business opportunity report: oilseeds and pulses

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Business Opportunity Report:

Oilseeds and Pulses

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Contents Page

Contents

Executive Summary ............................................................................................ 3

Chapter 1: Introduction .................................................................................... 4

Chapter 2: Ethiopian business climate in brief ......................................... 5

2.1 Ethiopian Economic Developments ....................................................... 5

2.2 Agriculture in Ethiopia ............................................................................... 5

2.3 Trade and Foreign Investment Regulations ....................................... 8

Chapter 3: Main trends and developments in the relevant

(sub) sector .......................................................................................................... 10

3.1 Importance of subsector to the economy .......................................... 10

3.2 Subsector in International Context ...................................................... 14

3.3 Value Chain Structure ............................................................................... 16

3.4 Production and Geography ..................................................................... 19

3.5 Trade & logistics ......................................................................................... 26

3.6 Internal Market ........................................................................................... 27

3.7 Export ............................................................................................................. 30

3.8 Access to Finance ........................................................................................ 34

3.9 Challenges in the Value Chain ................................................................ 35

Chapter 4: Institutional context ................................................................... 39

4.1 Sector policies and regulations ............................................................. 39

4.2 Public sector partners .............................................................................. 40

Chapter 5: Business opportunities .............................................................. 45

5.1 Vision .............................................................................................................. 45

5.2 Strengths and weaknesses analysis ..................................................... 45

5.3 Opportunities .............................................................................................. 47

Interviews and References ............................................................................ 50

Colophon

The Oilseeds and Pulses Business Opportunity Report 2015 is a publication by the Netherlands-African Business Council (NABC) and FME-CWM. Commissioned by the Netherlands Enterprise Agency (RVO.nl), Ministry of Economic Affairs and Ministry of Foreign Affairs.

Authors Mr. Thijs Ruters (NABC) Mr. Auke Boere (NABC) Ms. Daphne Willems (NABC) Mr. Dawit Kidane (NABC) Mr. Wannes Dolfen (NABC)

Design

Mr. Dawit Kidane (NABC)

Contact Details

NABC Prinses Margrietplantsoen 37 2595 AM Den Haag Postal Address P.O. Box 93082 2509 AB Den Haag The Netherlands T: +31 (0)70 304 3618 E-mail: [email protected]

www.nabc.nl

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Executive Summary

The extensive quantity of hectares of arable

land, the profitable climate conditions, high

rural population and the high quality soil

lead to great potentials for foreign investors

to grow crops in Ethiopia. Also for oilseeds

and pulses specifically arable land is

extensive and by improving the method of

production, disposal can be doubled. The

major challenges are increasing yields,

reducing unit cost prices and increasing

income from exports.

In the past few years the government

started economic restructuring and

investing in road, telephone, and railway

infrastructure. Several initiatives

mentioned in this report have not yet been

achieved, but will be important to reach the

goals of the Agricultural Growth Plan (AGP).

Next to that, the stakeholders in the

oilseeds and pulses sector are willing to

increase exports and are looking for

financing incentives to improve

competitiveness. Seeing the vast tract of

land not cultivated yet, one can surmise

that Ethiopia will take a leading role in the

supply of oilseeds and dry pulse crops in

the international arena. However, core

interventions and enabling actions need to

be undertaken which can holistically

strengthen the Ethiopian pulses value chain

to be productive and stable, and provide

year round reliable transactions that supply

domestic and international markets.1

1 Chilot et al, 2010

Stronger linkages between exporters and

producers (smallholders) are currently

being forged, which will lead to a more

efficient value chain where demand signals

are clearly communicated to the producers,

and where inputs are available to ensure

proper production of oilseeds and pulses.

Developing the export sector will drive

foreign reserve earnings and will create a

steady demand for both oilseeds and

pulses, thereby acting as a catalyst for the

sector. Exporters should be supported

through a business environment more

conducive to investment and policies aimed

at bolstering exporters’ scale, knowledge

base, as well as business acumen.

Next to improving the structure of export,

the need to establish advanced cleaning,

hulling, roasting and extraction facilities in

Ethiopia is large. In Ethiopia there is a large

diversity of high value oilseed crops, which

covers a substantial part of the world

production in especially high quality

sesame seed and increasingly also other

oilseeds like linseed and niger seed.

In general, the Ethiopian government

focuses on doubling the agricultural

production. The AGP is providing the

regulations to reach those goals. The

Ethiopian government established new

warehouses, which is a positive step

towards complying with the EU regulations.

At the moment CBI is working with 12

exporters to prepare them to export

oilseeds to the EU. The result will be a

business opportunity for the potential and

active traders.

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Chapter 1: Introduction

Ethiopia is a country with a very high

agricultural potential, which is

increasingly being met. Being dubbed by

many as Africa’s most promising food

basket and showing growth figures

unmatched by any other country, even in

Africa, Ethiopia is steadily on the way of

becoming one of the major agricultural

players in the world.

Within Ethiopian agriculture, oilseeds are

the most important export crop in terms

of volume and almost on par with coffee

in terms of export value. Pulses have

always been important for the domestic

market and are increasingly important for

export incomes as well. Oilseeds play a

significant role on the lives of the

Ethiopian agrarian community and

stakeholders in the national economy in

Ethiopia. Increasingly, sesame seed is

taking a significant role in the oilseeds

sector over the past years and has

become the most relevant commodity.

However, there is renewed interest from

Europe for linseeds and niger seeds.

Similarly, white-pea beans and chickpeas

are important crops within the Ethiopian

pulses sector.

Ethiopia’s potential as major oilseeds

exporter is a result of suitable climate for

annual and perennial oil plants,

availability of cheap labor force and huge

global demand for quality food oil.

Through these advantages, Ethiopia could

expand its foreign market presence

through increased production levels,

which will lead to at least doubling of its

current annual exports.

