Agro-processing accelerating industrialization
Toumelisan Gebre-Wold
The second-round forum intended to enhance the contribution of investment related to agriculture and agro-processing was conducted in Addis Ababa, starting from March 5, 2018. The exhibition had encouraged leather and textile producers to display their produces and link them with potential businesses that are engaged in same activities.
The Ministry of Industry had recently stated that corporations have been established, parallel to undertaking feasibility studies targeted to support successful construction of the afore mentioned agro-processing industries with an outlay of 30 billion Birr (it said the feasibility study had been carried out for several months). Following the feasibility study, various international financial sources have expressed interest to support the construction including UNDP, Italian government and African Development Bank (ADB).
It has been said that industries will be erected in Amhara, Oromia, Southern Nations and Nationalities and Tigray regions. To this end, the government has said it has been searching for financial assistances to help realize the projects since last year.
These integrated agro-industries will exclusively focus on consuming and processing agricultural raw materials. As a result, they will link agriculture produce of rural farmers with industry. To this end, nation has identified marketable surplus commodities in respective regions and it has carried out detailed value-chain analysis.
The term of agro-processing refers to the practice of transforming primary agricultural products into secondary or even tertiary commodities, which can be sold on the market for a much higher price. In other words, it means turning raw materials into more complex and expensive merchandise, instead of selling it cheap after the first step of production. Obviously, this would require a certain level of skills and technology, but it would also bring higher profits.
A common and traditional definition of agro-processing industry refers to the subset of manufacturing that processes raw materials and intermediate products derived from the agricultural sector, Agro-processing industry. Thus, it means transforming products originating from agriculture, forestry and fisheries to semi-processed and finalized goods.
Agro-processing development has a direct impact on the livelihoods of the poor both through increased employment in agro-industrial activities, and through increased demand for primary agricultural produce.
Though varying significantly by subsector and region, agro-industry, particularly in its initial stages of development, is relatively labour-intensive, providing a range of opportunities for self and wage employment. It is also frequently distinguished as high employer of females ranging from 50 per cent to as high as 90 per cent.
Besides, it would bring a series of other advantages. First, it would supply the community with a wider variety of locally produced cheaper goods. Furthermore, it would increase quality of life, thanks to increased access to secondary and tertiary agricultural products.
Secondly, it would extend agricultural products’ shelf-life, thus decreases wastage. Since farmers would no longer be desperate to sell their products quickly and avoid wastage, they would go for more offers on the market and choose the most pricy bid and profitable time.
As a result, it will help transform Ethiopia’s economy from agriculture-based to one driven primarily by light industries. Agro-processing is said to contribute a lot to poverty reduction by generating employment to the youth and creating income. The sector also has extensive linkages with other sectors of the economy and it is particularly important for developing Ethiopia’s economy; predominant step towards speeding up structural transformation of the economy.
Particularly, Ethiopia has agriculture-driven economy which is realizing sizeable transformation until now. For instance, the economic growth of the country has been double-digit as much as eleven percent since 2003/04. This commendable growth has been effected against the sub- Saharan regional average of 5.4 per cent, as conjectured by the World Bank earlier. The growth has continued until the beginning of last year (but now some organizations have predicted a decline due to instability encountered in Amhara and Oromia regions).
Agriculture is the cornerstone of Ethiopia’s economy, which is similar to the situation in most African countries. To be more specific, the sector is major employer and driver of the economy and over 85% of the population is engaged in this area. Currently, it also constitutes 46 per cent of gross domestic product (GDP) and 90 per cent of export value. Agro-processing factories are anticipated to accelerate the transition of the country from agriculture-led. Hence, it is a must to expand agro-processing activities and enhance the income of women and the youth employed on the area.
However, in the context of rising demand for more agricultural raw materials, medium-and large-scale agro-processing factories in Ethiopia often cite lack of raw material inputs as a main constraint hindering their ability to work at full capacity (for instance, textile factories face shortage of cotton and are coerced to import it from abroad to cover their demand).
This has emanated from chain of hurdles including poor quality of inputs and inefficiencies due to large number of smallholder farmers scattered over large areas (long handling chains between farmers in rural areas and processors in urban areas contribute to poor quality inputs, inefficient handling chains, as well as high post-harvest losses and higher prices).
In addition, poor linkages of farmers with agro-industries and their limited knowledge regarding best agricultural practices are among the constraints. Moreover, the presence of numerous middlemen is contributing to wastage of produce and inefficiency (it is assumed that wastage between the farm yard and the final consumer line amounts to as much as 40 per cent in fresh products and up to 20 percent in cereal crops, contributing to unnecessarily high prices).
Similarly, the problem of raw material supply is complicated by lengthy supply chain. And limited communication between farmers and processors means that farmers have little incentives to produce high quality products, employ best handling practice, invest in high quality inputs or adopt best agronomic practices.
To alleviate these problems, nation is striving to enhance the capacity of Rural Transformation Centers (RTCs) by training and providing capacity-building solutions for rural populations; training the rural communities aimed at enhancing knowledge, skills and abilities to increase quality of produce. The training focuses on cultivation boosting post-harvest handling, packaging and branding, product performance and animal feed management.
Likewise, capacity building effort includes organizing market information centers – a one-stop information centers that combine information and services offered by various ministries and government agencies (the centers are providing information on agro-processing development, prices, market trends, and current market demand in terms of products and quality, among other services).
The last but not least solution has aimed at offering agriculture support services. These services will help rural communities to enhance productivity; produce premium cash crops, including high-demand vegetables. It also covers areas such as dairy development, including raw milk marketing.
Currently, nation expects the industrial sector to play an important role in GDP growth, job creation, foreign exchange earnings, and small and medium-sized enterprise (SME) development over the coming years. The overall goal of the country’s Industrial Development Strategy (IDS) is to bring about the accelerated structural transformation of the economy through enhancing industrialization, raising the share of the industrial sector of GDP from less than 20 percent to 27 per cent by 2025.
Taking these opportunities in to account, nation is spearheading the development of integrated agro-industrial parks (IAIPs) and accompanying rural transformation centers (RTCs) with the intention of better integrating agricultural value chain actors. The development of IAIPs is prioritized in Ethiopia’s national development strategy and is a core component of the current Growth and Transformation Plan (GTP II, 2015-2020).
By and large, agro-food processing activities aim at developing food processing enterprises in rural areas, with an emphasis on improving agricultural product quality for local and overseas markets; this will support agro-industrial development through value-added activities and generation of additional income for farming communities.
Needless to say, agro-industries will be assisted to enhance their network of close linkages with farmers that supply raw inputs, for instance cotton gins and oil refineries. Over all, despite the challenges outlined above, agro-industry companies in Ethiopia are doing very well towards enhancing their productivity and expanding their capacity to foreign market export.
No doubt, the developments of agro-industries are offering Ethiopia with an opportunity to accelerate economic development and achieve industrial development goals. Currently, nation is striving to properly address fore-mentioned challenges and pave the way to industrialization.