CHAPTER EIGHT

ECONOMIC ACTIVITIES IN ETHIOPIA

8.1. Introduction
Humans have been involved in a number of activities in order to satisfy their diverse
material and spiritual needs. These activities, which are designed to satisfy the needs
of human beings, are known as economic activities.
Economic activities are highly diversified in their nature and characters. Some are
simple while others are complex. Some are primitive where as others are advanced.
But whatsoever characters they have, all of them are equally important through
satisfying peoples’ needs.

Geographers classify a nation’s economy into primary, secondary, tertiary or the service
sectors. Increasingly the service sectors are seen as forming a fourth or quaternary sector
and a fifth or quinary sector. This categorization is seen as a continuum of distance from
the natural environment. The continuum starts with the primary sector of an economy that
extracts or harvests products from the earth. The primary sector includes the production
of raw material and basic foods. Activities associated with the primary sector include
agriculture (both subsistence and commercial), mining, forestry, farming, grazing,
hunting and gathering, fishing and quarrying. The secondary sector of the economy
manufactures finished goods. All of manufacturing activities, and construction lie within
the secondary sector. The tertiary sector of the economy is the service industry that
provides services to the general population and businesses. Activities associated with this
sector include retail and wholesale sales, transportation and distribution, entertainment,
restaurants, clerical services, media, tourism, insurance, banking, healthcare, and law.

In this section, you will learn about the major types of economic activities in Ethiopia;
differentiate their spatiotemporal distributions and their contributions to the overall
development of the country.

Objectives

At the end of this chapter you will be able to:

  explain the roles of mining sector in the Ethiopian economy and the major
constraints of the sector;
 discuss the contributions and challenges of fishing and forestry sectors;
 Expound the main contributions, potentials, characteristics and problems of
Ethiopian agriculture;
 Explain the main contributions, potentials, characteristics, distribution and
problems of Ethiopian manufacturing industries;
 Examine types, roles and distribution of transportation infrastructure and services
in Ethiopia
 Identify tourist potentials of the country and look into the performance of the
sector to the socio-economic development of Ethiopia

8.2. Mining Activity in Ethiopia

Brainstorming Questions
1. Are there metallic minerals and non-metallic minerals including fossil fuels in
Ethiopia that could expedite its development?
2. Describe the contribution of mining industry to the economy of Ethiopia.
3. What do you think are the major challenges of the mining sector in Ethiopia?

4.2.1. Introduction

Mining involves the search for minerals from the crust of the earth. Minerals are naturally
occurring organic and inorganic substances. They form important part of natural
resources. Mining is important to the economy of Ethiopia. Currently, mining
contributes to only 1.5 % of GDP (USD 32 billion).

As you have seen in chapter two, the Geology of Ethiopia and the Horn, mineral
occurrences are associated with the geologic process. The oldest (Precambrian) rocks and
the sedimentary (Mesozoic) rocks host most of the economic metallic and nonmetallic
mineral deposits in Ethiopia.
So far, the developed large scale gold mine in Ethiopia is the Lege-dembi gold mine,
located in the southern greenstone belt region. It is operated by private company with
estimated reserve of 82 tons and an average annual production of 3.6 tons of gold.

There is also small-scale open pit mine of columbo-tantalite at Kenticha in the Adola belt.
The deposit is both a weathered crust ore (the top 60 meters) with proven reserve of 2400
tons of tantalum pentaoxide and 2300 tons of niobium pentaoxide, and primary ore with
proved reserve of 2393 ton Ta2O5 and 2362.5-ton Nb2O5. The Mine has been operating
since 1990 with a pilot plant producing about 20 tons per year. At present it is producing
over 190 tons of tantalite concentrate of tantalite colombite ore per annum. Tantalum is
used in making all electronic devices such as mobile phones, cameras, computers and so
forth and is thus highly demanded. Ethiopia presently supplies close to ten percent of the
World production of tantalum and has a good potential for a considerable expansion of
the percentage.

Secondary enriched (placer) gold has been mined traditionally (artisinaly) for years back
to biblical times. Formalization of the artisanal miners has been strengthened since the
early 2000’s that about 1000 Kg of gold is purchased from the local miners and dealers
by the National Bank of Ethiopia that in turn increases the generation of foreign currency.

Soda ash is being mined at Lake Abiyata in the Rift Valley about 200 kilometers south of
Addis Ababa. The reserve at Lake Abiyata and the surrounding lakes exceeds 460 million
tons of sodium carbonate at salt concentration ranging from 1.1 to 1.9%. The plant is
producing about 5,000 tons soda ash per year at semi -industrial scale. The consumers of
the soda ash are local caustic soda factory, soap and detergent manufacturers.

Kaolin, quartz and feldspar are also being mined from the Adola belt in southern Ethiopia
by government enterprise. The consumers of the products are the Awash-Melkasa
Aluminium Sulphate and Sulfuric Acid Factory and the Tabor Ceramics Factory.

Silica sand is also being mined and utilized by local industries. The cement factories of
the country are using high quality limestone, clay, gypsum and pumice as a raw material
for cement production.
There is also large input of construction minerals such as sand, gravel, scoria, crushed
stones, aggregates, pumice, scoria, etc to the construction industry (including buildings,
roads, dams, bridges etc.).

The gas fields are located in the south-eastern part of the country at Calub, Hilala and
Genale gas fields in the Ogaden Basin. The gas resources potential of these fields has
been assessed as 4.6 Trillion Cubic Feet (TCF).

Other mineral products including platinum from laterite, gemstones (opal and other
precious stones) and decorative and construction materials are also produced by licensed
foreign and local mining companies in the southern, western, central and northern regions
of the country.

8.2.2. Status of the mineral sector investment in Ethiopia

The Mining laws of Ethiopia have been issued in 1993 and amended recently, to attract
private sector investment compared to other developing countries mining codes. The
1994 mining regulation was also issued to make all licensing and administration
procedures as transparent as possible.

Encouraging foreign and local mineral development investments have been shown since
late 1990's. The total investment amount registered by the private sector to date is about
1.1 Billion US Dollars where by 95 % percent of it is direct foreign investment for the
development of precious and industrial minerals.

The mining stakes in Ethiopia are held by: The Ethiopian Mineral
Development Share Company, a Government organization (EMDSC) established in
2000 is engaged in all mining activities in the country; the Ezana Mining Development,
functioning since 1993, a privately owned Ethiopian enterprise in consulting in
all aspects related to mining including all types of explorations; the
Midrock Gold, a subsidiary of Midrock Gold Group, in operation at Shakisso town in
southern Ethiopia, involved in gold mining (production of 3500 kg of gold per year
extracting 50,000 tons of rock per month); and the National Mining Corporation
(set up in 1993), a private company involved in all facets of
mineral and petroleum product production including by products.

Potash mining has generated lot of interest in recent years. Allana Potash, a Canadian
mining company is poised to start mining for potash in the Afar Regional State while the
Indian Sainik Potash has been working in the Dallol depression.

Prospecting for iron, gold and base metals is also in progress in many regions of the
country. More and more gold mines are being located, such as in the Afar region and in
the Konso Zone in south western Ethiopia.

Presently a number of junior exploration and world class mining companies are operating
in Ethiopia for different mineral commodities. Apart from these there are wide ranges of
future investment opportunities found in Ethiopia that hope to be of mutual benefit to the
investors and the speedy socioeconomic development of the country.

8.2.3. The importance of Mining sector in Ethiopia

Economic benefits

 Generates revenue from sales, taxes, royalty: The federal government has been
collecting royalty of about 48.5 million birr (4.4 million USD) from the
large-scale production of gold every year for the last three years. The regional
administrations also collect royalty from the small scale and artisanal production
of precious minerals, industrial and construction materials.
 Generates foreign currency earnings: The amount of foreign currency earning is
about 135 million dollars every year for the last couple of years from the sales of
export of minerals such as gold, tantalite concentrate platinum, decorative
dimension stones and gemstones. This export earning contributes up to 7-10 % of
the total export foreign currency earnings of the country.
 Employment opportunity: The contribution of mining to employment in Ethiopia
is today small (a few thousand), as the sector is small and mining is not a
labour-intensive industry. Artisanal mining on the other hand is likely to involve
several hundred thousand workers.
Even though the country is believed to have wide mineral potential, the contribution of
the mining sector to the national economy has been a maximum of 6%.

Social Benefits
 Expansion of infrastructures such as roads, electric power, telecommunication etc
 Expansion of social services such as health facilities, schools service, schools,
water facilities as well as airstrips for the local communities.
 Train local communities to engage in other form of business such as plantation of
coffee and other trees, introducing agricultural activities (irrigation)
 Promote small entrepreneur’s engagement in the local community by providing
services such as hotel, mini- markets, stationeries, etc.

8.2.4. Environmental issues and management related to mining

It is inevitable that extraction of minerals from the earth leads to disturb the environment.
When disturbing the environment there must be careful and systemic protection of the
whole system of environment that assures sustainable use of the current resource and or
ecosystem and that bring about either less or almost none destruction or pollution of the
environment.

The mining legislation of Ethiopia, which came in to effect in 1993 has provision that
requires as compulsory criteria to study, submit and get approval of Environmental
Impact Assessment from the respective Authority in order to develop large scale mining
project. The common environmental issues in Ethiopia to be considered in development
of the medium to large scale mining projects are the surface and ground water system, the
physical land management (soil, rock stability, deforestation grass land, farm land, etc),
spillage of strange chemicals/metals, air, noise, dust, aesthetic values of the area, cultural
and tourist heritages, the communities as well as all other lives surround the mine
proximity.

