BY SOLOMON DIBABA
A week ago, Prime Minister Dr Abiy Ahmed and his team inaugurated the Yirgalem Agro-Industry Park which was the first agro-industrial park in southern Ethiopia. According to the Prime Minister, the park is expected to be a change-maker both in the economic status of the region and at the national level. Why do the Prime Minister and his administration keep focusing on the development of integrated agro-industrial parks? I hope some of my arguments will help to shed light on the issue.
For almost three decades, a lot has been uttered and promised to accelerate Ethiopia’s development through Agricultural Development Led Industrialization but the development of the agro-industry in Ethiopia dates back only a couple of years back. Statistics speak of the backdrop under which agro-industries in this country could start. But what do we mean by Integrated Agro-Industrial Parks?
An IAIP is a geographic cluster of independent firms grouped to gain economies of scale and positive externalities by sharing infrastructure – roads, power, communication, storage, packaging, by-product utilization, effluent treatment, logistics and transport, laboratory facilities, etc. – and taking advantage of opportunities for bulk purchasing and selling, training courses and extension services. Multiple agro-processing functions take place in the IAIPs, such as final processing, storage, packaging, marketing and distribution. Support businesses and social infrastructure are also present. IAIPs will include open area production zones, controlled environment growing, precision farming, knowledge hubs and research facilities, rural hubs, agri-infrastructure, collection centres, primary processing hubs, RTCs, social infrastructure and agri-marketing infrastructure, among others.
IAIPs will have state of the art infrastructure. General infrastructure will include roads, power, water, communications, drainage, sewerage, sewage treatment plant, effluent treatment plant, stormwater drains, rainwater harvesting, and firefighting facilities, among others. Specialized infrastructure will consist of cold storage units, quarantine facilities, quality control labs, quality certification centres, raw material storage, controlled and modified atmospheric storage, central processing centres, etc. Also, infrastructure at the IAIPs will emphasize environmental sustainability.
A report issued by the government in collaboration with UNIDO states that Ethiopia’s economy is predominantly agriculture-based. It directly supports 85 per cent of the population, constitutes 46 per cent of gross domestic product (GDP) and 90 per cent of export value. The agricultural sector is characterized by the presence of many smallholder farmers – with average land holdings of only 0.2 hectares – who account for an estimated 97 per cent of agricultural production in the country (Growth and Transformation Plan Progress Report 2013). However, the vast majority of farmers in Ethiopia are not integrated into commercial value chains.
The official report issued in 2012 indicates that While agriculture plays a central role in the Ethiopian economy, agro-industries accounted for only 5 per cent of GDP in 2012 (UNIDO 2012). In terms of contribution to the manufacturing sector, agro-industries – food and beverages – account for about 50 per cent, the largest share of manufactured goods. Ethiopia’s agro-exports are currently almost entirely limited to primary and unprocessed products. The share of processed products in total agro-industry exports constitute only 1.3 per cent (2013) and import dependency remains strong (UNCTAD, forthcoming). At the same time, globally, the export of processed food products is growing at approximately 10 per cent annually, suggesting that market conditions for exports of processed food are favourable.
Despite the excellent growth potential, a critical constraint to agro-industrial development is the lack of infrastructure to support supply to processors. While Ethiopia possesses competitive advantages in several crops such as oilseeds and cotton and horticultural crops such as fruits and vegetables, this advantage is often lost due to poor linkages with agro-industry and limited knowledge on the part of farmers regarding best agricultural practices. Moreover, the presence of numerous middlemen contributes to wastage and inefficiency. Wastage between the farm gate and the final consumer is often 40 per cent in fresh products and up to 20 per cent in cereal crops, contributing to unnecessarily high prices.
The above data indicates the opportunities and challenges that exist in the development of agro-industry and agro-industrial parks in the country. One of the most conspicuous challenges is the issue of ascertaining a proper value chain and integration between the elements of the relatively longer supply chain.
However, IPs are considered a vehicle for the structural transformation of the economy through the commercialization of the agricultural sector. They are also expected to help pave the way for the realization of the country’s vision of becoming a leading manufacturing hub in Africa.
On the other hand, modernizing the agricultural sector is the basis and key to the promotion of IAIPs. Modernization of the sector implies the development of agricultural machinery tools centre similar to the ones already in operation in Sheshemene in Oromia.
I think that there should also be a link between efforts in cluster farming and the modernization of agriculture through minimizing post-harvest loses that impede production and productivity.
The other issue related to IAIPs is the ability of the parks to put in place an efficient and effective management system as this is already a critical issue in the sector.
Integrated agro-industrial parks require modern logistics, power supply, and a continuous and uninterrupted raw material supply chain.
Besides, as these parks are also intended not only for local consumption but also for export, compromising quality for promoting quantity would be a big mistake as this is also an issue of public health in the context of meeting health standards to the optimum level.
The development of integrated agro-industrial is indeed a very competitive sector and this could be further accelerated as the country is already joining the AfCFTA.
In the Ethiopian context, agro-industrial parks are key tools for accelerating the nation’s efforts towards import substitution as a means for recovering foreign exchange earnings meant for agricultural products which are currently imported.
The Ethiopian Herald 20 March 2021