Consumption of oilseeds in Europe has

skyrocketed in recent years; and there is

high growing demand for quality and

organic varieties of seeds. Europeans are

some of the largest importers and

processors of edible oils. The various

usage potential of oilseeds makes them a

valuable commodity in Europe, especially

for the food industry, but also for

cosmetics and industrial purposes.

Moreover, Europeans (and North-

Americans) have an increased craving for

quality foods, super foods and the like, in

which group oilseed and pulses products

invariably seem to be categorized. This

enormous growth potential of the

Ethiopian oilseeds and pulses sector in

combination with Europe’s increasing

demand of quality oilseeds and pulses

products brings great opportunities.

These trends and opportunities will be

described in this Business Opportunities

Report on the Ethiopian Oilseeds and

Pulses sector.

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Chapter 2: Ethiopian business climate in brief

2.1 Ethiopian Economic

Developments

Ethiopia, with a population of about 96.6

million (2014)2, is the second-most

populous country in Sub-Saharan Africa

after Nigeria. Ethiopia has over the past

decade enjoyed one of the highest growth

rates in Africa – between 8% and 10%.

The economy is expected to continue to

grow at a healthy pace aided with a

remarkable decrease in inflation that

stood at a high of 36% in February 20123,

but has since dropped to 7.8% in January

20144.

Almost 25% of Ethiopia's population is

under the age of 18.5 Over the past two

decades, there has been significant

progress in key human development

indicators: primary school enrolments

have quadrupled, child mortality has been

cut in half, and the number of people with

access to clean water has more than

doubled. More recently, poverty

reduction has accelerated and the

(official) unemployment rate has

decreased from 26.4 % in 1999 to an all-

time low of 17.4% in 2014.6 However, it

should be noted that in a country like

Ethiopia many people work in the both

2 CIA Factbook, 2015 3 Worldbank, 2011 4 CSA, 2014 5 UNICEF, 2015 6 Trading Economics, 2015

rural and urban informal sectors and

employment figures are less indicative

than for countries in other regions in the

world like the Europe and North America.

2.2 Agriculture in Ethiopia

Ethiopia’s economy is largely based on

agriculture, which provides 80 - 85

percent of employment for the population

as well as contributing about 43.5% of the

GDP and 61% of total export.7 Agriculture

remains Ethiopia’s most promising

resource and potential for self-sufficiency

and export development. Many other

economic activities depend on

agriculture, including marketing,

processing, and export of agricultural

products. The agricultural sector plays a

central role in the economic and social life

of the nation and is a cornerstone of the

economy. The correlation between these

two phenomena can also be identified in

the trends in figure 1.

7 State.gov, 2013

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Figure 1. GDP (constant 2005 USD), Agriculture value added (constant 2005 USD)

Livestock and their products account for

about 20 percent of agricultural GDP.

Crops (mainly coffee, oilseeds, cereals and

pulses) account for the remaining 80 per

cent of the agricultural GDP, which

highlights their importance to the

Ethiopian economy. Smallholders, the

backbone of the sector, cultivate 95 per

cent of the cropped area and produce 90-

95 percent of cereals, pulses and

oilseeds.8

The total labor force in Ethiopia was last

measured at 45.145.776 in 2013,

according to the World Bank. About 80 -

85 percent of the people are employed in

agriculture, especially farming.9 This

8 FAO 9 Trading economics Ethiopia, 2015

implies that between 36.116.620 and

38.373.909 people are employed in

agriculture. Most recent statistics (2013)

provided by the UN show that more than

3 million farms (households) are already

involved in oilseeds production.

Production is overwhelmingly of a

subsistence nature, and a large part of

commodity exports are provided by the

small agricultural cash-crop sector.

Principal crops include coffee, pulses,

oilseeds, cereals, potatoes, sugarcane, and

vegetables. The commodities, coffee and

oilseeds are the largest foreign exchange

earner.

One of the key points being addressed by

the current Ethiopian government’s five-

year development plan (GTP I) is to

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double agricultural production by 2020 to

ensure food security in Ethiopia. The

most important policy underlying

agricultural development is the

Agricultural Growth Program (AGP).

Apart from the AGP, the government has

also formulated a plan for accelerated and

sustained development to end poverty

(PASDEP) by promoting, among other

things, commercialization of agriculture

and growth of the private sector and

infrastructure (especially roads, energy,

and irrigation). The AGP aimed primarily

at increasing agricultural productivity in a

sustainable manner, enhancing market

performance and facilitating value

addition in selected targeted areas.

The AGP – AMDe (Agricultural Growth

Program – Agribusiness and Market

Development) vision for the sesame value

chain is to expand quality production to

increase Ethiopia‘s share in international

markets. AGP - AMDe is operational in 11

sesame producing Woredas in Tigray,

Amhara and Oromiya Regional States of

Ethiopia, and the core activities in these

Woredas include:

Enhancing productivity of

farmers through provision of

training in management, finance,

and audit, business planning and

marketing to farmers’ cooperative

union management team

members.

Technology transfer support by

working in collaboration with

research institutes in the

production, multiplication and

dissemination of improved Sesame

seed varieties like Setit 1 and

Humera 1 and acquisition of non-

shattering varieties, farm

machineries for row planting,

cultivating and harvesting.

Enabling access to finance for

infrastructure support through the

provision of grants. AGP - AMDe

has constructed and delivered 4

warehouses of 5,000 mt capacity

each to date on a cost share basis

to four Farmers’ Cooperative

Unions (FCUs).

Ethiopia has a total area of 112 million

hectares of which about 15% is arable,

and only 1 % (of the 112 ha) is being

permanently cultivated.10 Overall,

Ethiopia’s natural resource base, the soil,

the climate, the relative humidity and the

vegetation types are promising for

agriculture.11

Ethiopia is the second largest sesame

exporter in the world after India and

sesame is second with coffee as first in

foreign exchange earnings. Ethiopia

earned 641.5 million USD in 2014 from

export of oil seeds.1296% of the Ethiopian

oilseed export is sesame seed. Ethiopia

produces more than 400,000 metric tons

of chickpea annually and is the sixth

largest producer of chickpea in the

world.13 Export of chickpeas in 2014

brought in 22.5 million USD.14 In addition,

10 World Bank, 2015 11 EPOSPEA.org 12 Trademap, 2015 13 Agribiz.et 14 Trademap, 2015

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Ethiopia grows specialty seeds like

safflower seed and castor beans.