In principle the licensees shall ensure the financial mobilization of the environmental
management and mine closure plan. Therefore, sinking fund is required to be pledged
while the mining activity is going on and management plan shall be implemented
throughout the life of the mine.
8.3. Forestry

It is related to exploiting forest products, which include gathering of fuel wood,

production of timber and charcoal, and construction of houses. Forest resources of
Ethiopia were described in Chapter Six, section 6.2; and in this section emphasis is given
on the economic significance of forestry activity for the national economy.

Economic significance of forest

Even though the importance of forest and forest product is little in earning foreign
exchange, their significance at local level is large. For instance, their contribution to the
national economy in the form of GDP is about 2.5%.
Most of the trees cut in Ethiopia today are used for domestic purposes like for;
 Fuel wood,
 Timber household furniture,
 For building and construction.
This indicates that forest products are sold on the local markets at lower prices. The
commercial exploitation of forest resources in Ethiopia is still in its infancy stage. This is
mainly because of the following major factors;

 Rapid deforestation
 Low demand for timer
 Lack of modern lumbering technology
 Inaccessibility of natural forest

8.4. Fishery

8.4.1. Introduction

Fishing is a primary economic activity that involves harvesting of fish resources from
water bodies. Fish can provide an important source of proteins in the diet for much of the
world’s population. Fishing is known to be one of the oldest human activities. Still
fishing is the most widely spread economic activity both in private and modern societies.
 Due to the presence of a number of lakes, river and reservoirs rich in fish resources,
Ethiopia has great potential for fishing. However, at present there is no reliable estimate
due to lack of exhaustive and systematic (regular) stock assessment. The total estimated
potential yield calculated from the surface area for major lakes is 60,000 tons per year.
However, in the face of the above uncertainty the potential yield stood between 30,000
and 45,000 tons per year for the main water bodies.

At present in Ethiopia, more than hundred local fish species have been identified. The
bulk of the production is made of Tilapia, Bargus, Clarias and Labeo species. In the two
southern Rift Valley lakes, Chamo and Abaya, Nile Perch is caught in significant
quantity. Nile perch is also found in major riverine fisheries. Moreover, principal
physical characteristics and the recent estimate of potential yield of the main water bodies
are presented in the table given below.

Table 8.1: Estimated fish Resource potential of Ethiopian lakes

Lakes Area Maximum Annual Potential Main Fish Species

Depth (1000 kg live
weight)
Tana 3600 km2 4 15,000 Barbus, Clarius, Tilapia

Abaya 1160 km2 13 7,000 Nile perch, Bagrus, Barbus Clarious, Labeo
Ziway 434 km2 4 3,000 Tilapia, Barbus
Chamo 557 km2 10 3,000 Nile perch, Bagrus, Barbus, Clarious,
Cyprinus
Koka 250 km2 5 2,000 Tilapia, barbus Clarious, Cyprinus
Langano 230 km2 45 3,000 Tilapia, barbus Clarious
Awassa 129 km2 10 1,000 Tilapia, Barbus Clarious
Metahara - 85 2,500
Beseka
Source: FAO,2015

8.4.2. Fishing Grounds in Ethiopia

Most fishing activities in Ethiopia take place in fresh waters, such as rivers, lakes and
ponds. According to Ethiopian Wildlife Conservation Department, Ethiopia’s fresh water
 bodies are known to have 101 species of fish, among which four are endemic to the
country. In general, the Ethiopian fishing grounds could be classified as Lakes and Rivers

Lakes fishery: the Ethiopian lakes are estimated to cover a surface area of about 7000
km2. They account about 79 percent of the total yearly fish production of the country.
The most important lakes where much of the fish production comes include Lakes Tana,
Ziway, Langano, Hawassa, Abaya and Chamo. The annual maximum sustainable fish
yields of our lake are estimated to be above 35,000 tons. However, presently only 4,000
tons are produced annually. Among the 101 species of fish available in the country 25 of
them are commercial fish species and are found in the lakes. Generally, the lakes have
high promising potential for the development of commercial fish industry.

River Fishery: Most rivers of Ethiopia have high fish resources. Most fish production of
the river is confined to local consumption by villagers living near and around river banks.
The fishing potential of Ethiopian rivers has not yet been fully known. But according to
some references, the country’s rivers and streams can produce; on average about
7,000-10,000 tons of fish annually. For example, river Baro alone can supply a maximum
sustainable yield of 2,500 tons per year.

Table 8.2. Ethiopian water bodies and their fisheries

Water bodies type Extent Fishery potential (tone/year) Catch (tone/year)

Major lakes 6,477km2 23,342 10,598

Major reservoir and dams 857km2 4,399 1,366
Small water bodies 275km2 1,952 303
Rivers 7,185km2 21,788 3,121

Total 14,794 km2 51,481 15,389

Source: Assefa, 2014

According to FishStat data, Tilapine species averaged about 50 percent, Catfish about 22
percent and Nile Perch about 9 percent of total production over the last decade. There are
seasonal variations in the availability of different types of fish, but as there are some
differences between the lakes, traders can smooth out supply to some extent.

8.4.3. Demand and consumption of fish

Fish as a source of human food has a long history in Ethiopia. People consume large
amount of fish in fasting days, in big cities, around production areas and towns,
especially in Hawassa, Zeway, Arbaminch, Bahir Dar and Addis Ababa.

Outside these areas, however, the domestic market for fish is small. The factors which
account for this low level of local fish consumption are the following.

 First, fish has not been integrated into the diet of most of the population.

 Second, because of religious influences on consumption patterns, the demand for

fish is only seasonal. The demand for fish is higher than supply during fasting
seasons.

 The other factors that contribute to the low level of consumption are the limited
supply of the product and its high price.

 Long distance of the fish production sites from densely populated areas and major
settlements, together with its perishability reduce fish consumption levels

The demand for fish is showing an increasing trend. For instance, total demand for fish in
2003 was about 67 thousand tonnes, which is predicted to grow 118 thousand tonnes in
2025. The rapid growth of population and the progressive shortage of livestock products
had changed the situation to a growing demand of fish.
Socio-economic contribution of the fishery sector
  Role of fisheries in the national economy: Despite the sector low contribution to
the Gross Domestic Product (0.1 percent), the fishery sector in Ethiopia plays an
appreciated role in terms of providing employment and income at the local level
and contributing to food supply at the national level.

 Trade: The Ethiopian cross-border fish trade is currently not properly

documented. However, available evidence from FAO Fishery and Aquaculture
Statistics,2015 has documented that the country earned 0.4 million USD from
exports and imports significant amounts of fish from neighbouring countries
amounted 3.8 million USD over the recent period. The per capita fish food supply
is around 300g, significantly below the mean 2.6 kg per capita per year for the
East African sub-region.

 Food security: Fisheries are regarded as an important sector in the effort to

increase animal protein consumption and achieve food security for the growing
population.

 Employment: A considerable workforce is employed, both directly and indirectly,

by Ethiopia’s capture fisheries which also help in sustaining local communities.
Whereas 4052 persons were employed directly by the sector in 2010, a total of
9,148 others benefited from indirect employment offered by the sector.

 Fish meal as animal feed source: Fishmeal is an excellent source of protein for
animals. The offal of fish can be processed and used for animal feed. It has high
levels of essential amino acids such as methionine and lysine, and it also has a
good balance of unsaturated fatty acids. These days, there is an increased demand
of fishmeal from poultry farmers.

 Sport fishing as a recreational value: Recreational fishing (sport fishing) is

particularly becoming common in southern part of Lake Tana. This activity has
been started in the country since 1970s.

8.4.4. Constraints and opportunities of the fishing sector

Like for most of Africa, Ethiopia is riddled with poverty, economic stagnation and
environmentally unsustainable practices, all of which pose serious constraints to fisheries
development. However, ample opportunities exist for the sector to help reverse national
development challenges by making a significant contribution to poverty alleviation,
economic growth, better nutrition and ecological improvement.

Factories, agriculture and sewage are the sources of major pollutants affecting Ethiopian
water bodies and their fisheries. The extraction of minerals from Lake Abijata could have
negative effect on fish stocks, just as the effluents from the tannery at Koka Reservoir
and the textile industries at Hawassa and Arba Minch can affect the fisheries. Also, the
increasing rate of deforestation could result in increased drying up of water bodies and
increase in water turbidity. Further, the dam on River Omo has negatively affected the
anadromous fish which migrate from Lake Turkana to spawn in the river.

Inadequate legal and policy frameworks have largely given rise to poor fishery resource
exploitation resulting, in some cases, in the overfishing of some important species, such
as the Nile perch in Lake Chamo, and tilapia in Lakes Hawassa and Ziway. Though there
are fishery laws and regulations currently in place, these legislations are inadequately
implemented.

The sector also suffers from limited human resource availability, with an acute shortage
of trained personnel. This poses serious constraints on fishery management and technical
and extension support services.

Public and private investment in fishery and aquaculture is low and the infrastructure
inadequate. There is also an urgent need to invest in modern value chain-based fish
processing and marketing infrastructure.

