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CHAPTER EIGHT
8.5. Agriculture in Ethiopia

Agriculture is defined as the purposeful tending of animals and plants. It is one of man‟s oldest
activities, and dates back to the Neolithic period (10,000 years before present). Even today,
agriculture remains an important economic activity accounting for more than 15 percent of the
earth's cultivable land. Similarly, about 60 percent of the world's population gets its livelihood
from agriculture.

The type of agriculture practiced in any area is influenced by physical and socio-economic
factors. The environmental factors like soil; climate, relief, etc. impose certain limitations on the
types of crops that may be cultivated and the type of livestock that may be reared. However, in
addition to such environmental factors, various socio-economic factors like farm size, type of
land tenure, capital availability, transport and marketing facilities, price, government polices,
etc. also influence farming patterns.

Agriculture is important for a number of reasons. It provides: basic food supplies for the
population; raw materials like cotton, sugar cane, oil seeds, etc. to industries; export crops,
from whose sales industries infrastructure and the like may be established; and employment
for the population.

The great majority of the Ethiopian population resides in rural areas engaged in some form of
agricultural activity. Agriculture is the backbone of the Ethiopian economy and therefore this
particular sector determines the growth of all the other sectors and, consequently, the whole
national economy. Despite a long history of agricultural practices in Ethiopian, the sector is still
very backward. Farming methods and techniques have hardly changed in the last 2000 years.
The sector is dominated by small-scale farmers that practice rain-fed mixed farming by
employing traditional technology, adopting a low input and low output production system. It is
also in this sector that the over whelming majority of the poor reside.

Therefore, in this section emphasis is given to explain to the agriculture systems of Ethiopia
including its role, structure and performance, farming type and the major challenges of the
sector.
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8.5.2. Contributions, potentials and characteristics of 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
country.

;- 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.

The Agricultural Resource Base/potentials of Ethiopia

Ethiopia has abundant agricultural resource base due to its varied agro-ecological zones. The
varied climatic conditions and contrasts in elevation allow for the cultivation of various crops
ranging from cool weather crops to sub-tropical and warm weather crops. The country has no
less than 21soil types with varying physical and chemical features, and in the alluvial beds of
major rivers close to 16 percent of the country's area is suitable for irrigated agriculture. The
country has also vast grazing land and livestock population as the country possesses a huge but
largely unutilized potentials of livestock resources with a vast (55 – 58 % of its total land area)
grazing land. The country has extensive livestock population, with estimated 30 – 35 million
livestock units (TLU) standing first in Africa and 10th in the world and numerous livestock
species.

Land Use

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.

Accepting the estimate that some 27.9 million-hectare of land is already cultivated (intensively
and moderately),the possibilities for expanding land under rain-fed agriculture is not very high.
More importantly, new land that can be brought under cultivation may be offset or even
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outstripped by land which needs to be withdrawn from cultivation because it is severely eroded
or degraded.

It is often suggested that the size of additional land that can be brought under rain-fed
cultivation is limited to the 100km wide strip of land stretching from Gambella, bordering Sudan
to Humera in the north. But this claim must be taken cautiously since the tropical rain forests in
the western parts of the country are highly fragile and incapable of supporting permanent
cultivation. It also requires heavy investment in infrastructure and machinery to cultivate the
land while animal husbandry is affected by trypansomasis.

Expansion into much of the non-arable lowland areas is constrained by moisture stress. But
these areas are drained by major river basins and are suitable for irrigation. It is estimated that
the major river basins of the country can irrigate about 3.5 million-hectare of land. At present
only about 161,010 ha or 4.6% is irrigated around the major river basins. Besides opening up
new land for cultivation, irrigation allows to cultivate two or three crops each year instead of a
single crop most common under dry farming. It also enables farmers to grow high value crops,
especially fruits and vegetables. Nonetheless, the amount of investment required to expand
irrigated agriculture around the major basins is often considerable.