More than 3 million farms (households)

are already involved in oilseeds

production.15 Production is characterized

as labor intensive, low-input, and rain fed.

The potentials to increase the production

are huge. Only 20% of the total available

agricultural land is used, mainly in the

highlands, and of the total amount of

occupied agricultural land only 7% is

used for oilseeds. Productivity per ha can

be doubled with higher input levels like

fertilizer and improved seeds.16

2.3 Trade and Foreign

Investment Regulations

The government started economic

restructuring, invests in road, telephone,

and railway infrastructure and wants to

become a member of the WTO. Land is

state-owned and can be leased from the

government. To encourage private

15 Wijnands et al, 2009 16 Agribiz.et

investment, the Ethiopian Government

has developed a package of incentives

under Regulation No.270/2012 for

domestic and foreign investors engaged

in new enterprises and expansions, across

a range of sectors. The incentives that are

available both to foreign and domestic

investors are mentioned below.17

Below are some of the regulations

regarding import and export of these

products:

a. Customs Duty Exemption

A 100% exemption from the payment of

import customs duty and other taxes

levied on imports is granted:

• For investments in capital goods

and construction materials

necessary for the establishment of

a new enterprise, or;

• For the expansion or upgrading of

an existing enterprise as well as

spare parts worth up to 15% of the

value of the imported capital

goods.

Such investment capital goods may be

transferred to investors enjoying similar

privileges. Exemptions from customs

duties or other taxes levied on imports

are granted for raw materials and packing

materials necessary for the production of

export goods. All other goods and services

destined for export are exempted from

any export and other taxes levied on

exports.

17 Wijnands et al, 2009

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b. Income Tax Exemption and

Loss Carry Forward

Any income derived from an approved

new manufacturing, agro-industrial or

agricultural investment is exempted from

the payment of income tax ranging from

2-8 years depending on the area of

investment, export volume and the

location in which the investment is

undertaken. Income derived from an

expansion or upgrading of an existing

manufacturing, agro-industrial or

agricultural enterprise is exempted from

income tax for a period of two years if it

exports at least 50% of its products and

increases, in value, its production by 25%.

Business enterprises that suffer losses

during the tax holiday period can carry

forward such losses for half of the income

tax exemption period, after the expiry of

such a period.

c. Remittance of Funds and

Investment Guarantee and

Protection

In Ethiopia, both the Constitution and the

investment Code protect private

property. Ethiopia is also a member of

MIGA (Multilateral Investment Guarantee

Agency), which issues guarantees against

non-commercial risks to enterprises that

invest in signatory countries. Besides,

Ethiopia has signed bilateral investment

promotion and protection treaties BITs

(Bilateral Investment Treaties) with a

number of countries.

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Chapter 3: Main trends and developments in the

relevant (sub) sector

3.1 Importance of subsector

to the economy

Oilseeds subsector

A variety of oil seeds are grown in

Ethiopia, of which sesame is by far the

most important both in terms of volume

(see Figure 2), value and export earnings.

The oilseeds produced are supplied both

for the local and international market, in

which especially sesame has become a

major foreign currency earner for

Ethiopia with exports all over the world,

but especially China, India and the

European Union. Sesame accounts for

over 90% of the values of oilseeds exports

from Ethiopia to the world. Ethiopia is the

second largest sesame exporter in the

world after India and sesame is second

only to coffee in foreign exchange

earnings.

Figure 2. EPOSPEA, 2015: Oil seeds export trend Ethiopia

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Selet Hulling PLC – Sesame processing in Ethiopia

Although the processing of oilseeds in Ethiopia is most often confined to cleaning, if at all, a

few examples of more advanced processing in the country exist.

The most prominent example is Selet Hulling PLC, a Joint Venture between the Ethiopian Kaleb

Service Farmers House and the Dutch Tradin Organic Agriculture B.V., made possible through

the Private Sector Investment (PSI) Program of the Dutch government and established in

December 2007.

Selet Hulling PLC has 2 major production units; a production farm and a processing factory.

The production farm is located in the Humera District in the utmost North-West of Ethiopia.

Sesame is produced there on Selet Hullings’ own 300 ha farm and on the farms of families

which are connected to two outgrower cooperatives that Selet Hulling works with; Fana Limat

cooperative (1000 farming families) and Shewit cooperative 500 farming families). These

farmers also receive training and go through a certification trajectory.

The factory of Selet Hulling is located 20 kilometers outside Addis Ababa and consists of a raw

material warehouse, a sesame cleaning line, a sesame dry-hulling line and a finished product

warehouse. These facilities have been built according to international food standards and are

organic and ISO 22.000:2005 certified, with equipment for the cleaning line from Denmark

and for the hulling line from Spain, USA, the Netherlands and China.

Selet Hulling makes use of the dry-hulling method, which has advantages over wet hulling

methods because of lower water consumption and consequent less impact on the

environment. Furthermore, rainwater is collected in the factory for the hulling process, which

is consequently filtered in multiple steps and UV-treated before entering the machine line. The

type of sesame seed that is hulled in this factory is known as the Humera-type. This sesame is

popular on the world market due to:

1. White and comparatively large, uniform seeds

2. A sweet and nutty taste

3. A sweet aroma

Selet Hulling follows an integrated Internal Control System and works according to

international quality systems like HACCP. According to the factory’s website, Selet Hulling’s

mission is “to be the world food and bakery industry’s premier supplier of top quality,

competitively priced, certified organic hulled sesame seeds for a healthier living”.