Local fish demand can be greatly increased with a change in the people’s food habit, in
favour of fish. Improvement in fishing techniques, technology transfer to fishers, training
of fishery management personnel, attraction of financial capital to the industry, fish value
chain improvement, and aquaculture, can all result to increased fish production, increased
trade and overall economic development of the country.
Attractive fish prices at local market for better profit; the presence of diversified fish
species; and inhabitants’ traditional knowledge for fisheries and good consumption habit
are considered as occasion for the sector escalation.

In addition, the future fishing villages’ offers homogeneous and less dispersed pastoral
communities which are ideal for social mobilization for poverty alleviation programs.
Reservoir fisheries require minimal initial investment and provides quick returns
compared to other economic activities. Access to microfinance facilities, which have
received strong internal and external support, will therefore promote rapid development
of fisheries, especially for the benefit of women and youth. It does not also require
sophisticated skills and knowledge for the entry and coping up with operation at small
scale level. Absence of social and culture taboo in fish consumption is also another asset
for fish production in Ethiopia.

Review Questions

1. State the most important socio-economic importance of fishery sector.

2. Mention the factors which account for the low level of local fish consumption in
Ethiopia.

8.5. Agriculture in Ethiopia

8.5.1. Introduction

Agriculture is defined as the purposeful tending of animals and plants. It is one of man’s
oldest activities, and dates back to the Neolithic period (10,000 years before present).
Even today, agriculture remains an important economic activity accounting for more than
15 percent of the earth's cultivable land. Similarly, about 60 percent of the world's
population gets its livelihood from agriculture.
The type of agriculture practiced in any area is influenced by physical and
socio-economic factors. The environmental factors like soil; climate, relief, etc. impose
certain limitations on the types of crops that may be cultivated and the type of livestock
that may be reared. However, in addition to such environmental factors, various
socio-economic factors like farm size, type of land tenure, capital availability, transport
and marketing facilities, price, government polices, etc. also influence farming patterns.

Agriculture is important for a number of reasons. It provides: basic food supplies for
the population; raw materials like cotton, sugar cane, oil seeds, etc. to industries; export
crops, from whose sales industries infrastructure and the like may be established; and
employment for the population.

The great majority of the Ethiopian population resides in rural areas engaged in some
form of agricultural activity. Agriculture is the backbone of the Ethiopian economy and
therefore this particular sector determines the growth of all the other sectors and,
consequently, the whole national economy. Despite a long history of agricultural
practices in Ethiopian, the sector is still very backward. Farming methods and
techniques have hardly changed in the last 2000 years. The sector is dominated by
small-scale farmers that practice rain-fed mixed farming by employing traditional
technology, adopting a low input and low output production system. It is also in this
sector that the over whelming majority of the poor reside.

Therefore, in this section emphasis is given to explain to the agriculture systems of

Ethiopia including its role, structure and performance, farming type and the major
challenges of the sector.

8.5.2. Contributions, potentials and characteristics of agriculture in Ethiopia

The contributions of agriculture in Ethiopia

The Ethiopian economy is an agrarian economy. Agriculture is the backbone of the

economy of the country as the following facts indicate.
  Agriculture accounts for most of (30- 42%)t of the Gross Domestic Product
(GDP) of the country.

 Agricultural products account for more than 90 percent of the foreign

exchange earnings of the country.

 Agriculture provides raw materials for the processing industries

 More than 80 percent of the Ethiopian population derives its livelihood

directly from agriculture.

The Agricultural Resource Base/potentials of Ethiopia

Ethiopia has abundant agricultural resource base due to its varied agro-ecological zones.
The varied climatic conditions and contrasts in elevation allow for the cultivation of
various crops ranging from cool weather crops to sub-tropical and warm weather crops.
The country has no less than 21soil types with varying physical and chemical features,
and in the alluvial beds of major rivers close to 16 percent of the country's area is suitable
for irrigated agriculture. The country has also vast grazing land and livestock population
as the country possesses a huge but largely unutilized potentials of livestock resources
with a vast (55 – 58 % of its total land area) grazing land. The country has extensive
livestock population, with estimated 30 – 35 million livestock units (TLU) standing first
in Africa and 10th in the world and numerous livestock species.

Land Use

Ethiopia has a total land area of about 113,000,000 hectares. There is no comprehensive
survey of land use pattern in the country but some estimates suggest that about
12.6million hectares, 10.3% of the total area, is intensively cultivated, and a further
15.3million hectares (12.5%) is moderately cultivated. High forest and wood land areas
account for 6.9%, while grassland for 30.5% of the total area.

Accepting the estimate that some 27.9 million-hectare of land is already cultivated
(intensively and moderately),the possibilities for expanding land under rain-fed
agriculture is not very high. More importantly, new land that can be brought under
cultivation may be offset or even outstripped by land which needs to be withdrawn from
cultivation because it is severely eroded or degraded.

It is often suggested that the size of additional land that can be brought under rain-fed
cultivation is limited to the 100km wide strip of land stretching from Gambella,
bordering Sudan to Humera in the north. But this claim must be taken cautiously since
the tropical rain forests in the western parts of the country are highly fragile and
incapable of supporting permanent cultivation. It also requires heavy investment in
infrastructure and machinery to cultivate the land while animal husbandry is affected by
trypansomasis.

Expansion into much of the non-arable lowland areas is constrained by moisture stress.
But these areas are drained by major river basins and are suitable for irrigation. It is
estimated that the major river basins of the country can irrigate about 3.5 million-hectare
of land. At present only about 161,010 ha or 4.6% is irrigated around the major river
basins. Besides opening up new land for cultivation, irrigation allows to cultivate two or
three crops each year instead of a single crop most common under dry farming. It also
enables farmers to grow high value crops, especially fruits and vegetables. Nonetheless,
the amount of investment required to expand irrigated agriculture around the major
basins is often considerable.

Agricultural Land Use in Ethiopia

Land resource is more crucial to the livelihood of the people depending on agriculture:

 Agriculture is a land-based activity unlike secondary and tertiary activities where

contribution of land to its output is greater. Thus, lack of access to land is directly
correlated with incidence of poverty in rural areas.
 Quality of land has a direct bearing on the productivity of agriculture
 Land ownership has a social value and serves as a security for credit, natural
hazards or life contingencies, and also adds to the social status.
Agricultural land refers to the share of land area that is arable, under permanent crops,
and under permanent pastures. Arable land includes land defined by the FAO as land
under temporary crops (double-cropped areas are counted once), temporary meadows for
mowing or for pasture, land under market or kitchen gardens, and land temporarily fallow.
Land under permanent crops is land cultivated with crops that occupy the land for long
periods and need not be replanted after each harvest, such as cocoa, coffee, and rubber.
This category includes land under flowering shrubs, fruit trees, nut trees, and vines, but
excludes land under trees grown for wood or timber. Permanent pasture is land used for
five or more years for forage, including natural and cultivated crops.

According to the result from 2016 Agricultural Sample Survey conducted by Ethiopian
Central Statistics Agency (CSA) more than 19 million hectares of land was used in
different types of land use by smallholder farmers during the major season of the survey
year.

The percent distribution of the land use by different types of land uses is shown in Fig 8.1.
Accordingly, about 77 percent of the land operated by smallholder farmers was allocated
to crops, both temporary and permanent crops while 11.5% of the land used for grazing
land.

Figure 8.1.:
Percentage distribution land utilization, main season 2016/17

Cropping seasons in Ethiopia

 The two main crop seasons in Ethiopia are the belg and meher seasons which receive
rainfall from February to June and from June to October, respectively. belg crop season
is officially defined as any crop harvested between March and August, while
the meher crop season is defined as any crop harvested between September and
February. The meher crop season is the main season and produces 90-95 percent of the
nation’s total cereals output, and the belg harvest provides the remaining 5-10 percent of
cereal output.

Cropping Pattern in Ethiopia

The highlands of Ethiopia are easily distinguishable from their lowland counter parts as
far as the pattern of agricultural land use is concerned. The highlands do not only produce
a variety of crops due to their improved environmental conditions as well as due to the
variety of agro-ecological zones caused by altitudinal variations, but they also practice an
elaborate system of land preparation and crop rotation.

The number of crops grown decreases as one moves from the central highlands to the
peripheral lowlands. The highlands are, thus, more diversified than the lowlands.
Cereals (teff, wheat, barley, maize, sorghum, etc,) are the most important crops in
Ethiopia as indicated in the Table 8.4.

Table 8.3: Estimates of Agricultural Production and Cultivated Areas of Major

Grain Crops for Private Peasant Holdings-Meher Season

2014/15 2015/16 2016/17 2017/18

Agricultural Total Total Total Total
Production Cultivate Productio Cultivate Productio Cultivate Productio Cultivate Productio
d Area* d Area* d Area* d Area*
n n n n

Cereals 10,144 236,077 9,974 231,288 10,219 253,847 10,232 267,789

(Annual %
3 9.4 -1.7 -2 2.5 9.8 0.1 5.5
Change)

Pulses 1,558 26,718 1,653 27,693 1,550 28,146 1,598 29,785

(Annual %
-10.6 -6.5 6.1 3.6 -6.2 1.6 3.1 5.8
Change)

Oilseeds 856 7,601 859.1 7,848.10 805 8,392 846 8,550

(Annual %
4.9 6.9 0.4 3.3 -6.3 6.9 5.1 1.9
Change)

Total 12,558 270,396 12,486 266,829 12,574 290,386 12,676 306,124

(Annual %C
1.2 7.5 -0.6 -1.3 0.7 8.8 0.8 5.4
hange)

Source: National Bank of Ethiopia, 2017/18

*Area in thousands of Hectares and Production in thousands of quintals

Animal Husbandry

Ethiopia has a large livestock population (1st in Africa). The distribution of livestock
production in terms of agro-ecological zones and administrative regions is very uneven.
About 75% of the cattle and sheep population are found in the highland zone while 70
percent of the goat and 100% of the camel population are found in the lowlands. More
than 90% of the livestock population is found in Oromia, Amhara and SNNPR. The
average number of cattle per household (per capital holdings) for the less densely
populated Afar region and Somali where livestock are central to the livelihood of the
pastoral population is the highest. Most of the total value of livestock output (70%) is
contributed by cattle.