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. Land under
permanent crops is land cultivated with crops that occupy the land for long periods and need
not be replanted after each harvest, such as cocoa, coffee, and rubber. This category includes
land under flowering shrubs, fruit trees, nut trees, and vines, but excludes land under trees
grown for wood or timber. Permanent pasture is land used for five or more years for forage,
including natural and cultivated crops.
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According to the result from 2016 Agricultural Sample Survey conducted by Ethiopian Central
Statistics Agency (CSA) more than 19 million hectares of land was used in different types of land
use by smallholder farmers during the major season of the survey year.

The percent distribution of the land use by different types of land uses is shown in Fig 8.1.
Accordingly, about 77 percent of the land operated by smallholder farmers was allocated to
crops, both temporary and permanent crops while 11.5% of the land used for grazing land.

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.

Cropping Pattern in Ethiopia

The highlands of Ethiopia are easily distinguishable from their lowland counter parts as far as
the pattern of agricultural land use is concerned. The highlands do not only produce a variety of
crops due to their improved environmental conditions as well as due to the variety of agro-
ecological zones caused by altitudinal variations, but they also practice an elaborate system of
land preparation and crop rotation.

The number of crops grown decreases as one moves from the central highlands to the
peripheral lowlands.

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. About 75% of the
cattle and sheep population are found in the highland zone while 70 percent of the goat and
100% of the camel population are found in the lowlands. More than 90% of the livestock
population is found in Oromia, Amhara and SNNPR. The average number of cattle per
household (per capital holdings) for the less densely populated Afar region and Somali where
livestock are central to the livelihood of the pastoral population is the highest. Most of the total
value of livestock output (70%) is contributed by cattle.

Livestock contribute 30-35% to agricultural GDP and 13-16% to overall GDP. These figures are
considered as an underestimate since they do not consider the value of manure (fertilizer, fuel)
and transport. The livestock sector contributes about 13% of the total value of agricultural
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export. The contribution of hides and skins from the livestock exports is the highest (more than
95%).

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

Even though there are some variations in the nature of practices and production endeavors of
farmers based on agro-ecological diversities and socio-cultural characteristics from place to
place, nevertheless agriculture in Ethiopia also possess some basic and general characteristics.
These basic attributes are:

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. Similarly, Ethiopian peasants usually cultivate different types
of corps (10-15) and rear different types of livestock to meet their various needs.

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.

2. 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
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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. Besides, the possibilities of
expanding agricultural land under rain- fed practices are limited or are not very high. Additional
land that can be brought under rain fed is found in the area stretching from Gambella to
Humerra for some 100 kilometres of width occupying the western lowlands of the country.
Moreover, this area is drained by major rivers (Baro, Abbay & Tekkeze Rivers) and is potentially
suitable for irrigation.

8.5.3. Agriculture Systems in Ethiopia

Agricultural system is defined in terms of similar resource basis, enterprise patterns, household
livelihood and constraint; and thus, could have similar development strategies and
interventions. Thus, 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.

Ethiopia has contrasted (diverse) climatic and soil types which created an ideal condition for the
cultivation of different corps and rearing of animals. 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.

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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. Farmers mainly depend on
cereals for subsistence which are grown along with pulses and oil corps for some commercial
purposes. 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.
Harvesting is done using family labor or contributed labor from neighborhoods. Crop cultivation
is mainly based on crop rotation. The plough is the main agricultural implement; and oxen are
principal means of draft power and equines provide the means of transport.

Ploughing is practiced many times (2-6) before planting. Seeds are mainly broadcast on the soil
surface and then ploughed in. Livestock rearing is based on unimproved native pasture
supplemented by crop residues.

Sustainable agriculture in this system is adversely affected by drought, soil degradation and the
practice of removing crop residues for feeding animals and using animal dung for fuel. Since
little or no organic matter is added to the soil and conservation-based farming practices (e.g.
terracing…) are rare, declining soil fertility necessitates shifts in crop pattern and increased
application of fertilizer to obtain high yields.

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 land is cultivated with hoe (human power) for
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horticultural crops. 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. In some areas draft animals are also used and cereals, pulses are
cultivated.

