Ethiopia's Economic Climate

Investment Opportunities In Agriculture & Agribusiness

Agriculture is the mainstay of the Ethiopian economy. The sector currently accounts for 52% of the GDP, 90% of the total foreign exchange earnings and 85% of employment. It also plays a crucial role in providing raw materials to local industry.

Ethiopia is endowed with abundant agricultural resources. The country ranges in altitude from 180 meters below sea level to 4,620 meters above sea level. It is characterized by very diverse physical features and can be classified into 18 major agro-ecological zones and 62 sub-zones each with its own physical and biological potential. Due to this extraordinary diversity, Ethiopia possesses one of the largest and most varied agricultural and genetic resource profiles in the world. Given such diversity, there is a vast array of potentially lucrative agricultural investment opportunities.

There are two rainy seasons in Ethiopia. These are the short rainy season, from mid-February to the end of April known as the Belg rains, and the main rains known as Meher which fall in the months of June to September. Rainfall distribution throughout the country varies according to the agro-ecological conditions in each specific area. Rainfall ranges from 2,200mm in the southwest, decreasing to below 100mm on the coastal plains.

Ethiopian agriculture consists primarily of small-holder farming. This accounts for more than 9000 of total agricultural production. Small-holders produce over 90% of grain and coffee. The major crops grown are cereals, pulses and oil seeds. In 1992 small-holder farmer production of cereals (teff, wheat, barley, maize and sorghum) accounted for 89% of the total crop production. In the same year, pulses contributed about 10% of the total production.

The government has initiated a five-year agricultural development program with the primary objective of closing the country's food gap. It is anticipated that this will be achieved in the medium term by attaining sustainable food production growth at a rate higher than the rise in population. Within this program there is considerable scope for foreign investment within the agricultural sector, particularly in plantation agricultural processing.

CASH CROPS

Coffee, cotton, tea, sugar, spices, oil seeds and tobacco are among the major commercial crops grown in Ethiopia. They now provide some of the best opportunities for investment in the agricultural sector.

Coffee

Ethiopia is the original home of coffee; the name 'coffee' itself was derived from Kaffa, one of Ethiopia's principal coffee growing regions. The country produces some of the best coffee in the world and coffee is Ethiopia's single most important export crop.

Prior to 1975 coffee production, processing and trading were all principally private sector activities. They were then nationalized and smallholder coffee producers were neglected. Since 1991 the number of private coffee exporters has again risen rapidly and the volume of coffee exported has also significantly increased.
Coffee provides sustenance, directly or indirectly, to nearly a quarter of the population in production, processing and marketing activities. Hence the need to encourage the private production, processing and marketing of high-value yielding coffee. There is a clear role and numerous opportunities for private investment to enhance and assist the growth of the private coffee sector.

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