Livestock contribute 30-35% to agricultural GDP and 13-16% to overall GDP. These
figures are considered as an underestimate since they do not consider the value of manure
(fertilizer, fuel) and transport. The livestock sector contributes about 13% of the total
value of agricultural export. The contribution of hides and skins from the livestock
exports is the highest (more than 95%).

Despite a large livestock population, the contribution of the livestock sector to the
national economy is limited due to primitive methods of livestock breading, cultural
attitudes, higher mortality rates of livestock due to disease and other causes.
Characteristics of Ethiopian Agriculture
Even though there are some variations in the nature of practices and production
endeavors of farmers based on agro-ecological diversities and socio-cultural
characteristics from place to place, nevertheless agriculture in Ethiopia also possess some
basic and general characteristics. These basic attributes are:

Subsistence Orientation
In Ethiopia peasants produce mainly for their own household consumption and only a
limited proportion is meant for the market. It is found that peasants retain up to 80% of
their produce for home consumption and seeds. Similarly, Ethiopian peasants usually
cultivate different types of corps (10-15) and rear different types of livestock to meet
their various needs.
2. Fragmentation of farm plots and Small size of Holdings
Because of the ever-increasing population that gave rise to continuous generational
division of land through generations; terrain irregularities and prolonged degradation,
holdings are highly fragmented in Ethiopia. The average number of plots per household
ranges mainly from 3-8. The vast majority of the farming households possess less than
one hectare of land, with the average land holding dropping to 0.28 ha/household
nowadays.

2. Low Use of Inputs

Ethiopian agriculture is characterized by low use of natural and chemical fertilizers.

Less than 60 percent of smallholder farmers used commercial, chemical fertilizers
while only 10 percent used organic fertilizers in 2016. Thus, only a small proportion
of the cropland is fertilized.

4. Susceptibility to Disasters

Agriculture is Ethiopia is highly vulnerable to natural disasters such as drought which

affects the lives of millions of humans and animals. The incidence and intensity of
disasters has been increasing. Limited soil conservation measures, forest destruction and
expansion of agriculture into marginal areas increased the frequency of drought. The
natural disasters have usually resulted in famines.
5. Limited practice of irrigation and dependence on rainfed agriculture

Although Ethiopia has vast area of irrigable land, the proportion of cultivated land is so
small due to physical (steep slopes and deep gorges, water logging, salinization and
siltation….) and human (e.g. capital, technology, skilled manpower etc) constraints.
Therefore, there is great dependence on rain-fed agriculture which renders it highly
vulnerable to climatic changes. Over 98 percent of the Ethiopian farmers rely on rain-fed
agriculture. Besides, the possibilities of expanding agricultural land under rain- fed
practices are limited or are not very high. Additional land that can be brought under rain
fed is found in the area stretching from Gambella to Humerra for some 100 kilometres of
width occupying the western lowlands of the country. Moreover, this area is drained by
major rivers (Baro, Abbay & Tekkeze Rivers) and is potentially suitable for irrigation.

8.5.3. Agriculture Systems in Ethiopia

Agricultural system is defined in terms of similar resource basis, enterprise patterns,

household livelihood and constraint; and thus, could have similar development strategies
and interventions. Thus, an agricultural system is a practice and a way of life carried by
rural people who are confined to relatively similar agro-physical resource basis and share
more related socio-cultural, economic and livelihood structures and patterns.

Ethiopia has contrasted (diverse) climatic and soil types which created an ideal condition
for the cultivation of different corps and rearing of animals. The farmers have developed
complex farming systems and cropping patterns in response to the diversified physical
environment.

The agricultural systems of Ethiopia can be classified based on:

 The Agro-ecological patterns to which the practices have been confined.

 Dominant types of crops or animals reared or combinations.
 Farming methods and tools used for cultivation, which are a reflection of
topographic and climatic influence.
  Level of technological input and the disposal of output.
Based on the dominant corps cultivated or animals reared and the main implements used
in cultivation, the following major farming systems are identified:

Highland mixed farming system

Lowland mixed farming system
Pastoral system
Shifting cultivation
Commercial agriculture
Highland mixed farming system
The highland areas of over 1500m.a.s.1 are characterized by ‘dega’ and ‘woina dega’
agro-ecological zones. The major characteristic feature of the farming activity is the
integration of crop and livestock production. Sub components of the system include:

Grain-plough complex
It is practiced in the central and northern parts of the country. Farmers mainly depend on
cereals for subsistence which are grown along with pulses and oil corps for some
commercial purposes. Barley and wheat dominate in the grain-plough complex of Arsi
and Bale, while ‘teff’ is the most important crop in the central and northern highlands of
Shoa and Gojjam. Harvesting is done using family labor or contributed labor from
neighborhoods. Crop cultivation is mainly based on crop rotation. The plough is the main
agricultural implement; and oxen are principal means of draft power and equines provide
the means of transport.

Ploughing is practiced many times (2-6) before planting. Seeds are mainly broadcast on
the soil surface and then ploughed in. Livestock rearing is based on unimproved native
pasture supplemented by crop residues.

Sustainable agriculture in this system is adversely affected by drought, soil degradation

and the practice of removing crop residues for feeding animals and using animal dung for
fuel. Since little or no organic matter is added to the soil and conservation-based farming
practices (e.g. terracing…) are rare, declining soil fertility necessitates shifts in crop
pattern and increased application of fertilizer to obtain high yields.
B. The Horticulture-Hoe complex
This agricultural system is primarily found in the high rainfall humid regions of southern
and southwestern parts of the country. The land is cultivated with hoe (human power) for
horticultural crops. The major crops grown include ‘enset’ (false banana), coffee, chat
and various other horticultural corps. In the ‘enset’ growing areas, farmers make
intensive use of dung. Horticulture crops such as sweet potatoes/sugar beet, lemon,
banana, mango, and avocados are widely grown. In some areas draft animals are also
used and cereals, pulses are cultivated. Maize is the major cereal crop of the region
grown; and production is favorable and less variable than in the grain-plough complex. In
large parts of the Horticulture – hoe complex areas an Agro – forestry farming system
using multiple cropping methods composed of coffee, Chat, Enset, with some tree plants
consisting both wood and fruit- trees which are grown inter – mixed on small farm plots.
The eastern highlands of Hararghe are also classified as part of the horticulture-hoe
complex and sorghum (staple food crop) is often intercropped with corps such as chat and
sweet potatoes.

Livestock, mostly cattle, form an integral part of the horticulture hoe system. With
increasing population pressure and farmland scarcity, stall-feeding has become a
common practice. However, in more humid areas, pests and diseases (e.g. tsetse fly) have
threatened livestock husbandry.

2. Lowland mixed agriculture

Lowland agriculture is practiced in the mountain foothills and the lower valleys below
1500m.a.s.1. The region is characterized by hot and dry conditions (450-800mm of
rainfall) and shallow soils with poor water retention.

Lowland agriculture is common in the Rift Valley and northern areas of Awash River.
Drought-tolerant varieties of sorghum, maize, wheat, teff, oil corps and lowland pulses
are grown. Livestock are also raised on common grazing land and crop residues. The
plough is used in the cultivation.

As a response to the shortage and variability of rainfall, farmers diversify their cropping
patterns by growing several crop varieties; shifting to early maturing crop varieties; and
drought tolerant ones. In times of serious drought livestock are relied up on for survival.
Other sources of income include sale of firewood and charcoal and off-farm employment
opportunities.

3. Pastoral complex
This type of agriculture is practiced in the arid and semiarid lowlands of Ethiopia where
average annual rainfall is less than 500mm by nomadic and semi-nomadic peoples of
Afar, Somali and Borena zone of Oromia and lowlands of the Southern Region of
southern Omo and Lake Turkana area. Livestock rearing is the main economic activity in
these sparsely populated dry and vast areas. Cattle, camels, sheep and goats are important
animals forming the livelihood of the population. In some lowlands, crops are produced
along flood plains and river banks.

Almost all the camels, about ¾ of the goats, ¼ of the sheep and about 20% of the cattle
are raised by pastoral communities. About 90% of the live animals exported come from
pastoral areas.

A major constraint to animal husbandry in the pastoral areas is shortage of water

especially during the long dry season. Overgrazing has also reduced the quantity, quality,
accessibility and stability of the resource base. Tropical livestock diseases are also major
predicaments to the system. Encroachments by highlanders searching for farmland; and a
shift to dry land cultivation by the nomads themselves have restrained grazing
opportunities. Range ecosystems are usually fragile because of lower fertility and shallow
top soil.

