ECONOMIC ACTIVITIES IN ETHIOPIA

Mining Activity in Ethiopia

The importance of Mining sector in Ethiopia
Economic benefits
 Generates revenue from sales, taxes, royalty:
 Generates foreign currency earnings
 Employment opportunity
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.
Fishery
• Fishing is a primary economic activity that involves
harvesting of fish resources from water bodies.
• 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.
Fishing Grounds in Ethiopia
• Most fishing activities in Ethiopia take place in fresh
waters, such as rivers, lakes and ponds.
• 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.
• 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.
• 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.
Socio-economic contribution of the fishery sector
• Role of fisheries in the national economy
• Trade
• Food security
• Employment
• Fish meal as animal feed source
• Sport fishing as a recreational value
Demand and consumption of fish
• the domestic market for fish is small. The factors which
account for this low level of local fish consumption are the
following.
• fish has not been integrated into the diet of most of the
population.
• 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
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 couantry.
 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.
• 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.
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.
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.
• 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.
• 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
1. 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.
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.
3. 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.
• Agriculture Systems in Ethiopia
• 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.
• 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:
1. Highland mixed farming system
2. Lowland mixed farming system
3. Pastoral system
4. Shifting cultivation
5. Commercial agriculture
1. 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:
A. Grain-plough complex
It is practiced in the central and northern parts of the country.
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.
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 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.
• 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.
2. Lowland mixed agriculture
• Lowland agriculture is practiced in the mountain foothills and the
lower valleys below 1500m.a.s.l.
• 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.
• 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.
• 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 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.
4. Shifting cultivation
• This is the cut-and- burn cultivation system whereby a
given plot of land is cultivated after 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 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.
• Mechanized farms were concentrated in the Awash valley, Arsi,
southern Shoa, and Humera-Metema 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.
• Lack of infrastructure is 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
• 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.
• 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
Manufacturing Industry in Ethiopia
• 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.
• The contribution of the industrial sector to the Gross Domestic Product
(GDP) over recent periods is only 11.7 percent.
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).
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.
• 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
• 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.
• The major contribution to GDP of the country comes from agriculture
and service sector. (Table.8.5)
• 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.
• The Spatial Distribution of Manufacturing Industries in
Ethiopia
• manufacturing establishments have been concentrated in a
few large towns.
• 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
• 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:
i. strong linkages with the agricultural sector as they use inputs from
the livestock and cotton sectors,
ii. they are also both labour intensive, thus absorbing labor from the
agricultural sector, and
iii. they have major export potential and low entry barriers.
• 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 industrial parks :
a. fully developed by the federal or regional
government;
b. developed by PPPs with the IPDC and
c. 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. ( Table 8.6).
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 Ethiopia
• 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.
Industrial development in Ethiopia: Challenges and
Opportunities
• 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 and opportunities of industrial development in
Ethiopia
Challenges
• High logistics and transportation cost
• Limited research/study and action on export incentives and
market
• Low labor productivity
• High cost of imported raw materials
• Limited compliance to the international requirements and
market
• Underdeveloped rural infrastructure in the potential areas
• Weak supply chain integration, market institutions and
information system
• Low level of technology
Opportunities
• Relatively cheap electricity charge in comparison to other African
countries
• Macroeconomic stability and rapidly growing economy
• Relatively cheap labor force & increasing number of trained
employees
• Access to wide market ( large domestic market, COMESA, AGOA,
EBA opportunities, China market etc.)
• Competitive incentive packages which include export incentives
• Integrated Agro-Industrial Parks (one stop shopping for all the
services, economies of scale, extension services, development of
common infrastructure)
• Global attention due to its remarkable economic growth and
credit worthiness