Helping to unleash the growth potential in Ethiopia's Agricultural Sector

Second International Agro-Industry Investment Forum
5 to 8 March 2018, Addis Ababa, Ethiopia

IFAD participated in the Forum’s session on Financing opportunities for the business sector, where representatives of multilateral development banks, international financial institutions and national banks highlighted the opportunities and challenges for accessing finance for investment in agro-industries and manufacturing in Ethiopia.

From left to right: Dr Gebrehiwot Ageba, Faculty of Business and Economics, Addis Ababa University (moderator); Mr Admassu Tadesse, President and Chief Executive Officer, Trade and Development Bank; Mr Getahun Nana, President, Development Bank of Ethiopia; Dr Abdul Kamara, Country Director for Ethiopia, AfDB; Dr Ulac Demirag, Country Director for Ethiopia and South Sudan, IFAD; Dr Yohannes Ayalew, Vice-Governor, National Bank of Ethiopia; and Mr Adamou Labara, Country Manager for Ethiopia, International Finance Corporation.

Hosted by the Government of Ethiopia and the United Nations Industrial Development Organization (UNIDO), the Second International Agro-Industry Investment Forum is taking place in Addis Ababa on 5-8 March 2018. The Forum is expected to bring together around 2,000 participants from the public and private sectors, including senior officials of the Government of Ethiopia and other partner countries. The aim of the forum is to mobilize private investment in light manufacturing with a particular focus on sectors with high growth potential, namely agro-processing, textiles and garments, and leather and leather products, as well as related sectors such as packaging and renewable energy.
Ethiopia has one of the fastest growing non-oil producing economies in the world and is increasingly becoming a major investment destination. Foreign Direct Investment rose by 46 per cent to US$3.2 billion from 2015 to 2016, driven by investments in infrastructure and manufacturing. However, the country needs greater investment to unleash the potential of the agricultural sector, which employs about 80 per cent of the population and depends upon fragile natural resources, and to achieve agricultural transformation.

As part of the Growth and Transformation Plan, the country´s flagship development programme, the government has identified the development of labour-intensive light manufacturing and Agro-industrial Parks (AIPs) as priorities for accelerating industrialization. In this regard, AIPs are being designed as one stop shops that avail "plug and play" infrastructure and related services to national and international investors. Currently, six AIPs have started operation, and seven more are in the pipeline, in addition to five more AIPs developed by private investors. These AIPs are expected to create new opportunities for farmers to access local and international markets with incentives for smallholders to increase their productivity, resulting in incomes and employment creation along rural value chains. They have the potential to become strong drivers for rural and agricultural transformation in Ethiopia. 

During his intervention, IFAD’s Mr Demirag stressed that the success of investments in the agribusiness sector, will depend on the performance of the respective value chains overall. In this regard, he emphasized the need to support smallholder farmers transform their subsistence low input, low output production system into well-performing business-like productive systems. He highlighted the areas in which governments and development partners should collaborate to strengthen the capacity of the farmers to deliver, including: investment in public goods, such as regulations and infrastructure; technical assistance to support producers to meet the market in terms of productivity and quality and facilitating viable commercial linkages and cooperation between the value chain actors. In addition, he pointed out specific instruments that the public sector and development partners could offer such as partial credit guarantees, insurance and matching grants on capital investments, an instrument that IFAD has piloted successfully in Ghana. Mr Demirag also noted the opportunities to strengthen the supply side, enhancing banks’ understanding of the agribusiness sector and establishing a culture of collaboration among the various actors in the value chains, based on their common and specific interests in order to reduce risks. Finally, he highlighted key policy instruments that could increase access to finance for farmers and investors along the value chains. In concluding, he stressed the need for the Government to strengthen implementation of social and environmental safeguards as to ensure the sustainability for all investments in the sector.