Unfortunately Selet Hulling was not available to verify to what extent they can currently

adhere to that mission, but it is clear that they can be considered as the major sesame

processor in Ethiopia.

(Source: www.selethulling.com)

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Given Ethiopia’s ability to produce large

volumes of high quality sesame, it is well

positioned to capitalize on the high

growth in the global sesame market by

expanding its downstream processing

activities.

Ethiopian sesame still has important

potential on the world market because it

produces high quality seed varieties that

are suitable for a wide range of

applications that are well known on the

world market. However, due to major

defaulting on contracts of especially

European importers in the period 2006 –

2008, many importers got reluctant to

source from Ethiopia (see boxed text).

Humera, Gondar and Wollega type

sesame seeds are varieties of sesame

seeds produced in Ethiopia that are well

known in the world market. They have

their own respective features, which

make them suitable for different uses.

Humera and Gondar type sesame seeds

are mainly suitable for bakery and

confectionary purposes, while Wollega

type sesame seed has a major competitive

advantage for edible oil production

because of its high oil content. The

Humera variety originates from the

Humera area in the North-West of

Ethiopia and constitutes about 70% of the

country’s annual sesame seed production.

The total area under cultivation is

450.000 – 500.000 ha, involving both

commercial and smallholder farmers.18 19

18 Oscar Geerts, SBN, personal 19 UN data

Price volatility of world market

Sesame in 2006-2008

Sesame is truly a world market product,

with producers and buyers in every world

continent. This contributes to a relatively

high price volatility, which in some years

is more capricious than in others. In the

years 2006 – 2008, with 2008 as the most

extreme case, the sesame price went up

majorly in a short period of time. The

following major factors caused this

situation:

- Increased demand from emerging

markets, not sufficiently met be

increased production

- Sharp rise in demand for bio-fuel,

making various producers shift

production from sesame to bio-fuel

- Bad harvests in different parts of the

world

The sharp and fast price rise of Ethiopian

sesame and increased interests from all

parts of the world meant that Ethiopian

suppliers could get much higher prices

than initially prospected. However,

importers from Europe already signed

contracts with Ethiopian suppliers in an

earlier stage, for a lower price. Certain

Ethiopian suppliers chose to default on

these contracts and sell their produce for

a higher price to other markets like China.

This situation has led to a decreased trust

under many European importers, which is

being rebuilt again slowly throughout the

years. It is up to all Ethiopian suppliers to

keep this trust now and adhere to already

made agreements with their importers.

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Despite the high export figures of sesame,

Ethiopia is at the same time importing a

variety of oil substitutes. Especially palm

oil imported from Malaysia is widely used

for cooking, given its superior price to

quality ratio in comparison to

domestically produced oil. Dr. Daniel

Dauro from the Agricultural

Transformation Agency states:

“One policy that is hindering the domestic

processing of oilseeds is the duty free

importation of foreign edible oils. Palm oil

is not taxed, while locally produced oil is.

Imported palm oil from for example

Malaysia and Indonesia is duty-free in

order to make it affordable to the majority

of the population. Less than 5 % is

produced in Ethiopia itself.”

Thus, the need for affordable edible oils

cannot be met by domestic production

and has to be largely met through duty-

free import from Asia. At the same time

that hinders a transformation to

Ethiopian production of edible oils out of

oilseeds.

Some by-products from pulses and

oilseeds such as cake, a by-product

released during the extraction of oil from

oilseeds and pulses, are used for the

production of animal feed. It forms an

essential input for animal feed

production, and dairy farmers can even

directly use the cakes as feed for their

cows. However, due to a high demand for

these cakes among Ethiopian feed

producers, oilseed processors are

hoarding the product. Therefore the

Ethiopian government has recently put a

ban on the export of all oilseed cakes as a

temporary measure, in order to ensure

sufficient availability in Ethiopia.20 This

implies that there are opportunities for

production targeting the local market.

The sector provides potential for a

powerful product - market combination

in the specific niche market for organic

oilseeds and pulses. The low cost of

production and the climatic conditions

that allow the production of specific sub-

types such as Humera, Gondar and

Wollega sesame seed are important

potential success factors. Though the

industry has grown, more progress is

needed to increase yields, improve farm

gate prices, and increase income from

exports.

Pulses subsector

Like for oilseeds, cultivation of pulses like

chickpeas, red kidney beans and white

pea beans is common in Ethiopia.

Ethiopia produces more than 400,000

metric tons of chickpea annually and is

the sixth largest producer of chickpeas in

the world. Cultivation of pulses is carried

out in both the highland and lowland

areas of the country, mainly by peasant

farmers. Currently, the country exports a

large quantity of pulses to the

international market (see figure 3). There

are also a number of factories that

process pulses in the country.

Pulses, especially red kidney beans, are

produced through major cooperatives

20 Moti Cheru, Director Feed Department VDFACA

14

that exist along the major regions of

Ethiopia such as Tsehay Union in Oromiya

and Mercha Union in Oromiya. Chickpeas

on the other hand, are exported with

contract-based linkage between large size

business and small farmer’s organizations

(unions) such as ACOS Ethiopia.

Figure 3 EPOSPEA, 2015: Pulses export trend Ethiopia

3.2 Subsector in

International Context

Edible oil and oil crops are among the

most widely traded commodities in the

world. However, the production and

export of oilseeds is dominated by a

group of producing countries. The United

States, China, Brazil, India, Argentina, the

EU and Canada are the world’s largest

producers and account for about 70

percent of global oilseeds output.21

Despite increasing production, erratic

climatic conditions in many countries in

general, and throughout the South

American continent in particular, have

21 Hoffman et al., 2009

been affecting oilseeds production22.

Despite substantial growth in oilseeds

production in the past 25 years, and

recent gains in export volume, both

exporters and importers have been

engaged in trade distorting policies –such

as deferential export taxes and

production subsidies.

In Ethiopia as a result, many attempts

have been made to favor domestic

oilseeds production at the expense of

imports or to encourage domestic

processing of imported oilseeds versus

imports of oilseeds products.

