Natural Economy of Ethiopia
From "The Economy" in Ethiopia: A Country Study by Mulatu Wubneh, 1993.
From: Unknown To: 1993 C.E.
Location: Ethiopia
From "The Economy" in Ethiopia: A Country Study by Mulatu Wubneh, 1993.
Agricultural Production
The effect of the PMAC's land reform program on food production and its marketing and distribution policies were among two of the major controversies surrounding the revolution. Available data on crop production show that land reform and the various government rural programs had a minimal impact on increasing the food supply, as production levels displayed considerable fluctuations and low growth rates at best (see table 13, Appendix).
Major Cash Crops
The most important cash crop in Ethiopia was coffee. During the 1970s, coffee exports accounted for 50 to 60 percent of the total value of all exports, although coffee's share dropped to 25 percent as a result of the economic dislocation following the 1974 revolution. By 1976 coffee exports had recovered, and in the five years ending in 1988/89, coffee accounted for about 63 percent of the value of exports. Domestically, coffee contributed about 20 percent of the government's revenue. Approximately 25 percent of Ethiopia's population depended directly or indirectly on coffee for its livelihood.
Ethiopia's coffee is almost exclusively of the arabica type, which grows best at altitudes between 1,000 and 2,000 meters. Coffee grows wild in many parts of the country, although most Ethiopian coffee is produced in the southern and western regions of Kefa, Sidamo, Ilubabor, Gamo Gofa, Welega, and Harerge.
Reliable estimates of coffee production in Ethiopia were unavailable as of mid-1991. However, some observers indicated that Ethiopia produced between 140,000 and 180,000 tons annually. The Ethiopian government placed coffee production at 187,000 tons in 1979/80, 233,000 tons in 1983/84, and 172,000 tons in 1985/86. Estimates for 1986/87 and 1987/88 were put at 186,000 and 189,000 tons, respectively. Preliminary figures from other sources indicated that coffee production continued to rise in 1988/89 and 1989/90 but registered a sharp decline of perhaps as much as one-third during 1990/91.
About 44 percent of the coffee produced was exported. Although the potential for local coffee consumption was high, the government, eager to increase its hard-currency reserves, suppressed domestic consumption by controlling coffee sales. The government also restricted the transfer of coffee from coffee-producing areas to other parts of the country. This practice made the price of local coffee two to three times higher than the price of exported coffee.
About 98 percent of the coffee was produced by peasants on small holdings of less than a hectare, and the remaining 2 percent was produced by state farms. Some estimates indicated that yields on peasant farms were higher than those on state farms. In the 1980s, as part of an effort to increase production and to improve the cultivation and harvesting of coffee, the government created the Ministry of Coffee and Tea Development, which was responsible for production and marketing. The ten-year plan called for an increase in the size of state farms producing coffee from 14,000-15,000 hectares to 50,000 hectares by 1994. However, given the strain on the government's financial resources and the consistently declining coffee price in the world market, this may have been an unrealistic goal.
The decline in world coffee prices, which began in 1987, reduced Ethiopia's foreign-exchange earnings. In early 1989, for example, the price of one kilogram of coffee was US$0.58; by June it had dropped to US$0.32. Mengistu told the 1989 WPE party congress that at US$0.32 per kilogram, foreign-exchange earnings from coffee would drop by 240 million birr, and government revenue would be reduced by 140 million birr by the end of 1989. Such declines not only hampered the government's ability to implement its political, economic, and social programs but also reduced Addis Ababa's capacity to prosecute its war against various rebel groups in northern Ethiopia.
Before the revolution, pulses and oilseeds played an important role, second only to coffee, in Ethiopia's exports. In EFY 1974/75, pulses and oilseeds accounted for 34 percent of export earnings (about 163 million birr), but this share declined to about 3 percent (about 30 million birr) in EFY 1988/89 (see table 14, Appendix). Three factors contributed to the decline in the relative importance of pulses and oilseeds. First, the recurring droughts had devastated the country's main areas where pulses and oilseeds were produced. Second, because peasants faced food shortages, they gave priority to cereal staples to sustain themselves. Finally, although the production cost of pulses and oilseeds continued to rise, the government's price control policy left virtually unchanged the official procurement price of these crops, thus substantially reducing net income from them. The Ethiopian Pulses and Oilseeds Corporation, the agency responsible for exporting two-thirds of these crops, reported losses in EFY 1982/83 and EFY 1983/84. In EFY 1983/84, the corporation received export subsidies of more than 9 million birr. Subsequently, production of both crops failed to improve; by 1988 the output index, whose base year was 1972 (100), was 85.3 for pulses and 15.8 for oilseeds. Given the country's economic and political problems and the ongoing war in the north, there was little prospect of improvement.