Maize is the major cereal crop of the region grown; and production is favorable and less
variable than in the grain-plough complex. In large parts of the Horticulture – hoe complex
areas an Agro – forestry farming system using multiple cropping methods composed of coffee,
Chat, Enset, with some tree plants consisting both wood and fruit- trees which are grown inter
– mixed on small farm plots. The eastern highlands of Hararghe are also classified as part of the
horticulture-hoe complex and sorghum (staple food crop) is often intercropped with corps such
as chat and sweet potatoes.

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.
However, in more humid areas, pests and diseases (e.g. tsetse fly) have threatened livestock
husbandry.

2. Lowland mixed agriculture

Lowland agriculture is practiced in the mountain foothills and the lower valleys below
1500m.a.s.1. 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. The plough is used in the
cultivation.

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. In times of serious drought livestock are relied up on for survival. 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 where average
annual rainfall is less than 500mm 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
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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. Range ecosystems
are usually fragile because of lower fertility and shallow top soil.

4. Shifting cultivation

This is the cut-and- burn cultivation system whereby a given plot of land is cultivated after
clearing until its natural fertility is exhausted to a level it cannot support plant life any longer
and then abandoned for another 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 of people living by the practice 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.

It was introduced in the 1960s when the government decided to produce more commercial
corps to meet the growing demand for food in the urban areas and agricultural raw materials
for industries. Mechanized farms were concentrated in the Awash valley, Arsi, southern Shoa,
and Humera-Metema by the time 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. 143

Currently, the economic reform permitted the participation of the private sector in large scale
commercial farming. Investment permits are issued by the Ethiopian investment authority and
regional investment offices. However, the main problem faced by investors in agriculture is
access to land as it has to be free of other users to be leased to an investor by the regional
government. As a result investors need to go to low, hot, disease ridden areas of the south and
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west to find „unoccupied‟ land. Lack of infrastructure is also 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 local communities.

8.5.4. 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. Studies suggest that on the average, small land holding is less than 1 hectare per
household. As the land is too small to produce any marketable surplus under the prevailing
conditions, subsistence and survival are the overriding concern of the farmers. This resulted in
lack of cash for investment, purchase of commercial inputs and purchase of oxen for land
preparation.

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 144

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
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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

8.6. Manufacturing Industry in Ethiopia

8.6.1. Introduction

Industrial development in Ethiopia is extremely backward. The contribution of the industrial

sector to the Gross Domestic Product (GDP) over recent periods is only 11.7 percent. The
backwardness of the industrial sector is an indication of the low-level development of the
Ethiopian economy. In the modern world development is equated with industrialization.

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.

Employment in Industries

The total number of persons employed by various manufacturing industries was reported as
over 329,000 in 2015/16 (Figure 8.2). This represents a continually increasing trend in the
number of employees working in all industries over the last five years. But there is as yet no
clear pattern to the availability of jobs by industrial group. Textiles and garments increased
from 2011/2012 to 2013/2014, but then declined. The number of persons engaged in
machinery and equipment grew tremendously from 2012/2013 to 2013/2014, but then
contracted just as rapidly to 2014/2015.

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
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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). The Ethiopian large and medium size manufacturing sector is
dominated by food and beverages. It accounted for the largest proportion of the overall large
and medium manufacturing value added between 2000/01 and 2010/11.

8.6.2. Types and characteristics of manufacturing

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. People engaged in such activities were despised and were given various
pejoratives such as "buda" "faki" etc. The people were not encouraged to refine their products.

This is probably the most important factor in retarding the pace of development of the cottage
industries.

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

The development of manufacturing activities is measure of the development stage of countries.

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.
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8.6.3. The Spatial Distribution of Manufacturing Industries in Ethiopia

Historically, manufacturing establishments have been concentrated in a few large towns. In

1995/96 the top ten towns accounted for about 85 per cent of the total number of
establishments and 79 per cent employment; where in the same year Addis Ababa alone
accounted for about 67 per cent and 60 per cent respectively. This concentration has shown a
modest decline and in 2009/10 the top ten towns share reached 60 percent and 62 per cent of
the total number of MLSM establishments and employment respectively. The share of Addis
Ababa also correspondingly declined to 40 per cent and 46 per cent respectively in the same
year. New industrial towns such as Burayu, Sululta, Sebeta, Mojo, and Ambo are emerging
around the capital city. Four of these were among the top ten industrial towns in both 2003/04
and 2009/10. This brings the concentration in Addis Ababa and the surrounding towns (in a 100
km radius), 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.