4. Shifting cultivation
This is the cut-and- burn cultivation system whereby a given plot of land is cultivated
after clearing until its natural fertility is exhausted to a level it cannot support plant life
any longer and then abandoned for another clearing. In Ethiopia shifting cultivation is
practiced by some ethnic groups living in western and south western fringes of the
Ethiopian highlands and lowlands or Benishangul-Gumuz, Gambella and Southern
Regions where population density is low and livestock rearing is limited in some areas
due to tsetsefly infestation (trypanosomiasis). The scale of shifting cultivation in terms
size of people living by the practice is presently on decline in the country, due to
government intervention and settlement (villagization) programs, and the subsequent
introduction and sorting the community to sedentary farming.

5. Commercial agriculture
Commercial agriculture is a modern farming practice involving the production of crops or
animal products for market by using some degree of mechanization and hired laborers.
It was introduced in the 1960s when the government decided to produce more
commercial corps to meet the growing demand for food in the urban areas and
agricultural raw materials for industries. Mechanized farms were concentrated in the
Awash valley, Arsi, southern Shoa, and Humera-Metema by the time many of which
were nationalized (1975) and converted into state farms. New coffee and tea farms were
also created during the Dergue. The incumbent government also introduced large-scale
sugarcane plantations for the sugar industries.

Currently, the economic reform permitted the participation of the private sector in large
scale commercial farming. Investment permits are issued by the Ethiopian investment
authority and regional investment offices. However, the main problem faced by investors
in agriculture is access to land as it has to be free of other users to be leased to an investor
by the regional government. As a result investors need to go to low, hot, disease ridden
areas of the south and west to find ‘unoccupied’ land. Lack of infrastructure is also a
major barrier to the profit –motivated commercial farmers. There have been also conflicts
with local inhabitants who claim that the land belongs to them that call for sound conflict
resolution mechanisms and enhancing livelihood conditions of local communities.

8.5.4. Major problems of Ethiopian agriculture

The Ethiopian agriculture has been characterized by low production and productivity.
Despite the existence of a huge agricultural population, the sector failed to satisfy the
food needs of the growing population. The major obstacles to the development of this
sector include:
Land degradation: because of the rugged topography, about half of the cultivable land of
Ethiopia is exposed to various level of soil erosion. The soil in many areas has lost some
biological productivity and physical properties needed for optimal plant growth.

Variable rainfall: Ethiopian agriculture is heavily dependent upon unreliable rainfall

which may produce surplus only in years of favorable weather. The rain sometimes
comes early or late; and at other times it falls short of the required number of falls

Land fragmentation: The increasing population size of rural Ethiopia and the limited
total land area, especially, in the high land farming area has been the cause for declining
percapita landholding. Studies suggest that on the average, small land holding is less than
1 hectare per household. As the land is too small to produce any marketable surplus under
the prevailing conditions, subsistence and survival are the overriding concern of the
farmers. This resulted in lack of cash for investment, purchase of commercial inputs and
purchase of oxen for land preparation.

Land tenure insecurity: Uncertainty about the possible communalization of land and
continuing land redistribution erodes the incentive to invest in permanent conservation
and improvement on individual holdings. Land remains under the state control in
EPDRF. And, land is the collective property of the Ethiopian people and is not subject to
buying and selling deal.

Backward technology: In Ethiopia the smallholder farming is characterized by

dependence on traditional tools and farming practices. Land preparing, is done by oxen
drown plough; planting is performed by manual broadcasting; weeding and harvesting
are performed manually; and threshing is also carried out by animals trampling the
harvested crop. Moreover, agricultural produce in transported by primitive means like
pack animals and human percentage. Low application of modern inputs fertilizer
pesticides, and improved seeds) poor animal breeds etc. also characterize the Ethiopian
small holder farming.

Poor rural infrastructure: transport and communication systems area poorly developed.
Agricultural output is usually carried long distance by traditional transport means like
pack animals or by humans, to sale place. The poor infrastructure has severely hampered
socioeconomic development particularly in the rural area.

Other problems that constrain Ethiopian agriculture include, overgrazing, nutrition

stress and diminished grazing land area; widespread prevalence of different diseases and
parasites; poor genetic structure and lower productivity in terms of growth, yield and
reproduction; weak agricultural research and extension; and capital constraints of
peasants required for investment in their farms among others

Review Questions

1. State the agricultural resource base of Ethiopia

2. List down the major farming systems of Ethiopia.
3. List the most important contributions of the agricultural sector in
Ethiopia.
4. What are the major constraints facing small-scale farmers in earning their
livelihood?

8.6. Manufacturing Industry in Ethiopia

8.6.1. Introduction

Industrial development in Ethiopia is extremely backward. The contribution of the

industrial sector to the Gross Domestic Product (GDP) over recent periods is only 11.7
percent. The backwardness of the industrial sector is an indication of the low-level
development of the Ethiopian economy. In the modern world development is equated
with industrialization.

Manufacturing is a process of changing commodities to consumable forms. In this

process there is an addition of value. In other words, the value of commodities is more
 after the undergone manufacturing. Manufacturing is, therefore, a higher-level economic
activity than the production of primary materials.

Employment in Industries

The total number of persons employed by various manufacturing industries was reported
as over 329,000 in 2015/16 (Figure 8.2). This represents a continually increasing trend in
the number of employees working in all industries over the last five years. But there is as
yet no clear pattern to the availability of jobs by industrial group. Textiles and garments
increased from 2011/2012 to 2013/2014, but then declined. The number of persons
engaged in machinery and equipment grew tremendously from 2012/2013 to 2013/2014,
but then contracted just as rapidly to 2014/2015.

Figure 8.2: Number of persons employed by major

industrial Group-Public and private (2011/12-2015/16)

The employment distribution of the different firm size within the manufacturing sector
indicated that micro enterprises employ 138,951 (51%); small enterprises employ 10,960
(3.9%); medium enterprises employ 14, 757 (5.4%) and large enterprises employ 108,226
(39.7%) in 2007/08 alone.

The value of industrial production

Gross value of production by manufacturing sector worth about 113 billion Birr in 2012/13
and value added generated is estimated to reach 32 billion Birr in the same year, which was
about 4% of the value addition to the entire economy in the same year. It was also
indicated that, the largest value addition came from the food and beverage subsector,
which was around 8 billion birr in 2012/13, followed by non-metallic mineral subsector
(4.3 billion Birr) and metal and engineering subsector (3.9 billion Birr) while the smallest
contribution came from textile and apparel industry (396 million Birr). The Ethiopian large
and medium size manufacturing sector is dominated by food and beverages. It accounted
for the largest proportion of the overall large and medium manufacturing value added
between 2000/01 and 2010/11.

8.6.2. Types and characteristics of manufacturing

Types of Manufacturing Industries

It is possible to identify two types of industries in Ethiopia. These are the traditional or
cottage industries and the modern manufacturing industries.

 The Cottage (traditional)industries

Cottage industries have a long-standing place in Ethiopian history. Though the time of
their inception is not clearly known, various kinds of weaving, woodcarving, pottery,
metal works, basketry etc. are known for a long time.

A peculiar feature of the cottage industries in Ethiopia is that they remain static; i.e.,
they existed with little changes and refinement throughout their long period of
existence. The major factor for this phenomenon is the negative traditional attitudes
towards such activities, which prevailed among various Ethiopian communities. The
activities were considered of low social cast activities. People engaged in such
activities were despised and were given various pejoratives such as "buda" "faki" etc.
The people were not encouraged to refine their products. This is probably the most
important factor in retarding the pace of development of the cottage industries.

Other than the aforementioned factor other factors include the limited availability of the
factors of industrialization such as minerals, market, agricultural raw materials and
sources of power, which are the basis for industrial development.

 Manufacturing Industries
 The development of manufacturing activities is measure of the development stage of
countries. In Ethiopia manufacturing industries are at a low level of development. Most
of the manufacturing industries are light industries i.e. industries that process consumer
goods like textiles, food, tobacco etc. Heavy industries that manufacture capital goods
are very small.

Industrial development in Ethiopia is extremely backward. The contribution of the

industrial sector to the Gross Domestic Product (GDP) is only 11.7 percent over the
recent period (Table.8.5). The major contribution to GDP of the country comes from
agriculture and service sector. Further, specifically looking at the performance of
manufacturing remains a cause for concern as its contribution to GDP not only remained
low but also contracted slightly from about 6% of GDP during 2000-04 to about 4%
during the 2010-2014. Despite the attention given to manufacturing in the GTP plans,
the sector is not expanding as expected.

Table 8.4: Gross Domestic Product by Sector

Year Agriculture Industry Manufacturing Service

1980-84 55.8 9.6 4.7 34 .6

1985-89 52.8 10.7 4.9 36 .5
1990-94 59.5 8 4 .0 32.5
1995-99 53.6 11.7 6 .1 34 .6
2000-04 43.5 13.3 6 .1 43.2
2005-09 46.6 11.8 4.7 41.6
2010-14 44 .9 11.7 4 .0 43 .4
Average 51 11 4.9 38.1

Source: World Development Indicators (2015)

Note: The share of industry in GDP includes that of manufacturing.