Cotton is grown throughout Ethiopia below elevations of about 1,400 meters. Because most of the lowlands lack adequate rainfall, cotton cultivation depends largely on irrigation. Before the revolution, large-scale commercial cotton plantations were developed in the Awash Valley and the Humera areas. The Tendaho Cotton Plantation in the lower Awash Valley was one of Ethiopia's largest cotton plantations. Rain-fed cotton also grew in Humera, Bilate (in Sidamo), and Arba Minch (in Gamo Gofa).
Since the revolution, most commercial cotton has been grown on irrigated state farms, mostly in the Awash Valley area. Production jumped from 43,500 tons in 1974/75 to 74,900 tons in 1984/85. Similarly, the area of cultivation increased from 22,600 hectares in 1974/75 to 33,900 hectares in 1984/85.
Major Staple Crops
Ethiopia's major staple crops include a variety of cereals, pulses, oilseeds, and coffee. Grains are the most important field crops and the chief element in the diet of most Ethiopians. The principal grains are teff, wheat, barley, corn, sorghum, and millet. The first three are primarily cool-weather crops cultivated at altitudes generally above 1,500 meters. Teff, indigenous to Ethiopia, furnishes the flour for injera, an unleavened bread that is the principal form in which grain is consumed in the highlands and in urban centers throughout the country. Barley is grown mostly between 2,000 and 3,500 meters. A major subsistence crop, barley is used as food and in the production of tella, a locally produced beer.
Sorghum, millet, and corn are cultivated mostly in warmer areas at lower altitudes along the country's western, southwestern, and eastern peripheries. Sorghum and millet, which are drought resistant, grow well at low elevations where rainfall is less reliable. Corn is grown chiefly between elevations of 1,500 and 2,200 meters and requires large amounts of rainfall to ensure good harvests. These three grains constitute the staple foods of a good part of the population and are major items in the diet of the nomads.
Pulses are the second most important element in the national diet and a principal protein source. They are boiled, roasted, or included in a stew-like dish known as wot, which is sometimes a main dish and sometimes a supplementary food. Pulses, grown widely at all altitudes from sea level to about 3,000 meters, are more prevalent in the northern and central highlands. Pulses were a particularly important export item before the revolution.
The Ethiopian Orthodox Church traditionally has forbidden consumption of animal fats on many days of the year. As a result, vegetable oils are widely used, and oilseed cultivation is an important agricultural activity. The most important oilseed is the indigenous niger seed (neug), which is grown on 50 percent or more of the area devoted to oilseeds. Niger seed is found mostly in the northern and central highlands at elevations between 1,800 and 2,500 meters. Flaxseed, also indigenous, is cultivated in the same general area as niger seed. The third most important oilseed is sesame, which grows at elevations from sea level to about 1,500 meters. In addition to its domestic use, sesame is also the principal export oilseed. Oilseeds of lesser significance include castor beans, rape-seed, groundnuts (peanuts), and safflower and sunflower seeds. Most oilseeds are raised by small-scale farmers, but sesame was also grown by large-scale commercial farms before the era of land reform and the nationalization of agribusiness.
Ensete, known locally as false banana, is an important food source in Ethiopia's southern and southwestern highlands. It is cultivated principally by the Gurage, Sidama, and several other ethnic groups in the region. Resembling the banana but bearing an inedible fruit, the plant produces large quantities of starch in its underground rhizome and an above-ground stem that can reach a height of several meters. Ensete flour constitutes the staple food of the local people. Taro, yams, and sweet potatoes are commonly grown in the same region as the ensete.
The consumption of vegetables and fruits is relatively limited, largely because of their high cost. Common vegetables include onions, peppers, squash, and a cabbage similar to kale. Demand for vegetables has stimulated truck farming around the main urban areas such as Addis Ababa and Asmera. Prior to the revolution, urbanization increased the demand for fruit, leading to the establishment of citrus orchards in areas with access to irrigation in Shewa, Arsi, Harerge, and Eritrea. The Mengistu regime encouraged fruit and vegetable production. Fresh fruits, including citrus and bananas, as well as fresh and frozen vegetables, became important export items, but their profitability was marginal. The Ethiopian Fruit and Vegetable Marketing Enterprise (EFVME), which handled about 75 percent of Ethiopia's exports of fruits and vegetables in 1984-85, had to receive government subsidies because of losses.
Ethiopia's demand for grain continued to increase because of population pressures, while supply remained short, largely because of drought and government agricultural policies, such as price controls, which adversely affected crop production. Food production had consistently declined throughout the 1980s. Consequently, Ethiopia became a net importer of grain worth about 243 million birr annually from 1983/84 to 1987/88. The food deficit estimate for the 1985/89 period indicated that production averaged about 6 million tons while demand reached about 10 million tons, thus creating an annual deficit of roughly 4 million tons. Much of the food deficit was covered through food aid. Between 1984/85 and 1986/87, at the height of the drought, Ethiopia received more than 1.7 million tons of grain, about 14 percent of the total food aid for Africa. In addition, Ethiopia spent 341 million birr on food purchases during the 1985-87 period.