22 http://www.oilworld.biz/app.php?fid=1090&fpar=0&isSSL=0&aps=0&blub=99d5d4612ae78dfcf3f261cddd2f91a5

15

Demand for vegetable/edible23 oil has

consistently been moving up due to

consistent increase in consumption,

which is in turn caused by the increasing

population as well as increase in

disposable income in developing

economies. For example, world’s

vegetable oil production and

consumption for 2008-09 stood at around

133 and 130 million tons respectively.

For 2010-11 it showed 145 million tons of

production and 144 million tons of

consumption. China is the largest

consumer (around 25 million tons in

2008-09) in the world followed by India.

The EU (mainly Belgium and The

Netherlands), United States, Indonesia,

Malaysia, and Brazil are the other large

consumers. The international demand for

edible oil in 2008-09 was 56 million tons,

which is forecasted to grow up to 60

million tons in 2010-11. Indonesia and

Malaysia are the leading exporters of

vegetable oil. Argentina, Ukraine, Canada,

United States and Brazil are other

suppliers to the world market. Palm oil is

the major export for Asian nations while

soybean, sunflower and canola

(rapeseed) oils are major exports for

American countries24. China is the world's

biggest importer of vegetable oil followed

by India; EU-27, United States and Asian

countries are other major buyers.

Commodities’ share of the world’s edible

oil trade shows that palm oil is the

internationally most traded vegetable oil

23 Edible and vegetable oil are used interchangeably 24 http://www.agricommodityprices.com/futures_prices.php?id=244

with more than 60% world market share

followed by soybean oil. Sunflower,

rapeseed and coconut oil are other oils

traded in the world market25.

25 http://www.agricommodityprices.com/futures_prices.php?id=244

Export of Ethiopian pulses – ACOS

Ethiopia P.L.C.

ACOS Ethiopia P.L.C. is Ethiopia’s leading

quality pulses export company. It has

introduced a number of new varieties,

aiming to enter the international market.

One of these varieties is ACOS Dube

which, due to its larger chickpea seed

size, has the potential to fetch premium

European market prices. Despite past

undeliverable experiences working with

cooperatives, with help from SNV/C4C-

program and with a better sustainable

business arrangement, ACOS scaled up its

operations providing more in kind Dube

Seeds to more unions.

The experience has also built the

confidence of the unions to take control

of their marketing. The experiences of

this progressive union and the lessons

learned will be shared with other unions

and their member cooperatives for

replication. Next year 3000 quintal of

ACOS Dube is expected to be harvested

and double that amount in 2016; truly an

enrichment of Ethiopia’s current chickpea

offering. At the moment however, most

of ACOS’ exports to Europe fill the gap

where Mexico cannot deliver. The lessons

learned from ACOS production and

exporting chain has been taken up by

the chickpea cluster of Oromia.

16

3.3 Value Chain Structure

The scheme below provides a general

overview of the different players in

various commodity chains in Ethiopia;

from farmers to traders to processors to

exporters to consumers. Still, for each

commodity a different value chain is in

place and in this chapter we will describe

the sesame value chain on behalf of the

oilseeds and the chickpea value chain on

behalf of the pulses.

The sesame value chain

Getting sesame from producer to end

(international) buyer in Ethiopia involves

a range of players most of the time, partly

depending on whether the sesame is

organic or non-organic.

Figure 4 gives an idea of the value chain

for non-organic sesame. In one possible

chain, farmers sell their produce to the

primary market (also called spot market),

where all the sesame is bulked.

Sometimes there are traders in between

the farmer and the primary market,

although this is illegal practice.

In almost each Kebele (smallest

administrative zone in Ethiopia), a

primary market has been allocated where

legal trade may take place. From the

primary market the sesame goes to the

Ethiopian Commodity Exchange (ECX),

where the sesame is graded into different

quality groups (1-5). From the ECX the

graded sesame goes to the export traders,

who sell it to the international buyers.

Figure 4. Getahun Bikora – Ministry of Trade (2013): Sesame Value Chain

17

Although the ECX provides producers

market price transparency, there are

various reasons to avoid selling through

the ECX:

- No differentiation is made

between various sub-regional

sesame varieties. Varieties that are

recognized as Humera type

sesame seeds are acknowledged at

the ECX when they are produced in

certain districts. Once the Humera

type varieties are produced

outside these districts, then the

seed may be reckoned as Wellega

type (for example). This also

happens the other way around.

Wellega type seeds produced in

areas that are considered to be

delivering Humera type seeds, will

eventually be traded and exported

as Humera type seeds

- No differentiation is made

between organic and non-organic

sesame

- The grading system of the sesame

at the ECX is not fully transparent

Another value chain, not shown in the

above figure, goes via the primary

cooperatives. In this case, farmers are

organized in a primary cooperative to

which they sell their produce. The

cooperative consequently sells to the ECX,

which means no differentiation will be

made for sesame type. The cooperative

can also sell to the Union, which can

directly sell to the international market.

Important examples of unions in Ethiopia

are Tsehay Union, Selam Union, Metema

Union, Dansha Union and Setit Union.

Only a small number of investor farmers

avoid the whole chain and sell their

produce directly to international buyers,

either before or after processing.26 The

Ethiopian-Dutch Joint Venture Selet

Hulling is an example of an integrated

investment, which includes production

and processing (cleaning and hulling),

after which their organic produce can be

directly sold to the international market

(See boxed text on page 12). A second

example is Dipasa Agro PLC which hulls

and roasts sesame for the export market

(see boxed text on page 27). Other

important processors are:

1. Ambasel Trading, which cleans

hulls and roasts white sesame,

produces sesame paste (tahini).

They export to Middle Eastern,

Asian and European markets27

2. The Ethiopian-Israeli Joint Venture

Sheba Trading in Gondar, which

makes food products from sesame.

Their plant has a processing

capacity of more than 250 tons

sesame seeds annually and their

major products are Tahini, Halva,

and hulled sesame seed.