The existing industrial establishments in Ethiopia are few in number and most of them
lack capital and have low productive and job creation capacity. Besides, most of the
industries rely on agriculture raw material for production.
 8.6.3. The Spatial Distribution of Manufacturing Industries in Ethiopia

Historically, manufacturing establishments have been concentrated in a few large towns.

In 1995/96 the top ten towns accounted for about 85 per cent of the total number of
establishments and 79 per cent employment; where in the same year Addis Ababa alone
accounted for about 67 per cent and 60 per cent respectively. This concentration has
shown a modest decline and in 2009/10 the top ten towns share reached 60 percent and
62 per cent of the total number of MLSM establishments and employment respectively.
The share of Addis Ababa also correspondingly declined to 40 per cent and 46 per cent
respectively in the same year. New industrial towns such as Burayu, Sululta, Sebeta,
Mojo, and Ambo are emerging around the capital city. Four of these were among the top
ten industrial towns in both 2003/04 and 2009/10. This brings the concentration in Addis
Ababa and the surrounding towns (in a 100 km radius), for example in 2009/10, to above
48 per cent (number of establishments) and 52 per cent (in terms of employment).

Some of the current regional capitals such as Hawassa in the south, Dire Dawa in the east,
Mekelle in the north, and Bahr Dar in the northwest are also among the top ten towns
hosting a substantial number of industrial establishments. The gap between the first and
the next top-ranking towns is, however, very large. For example, in 2009/10, the first top
town (Addis Ababa) hosted about eleven times more manufacturing establishments than
the second largest industrial concentration town (Hawassa).

Table 8.5: Geographical distribution of Manufacturing enterprises

Top 10 towns share (%) Top 10 towns share (%) Top 10 towns share (%)

1995/96 2003/04 2009/10

Top 10 towns # of est. Employment Top 10 # of est. Employment Top 10 towns # of est. Employment
towns
Addis Ababa 67.2 60.4 Addis Ababa 55.8 53.6 Addis Ababa 40.3 45.9
Dire Dawa 4.0 7.0 Hawassa 3.3 2.8 Hawassa 3.6 2.5
Bahr Dar 2.6 3.3 Mekelle 3.0 1.7 Dire Dawa 2.8 1.9
Awassa 2.4 3.2 Bahr Dar 2.3 2.6 Mekelle 2.8 1.9
Adama* 2.3 1.5 Burayu* 2.2 1.4 Adama* 2.4 3.1
Jimma 1.9 0.4 Dire Dawa 2.2 3.9 Bahr Dar 2.3 1.4
Mekelle 1.6 0.3 Adama* 2.2 1.7 Bisheftu* 1.7 2.5
Besheftu* 1.1 1.2 Besheftu * 1.9 2.8 Sebeta* 1.7 1.5
Harar 1.1 1.3 Sebeta* 1.7 1.7 Burayu* 1.6 1.3
Dessie 1.0 0.3 Dessie 1.5 0.4 Hosana 1.1 0.3
Top 10 towns 85.2 79.1 76.3 72.6 60.5 62
Sum (%)
Total 622 91,096 982 104,681 2,172 186,978

Source: Mulu Gebreeyesus, 2016Note: (*) Indicates towns fewer than 100 km from
Addis Ababa.

Looking at the current spatial distribution of industries similar trends is observed over the
recent period where industrial distribution and activities concentrate in specific regions.
The total number of large and medium scale manufacturing industries reported in
2015/16 was 3,596. About 37 percent of the manufacturing industries were located in
Addis Ababa followed by Oromia with more than 27 percent and Tigray with about 14
percent of the industries. Many of the industries in Oromia are located around Addis
Ababa.

There could be many reasons as to why industries concentrate in and around specific
towns and regions in the country. The agglomeration of industries in towns and
specific regions mentioned above is explained by the availability of infra-structural
facilities. In the case of the Addis Ababa-Adama industrial area, the Addis-Djibouti
railway, proximity to the port of Djibouti, and availability of social service facilities
are important. The railway and the development of infrastructure in the area explain
the relatively higher concentration of industries around DireDawa. Political
decisions could also influence the spatial distribution of manufacturing
industries. The question of industrial location and regional equity requires a
complex planning activity involving correct location policies and resource
 availability, each of which must be based on thorough and interdisciplinary
examination.

Industrial parks/zones in Ethiopia

The agro-processing industries, leather products and the textile and apparel sectors have
been designated as top priority manufacturing industries in the latest five-year
development plan (2015 to 2020). The main reasons include:

strong linkages with the agricultural sector as they use inputs from the livestock and
cotton sectors,
they are also both labour intensive, thus absorbing labor from the agricultural sector,
and
they have major export potential and low entry barriers. To unleash these supportive
industries, the government established industrial parks across the country to
cluster these industries
The development and construction of industrial parks started in 2014 when the Ethiopian
Industrial Parks Development Corporation (IPDC) was established. It gained momentum
in 2015 with the Industrial Parks proclamation 886/2015. Three mechanisms are in place
for the establishment of IPs/SEZs:

fully developed by the federal or regional government;

developed by PPPs with the IPDC and
by private developers only.
Industrial parks in Ethiopia can also be categorized based on their focus sector;
 Textile and garment;
 Leather and shoes
 Agro-processing,
 Pharmaceutical and IT park. (see the detail description on Table 8.6).
Table 8.6. Distribution of Industrial parks (IPs) and Zones in Ethiopia

No Name Location Main industry

Federal Development Park
1 Bole Lemi Industrial Park Addis Garment
Ababa
2 Hawassa Industrial Park SNNPR Garment
3 Mekele Industrial Park Tigray Garment
4 Kombolcha Industrial Park Amhara Garment
5 Jima Industrial Park Oromia Garment
6 Adama Industrial Park Oromia Assembling, garment, food
7 Bole Lami Industrial Park II Addis Garment
8 Kilinto Industrial Park Ababa
Addis Pharmaceutical, medical
9 Dire Dawa Industrial park Ababa
Dire Dawa equipment garment, food
Assembling,
10 Bahir Dar Industrial park Amhara Garment
11 Arerti Industrial Park Amhara Construction products, home
12 Debre Birhan Industrial Park Amhara -appliance
13 Aysha Industrial Park Somali -
14 Airline and logistics parks 4 Addis Transportation
15 Addis Industrial Village 5 Ababa
Addis
16 Modjo Leather City Ababa
Oromia Leather
Regionally Developed parks
1 Bure Integrated Agro-Industrial Park Amhara Agro-processing
2 Bulbula Integrated Agro-Industrial Oromia Agro-processing
3 Park
Yirgalem Integrated Agro-Industrial SNNPR Agro-processing
4 Park Integrated Agro-Industrial Park Tigray
Baeker Agro-processing

Private parks
1 Eastern Industrial park Oromia Various
2 Huajian Light Industry City Addis Shoes, garment
3 Modjo George Shoe Industrial Park Oromia Leather
4 Kingdom Linen Industry Zone Dire Dawa Linen
Source: UNIDO, 2018 NB: some of the parks are
under construction

Contributions of Industrial Parks in Ethiopia

 Stimulating investment and creating employment
 Facilitating export growth and foreign exchange earnings
 Developing industrial clusters through forward/backward linkages
 Eliciting knowledge transfer and technology spill over
 Establishing connections to global value chain
 Fostering Sustainable Growth and social equality
 Enforcing implementation of national industrialization strategy
The Sugar Sector Mega Projects in
Ethiopiahttps://www.ethiopiansugar.com/the-industry-with-scores-of-benefits/

Sugar Industry is one of the industries which contribute immensely for the industrial
transformation of our country. The country has huge labor and resources like water,
suitable climate and ideal landscape to expand this export-oriented manufacturing
industry. Ethiopia has favorable climate for sugarcane development. It also has more than
500 thousand hectares of irrigable land suitable for the sector. Moreover, it has abundant
untapped water resource. These make the sector seek more attention and a coordinated
effort

Until recently, Ethiopia has been a net importer of sugar as the two old sugar factories
(Wonji and Metehara) have limited capacity to meet domestic demand. Cognizant of the
existing limited capacity observed in the two factories, the government of Ethiopia is
heavily investing in sugar production. One of the targets of the first Growth and
Transformation Program (GTP I) was to expand the sugar sector with the ambition for
Ethiopia to become one of the top ten sugar exporters in the world. This plan involved the
construction of ten large sugar plantations and factories like Omo-Kuraz Sugar Factory II,
Kessem , Arjo Dediessa, Tendaho, Finchaa, Metehara, Wolqayet Sugar development
project, Tana-belese Sugar Factory II etc. However, work on the construction of the
major sugar factories is delayed and yet to be completed.