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. To unleash these supportive
industries, the government established industrial parks across the country to cluster these
industries

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 IPs/SEZs:

a. fully developed by the federal or regional government;

b. developed by PPPs with the IPDC and

c. by private developers only.

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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.

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
8.7. The Service Sector in Ethiopia

8.7.1. Introduction

Tertiary economic activity involves the distribution and provision of goods and rendering
services. Tertiary institutions include wholesale and retail outlets, banking and other financial
services, governmental and educational services, medical facilities, and much other business
and service functions upon which we depend daily. Security services, transportation,
information and telecommunication services, tourism, health services, education institutions
and research centers all are vital tertiary economic activities. In this section, discussion will be
made on the three of the service activities in Ethiopia: transportation and communication,
trade and tourism.

8.7.2. Transportation and communication in Ethiopia: types, roles and characteristics

[Link]. Transportation

Transportation is a service or facility by which persons, manufactured goods, and property are
physically carried from one location to another. Transportation is fundamental to civilization.
Transportation, it is usually said, is the lifeline or the blood vessel of an economy. This is why
we invariably see a well-developed transportation network in well-developed [Link]
role of transportation in socio-economic development is that it allows for: division of labor and
15

labor specialization, procurement of raw materials from various sources, dispatch of goods to
market places and personal mobility etc.

There are five different types of transport in Ethiopia. These are:

a. Traditional Transport:

This includes the use of pack animals (donkeys, mules, horses, camel) and goods carried by
humans. The contribution of these means of transport to the national economy is not known in
statistical terms. In rural Ethiopia where modern transport systems are very few, it is obvious
that they make immense contributions. Even in urban areas like Addis Ababa, modern meansof
transport has not totally done away with the traditional means.

b. Road Transport

Today most passengers and goods in Ethiopia are transported by road transport. In Ethiopia
road transportation is relatively a recent phenomenon. Italians basically started it during their
period of occupation. These roads were essentially built for military movement purposes. In
other words, they were not built for the purpose of economic integration of the country. Later
on, with Addis Ababa growing as the political center of the country, the roads built in
subsequent periods were constructed for administrative connections. The radial patterns of
network development with the center being Addis Ababa, exhibits administrative integration
rather than economic integration. This, however, does not mean that the roads were not used
for economic purposes.

i. Road Network

Data obtained from the Ethiopian Roads Authority showed that during 2004/05 classified road
network in Ethiopia was 37,018 km while the total road network increased rapidly and reached
126,773 km during 2017/18 (this includes 35,958 km rural road (28.3%).

ii. Road Density

The rugged terrain in Ethiopia makes road construction difficult and expensive. If we compare
the length of roads to the total area of the country, we observe that it serves a small area. One-
km road serves an area of about 66 km2. If we generously assume a distance 10 kms on either 1

side of a road as being accessible only about 370, 000, km2 area or 30 percent of the country is
accessible. In many cases roads assume the purpose of connecting nodes or places forgetting
the people and the economy in the hinterland or in between the nods. The road density/1000
persons was 0.5 in 2004/5 that increased to 1.27 in 2017/18. Likewise the road
density/1000square kilometer was 33.7 in 2004/5 that improved in a way to 115.2 in 2017/18.
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Although the road network has shown an increasing trend, the progress so far is still far below
the need compared to the large land area and population of the country. Network distribution
per thousand sq. km and per million people is only 115.2 km and 1.3 km, respectively. This
makes the country one of the least accessible in Sub-Sahara Africa.

iii. Road accessibility

In 2016/17, annual average distance from all-weather roads declined by 6.5 percent from 4.6
km in 2015/16 to 4.6 km. Similarly, the proportion of area more than 5 km from all-weather
roads dropped to 33.5 percent from 31.6 percent last year. By 2019/20, it is envisaged to
narrow the proportion of area more than 5 Km from all-weather road to 13.5 percent (Table
8.10).

