.73 million Projected to exceed 100 million by 2017-

2018 (Source: World Bank 2013) Population Growth Rate: 2.61％

- Good Security Environment (The 15th safest country in the world.

(Number 1 security environment in Africa)

- Fair Income Distribution

 Why Ethiopia ? Investment costs

- Labor cost less than 100 USD per month with high labor
productivity

- Incentive 5 years tax exemption measures

- Electricity cost 2.7 US cents per KWH

- Rent of factory building 1 USD per square meter

- Preferential trade agreements such AGOA/Cotonou (EU and

US) Proximity to EU/US, middle east and Asia

- Authorized Economic Operator (AEO) status for pioneer (first

comers) with special privileges on case by case basis through
the office of the prime minister )
 Why Ethiopia? (Wage)
Unskilled monthly Labor productivity
wage, increase per year,
JETRO Dec. 2013 By Asian Productivity Organization index 1970-2011

Singapore $1,433 3.3%

Taiwan $1,054 4.9%
Malaysia $429 3.1%

Thailand $366 3.5%

Indonesia $234 3.0%

Vietnam $162 4.5%
India $217 5.0%

N.A.
Ethiopia $50 Rapid growth of FDI workers in AA;

Source: Prof. Kenichi OHNO, National Graduate Institute for Policy Studies, JAPAN
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 Selecting Priority Sectors
Opportunities Assets Sectors

Job Creation Trainable, Low- Leather and

cost labour leather products

Raw Abundant Textiles and

Resources apparel sector
materials

Export AGOA/Contonou/ Agro-food sector

Proximity to EU/US
Potential

Attracting Global trend Industrial zones

Investment
 Coordinating the PCP
• Joint Steering Committee
• National Task Force
• Sub-sector Working Groups

JSC

PCP Sec

NTTF

SSWG1 SSWG2 SSWG3

 Coordination
Joint Steering Committee (JSC)
• Chaired by MOFED /PM
• Members: GoE ministries; International Financial Institutions,
donor agencies, private sector . . .
• Main responsibility: Provide strategic oversight, prioritization
resource mobilization and allocation , investment promotion
National Technical Taskforce (NTTF)
• Chaired by MOI
• Members: MOI, MOA, EIC, Implementing agencies . . .
• Main responsibility: Develop action plan, review
implementation status and challenges and recommend
mitigation measures, provide technical backstopping,
monitoring and evaluation support
 Integrated agro-industrial Parks
(Geographic clustering of Industries)
• Showcase potential and investment opportunities in the
Agriculture and Food processing sector
• Address supply chain and infrastructure-related issues
• Linking farmers with the demand side of the food chain
(promoting demand-based agricultural practices)
• Provide a platform for industry agriculture interaction and
trade facilitation year-round
• Provide traders/exporters with market intelligence and
information
• Transfer of technology in agriculture and processing
• Develop entrepreneurship skills in farmers.
• Targeted incentive regime to Private sector
 Spatial clustering of agro-value chain
Integrated Agro-Food Parks (IAFP): The way for demand driven primary
production, rural off-farm Job creation and integration of the value chain
Rural Production Rural
Transformation Transformation
Centers Modern Farm Clusters Centers
Green Houses
Utilities & Livestock farms FP Zones
Services Mushroom Nursery
Agro tourism R&D
Wellness & Incubation
Nutrition QCL
Common Agribusiness R
AIP &
Infrastructure Mgt. Trg. Inst
D
Cold Stores Convention Center
Ripening Chambers IT/ Library
Warehousing Training Center

Terminal Markets Commissaries &

Logistics Packaging
Rural Commercial Rural
Transformation Complex Transformation
Centers Centers

Trade
 Rural transformation centres

• Primary function of a RTC is to serve as aggregation centres)

• RTCs would also have infrastructure for primary and secondary
education, primary healthcare, rural markets, social infrastructure, rural
banks, etc.
• Provide traders/exporters with market intelligence and information
• Transfer of technology in agriculture and processing
• Develop entrepreneurship skills in farmers
• 500 acres PARK > ca 20-25 Rural Transformation Centres

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 Integrating Small Holder Farmers to Global Market

Primary function of a RTC is collection or procurement centre (aggregation centers)

RTCs could be Farmers Cooperatives, UNIONS

Village

Village

Farm credit, Villag

farm finance e
Agri- clinic

Primary
Health
Village RTC Mentoring and
Rural training
Transformation
Commercial Centers
rural market,
office space Food and
entertainment
Collection
centre Village
Village
 Beneficiaries and Scale
Production

Modern Farm Clusters

Green Houses
Utilities & Livestock farms
FP Zones
Services Mushroom Nursery

Agro tourism R&D

Village
Village
RTC Wellness &
Nutrition

Common
Infrastructure
AFP
Incubation
QCL

Agribusiness
Mgt. Trg. Inst
R
&
D
Rural Cold Stores Convention Center
IT/ Library
Village
Transformation Ripening Chambers
Warehousing Training Center
Village Centers Terminal Markets Commissaries &
Logistics Packaging
Commercial
Complex

10 to 20 villages per RTC In towns Population of ca AFP 500 acres Trade

5-10 K 20 to 25 RTCs
Farmers with an average Catchment area of 50 km R
land holding of 0.3 ha in Products must reach with
7500 Km squared = 1.3 in 4-5 hours
million farmers
Partnership ( concrete example of the IAIP development)
4 parks
• Geographical clustering of industries
• Market access for 1.3 million SHF
• One stop service
• Shared services (packaging, cold and dry storage, training centers,
research banks , logistics etc.. )

Partner Interventions
UNIDO; FAO, UNDP, ATA Feasibility study, business plan

Federal and regional Land , offsite infrastructure

governments
IFC Finance for the private sector (TBD)

WB (ITC) Loan to the government infrastructure and capacity building

(TBD)
AfDB Off-site infrastructure (TBD)

Private sector Anchor investors/leasing shells

Agro Industry Growth Corridors (17 selected)
4 Strategically located IAIPs selected
 Progress Agro-Industry sector
- Draft Feasibility study for 2 of 4
integrated Agro-Industry park completed
- The Rural Transformation Centers is
being finalized
- Complete plan will be presented to JSC
for fund mobilization allocation
- Estimated cost 200+ Million USD each
- Partners: FAO, ITC and UNIDO
- Investment promotion planned for
November
 Progress Leather and Leather products sector
• Feasibility study, business plan and design
finalized for Modjo leather City completed

• Endorsed by the government of Ethiopia

• Summary of the report submitted to the

EIB and under review

• Estimated cost 70 Million USD

• Partners: ITC EIB, EU, GoE

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Summary of Ongoing TC program ITC and UNIDO

Project Funding
Technical Assistance for Upgrading of the Ethiopian
Leather and Leather products €3,453,729
Productive work for Youth and Women through SMEs €600,000
promotion in Ethiopia
Improving the Sustainability and Inclusiveness of the €1,500,000
Ethiopian Coffee Value through Private and Public
Partnership
Catalyzing Agribusiness investment through €350,000
development of IAIP

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 THANK YOU

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