8.6.4. Industrial development in Ethiopia: Challenges and Opportunities

Ethiopia has adopted different policies for the development of industry over the past
century. The industrial policies have distinctive features when looking at the guiding
vision (policy), ownership structure, and market orientation. Broadly, they can be
characterized as the import substitution and private sector-led (from early 1950s to 1974);
the import substitution and state-led (from 1974 to 1991), and the export-orientated and
private sector-led from 1991.
 Challenges of the Manufacturing Sector

Ethiopian’s industrial base and economic development are the lowest even by African
standard. There are various constraints to the country’s industrial development. However,
the potential for industrial development is also enormous. The constraints and
opportunities for industrial development are indicated as follows:

Challenges and opportunities of industrial development in Ethiopia

Challenges Opportunities
Relatively cheap electricity charge in comparison to
High logistics and transportation cost other African countries

Limited research/study and action on export Macroeconomic stability and rapidly growing
incentives and market economy
Low labor productivity Relatively cheap labor force & increasing number of
trained employees
High cost of imported raw materials Access to wide market ( large domestic market,
COMESA, AGOA, EBA opportunities, China market
etc.)
Limited compliance to the international Competitive incentive packages which include export
requirements and market incentives

Underdeveloped rural infrastructure in the potential Integrated Agro-Industrial Parks (one stop shopping
areas for all the services, economies of scale, extension
services, development of common infrastructure)
Weak supply chain integration, market institutions Global attention due to its remarkable economic
and information system growth and credit worthiness

Low level of technology

Review Questions
1. What is manufacturing?
2. How important is manufacturing to the development of Ethiopia?
3. What are the major constrients of the development of the manufacturing
sector in Ethiopia?
 4. How important are the industrial parks to the development of
manufacturing industries in Ethiopia?

8.7. The Service Sector in Ethiopia

8.7.1. Introduction

Tertiary economic activity involves the distribution and provision of goods and rendering
services. Tertiary institutions include wholesale and retail outlets, banking and other
financial services, governmental and educational services, medical facilities, and much
other business and service functions upon which we depend daily. Security services,
transportation, information and telecommunication services, tourism, health services,
education institutions and research centers all are vital tertiary economic activities. In this
section, discussion will be made on the three of the service activities in Ethiopia:
transportation and communication, trade and tourism.

8.7.2. Transportation and communication in Ethiopia: types, roles and

characteristics

8.7.2.1. Transportation
Transportation is a service or facility by which persons, manufactured goods, and
property are physically carried from one location to another. Transportation is
fundamental to civilization. Transportation, it is usually said, is the lifeline or the blood
vessel of an economy. This is why we invariably see a well-developed transportation
network in well-developed economies.The role of transportation in socio-economic
development is that it allows for: division of labor and labor specialization, procurement
of raw materials from various sources, dispatch of goods to market places and personal
mobility etc.
 There are five different types of transport in Ethiopia. These are:
Traditional Transport:

This includes the use of pack animals (donkeys, mules, horses, camel) and goods carried
by humans. The contribution of these means of transport to the national economy is not
known in statistical terms. In rural Ethiopia where modern transport systems are very few,
it is obvious that they make immense contributions. Even in urban areas like Addis
Ababa, modern meansof transport has not totally done away with the traditional means.

b. Road Transport

Today most passengers and goods in Ethiopia are transported by road transport. In
Ethiopia road transportation is relatively a recent phenomenon. Italians basically
started it during their period of occupation. These roads were essentially built for
military movement purposes. In other words, they were not built for the purpose of
economic integration of the country. Later on, with Addis Ababa growing as the
political center of the country, the roads built in subsequent periods were constructed for
administrative connections. The radial patterns of network development with the center
being Addis Ababa, exhibits administrative integration rather than economic integration.
This, however, does not mean that the roads were not used for economic purposes.

Road Network
Data obtained from the Ethiopian Roads Authority showed that during 2004/05 classified
road network in Ethiopia was 37,018 km while the total road network increased rapidly
and reached 126,773 km during 2017/18 (this includes 35,958 km rural road (28.3%).
(seeTable 8.7)

Table 8.7: Length of all-Weather Roads by Type(2004-2017)

Year Federal Road Rural road Total**

Asphalt Gravel
2004/05 4,972 13,640 18,406 37,018
2005/06 5,002 14,311 20,164 39,477
2006/07 5,452 14,628 22,349 42,429
2007/08 6,066 14,363 23,930 44,359
2008/09 6,938 14,234 25,640 46,812
2009/10 7,476 14,373 26,944 48,793
2010/11 8,295 14,136 30,712 53,997
2011/12 9,875 14,675 31,550 63,083
2012/13 11,301 14,455 32,582 85,966
2013/14 12,640 14,217 33,609 99,522
2014/15 13,551 14,055 30,641 110,414
2015/16 14,632 13,400 31,620 113,066
2016/17 15,886 12,813 33,367 120,171
2017/18 15,886 12,813 35,985 126,773
Source: National Bank of Ethiopia,2017/1

ii. Road Density

The rugged terrain in Ethiopia makes road construction difficult and expensive. If we
compare the length of roads to the total area of the country, we observe that it serves a
small area. One-km road serves an area of about 66 km2. If we generously assume a
distance 10 kms on either side of a road as being accessible only about 370, 000, km2
area or 30 percent of the country is accessible. In many cases roads assume the purpose
of connecting nodes or places forgetting the people and the economy in the hinterland or
in between the nods. The road density/1000 persons was 0.5 in 2004/5 that increased to
1.27 in 2017/18. Likewise the road density/1000square kilometer was 33.7 in 2004/5 that
improved in a way to 115.2 in 2017/18.

Although the road network has shown an increasing trend, the progress so far is still far
below the need compared to the large land area and population of the country. Network
distribution per thousand sq. km and per million people is only 115.2 km and 1.3 km,
respectively. This makes the country one of the least accessible in Sub-Sahara Africa.

iii. Road accessibility

In 2016/17, annual average distance from all-weather roads declined by 6.5 percent from
4.6 km in 2015/16 to 4.6 km. Similarly, the proportion of area more than 5 km from
all-weather roads dropped to 33.5 percent from 31.6 percent last year. By 2019/20, it is
envisaged to narrow the proportion of area more than 5 Km from all-weather road to 13.5
percent (Table 8.10).

Railway
The major advantage of rail transport is that it helps transport bulky products. For more
than a century, Ethiopia was served by an international meter gauge railway, from
Addis Ababa to Djibouti City in Djibouti. The railway was built from 1897–1917
and was about 781 km long primarily served to move export- imports for a long time.
Compared to those of the developed countries the railway was backward. It was also a
single lane track. Eventually the Ethio-Djibouti Railway and its decades old rolling
stock was lacking spare parts and forced to closed down over a number of years.

Recently a new railway line of 750 km length connecting Addis Ababa to Djibouti, was
officially inaugurated in Djibouti in 2018. The Addis Ababa–Djibouti Railway is a new
standard gauge international railway that serves as the backbone of the new Ethiopian
National Railway Network. It provides Ethiopia with access to the sea, linking Addis
Ababa with Djibouti and its Port of Doraleh. More than 95% of Ethiopia's trade passes
through Djibouti, accounting for 70% of the activity at the Port of Djibouti.

The other important railway is Addis Ababa Light Rail Transit. It is the first light rail and
rapid transit in eastern and sub-Saharan Africa. The total length of both lines (north-south
and east-west) of the rail is 31.6 kilometres (19.6 mi), with 39 stations. The rail project
was constructed by China Railway Engineering Corporation Limited (CREC) and is
currently operated by Chinese firm Shenzhen Metro Group Company. It is estimated that
AALRT currently transports about 60,000 people daily, significantly reducing traffic
congestion in the capital, Addis Ababa.

d. Waterways
Waterways are two types. These are seaways and inland waterways. When we talk of
seaways we are talking about open areas. Ethiopia being a landlocked country does not
have direct access to such areas. Presently, the Red Sea through the port of Djibouti is
very important for Ethiopia's external trade. Inland waterways are classified in to two
i.e., rivers and lakes. Because of the nature of the topography over which Ethiopian
rivers flow, Ethiopian rivers with the exception of Baro and Omo in their lower
courses, cannot be used for transportation. On some of the lakes like Tana and Abaya
there is small-scale transportation. The contribution of inland waterways to the
Ethiopian economy is very small.
e. Airways
The other transportation mode, fairly recent in appearance and modern in its constitution,
is air transport. Air transport is the fastest means of transportation from one place to the
other. It has reduced distances by minimizing the travel time. It is very essential for a
country like Ethiopia, where the topography is difficult for communication. There is no
problem of laying the track for airways. The problem with air transportation is that they
are expensive and cannot be used for transporting bulky products. EAL serve some
forty-five cities and towns in the country. The reputed Ethiopian Airlines also gives
impressive international service.

8.7.2.2. Communications

Communication is the process of conveying messages to others. An effective

communication system plays a vital role to: accelerate the pace of development, enhance
closer social integration, and to promote the basic aim of economic activities. Some of
the communication services that are commonly used in Ethiopia include radio, television,
internet, satellite, print publications, fixed and mobile telephones, and post offices.
Microwave radio; open-wire; HF, VHF, UHF radio communication services; and satellite
contribute to the domestic telecommunications system.

The Contribution of Transportation and communication to Socio-Economic

Development

The contribution of transportation to a country’s development is high. Its share of

contribution to the GDP of a country is incontrovertible, though the nature and extent of
the contribution varies from country to country. Transportation plays important economic,
social and political roles some of which are indicated hereunder:

 It creates job opportunity

 It promotes investment sector - on infrastructure development.
 Transportation plays a big role for both national and international trade.
 It serves as a source of income generation both for governments and the public;
 It contributes to the maintaining a country’s peace, political wellbeing and
stability;
  Plays the role of linking rural areas and rural products to urban centers and helps
in increasing and interconnecting market outlets;
 Makes big contribution to the development of tourism, entertainment, sports and
peaceful relationship among people.
Although the expansion of the transport sector is of tremendous economic, social and
political benefit, there are nevertheless some negative aspects to it. The fact that its
energy consumption is high, that it is foremost among the factors that contribute to
environmental pollution, that it has been classified among the world's killer diseases
with regard to traffic accidents, and that it has become a source of anxiety in
terms of congestion constitute the negative side of the transport sector.