c. Railway

The major advantage of rail transport is that it helps transport bulky products. For more than a
century, Ethiopia was served by an international meter gauge railway, from Addis Ababa to
Djibouti City in Djibouti. The railway was built from 1897–1917 and was about 781 km long
primarily served to move export- imports for a long time. Compared to those of the developed
countries the railway was backward. It was also a single lane track. Eventually the Ethio-Djibouti
Railway and its decades old rolling stock was lacking spare parts and forced to closed down over
a number of years.

Recently a new railway line of 750 km length connecting Addis Ababa to Djibouti, was officially
inaugurated in Djibouti in 2018. The Addis Ababa–Djibouti Railway is a new standard gauge
international railway that serves as the backbone of the new Ethiopian National Railway
Network. It provides Ethiopia with access to the sea, linking Addis Ababa with Djibouti and its
Port of Doraleh. More than 95% of Ethiopia's trade passes through Djibouti, accounting for 70%
of the activity at the Port of Djibouti. 157

The other important railway is Addis Ababa Light Rail Transit. It is the first light rail and rapid
transit in eastern and sub-Saharan Africa. The total length of both lines (north-south and east-
west) of the rail is 31.6 kilometres (19.6 mi), with 39 stations. The rail project was constructed
by China Railway Engineering Corporation Limited (CREC) and is currently operated by Chinese
firm Shenzhen Metro Group Company. It is estimated that AALRT currently transports about
60,000 people daily, significantly reducing traffic congestion in the capital, Addis Ababa.

d. Waterways

Waterways are two types. These are seaways and inland waterways. When we talk of seaways
we are talking about open areas. Ethiopia being a landlocked country does not have direct
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access to such areas. Presently, the Red Sea through the port of Djibouti is very important for
Ethiopia's external trade. Inland waterways are classified in to two i.e., rivers and lakes.
Because of the nature of the topography over which Ethiopian rivers flow, Ethiopian rivers with
the exception of Baro and Omo in their lower courses, cannot be used for transportation. On
some of the lakes like Tana and Abaya there is small-scale transportation. The contribution of
inland waterways to the Ethiopian economy is very small.

e. Airways

The other transportation mode, fairly recent in appearance and modern in its constitution, is air
transport. Air transport is the fastest means of transportation from one place to the other. It
has reduced distances by minimizing the travel time. It is very essential for a country like
Ethiopia, where the topography is difficult for communication. There is no problem of laying the
track for airways. The problem with air transportation is that they are expensive and cannot be
used for transporting bulky products. EAL serve some forty-five cities and towns in the country.
The reputed Ethiopian Airlines also gives impressive international service.

[Link]. Communications

Communication is the process of conveying messages to others. An effective communication

system plays a vital role to: accelerate the pace of development, enhance closer social
integration, and to promote the basic aim of economic activities. Some of the communication
services that are commonly used in Ethiopia include radio, television, internet, satellite, print
publications, fixed and mobile telephones, and post offices. Microwave radio; open-wire; HF,

VHF, UHF radio communication services; and satellite contribute to the domestic telecom-
munications system.

The Contribution of Transportation and communication to Socio-Economic Development

The contribution of transportation to a country‟s development is high. Its share of contribution

to the GDP of a country is incontrovertible, though the nature and extent of the contribution
varies from country to country. Transportation plays important economic, social and political
roles some of which are indicated hereunder:

 It creates job opportunity

 It promotes investment sector - on infrastructure development.

 Transportation plays a big role for both national and international trade.

 It serves as a source of income generation both for governments and the public;
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 It contributes to the maintaining a country‟s peace, political wellbeing and stability;

 Plays the role of linking rural areas and rural products to urban centers and helps in increasing
and interconnecting market outlets;

 Makes big contribution to the development of tourism, entertainment, sports and peaceful
relationship among people.