26 Interview with Oscar Geerts, SBN-network, 10-07-2015 27 Ambaseltrading.com.et

18

Figure 5. Chickpea Value Chain in Ethiopia

The chickpea value chain

For chickpea, one of the major pulses

grown in Ethiopia, the value chain is even

more complex than for sesame. First of

all, it is important to make a distinction

between the smaller chickpea types that

are used for local consumption, especially

in one of the country’s major dishes shiro.

This type of chickpea is normally not

exported outside Ethiopia. Here we will

focus on the value chain of the larger

chickpea type that was originally

imported from Mexico, at the same time

Ethiopia’s major competitor on the world

market for large chickpeas.

As can be seen from the figure, chickpea

farmers in Ethiopia can supply to

numerous amounts of stakeholders in the

sector, depending on accessibility to

either of them. According to Eyerusalem

Regassa from SNV’s Cooperatives 4

Change program, not more than 10 % of

the agricultural products are sold to

primary cooperatives and this holds for

chickpeas as well. Still, the far majority is

sold to traders / brokers, who

consequently sell to woreda wholesalers

or urban wholesalers. Most of the

retailers, both woreda and urban, get

their chickpeas from these wholesalers.

For the export market, the larger chickpea

type the value chain can be different still,

especially when larger companies like

ACOS have integrated most of the chain. If

the chickpeas are sold to the primary

cooperatives, then most often the

chickpeas are first sold to the unions, who

consequently sell them to exporters /

trading companies with an export license.

From there, the chickpeas are sold to

companies abroad.

19

Brokers/wholesalers/ECX

An estimation made by SNV mentions

over 300 wholesalers in sesame seed only

for the capital city of Addis Ababa. This

indicates that the number of collectors

and wholesalers for the whole country

might be running in the thousands. The

relative fragmentation, corresponding

transport costs and difficulties for

tracking and tracing systems might cause

difficulties for large-scale international

trade28.

In 2008, the Ethiopian Commodity

Exchange, ECX has been established to

facilitate trade between producers and

wholesalers and exporters, and to

increase transparency. The Ethiopian

Commodity Exchange is a marketplace,

where buyers and sellers come together

to trade, assured of quality, delivery and

payment. The vision of ECX is to

transform the Ethiopian economy by

becoming a global commodity market of

choice. ECX’s mission is to connect all

buyers and sellers in an efficient, reliable,

and transparent market by harnessing

innovation and technology, and based on

continuous learning, fairness, and

commitment to excellence. Sesame and

Red Kidney beans are both included in the

ECX29.

28 snvworld.org 29 ecx.com.et

3.4 Production and

Geography

a. Oil Seeds Sub-Sector

This section describes some

characteristics of standard agronomy

practice in sesame and linseed

production, and potential improvements

to increase the level and quality of the

output.

Among the important oil crops grown in Ethiopia, sesame is highly adapted to arid and semi-arid low land environment. Main areas of production are located in the semi-arid lowlands of North-West Ethiopia which include Humera, Tsegede and Wolkayit in Tigrayand Metema, Quaraand Tach Armachiho, Mirab Armachiho and Tegede in Amhara Regional State. These production zones account for more than 70% of the national production30 (see Map 1).

Sesame production systems are

characterized as very labor intensive with

low external input use and generally rain-

fed. Reports on average land size and

production vary depending on which

source used, but range from 0.75 – 2 ha

for size of land and average yields of 400

to 600-800 kg/ha. The potential to

increase productivity per ha through

higher input levels and improved

technologies is huge. Moreover, arable

virgin and fertile lands are available that

offer good opportunities for organic and

sustainable sesame production.

30 Abera, 2009

20

Map 1. Sesame production areas in orange31

Sesame is fairly drought resistant and

about 300-750 mm of rainfall is

considered sufficient, but sesame can also

grow in areas with over 1000 mm. Too

high humidity will cause large problems

with leaf blight. In the Awash region, with

low rainfall, use of irrigation can more

than double the yield of sesame compared

to rain fed production: 1600 kg/ha with

irrigation and 600 kg/ha with rain fed

production with the best adapted sesame

variety. Sesame has a high temperature

requirement for germination: soil

temperatures should be above 25 °C and

sesame should be grown therefore in the

tropical climates of Ethiopia. Sesame can

be grown on altitudes between 500 and

1500 m, but higher altitudes are possible

if the temperatures are high enough for

good germination. Soils should be well

drained, but with good water retention

capacity.

31 Getahun Bikora, Ministry of Trade (2013)

Sesame requires a normal labor input for

land preparation and sowing, a similar

labor input for weeding as linseed and a

high labor input during harvesting.

Harvesting should be carried out in a 2-4

day window, and therefore in many

regions labor input from outside the

region is used during harvesting. Labor

input per ha for harvesting is about 30-40

person-days. Hand harvesting is needed

to prevent shattering losses, as the

Ethiopian varieties are shattering types,

and the seedpods need to be partially

open at harvest, since otherwise

threshing is difficult. In other countries

with higher labor costs, mechanical

harvesting is used, but this is only

possible with non-shattering types with

‘paper shell’ pods. These are currently not

used in Ethiopia, but introduction could

be an interesting opportunity.32

Challenges & opportunities

Crop protection

More attention to crop protection

improves yields of sesame. The yield loss

due to diseases and pests in sesame can

be very high. In high rainfall areas, full

crop losses can occur due to leaf blight. In

drier areas, leaf blight is no problem at all.

