Ethiopia: Transforming Livestock Sector, Solving Export Bottlenecks

by Zelalem

Ethiopia is one of the top ranking countries in Africa and among the first ten in the world in terms of livestock resources. And it is not uncommon to see majority of the rural population engaged in some way with animal husbandry. Animal husbandry in rural areas is used for the provision of draft power, food, source of cash, fuel for cooking, hides and skins, and as a means of transport for carrying goods and people.

Especially, in the highland part of the country, oxen is used as a farming system in crop production. Possession of high number of livestock in pastoral areas is also taken as a wealth which creates social prestige among the community.

Unluckily, even if the nation is rich in livestock resources, per capita consumption of livestock products of its people is still at lower level. Moreover, the revenue collected from live animal export is still insignificant when compared to the potential of the sector.

According to recent reports from the Ethiopian Investment Commission, the country has over 35 million cattle, 23.4 million sheep, l7.5 million goats, 5.5 million horses and mules, l million camels, and million poultry.

Experts in the field suggest that the nation should take measures to transform its traditional methods of animal husbandry to a modern domestic breeding and livestock processing programs. They also stress the importance to consider value added activities in the livestock sector as the nation is losing a lot by just exporting live animals.

For this effect, they recommend, the need for a well studied strategy that looks at promoting the livestock processing sector and eliminating non-value added efforts through building modern abattoir plants.

The government has given due attention to the sector and created conducive investment opportunities to modernize and commercialize livestock. However, the efforts have been found inefficient and ineffective since the intended results were not realized well.

According to the information from the Ministry of Livestock and Fishery, the government has allocated huge investments to improve the livestock sector and create conducive investment environment for the private sector by recognizing sector’s potential as a key driver for Ethiopia’s economy. Concurrently, with the intention of transforming country’s livestock sector and gain substantial economic benefit, the government has currently constructed integrated aggro-industry parks.

Contrary to this effort, however, the sector is highly challenged by many factors. Illegal trade and live animals smuggling to neighboring countries, inadequately organized and modernized domestic and export market chain, fodder shortage, major health problems as well as gaps in value chain and processing have often challenged the sector and lowered its economic earnings.

According to CEO of the Ethiopian Livestock Traders Association Meseret Adugnaw, livestock trading often faced various problems related to poor local and export market linkage, lack of modern vehicles to transporting animals, protection, licensing and availability of land.

He said the Association is closely working with the Ministry of Livestock and Fishery to solve the various challenges that the sector often encounters. He stressed “The government is considering the requests made by the Association in the areas such as provision of land, tax free importation of animal vehicles and other related challenges.”

The fact that the sector demands a huge capital is also the other big challenge, Meseret stressed adding : “Looking forward for private banks to offer short and safe loan services to local investors is something that should be given attention to effectively support the livestock sector.”

Taking livestock export data reports, Meseret further noted that export has declined in 2017 when compared with the preceding year’s performance. “The total amount of capital obtained in the year 2016/17 has shown over a twofold decline. In the 2015/16 period the revenue from livestock data was over 148 million USD,” he added.

Illegal trade, inadequate financial services towards providing credit for investors, bureaucratic provision of land especially for those engaged in livestock fattening and animal rearing, shortage of animal feeds, knowledge and skill gaps and poor market linkage in the international markets, unavailability of livestock processing plants have contributed a lot for the deterioration of sector’s performance. And they are still major constraints that the sector is facing.

To curb these and other challenges thereby tap sectors potential hence, according to him, transforming the sector is the best option. Building modern abattoir and looking forward towards potential market outside the nation solves many challenges of sector.

“Transforming the sector will also address market related problems problems that farmers and pastorals commonly face in the remotest areas of the nation,” he remarked.

Ministry of Livestock and Fishery Policy and Research Adviser to the Minister Dr. Thomas Chernet underlined that the Ministry is working in the areas of livestock trade as illegal trade across the border is a challenge in the area.

The Adviser sated that neighboring countries are benefiting better than Ethiopia from the sector by re-exporting the smuggled animals to Middle Eastern countries. The government indeed, is working persistently to stop illegal trade of animals.

Furthermore, it has now established quarantines to collect, inspect and manage the health of livestock so as to ensure quality and safety of exports in the Mile, Afar, Jijgiga and Djibouti ports through the required vaccination and health care prevention tasks until they reach to their final destination.

The Ministry is highly focusing on advancing livestock productivity to satisfy local and international market demands. Hence, “Much focus will be given for transforming the sector both at individual and national level.”

Regardless of its ample potential in the sector, the nation is not capable of satisfying the meat and milk demands of its people as per the global standard. Surprisingly, it is still importing powdered milks from abroad.

Transforming the sector is being government’s top priority in the second Growth and Transformation Plan (GTP-II), and target is set to increase the number of high breed cattle from the current 777 to 9000 cross breeds.

Domestic cow gives close to eight liter of milk at an average. However, the global experience shows that a cow could yield between 50-70 liters a day. “As part of the transformational change, hence, it is planned to increase this amount to 12- 20 liters at the end of GTP-II.” he unveiled.

The population of Ethiopia was about 52 million some 25 years back, but now the number is estimated to be close to 100 million. The land coverage is 1 .1 million square kilometer. This calls for transformation in productivity in the livestock and other development sectors.

Exporting live animals in the long run is also a loss to the nation, the Adviser said adding “The practice of exporting live animals is not a preferred option that the country adheres to it in the future. Rather, exporting processed livestock through value addition should be the area that the nation gives due focus. “Building processing plant, in this regard, will create ample opportunities to curb local market related problems and the many bottlenecks that are hampering the sector. Investors also should eliminate non-value added trend and support the economy through adding value to their exports,” the Adviser stressed.

As livestock processing sector demands huge capital and expertise, it calls for joint ventures, he added. Joint ventures (JVs), according to him, are cooperative enterprises entered into by two or more business entities for the purpose of a specific project or other business activities. Often the joint venture creates a separate business entity to which the owners contribute assets, have equity or share, and agree on how this entity will be managed. The new entity may be a cooperation, limited liability or partnership.

In other cases, individual entities retain their individuality and they operate under a joint venture agreement. In any case, the parties in the JV share in the management, profits, and losses, according to a joint venture agreement or contract they made. Joint ventures are often entered into for a single purpose – a production or research activity. But they may also be formed for a continuing purpose. The structure (JV) can combine large and small companies on big and little projects.

And When a joint venture is formed, the most common structure is to set up a separate business entity. Then the parties each own a specific percentage of the entity. If the joint venture is a corporation, for example, and two businesses have equal shares in the business, they structure the company so each the partner entities has an equal number of shares of company stock and equal management and board of directors.

Dr Bishaw Benti is an owner of Excel Argo-Indrutsial P.L.C. and engaged in livestock sector. He aspires to form a strong joint venture with foreign companies. As to him getting huge finance loan is a difficult matter. However, formation of JV will solve it easily.

His Company is on the right track to forming joint ventures. So far, he has signed Memorandum of Understandings (MoU) with other companies and discussions are made with potential foreign investors. “Buna International Bank is supporting our firm to lessen the financial bottlenecks which is a big service for our firm. And other banks should also have similar platforms to support huge joint ventures that mobilizes huge fiance.”

Furthermore, the government is exerting its level best by establishing or organizing a specific Ministry that will work on the area to attract foreign investors.

Dr Thomas stressed “Formation of joint ventures and facilitating means to get huge finance are the areas that the government is looking forward to support the sector. And Joint venture formation is crucial to solve the market, financial and skill gaps that are predominant constraints in the area.”

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