Livestock
Livestock production plays an important role in Ethiopia's economy. Estimates for 1987 indicated that livestock production contributed one-third of agriculture's share of GDP, or nearly 15 percent of total GDP. Hides and skins constituted the second largest export earner, averaging about 15 percent of the total export value during the period 1984/85 to 1988/89; live animals averaged around 3 percent of the total value of exports during the same period.
Although varying from region to region, the role of livestock in the Ethiopian economy was greater than the figures suggest. Almost the entire rural population was involved in some way with animal husbandry, whose role included the provision of draft power, food, cash, transportation, fuel, and, especially in pastoral areas, social prestige. In the highlands, oxen provided draft power in crop production. In pastoral areas, livestock formed the basis of the economy. Per capita meat consumption was high by developing countries' standards, an estimated thirteen kilograms annually. According to a 1987 estimate, beef accounted for about 51 percent of all meat consumption, followed by mutton and lamb (19 percent), poultry (15 percent), and goat (14 percent).
Ethiopia's estimated livestock population of about 78.4 million in 1988 was believed to be Africa's largest. There were approximately 31 million cattle, 23.4 million sheep, 17.5 million goats, 5.5 million horses and mules, 1 million camels, and 57 million poultry. Livestock was distributed throughout the country, with the greatest concentration in the highlands, where more than 90 percent of these animals were located. The raising of livestock always has been largely a subsistence activity.
Ethiopia has great potential for increased livestock production, both for local use and for export. However, expansion was constrained by inadequate nutrition, disease, a lack of support services such as extension services, insufficient data with which to plan improved services, and inadequate information on how to improve animal breeding, marketing, and processing. The high concentration of animals in the highlands, together with the fact that cattle are often kept for status, reduces the economic potential of Ethiopian livestock.
Both the imperial and the Marxist governments tried to improve livestock production by instituting programs such as free vaccination, well-digging, construction of feeder roads, and improvement of pastureland, largely through international organizations such as the World Bank and the African Development Bank. The Mengistu regime also opened veterinary stations at Bahir Dar, Buno Bedele, and Debre Zeyit to provide treatment and vaccination services.
Cattle in Ethiopia are almost entirely of the zebu type and are poor sources of milk and meat. However, these cattle do relatively well under the traditional production system. About 70 percent of the cattle in 1987 were in the highlands, and the remaining 30 percent were kept by nomadic pastoralists in the lowland areas. Meat and milk yields are low and losses high, especially among calves and young stock. Contagious diseases and parasitic infections are major causes of death, factors that are exacerbated by malnutrition and starvation. Recurring drought takes a heavy toll on the animal population, although it is difficult to determine the extent of losses. Practically all animals are range-fed. During the rainy seasons, water and grass are generally plentiful, but with the onset of the dry season, forage is generally insufficient to keep animals nourished and able to resist disease.
Most of Ethiopia's estimated 41 million sheep and goats are raised by small farmers who used them as a major source of meat and cash income. About three-quarters of the total sheep flock is in the highlands, whereas lowland pastoralists maintain about three-quarters of the goat herd. Both animals have high sales value in urban centers, particularly during holidays such as Easter and New Year's Day.
Most of the estimated 7 million equines (horses, mules, and donkeys) are used to transport produce and other agricultural goods. Camels also play a key role as pack animals in areas below 1,500 meters in elevation. Additionally, camels provide pastoralists in those areas with milk and meat.
Poultry farming is widely practiced in Ethiopia; almost every farmstead keeps some poultry for consumption and for cash sale. The highest concentration of poultry is in Shewa, in central Welo, and in northwestern Tigray. Individual poultry farms supply eggs and meat to urban dwellers. By 1990 the state had begun to develop large poultry farms, mostly around Addis Ababa, to supply hotels and government institutions.
Fishing
Ethiopia's many lakes, rivers, and reservoirs and its approximately 960 kilometers of Red Sea coastline are fertile fishing grounds. However, fishing contributed less than 1 percent of GDP in 1987. The ten-year plan in 1983/84 estimated that the country had the potential to produce more than 92,000 tons of fish—66,000 tons from the Red Sea and the remaining 26,000 tons from lakes and rivers. But actual production in 1983/84 was estimated at 600 to 1,200 tons.