Although the expansion of the transport sector is of tremendous economic, social and political
benefit, there are nevertheless some negative aspects to it. The fact that its energy
consumption is high, that it is foremost among the factors that contribute to environmental
pollution, that it has been classified among the world's killer diseases with regard to traffic
accidents, and that it has become a source of anxiety in terms of congestion constitute the
negative side of the transport sector.

8.7.3. Trade in Ethiopia

Trade is a process of exchange of products involving change in ownership of commodities. The

development of trade in a country depends on the development of production activities. Trade
basically arises when regions or persons complement one another with their products. A
country carries out two types of trade. These are internal trade and external trade.

Internal trade: This refers to the exchange of goods and services within the country. It can be
done between regions or within a region.

External Trade: External trade refers to the exchange conducted between countries. In other
words, it is concerned with import-export trade.

Foreign Trade

The main reason that necessitates trade with one another rather than running completely
independent economies is that, the earth‟s resources are not equally distributed across its
surface. That means different countries have different factor endowments, and the
international mobility of these factors is severely limited. Some countries are rich in capital
resources, others are rich in labor resources, and still others are rich in natural resources.
Hence, every country must trade with others to acquire what it lacks.

Structure of Commodity Export of Ethiopia

As the Ethiopian economy is an agrarian economy its merchandise (visible) export is

determined by agricultural products. According to the data from National Bank of
Ethiopia/NBE/, for all study periods the export structure of Ethiopia has been characterized by
greater concentration of few traditional exports such as coffee, oil seeds, and pulses and chat.
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Coffee dominates the total merchandise export item of the country and accounts for 29.5% of
visible export earnings. Oilseeds accounting for 14.9 % take the second position followed by
pulses 9.5 %, and chat 9.5 %.

The Geographic Structure of Exports

Alike the commodity structure, the country‟s exports has been concentrated geographically
with largest proportion of exports destined to limited markets. The major export destinations
for Ethiopian goods show that Asia accounted for 39.8 % of Ethiopia‟s export earnings followed
by Europe (28.7%). On the other hand, about 20.9 % of Ethiopia‟s export earnings originated
from markets in Africa

Looking at the direction of trade by individual country, five countries (China, USA, Netherlands, Saudi
Arabia and Djibouti) are important which account for 39% of the Ethiopia‟s export between in
2015/2016.

With regard to imports of goods, during 2017/18, Asia accounted for 64.2 percent of the total
imports of Ethiopia followed by Europe (19.3 %).Ethiopia‟s total imports with the U.S.A
accounted for 9.4 percent of the total import bill. About 51% of Ethiopian‟s merchandise
import originated from china, U.S.A, Japan, Italy, and USA.

8.7.4. Tourism in Ethiopia: Types, major tourist attraction sites, challenges and prospects

UNWTO (2002) defined tourism as

"Tourism comprises the activities of persons traveling to and staying in places outside their
usual environment for not more than one consecutive year for leisure, business and other
purposes. “

Tourism is one of the largest and most important industries in the world in terms of
employment creation and generation of foreign revenue. As a worldwide export category,
tourism ranked fourth in 2013, after fuels, chemicals, food, and ahead of automotive products

As one of the developing countries, Ethiopia and its tourism is becoming an important sector
contributing a great deal towards the social, cultural, and economic development aspects of the
country. Though tourism development is still unsatisfactory, international tourist arrivals in

Ethiopia have shown a considerable growth. Likewise, the contributions of tourism income to
GDP as well as export earnings are growing in recent years.

Types of Tourism
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Ethiopia is endowed with unique landscape, paleontological, archaeological, historical and living
cultural tourism attractions. Based on these attractions diverse types of tourism are there in the
country. The common tourism forms in the country include living culture tourism, history
tourism, archaeology tourism, palaeontology tourism, park tourism, geo-tourism, agro-
biodiversity and coffee tourism, rural tourism, conference tourism and sport tourism are

Major Tourist attraction sites of Ethiopia

Historic Attraction sites

i. The Obelisk of Axum: preserves an ancient history of the era of the Axumite powerful empire
having trade links as far as India and China. Visitors will enjoy the sites of these monolithic
obelisks and many more wonders surrounding their history, notably the Bath of the Legendary
Queen of Sheba and archeological findings that depict the way of life of the Axumite period that
reigned from pre-Christ times up until the 11th century AD.