Insect pests can technically be controlled

using insecticides. Weed control uses a

high labor input as currently this is done

by hand. Opportunities will exist to

improve weed control by mechanization,

if sowing in rows is used. A major option

for yield losses is breeding for resistance. 32 Wijnands et al, 2009

21

Crop rotation: an opportunity for

oilseed crops

Crop rotation can be very beneficial for

producers of sesame. Data on effects of

mono-cropping of sesame have not been

found, but demonstrations of optimal

rotation schemes are being implemented

(e.g. by the Ethiopian Institute of

Agricultural Research and extension

services). The advised rotations contain

multiple crops (e.g. sesame-sorghum-

soybean-maize, or sesame-sorghum-

cotton-maize). The situation with sesame

is different from that for linseed, as the

farm income per hectare for sesame is

often higher with sesame than with other

crops leading to a situation of mono-

cropping of sesame.33 The Sesame

Business Network in cooperation with the

2-SCALE Program of IFDC also specifically

focuses on crop rotation and how to make

rotation crops marketable.34

Linseed

For linseed, the characteristics of suitable

agro-ecological zones can be summed up

as follows:

• Total rainfall should preferably be

between 500 and 1000 mm. If linseed is

grown in areas with a water supply of less

than 500 mm, the seed and oil yield

reduces and a there is a shift towards

more saturated fatty acids and more

protein in the seed.

33 Jacques et al, 2012 34 Oscar Geerts, SBN, personal

• Day temperature should be below 30 °C,

night temperatures above -5 °C during

seedling stage and above 0 °C during

flowering and seed set. Total temperature

sums are needed of 1600-1850 °C days.

Preferred average daytime temperatures

are between 19.5 and 24 °C. The total

crop duration is between 90 and 110

days. High temperatures and low rainfall

during flowering and seed set lead to

lower seed yields, lower oil content, lower

content of unsaturated fatty acids and

increased saturated fatty acids and

protein content.

• Linseed needs vernalization - a cold

period that induces flowering - which can

be realized with temperature of 2° during

5 to 20 days. Through vernalization,

flowering starts around two weeks

earlier.

• Linseed grows best on medium-heavy

soils. Unsuitable soils are dry sandy soils,

wet, compact clays and marshy soils, or

very acid soils. The preferred pH of the

soil is between 6 and 7. Linseed is

moderately tolerant to salinity. Linseed

often only gives a small response to

fertilizer application as it can produce

well on the residual nutrients that remain

in the soil after fertilized crops like wheat.

• Altitudes should be above 1200 m and

below 3500 m, but the main production

areas are between 1600 and 2000 meter

in the South-West of Ethiopia and

between 2200 and 2600 m in Bale and

Arsi. Agro-ecological zones suitable for

22

linseed have an area of about 2,500,000

ha.

The current practices in linseed primary

production are:35

• Linseed in Ethiopia only grows as an

oilseed crop (not as fiber). Farmers use

seed of previous harvest as sowing seed.

These mainly local varieties are not

uniform.

• Land preparation on the smallholdings is done with oxen. Tillage of three times is recommended to create a fine seedbed, but in practice, labor and oxen are limited during the sowing season. This often leads to allocation of the ploughing capacity to crops that have higher economic yields like wheat. Often only one preparation is carried out which creates a coarse seedbed and a lower initial development of linseed. Farmers compensate this by higher levels sowing seed -up to 80 kg/ha-, while with optimal tillage establishment 25 to 40 kg/ha sowing seed is sufficient. The large state farms use modern equipment like tractors and combine harvesters.


23

• Linseed is normally sown as the last crop in a rotation, without fertilizer application. With the average yields in Ethiopia of 600-800 kg/ha, the crop will take up in the above ground an amount of

50-75 kg N/ha, 10-16 kg P/ha and 40-60 kg K/ha. Care should be taken when nutrients are exported from the field, replenishment of the soil nutrients should take place.

b. Pulses Sub-Sector

Figure 7. Pulses production by pulse type (1994/95 to 2008/09) ,000s tons (Chilot et at, 2010)

Figure 6,

24

While pulses are grown throughout

Ethiopia and account for 13 percent of

cropped land area, production is

concentrated in the Amhara and Oromiya

regions, which together account for 92

percent of chickpea production, 85

percent of faba bean production, 79

percent of haricot bean (including white

pea bean production), and 79 percent of

field pea production (see Figure 7).

Amhara region also brings forward the

largest producer of three out of the four

major pulses varieties in the country. The

primary producers of pulses are

smallholders with small and dispersed

plots under rain fed conditions. Women

are also heavily involved in production,

conducting the majority of on-farm labor

during both planting and harvest, with

additional activities in value-addition.

Significant potential for productivity

gains in the pulses sector are obvious.

Comparisons between current yields with

international and on-farm trial

benchmarks demonstrate that for both

chickpeas and faba beans, Ethiopia has

substantially lower yields than on-farm

trail and international yields would

suggest possible. For example, although

the Ethiopian average chickpea yield, at

1.2 tons per hectare is higher than

countries including India, farm tests on

experimental plots in Ethiopia have

achieved yields from 2.9 to 3.5 tons per

hectare. This implies a minimum

productivity gap of at least 150 percent.

At the farm level, productivity appears to

be severely constrained by three major

factors:

1. Limited or no use of chemical fertilizers

for pulses (e.g., phosphates) - Studies in

Ethiopia and elsewhere have

demonstrated the productivity benefits

for pulses from phosphate fertilizers (e.g.,

super- phosphates) in particular.

Fertilizer use in Ethiopia is comparatively

low, averaging 25 kg/ha of nutrients, and

much of this is currently applied on

cereals. Lack of fertilizer use can be

subscribed to a limited access to credit,

lack of import (especially of phosphate

fertilizers) into the country and lack of

awareness of the benefits of the use of

such fertilizers. The use of fertilizer is

especially important in light of multiple

Ethiopia-specific studies that assert that

soil fertility depletion is one of the

fundamental causes for declining per

capita production.36

2. Very limited availability of improved

seeds (most pulses are grown from

unimproved cultivars with low genetic

potential) - Despite the release of a large

number of improved pulse varieties

which are adapted to a wide range of

rainfall, soil and altitude regimes, the use

of certified improved seeds by farmers is

very low. A combination of factors explain

low adoption: on the one hand, supply

side constraints including extension, limit

the knowledge of smallholder on

production practices and benefits of

diversification; on the other hand, a set of


25

market-led demand constraints,

particularly the price instability in 2008,

led to diminished trust in the pulses

sector for small producers after declining

market returns.

