For years Ethiopia exported its agricultural products and minerals in their raw form with no or very little value addition. This has been a major reason behind the nation’s fledgling economy despite having immense natural resources and other wealth. The country needs to speed up its ongoing efforts to transform its export sector by enabling it to significantly shift from exporting raw items to processed ones.
According to the Ministry of Agriculture 77 % of Ethiopia’s export products are derived from agriculture. The sector is the main stay of the nation’s Economy and 65 % of the population derives its living from the sector. It also contributes a third of the total Gross Domestic Product /GDP/.
The export sector in one way or another is dependent on agriculture. According to experts the sector is still in its subsistence level. It is said that successive regimes prioritized the sector to attain growth but the effort is still in vein.
Sedentary farming and animal husbandry are still the main sources of export items to the country followed by minerals. Coffee, oil seeds, livestock and gold are traditionally the main exports. The emerging export products such as flower, vegetable, fruits also play vital role in export earnings. These products are produced in the modern farming and attributes for attracting foreign investment, job creation, joining the international value chain and technology transfer.
According to the Ministry of Trade and Regional Integration report, the Middle East, Europe, USA and Asia are the main export destinations of Ethiopia’s export. As mentioned above agricultural products are exported in their raw form causing loss of opportunity cost on the country. As the products are less competent in the world market and similar products produced in other countries in better skills, technology and knowledge with less production cost can easily penetrate the market and enjoy better price.
The undiversified nature of the products also reduces the nation’s chance to earn more hard currency. In the same way as manufactured goods, agricultural production needs more inputs and when the utilization of inputs increases the quality as well as the quantity of products is increased.
However, according to the World Bank recent report, the amount of the utilization of agricultural inputs such as select seeds, fertilizer, pest and herbicides here in Ethiopia is very low even compared to the Sub Saharan African scale. Hence, boosting the agriculture production and productivity needs importation of more inputs which incurs the nation more foreign currency which is in short supply in market.
Looking the matter in the light of the nation’s macro-economic aspect, Ethiopia earns USD 4 billion from export trade while it imports worth of USD 20 billion. This implies how the nation is immersed in trade deficit.
The land locked-ness of the country further exacerbates the situation. Most imported items are inputs used for industry and agricultural production. Pharmaceutical products and petrochemicals also have the lion’s share in the imported items.
According to Professor Alemayehu Geda a Lecturer and Researcher at the Addis Ababa University Department of Economics, the World Trade in the last 100 years has been favoring the industrial advanced countries at the expense of the poor. The major export items of the rich countries are industrial finished goods while the poor countries export agricultural raw materials to the industrially advanced countries. And while the price of industrial goods keeps increasing from time to time, the agricultural products exported by the poor countries price goes declining.
The situation has left the poor countries to be poorer while putting the rich countries gains advantageous position. Therefore as to Alemayehu, to escape such tragic phenomena poor countries should work more on exporting their agricultural products with value addition so that they can gain a lot of hard currency from their exports. Because processed agricultural products are more competent in the market than the products in their raw form.
As to Alemayehu, exporting value added products can bring economic success in many countries. Indonesia and other Asian countries can be cited in this regard. Three decades ago Nickel was the major export earner for Indonesia but was exported in its raw form. At that time the country earned USD 1 billion annually; yet after the country began adding value to its export items it was able to triple its foreign currency earnings and in the later decades the nation earned USD 20 billion from the Nickel export. Now the country’s revenue from the export of nickel has hit USD 30 billion. Therefore as to him, other developing countries should replicate the experience.
Export items of many African countries are derived from agriculture in their raw form and became less competent in the world market. Contrary to this, the advanced countries which imported agriculture products from Africa, add value and re-exported the products to the third country with the maximum price and this makes them advantageous economically.
The Ministry of Agriculture is actively working to boost agricultural exports through various initiatives focused on increasing production, improving quality, and enhancing value chains. These efforts include distributing fertilizer, combating pests, promoting agroforestry, and modernizing production systems. The Ministry also emphasizes private investment, financial inclusion for smallholder farmers, and leveraging technology like the Digital Agriculture.
In addition it focused on expanding production of key commodities like wheat, soybeans, sesame, onions, tomatoes, avocados, bananas, poultry, milk, and red meat. The Ministry is prioritizing quality and safety standards to meet international market expectations and ensure public health. This includes efforts to enhance regulatory capacity and product quality assurance.
It is actively working to improve value chains, connecting local and foreign investors with regional governments and research centers to support production, processing and export mechanisms.
In addition, it is promoting the adoption of modern technology, including the Digital Agriculture roadmap to enhance productivity and livelihoods for smallholder farmers. It also encourages private investment in the agricultural sector and is working to create an enabling environment for businesses.
It also focused on developing irrigation capacity, expanding agricultural mechanization services, and improving livestock, animal feed, and animal health. Ethiopia aims to diversify its agricultural exports beyond traditional commodities like coffee, with a focus on horticulture, livestock, and spices.
Ethiopia is actively working to enhance livestock export by addressing constraints in the sector, improving productivity and quality.
Following the relentless efforts to boost foreign currency earning through increasing the quality and quantity of agricultural products, recently some progress has been witnessed. According to the Ethiopian Coffee and Tea Authority, the nation has reported record earnings from coffee exports, generating USD 1.87 billion over the ten months to April 2025 a historic high for the Horn of Africa nation, and a significant milestone for its most prized commodity.
The figures, disclosed by ECTA, represent an 87 % increase in export revenue compared to the same period last year, with shipment volumes rising by 70 % to 354,302 metric tons. The surge marks a striking rebound in one of the world’s oldest coffee economies, powered by targeted domestic reforms and favorable conditions in global markets.
The strong performance to Ethiopia’s national coffee development strategy, which includes efforts to improve traceability, enhance quality control and expand access to international buyers through digital auction platforms and bilateral trade agreements are attributed to the gained result.
Ethiopia’s top export destinations remained stable, with Germany, Saudi Arabia and the United States leading in volume and value. Demand from traditional partners has been bolstered by shifting consumer preferences toward sustainably sourced, single-origin Arabica beans qualities for which Ethiopian coffee is globally renowned.
As the ancestral home of Arabica coffee, Ethiopia occupies a unique place in the global supply chain. But recent gains come against a backdrop of heightened volatility in international commodity markets, where coffee prices have been buffeted by climate risks, supply chain disruptions, and geopolitical tensions in other major producing regions such as Brazil and Colombia.
The International Coffee Organization (ICO) recently noted a sustained uptick in global Arabica prices, driven by tighter inventories and a post-pandemic resurgence in out-of-home consumption. Meanwhile, specialty coffee consumption is growing in Asia and the Middle East, creating new opportunities for African exporters.
Despite macroeconomic challenges including a persistent foreign exchange shortage and high inflation at home Ethiopia’s coffee sector has benefited from a weakening local currency, which has made its exports more competitive on the international stage.
With two months remaining in the Ethiopian fiscal year, authorities are optimistic that the upward trajectory will continue. If current trends hold, Ethiopia is on track to surpass the two billion US Dollars it will be more interesting and inspires to replicate the result by other agricultural products.
BY ABEBE WOLDEGIORGIS
THE ETHIOPIAN HERALD TUESDAY 1 JULY 2025