8.7.3. Trade in Ethiopia

Trade is a process of exchange of products involving change in ownership of

commodities. The development of trade in a country depends on the development of
production activities. Trade basically arises when regions or persons complement one
another with their products. A country carries out two types of trade. These are internal
trade and external trade.

Internal trade: This refers to the exchange of goods and services within the country. It
can be done between regions or within a region.

External Trade: External trade refers to the exchange conducted between countries. In
other words, it is concerned with import-export trade.

Foreign Trade
The main reason that necessitates trade with one another rather than running completely
independent economies is that, the earth’s resources are not equally distributed across its
surface. That means different countries have different factor endowments, and the
international mobility of these factors is severely limited. Some countries are rich in
capital resources, others are rich in labor resources, and still others are rich in natural
resources. Hence, every country must trade with others to acquire what it lacks.

Structure of Commodity Export of Ethiopia

 As the Ethiopian economy is an agrarian economy its merchandise (visible) export is
determined by agricultural products. According to the data from National Bank of
Ethiopia/NBE/, for all study periods the export structure of Ethiopia has been
characterized by greater concentration of few traditional exports such as coffee, oil seeds,
and pulses and chat. Coffee dominates the total merchandise export item of the country
and accounts for 29.5% of visible export earnings. Oilseeds accounting for 14.9 % take
the second position followed by pulses 9.5 %, and chat 9.5 % (Table 8.9).

Table 8.9: The share of export items in the total merchandise export value

2015/16 2016/17 2017/18

Particulars
%share %share %share

Coffee 25.2 30.4 29.5

Oilseeds 16.6 12.1 14.9

Leather and Leather products 4 3.9 4.7

Pulses 8.1 9.6 9.5

Meat & Meat Products 3.4 3.4 3.6

Fruits & Vegetables 1.9 1.9 2.2

Live Animals 5.2 2.3 2.2

Chat 9.2 9.4 9.3

Gold 10.1 7.2 3.5

Flower 7.9 7.5 8

Electricity 1.1 2.5 3

Others 7.4 9.7 9.7

Total Export 100 100 100

Source: National Bank of Ethiopia, 2018

The Geographic Structure of Exports

Alike the commodity structure, the country’s exports has been concentrated
geographically with largest proportion of exports destined to limited markets. The major
export destinations for Ethiopian goods show that Asia accounted for 39.8 % of
Ethiopia’s export earnings followed by Europe (28.7%). On the other hand, about
20.9 % of Ethiopia’s export earnings originated from markets in Africa. (Figure 8.3)
 Source:
Author Compilation

Looking at the direction of trade by individual country, five countries (China, USA,
Netherlands, Saudi Arabia and Djibouti) are important which account for 39% of the
Ethiopia’s export between in 2015/2016.

With regard to imports of goods, during 2017/18, Asia accounted for 64.2 percent of the
total imports of Ethiopia followed by Europe (19.3 %).Ethiopia’s total imports with the
U.S.A accounted for 9.4 percent of the total import bill. About 51% of Ethiopian’s
merchandise import originated from china, U.S.A, Japan, Italy, and USA (Figure 8.4).
 F ig u r e 8 .4 .I m p o r t b y O r ig in % 2 0 1 7 / 1 8
Y u g o s l a v ia
D j i b o u ti
K enya
R u s s ia
Sudan
U .K .
F rance
N e t h e rl a n d s
G e r m an y
U .A .E
S a u d i A r a b ia
I ta l y
Japan
U .S .A .
C h in a, P . R ep .
R e s t o f t h e W o rl d
0 .0 0 0 1 0 .0 0 0 2 0 .0 0 0 3 0 .0 0 0 4 0 .0 0 0 5 0 .0 0 0
Source: Author compilation
8.7.4. Tourism in Ethiopia: Types, major tourist attraction sites, challenges and
prospects

UNWTO (2002) defined tourism as

"Tourism comprises the activities of persons traveling to and staying in

places outside their usual environment for not more than one consecutive
year for leisure, business and other purposes. “

Tourism is one of the largest and most important industries in the world in terms of
employment creation and generation of foreign revenue. As a worldwide export category,
tourism ranked fourth in 2013, after fuels, chemicals, food, and ahead of automotive
products

As one of the developing countries, Ethiopia and its tourism is becoming an important
sector contributing a great deal towards the social, cultural, and economic development
aspects of the country. Though tourism development is still unsatisfactory, international
tourist arrivals in Ethiopia have shown a considerable growth. Likewise, the contributions
of tourism income to GDP as well as export earnings are growing in recent years.

Types of Tourism

Ethiopia is endowed with unique landscape, paleontological, archaeological, historical

and living cultural tourism attractions. Based on these attractions diverse types of
tourism are there in the country. The common tourism forms in the country include
living culture tourism, history tourism, archaeology tourism, palaeontology tourism, park
tourism, geo-tourism, agro-biodiversity and coffee tourism, rural tourism, conference
tourism and sport tourism are

Major Tourist attraction sites of Ethiopia

Historic Attraction sites

 The Obelisk of Axum: preserves an ancient history of the era of the Axumite
powerful empire having trade links as far as India and China. Visitors will enjoy
the sites of these monolithic obelisks and many more wonders surrounding their
history, notably the Bath of the Legendary Queen of Sheba and archeological
findings that depict the way of life of the Axumite period that reigned from
pre-Christ times up until the 11th century AD.
The Churches of Lalibela- the UNESCO has named the rock-hewn churches of
Lalibela as the 8th wonders of the world. Lalibela presents the site of a chain of
rock carved out 11th century churches with astonishing architectural designs and
interior decorations. Ahistorical myth narrates King Lalibela; on his own (with the
help of angels) completed the construction of the churches. After his death the
king has been designated as an Ethiopian saint.
The Castles of Gondar- built in the mid- 17th century together with the surrounding
centuries-old churches depict yet another sophisticated architectural wonders. The
Castles are found in the city of Gondar, which has been the seat of government
following Axum and Lalibela.
The Walls of Harar- built in the early 16th century, the walls are designated after the
city of Harar. The Walls have 5 arched gates inviting to the city's popular
basketworks, variety of fruits and colourfully decorated costumes of Hararie
women.The city of Harar is considered as the 4th holy city of Islam.

Natural Attraction sites

i. The Blue Nile Falls- locally known as Tississat, meaning 'water that smokes'
presents a spectacular water fall with an intense gash from more than forty-five
meters (150feet) peak, producing rainbows across the gorge. The area is also
inhabited with fascinating wild lives and birds.

ii. Simien Mountains- Simien mountains are home of Ethiopia's highest peak
Ras Dashen with the height of 4,620 meters above sea level. With the
assistance of a professional guide, the area is ideal for mountain trekking. The
endemic Walia Ibex and the Gelada baboon are also found here.
 iii. The Rift Valley Lakes- Ethiopia is one of the countries that the Great Rift
Valley system traverses. The Valley embraces the beautiful chains of lakes
with abundant wildlife and variety of birds. The Rift Valley comprises famous
natural parks known as Abijatta-Shalla, Nechisar, Mago and Omo national
parks. Each national park presents a unique feature for bird-watching, trekking
and wild life scenery.

iv. The National Parks: Being a land of diverse geographic settings and rich
natural resources, National Parks in Ethiopia, present spectacular visiting
opportunities for tourists that are keen on admiring and enjoying nature.

The Role of Tourism in the Economy of Ethiopia

The direct export earnings generated by tourism in Ethiopia are increasing, and tourism
seems to be the third source of export revenue after agriculture and industry.

International tourist arrivals have been on a growth trajectory since the 1990s rising from
64,000 in 1990 to 681,249 in 2013. This has been matched by growth in the contribution
of the travel and tourism sector’s direct contribution to the country’s GDP which in 2017
was 2.7%, and is expected to grow by 6.7% per annum reaching 6.1% of GDP by 2028.

Further, the industry is now an important source of employment accounting for 2.4% of
total employment in 2017 representing 604,000 jobs directly and this is forecast to grow
by 1.9% per annum in 2028 to 742,000 jobs (2.1% of total employment). Such
performance has seen the tourism industry increasingly becoming an important economic
sector in the country.

Challenges of the sector to be addressed

Ethiopia’s possession of varied attractions is regarded as an opportunity for the sector.

However, at present, the following major challenges are also confronting the sector:

 Weak institutional framework and implementation capacity, skilled human

resources and financing
  Very limited accommodating capacity of international standards for leisure
tourism, with investment concentrated in main cities and business-type hotels
 Lack of basic and IT infrastructure present challenges for tourism businesses
 Narrow product range offered to the market by incoming operators
 Weak private sector associations
 Unplanned destination development
 Poor visitor management in natural and heritage sites puts sites at risk
 Poor tourism statistics

Ethiopia has a wealth of natural and cultural resources, with some unique cultural and
natural features that set it apart from other African destinations. Current international
trends in world markets present opportunities to diversify the product portfolio and attract
more visitors, and international markets were prioritized by the Marketing and Branding
Strategy as being among the ‘core’ markets with high revenue potential and high affinity
for leisure travel to Ethiopia, as well as among the ‘steady markets’ that are easier to
penetrate.