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Ethiopia Business

Business

According to countryaah, Ethiopia is considered one of the world's poorest countries. The majority of the country's population rely on agriculture and livestock management. To the extent that industrial establishment has taken place, it has mainly been concentrated to the capital with surrounding towns and to Dire Dawa. Despite strong economic growth from 2004 onwards, the country still has one of the lowest GDP per capita in the world.

Business and Economy of Ethiopia

Background

Following a traditional, albeit slow and paternalistic, modernization policy during the emperor era, the 1974 revolution meant, at least on paper, a sharp turn for Ethiopia. Communications, industry and financial institutions were nationalized and an embryo for central planning of the Soviet type was established. No actual and efficient production planning seems to have ever been successful, and despite the fact that the industrial sector was favored at the expense of agriculture, investment levels in the industry remained low.

As the economic difficulties increased over time, partly as a result of economic failures, low productivity, reduced Soviet support and, not least, the very large costs of the armed forces, a liberalization program was launched towards the end of the 1980s. It included greater scope for private enterprise and opening up the economy to foreign countries. The war against Eritrea in 1998–2000 brought great financial burdens and the country's chronic trade deficit increased further. A longer dry season in 2003 also diluted the difficult situation, as did the worst drought in 60 years that hit the area in 2011, and the country is dependent on food assistance.

Agriculture

The majority of the population receives their livelihoods in agriculture, which until 1975 were mainly conducted as small or leased farms. Large regional variations in forms of lease have affected both the nature of self-sufficient farmers and the degree of fragmentation of the properties. Despite efforts in the post-war period to implement more modern methods, arable farming has remained old-fashioned, not least because of the nature of the land distribution. After the fall of the empire, a land reform was implemented in 1975, whereby the land was nationalized and distributed with the right of use to the members of newly formed peasant associations. From 1979-80, a collectivization of the land began, from the mid-1980s, often combined with or preceded by a village education program, where detached farms were merged into newly built settlements.

Almost one-eighth of the country's total area is considered cultivable. Ethiopia, which is identified as one of the core areas for our cultural plants, offers a variety of natural geographical and ecological environments, which contributes to significant variations in cultivation systems and crops.

The indigenous cereals tef as well as barley and sorghum have traditionally been of great importance but have to some extent been pushed back by increased cultivation of wheat and maize. Other crops include fodder, legumes and oilseeds. A particular cultural zone is the area in the south where the Ethiopian banana (Enseʹte ventricoʹsum) is the dominant crop; From stems and shoots you get fiber, young shoots are cooked and starches can be extracted from the leaves. Otherwise, lowland agriculture is a small-scale agricultural enterprise focused on self-management. Sweat and hake farming is practiced in many places in peripheral and sparsely populated areas, but has increasingly come into conflict with the large farms and with new settlements by immigrant highland farmers.

Livestock management is important in the highlands and eastern parts. An often fragile equilibrium has been maintained between arable farming and animal production; the very extensive stock of cattle, sheep and goats has in many places actively contributed to the wear and tear of the natural environment. The problem was exacerbated by land reform and subsequent efforts to expand the collective sector, showing little understanding of the needs of animal husbandry and its importance to farmers. To the extent that the climate and prevalence of malaria and other parasites allow, several of the lowland population groups (eg, aphas, Somalis and some oromo) have developed a nomadic or seminomadic household. Here, cattle, sheep and goats as well as camels play a significant role. Land use conflicts with the modern agricultural sector have occurred.

The emergence of a modern, economically favored large-scale agriculture began during the last decades of the imperial era. It was concentrated in the central and southern highlands and was based on cereal production or slaughter animal and dairy production. In addition, large-scale cultivation of coffee, sugar, fruit, sesame seeds, cotton and sisal was concentrated in the lowlands and the southeastern highlands. All of these units were nationalized in 1975 and converted into state farms, which have proven to be unproductive despite being favored over private and collective agriculture. Since 1991, Ethiopian small farmers have been given more freedom to make their own financial decisions. The prices of agricultural products doubled in 1991-95, the cultivated land increased by 34 percent and the average harvest per hectare increased by 5 percent. However, the state still owns all land, which makes the lessee less inclined to make investments. Ethiopia is one of the countries thereland grabbing, which means that large areas of agricultural land are leased out to foreign companies, is most relevant.

In addition to coffee and sugar, oilseeds, beans and cut flowers have become important export products in recent years. The khat plant khat in Sweden is also grown on a commercial scale.

Forestry

A large part of the country, mainly the highlands in the west, was previously wooded, but uncontrolled harvesting in the 20th century resulted in the disappearance of the entire forest stock. This has resulted in extensive soil erosion. At the beginning of the 1990s, the share of wooded land was only about 3 percent. Although much of the harvesting is a result of farmers' hunting for new arable land, agriculture is in the long run negatively affected by erosion and depletion. The need for firewood is also an important cause of deforestation. Forest replanting is now taking place on a large scale and the proportion of wooded land has increased to just over 12 percent.

Mineral

Gold is the only mineral that has any significance for the country's exports, but potassium carbonate (pot ash), tantalite, lime, salt and marble are also mined. Ethiopia also has oil and natural gas, but both exploration and production are hampered by the fact that most of the deposits are in troubled areas, including the disputed Ogaden.

Energy

Ethiopia has great potential for production of water energy, and a rapid expansion of dams and power plants is ongoing, including major projects in the Omo River and at the Blue Nile, where the so-called Millennium Dam began to be built in 2011. The latter project has met resistance from Egypt, which fears that the volume of water in the Nile will be affected. Environmental and human rights groups have also warned of the consequences for nature and people that the large dam construction is expected to have. Despite oil deposits in the country, Ethiopia is dependent on imports to meet its oil needs. The majority of the population still does not have access to electricity and fires with firewood, charcoal and animal waste. However, the electricity grid is undergoing rapid expansion.

Industry

The textile industry is the most important industrial industry and responds with facilities in, among others, Addis Ababa, Kombolcha, Akaki, Dire Dawam. for about half of industrial employment. The industry has grown strongly during the 2000s and in 2006-11 the industry quadrupled its turnover. During the same period, the textile industry increased its exports to Europe by 500 percent. The food industry and breweries also occupy a central position, as does the production of leather, leather goods and building materials. The engineering industry is conducted on a limited scale, mainly in Addis Ababa, Akaki and Nazret.

The industry mainly produces for domestic consumption, but some processing of local raw materials (mainly from agriculture) for export takes place. Many industrial projects, as well as a significant part of the expansion of energy supply, were previously funded under Soviet and Eastern European development programs, while international aid organizations and Western countries have prioritized agriculture and infrastructure. The industrial sector has been privatized to some extent, but many of the large companies are still state-owned.

Foreign trade

Like industry, Ethiopian foreign trade is dependent on agricultural products. Coffee has long accounted for more than 50 percent of export revenue, but the crop's share of exports has halved, while primarily oilseeds have increased in importance. Other export products include khat, hides, skins and live cattle. Over the past few decades, an attempt has been made to expand the export range of processed leather goods, meat, sugar and vegetables. During the 2000s, exports of gold and cut flowers have grown sharply. However, this has not been able to offset the large and growing trade deficit. Imports are dominated by oil and oil products, machinery, transport equipment and other industrial goods, chemical products, food and not least weapons. Main trading partners are China, Sudan, Switzerland, Germany and Saudi Arabia.

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