Fresh fish are consumed along the Red Sea coast, in Asmera, and in the vicinity of the Great Rift Valley lakes. Outside these areas, however, the domestic market for fish is small. Two factors account for this low level of local fish consumption. First, fish has not been integrated into the diet of most of the population. Second, because of religious influences on consumption patterns, the demand for fish is only seasonal. During Lent, for example, Christians who abstain from eating meat, milk, and eggs consume fish.
There was considerable commercial fishing activity in the Red Sea prior to 1974, chiefly consisting of private foreign companies that exported most of their catch after processing the fish onshore. For instance, in 1970 private companies exported about 9, 140 tons of fish. After the 1974 revolution, most commercial fishing companies left Ethiopia, which reduced fish exports.
The Mengistu regime encouraged the establishment of fishery associations and cooperatives along the Red Sea coast and in the Great Rift Valley lakes area. In 1978 the government established the Fish Production and Marketing Corporation (FPMC) to help improve the Ethiopian fish industry. The following year, the Ministry of Agriculture created the Fisheries Resources Development Department to help improve fish breeding, control, and marketing. The FPMC received loans from the Agricultural and Industrial Development Bank and aid from the European Community (EC) to purchase various types of transportation equipment and to establish modern shops and cold storage.
In late 1990, the Red Sea Fishery Resources Development Project, which is managed by the Food and Agriculture Organization of the United Nations (FAO), received funding from the United Nations Development Programme (UNDP) and the Capital Development Fund to purchase motor boats, fishing nets, and other accessories for five fishermen's cooperatives in Aseb. The government hoped this equipment would help increase production and eventually enable the five cooperatives to extract 450 tons of fish annually. Nevertheless, the 1988/89 fish production of sixty tons fell by more than half in 1989/90 because of security problems in the area.
Forestry
In the late nineteenth century, about 30 percent of the country was covered with forest. The clearing of land for agricultural use and the cutting of trees for fuel gradually changed the scene, and today forest areas have dwindled to less than 4 percent of Ethiopia's total land. The northern parts of the highlands are almost devoid of trees. However, about 4.5 million hectares of dense forest exist in the southern and southwestern sections of the highlands. Some of these include coniferous forests, found at elevations above 1,600 meters, but a majority of the forestland consists primarily of woodlands found in drier areas of the highlands and in the drier areas bordering the highlands.
Lumber from the coniferous forests is important to the construction industry. The broadleaf evergreen forests furnish timber that is used in construction and in the production of plywood. The woodlands are a major source of firewood and charcoal. Certain trees—boswellia and species of commiphora—are of special economic significance. Both grow in the arid lowlands and produce gums that are the bases for frankincense and myrrh. A species of acacia found in several parts of the country is a source of gum arabic used in the manufacture of adhesives, pharmaceutical products, and confectionery. The eucalyptus, an exotic tree introduced in the late nineteenth century and grown mainly near urban areas, is a valuable source of telephone and telegraph poles, tool handles, furniture, and firewood. It is also a major source of the material from which fiberboard and particleboard are made.
Data on forestry's contribution to the economy are not readily available, largely because most GDP tables aggregate data on forestry, fishing, and hunting. In 1980/81 forestry accounted for 2.5 percent of GDP at constant 1960/61 factor cost and 5.4 percent of the share attributable to the agricultural sector.
Before 1974 about half of the forestland was privately owned or claimed, and roughly half was held by the government. There was little government control of forestry operations prior to the revolution. The 1975 land reform nationalized forestland and sawmills, which existed mostly in the south. The government controlled harvesting of forestland, and in some cases individuals had to secure permits from local peasant associations to cut trees. But this measure encouraged illegal logging and accelerated the destruction of Ethiopia's remaining forests. To ensure that conservation activity conformed with government policy and directives on land use, reforestation programs were organized through the Ministry of Agriculture or district offices that planned, coordinated, and monitored all work. The local peasant associations lacked decision-making authority.
Reforestation programs resulted in the planting of millions of seedlings in community forests throughout Ethiopia. A variety of Non-Governmental Organizations (NGOs), which had to organize their activities through the local peasant association, supplemented government efforts to rehabilitate Ethiopia's forests. However, critics maintain that both systems caused communal resources to be developed at the expense of private needs. As a result, reforestation programs did not perform well. Seedling survival rates varied from as low as 5 to 20 percent in some areas to 40 percent in others, largely because of inadequate care and premature cutting by peasants. In late 1990, Addis Ababa was in the process of launching the Ethiopian Forestry Action Plan (EFAP) to improve forestry conservation, increase public participation in reforestation projects, and prevent further depletion of existing forest resources.
It remained to be seen whether this plan would improve the state of Ethiopia's forests.
Wubneh, Mulatu, "The Economy" Ethiopia: A Country Study. Edited by Thomas P. Ofcansky and LaVerle Berry. Federal Research Division, Library of Congress, 1993.
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