Opportunities for Public Private Partnership in Ethiopia’s Agriculture

Ethiopia on the move …• Sustained economic growth – 10%+ GDP

growth and 8%+ per capita income growth over the last five years (has added more to its GDP & pci in the last 5 years than in the last 5 decades)

• Ranked by the Economist as among the top five fastest growing economies in the world

• A regional giant – in nominal terms, has surpassed the Kenyan economy; a large consumer base – population of 80million and growing

• Massive public investments in infrastructure and human development – power generation (hydro) has grown from 400mw to over 2,000mw in 5yrs. Expected to reach 10,000mw by 2015

Ernst & Young forecast for Ethiopia’s economy in 2025:

•GDP (PPP): US$490 billion

•GDP/capita (PPP): US$4,000

•3rd largest economy in SSA

Population projections:•120 million (2020)

•278 million (2050)

Agriculture as a driver of growth for Ethiopia

▪ Huge potential to increase production by closing the productivity gap

GDP per smallholder can be increased by 95% by 2025, contributing USD 19 bln to country GDP

Export value could reach USD 8 bln

▪ Weak actors across most critical value chains (e.g. lack of entrepreneurial aggregators)

▪ Underdeveloped irrigation potential (less than 5%)

▪ Unrealized potential for cultivable land

▪ Gaps in enabling policy environment and infrastructure (financing, transport, communication)

▪ Social and physical constraints: soil degradation, land fragmentation, vulnerability to droughts, gender disparities

...yet a number of critical challenges to overcome

Agriculture is a key driver for Ethiopia’s development...

... with a significant growth potential...

▪ Economy focused on agriculture (43% of GDP, 80% of export value, 83% of population dependent for income)

▪ Consistent growth of over 8 to 10 percent per annum over the past decade

▪ Sector driven by smallholder farmers (95% of total production)

A snapshot of the the agricultural production landscape …

Key Crops Hectares under cultivation

Production (quintals)

Cereals 9.7m 177.6m

Teff 2.8m 34.8m

Maize 2.0m 49.9m

Wheat 1.6m 28.6m

Barley 1.0m 17.0m

Pulses 1.4m 19.5m

Chick Peas 208.4t 3.2m

Lentils 77.3t 809t

Oilseeds 774.5t 6.3m

Nueg (Niger) 247.6t 1.4m

Sesame 384.7t 3.3m

Fruits 54.6t 4.8m

Bananas 31.9t 2.7m

Coffee 498.6t 3.7m

Source: Ethiopian Central Statistical Authority, 2011

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Ethiopia‘s vision on agricultural transformation

Food security

Enhanced environmental conservation

Improved gender inclusion and equity

Ethiopia aspires to transform its agriculture into

a sustainable market-led sector and achieve :

Part of country‘s aspiration to achievemiddle income status by 2020

SOURCE: Ethiopia‘s PIF, ATA team

AGP activities offer potential entry points for private sector involvement (1/3)

potential entry points for private sector

Strategic objectives

Reduction in degradation and improvement in productivity of natural resources

Achievement of a sustainable increase in agricultural productivity and production

Achievement of universal food security and protection of vulnerable households from natural disasters

Acceleration of agricultural commercializa-tion and agro-industrial development

Natural Resource Management

Productivity and Production

Disaster Risk Management and Food Security

Rural Com-mercialization

6Potential entry points for pubic private partnerships

... with clear targets for each element

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Productivity and Production

Rural Commercialization

Natural Resource Management

Disaster Risk Management and Food Security

• Increase productivity in major crops by 29%• Increase amount of cultivable land by 8%• Increase land with fertile soil by x17• Increase export of coffee by x3.5

• 8% annual increase in rural income • 10% annual increase in the number of farmers with access

to financial services • Increase the number of trained farmers from 14 to 450 ths• 12% annual increase in level of investment in agribusiness• Increase in mobile penetration from 9 to 45%

• Introduce land planning and management system to additional 181 woredas*

• 8% annual increase of arable land irrigated

• Increase major crop production by 40%• Decrease the number of people chronically food insecure

form 7.1 to 1.4 million

* Administrative unit of Ethiopia (equivalent to a district)SOURCE: Ethiopia‘s Agricultural Sector Policy and Investment Framework, GTP Agriculture Policy Matrix

SELECTED TARGETS

Approach to transformation

Creating enabling environment

Holistic, integrated programme covering priority focus areas through key levers:

Improving industry structure and engaging private sector

Improving frontline extension quality

Scaling irrigation and better land management

Increasing productivity of smallholder farmers

SOURCE: Ethiopia‘s PIF, ATA team

Investment platformfor increasing agricultural productivity and market access in key value chains in targeted high potential areas

Developments so far: key transformational interventions in support of agricultural growth

Dedicated independent

unit to support and monitor

implementation, reporting

to the Prime Minister

ECX

A first of its kind national multi-commodity exchange that provides low-cost, secure marketplace trading services