ii. The Churches of Lalibela- the UNESCO has named the rock-hewn churches of Lalibela as the
8th wonders of the world. Lalibela presents the site of a chain of rock carved out 11th century
churches with astonishing architectural designs and interior decorations. Ahistorical myth
narrates King Lalibela; on his own (with the help of angels) completed the construction of the
churches. After his death the king has been designated as an Ethiopian saint.

iii. The Castles of Gondar- built in the mid-17th century together with the surrounding
centuries-old churches depict yet another sophisticated architectural wonders. The Castles are
found in the city of Gondar, which has been the seat of government following Axum and
Lalibela.

iv. The Walls of Harar- built in the early 16th century, the walls are designated after the city of
Harar. The Walls have 5 arched gates inviting to the city's popular basketworks, variety of fruits
and colourfully decorated costumes of Hararie [Link] city of Harar is considered as the 4th
holy city of Islam.

Natural Attraction sites

i. The Blue Nile Falls- locally known as Tississat, meaning 'water that smokes' presents a
spectacular water fall with an intense gash from more than forty-five meters (150feet) peak,
producing rainbows across the gorge. The area is also inhabited with fascinating wild lives and
birds.
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ii. Simien Mountains- Simien mountains are home of Ethiopia's highest peak Ras Dashen with
the height of 4,620 meters above sea level. With the assistance of a professional guide, the area
is ideal for mountain trekking. The endemic Walia Ibex and the Gelada baboon are also found
here.

iii. The Rift Valley Lakes- Ethiopia is one of the countries that the Great Rift Valley system
traverses. The Valley embraces the beautiful chains of lakes with abundant wildlife and variety
of birds. The Rift Valley comprises famous natural parks known as Abijatta-Shalla, Nechisar,
Mago and Omo national parks. Each national park presents a unique feature for bird-watching,
trekking and wild life scenery.

iv. The National Parks: Being a land of diverse geographic settings and rich natural resources,
National Parks in Ethiopia, present spectacular visiting opportunities for tourists that are keen
on admiring and enjoying nature.

The Role of Tourism in the Economy of Ethiopia

The direct export earnings generated by tourism in Ethiopia are increasing, and tourism seems
to be the third source of export revenue after agriculture and industry.

International tourist arrivals have been on a growth trajectory since the 1990s rising from
64,000 in 1990 to 681,249 in 2013. This has been matched by growth in the contribution of the
travel and tourism sector‟s direct contribution to the country‟s GDP which in 2017 was 2.7%,
and is expected to grow by 6.7% per annum reaching 6.1% of GDP by 2028.

Further, the industry is now an important source of employment accounting for 2.4% of total
employment in 2017 representing 604,000 jobs directly and this is forecast to grow by 1.9% per
annum in 2028 to 742,000 jobs (2.1% of total employment). Such performance has seen the
tourism industry increasingly becoming an important economic sector in the country.

Challenges of the sector to be addressed

Ethiopia‟s possession of varied attractions is regarded as an opportunity for the sector.

However, at present, the following major challenges are also confronting the sector:

 Weak institutional framework and implementation capacity, skilled human resources and
financing

 Very limited accommodating capacity of international standards for leisure tourism, with
investment concentrated in main cities and business-type hotels

 Lack of basic and IT infrastructure present challenges for tourism businesses

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 Narrow product range offered to the market by incoming operators

 Weak private sector associations

 Unplanned destination development

 Poor visitor management in natural and heritage sites puts sites at risk

 Poor tourism statistics

Ethiopia has a wealth of natural and cultural resources, with some unique cultural and natural
features that set it apart from other African destinations. Current international trends in world
markets present opportunities to diversify the product portfolio and attract more visitors, and
international markets were prioritized by the Marketing and Branding Strategy as being among
the „core‟ markets with high revenue potential and high affinity for leisure travel to Ethiopia, as
well as among the „steady markets‟ that are easier to penetrate.