Key features of the AGP

Key commodities using a value-chain approach identified

for each cluster

Main beneficiaries

small- and medium-scale

farmers

Focus on selected

geographic clusters

Bottom up, decentrilized planning approach to identify key interventions at a local level (83 high potential areas)

E.g. AGP-AMD

project supported by

USAID selected 8 key

value chains in 6

clusters:• Wheat• Maize• Sesame• Pulses• Coffee• Honey• Meat and dairy

Adoption of new technology and changing behaviour and

mindsets

10SOURCE: USAID, ATA team

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83 woredas in 20 clusters in four of the largest regions

Selection of geographic clusters•Access to markets (access to cities of 50,000 population or over in less than 5 hours)

•natural resource endowment (rainfall distribution with annual average of 700 mm or over soil types suitable for crop and fodder production

• potential for development of small-scale irrigation facilities

• institutional capacity (public staff number and skill base; institutional plurality of service providers, including good basis and growth of viable cooperatives and farmer groups); and

• willingness and commitment to participate (supportive policy environment; performance of projects/programs supported by other donors; existing partnership engagements with private sector).

AGP: example of a targeted geographic area

• Focus area (4 woredas) covers population of 0.5 mln

• Wheat is one of prioritized crops: potential to increase yield by 120% and double farmer‘s income

• Main levers include:

• Improving competitiveness

• Access to finance

• Enhanced fertilizer use and adoption of new technology

• Investment in storage facilities

SOURCE: World bank, ATA team

AGP activities offer potential entry points for public private partnerships (1/3)

potential entry points for private sector

Strategic objectives

• Adoption of improved technologies for processing and production

• Strengthening marketing and processing of select commodities

• Engagement with private sector

Agricultural production and

commercialization

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Small-scale rural infrastructure

development and management

• Construct/rehabilitate/manage small-scale rural infrastructure for increased productivity

• Improve efficiency of key value chains through improved access to markets

Market and Agribusiness development

Examples

PepsiCo has partnered with a local company to source and produce a chickpea based nutritious food

Diageo has expressed readiness to invest in the sourcing and production of barley following its recent acquisition of a major brewery

• Agribusiness opportunities exist along the value chains of key crops found in AGP geographic clusters:– wheat– maize– chickpeas– teff– soya bean

• Opportunities also exist in the development of the supply systems of key inputs:– Seeds– Fertilizers– Crop protection products– Machinery

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AGP activities offer potential entry points for public private partnerships (2/3)

SOURCE: Ethiopia‘s PIF, ATA team

Key goals

Example of private partnership in agribusiness development - EthioPEA

EthioPEA

Omega Farms

Produce nutritious products made from local chickpeas for low income consumers in Ethiopia

Increase yileds and quality of chickpeas to turn it into a major export crop

In collaboration with a numberof private and public actors

Pilot launched in several regions to evaluate potential of productivity improvement through modern irrigation, better seed quality and transfering best practices

15SOURCE: ATA team, PepsiCo

An emerging public private partnership ….

Ministry of Agriculture

Market and Agribusiness development

Institutional strengthening and development

• Investing in and strengthening key public advisory services – e.g. agricultural extension services, soil fertility management services, animal health services – the AGP is creating a conducive environment as well as strengthening the capacity of the public sector to effectively respond to potential interventions by the private sector

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AGP activities offer potential entry points for public private partnerships (3/3)

SOURCE: Ethiopia‘s PIF, ATA team

Cold chain supply management

• Investment in storage, distribution facilities and equipment (e.g. refrigerator trucks)

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In addition, investment opportunities exist in backbone infrastructure development

SOURCE: ATA team

Description

Warehousing • Investment in warehousing and aggregation facilities for agricultural outputs

Financial services

Transport•Investment in transport infrastructure, e.g. roads, rail

Overview of potential setups for private sector engagementBenefitsRole

MNCs▪ Investment in specific value

chains to increase production and quality of crops

▪ Distribution of inputs▪ Supporting pilots to introduce

best practices ▪ Increase in small holder productivity

▪ Cost reduction through developing local sourcing of supplies

▪ Improved supply of key commodities

▪ Link to commercial markets

▪ Transfer of technology and management skills

▪ Access to finance

▪ Sustainable demand for SMEs

▪ Investment in aggregation and training facilities

Social VC▪ Providing catalytic capital to

jumpstart infrastructure projects and innovative value chain models until they reach a self-sustaining momentum

Others ▪ tbd

▪ Investment in specific value chains and regions

▪ Investment in aggregation and processing facilities

▪ Farmers and entrepreneurs capability building

National companies

Small local entrepreneurs

19SOURCE: ATA team

Next steps for engaging the private sector

Joint public and private identification of areas for private

sector engagement

Establishment of partnership structures (e.g.

projects, committees, industry

associations)

Development of

investment plans

for specific

initiatives

Joint execution

and monitoring

Focus of today’s meeting

20SOURCE: ATA team