3. The use of conventional agronomic

practices (e.g., sub-optimal crop rotations,

poor seed bed preparation) - While

agronomic practices such as the timing of

plowing, fertilizer and insecticide

applications, crop rotation, and weeding

and harvesting are critically important to

achieve optimum productivity, many

farmers seem unaware of their benefits.

Limited knowledge of best practices for

overall agronomic practices and post-

harvest management has resulted in poor

quality, low yielding pulses.

In particular, the lack of crop rotation is a

key issue with respect to farm

management practices. Currently, 13

percent of the land area used for grain

production in any one year is devoted to

pulses, suggesting a significant portion of

the remaining cultivated area for grain is

under mono-cropping. The adoption of

optimal rotations, besides increasing the

productivity of pulses and the subsequent

cereal crop through improving soil

fertility, can increase farmer income as

area devoted to pulses increases.37


26

3.5 Trade & logistics

Intermediaries (middlemen, collectors,

traders, wholesalers and retailers) are

active between producers and consumers.

The time aspect refers to the inventory

and sourcing functions. Due to seasonality

of agricultural production patterns and an

even seasonal demand pattern for edible

oil, storing products bridges the time

between harvest and consumption.

Wholesalers have the function of bulking:

collecting large quantities of oilseed for

the processing plants. Trucks mainly do

transport of oilseeds from the producing

region to the port of export, mostly

Djibouti and Port of Sudan. Most of the

exporting companies have well-

maintained or new IVECO trucks. The

distance between the sesame production

regions and Djibouti is about 1,500km:

for instance, the distance from Bahir Dar

in the Amhara region to Addis is 560 km

and from Addis Ababa to Djibouti 900 km.

Although road density is very low in

Ethiopia, most of the main roads are in

good condition. Transport costs to

Djibouti port are indicated at 50 USD per

ton. Moreover, distributors are bulk

breakers and varieties assemblers:

providing retailers or consumers with

small quantities of a large number of

products. Intermediaries provide services

in the marketing channel that enables

producers to focus and to specialize. In

addition, the above-mentioned functions

(collecting, storing, logistics, bulk

breaking, assortment assembling) they

perform also functions for instance like

quality control, financing stock, price

negotiation, invoicing or matching supply

and demand.

Key Findings

1. The collector´s cost of sesame seed

amount to ETB56/100 kg and is

around 10 per cent of the

producer´s value.

2. The collector´s and export trader´s

gross margins (rent for own labor

and capital) are 2-3 per cent, the

rest are direct costs,

3. The exporters´ cost without

logistics are between ETB38 and

56/100kg.

4. Logistic costs are around ETB

0.05/10kg/km38

38 Journal of Economics and Sustainable Development, 2015

Ever-Improving Transport Grid

Ethiopia has the potential to be a new

origin for sesame seed. The national

transport grid is improving year by year

and the new railway to Djibouti opens up

new avenues for transport. More railway

lines are on the way and quality road

infrastructure is increasing rapidly,

including an already finished highway

between Addis Ababa and Adama. Easier

and less time-consuming transport will

soon be available.

27

3.6 Internal Market

Oil Seeds Sub-Sector

Despite the large production of sesame

and linseed, Ethiopia still imports large

amounts of edible oil, mainly palm oil.

Palm oil is mainly imported from

Malaysia, Singapore, and the United Arab

Emirates. Local production is only able to

meet about 5 % of the demand.39 Only 15

oil-processing plants are annually

processing 40,000 tons good quality

edible oils; otherwise 850 informal, small

and micro scale cottage oil seed

processors are extracting crude oil.40

In the high-end market, especially in

Addis Ababa, sesame seeds are sprinkled

on bread, bagels, and hamburger buns.41

39 Daniel Dauro, ATA, personal 40 ESAI, 2013 41 ESAI, 2013

Dipasa Agro PLC

Dipasa Agro PLC is one of the Dipasa groups and established in April 30, 2008 as a joint venture company between Dipasa Europe B.V from the Netherlands and Agro prom International PLC from Ethiopia. The company has established a modern sesame seeds processing factory that meets quality requirements of high value markets. It is located in Ethiopia, Oromia Regional State at Burayu town, which is 15 km west of Addis Ababa.

It is engaged in the hulling and roasting of sesame seeds for export to various countries worldwide and the Far East, Middle East, North America and European countries in particular. Dipasa has its own farmland in Humera and is working intensively in cooperation with sesame seed out-grower farmers associations since March 2012. Through this out-grower scheme, it tries to source traceable, organic and conventional sesame seed.

Dipasa is processing the Humera type of sesame and is currently engaged in exporting the following processed products of this type of sesame:

Cleaned natural sesame seeds Mechanically hulled sesame seeds Hulled and roasted sesame seeds

Dipasa Agro PLC has an organic certificate from BCS OKO-GARANTIE – a German

organic certifier.

28

Linseeds are crushed and used locally in a

dish called Telba. Niger Seeds are mainly

used for oil extraction. Soybeans,

groundnuts, cottonseed etc. are entirely

used domestically. The oilseed crushing

and refining industry produces for the

domestic market. Most of the oil is

consumed as crude oil for cooking.42 Oil

that has been crushed through small-scale

manufacturing is used mainly in the

urban areas. Similarly, crushing of seeds

for oil, at home, is also a very common

activity in less urbanized areas.43 Oilseed

cakes are furthermore used as animal

feed (ingredients), while soya is one of

the two major raw material inputs for

animal feed together with maize.

The estimated actual domestic production

of edible oil ranges between 5,000 and

8,000 tons annually for the medium and

large-scale enterprises. This production is

42 Wijnands et al, 2009 43 Oscar Geerts, SBN-program

less than half of the full capacity. This

provides an opportunity to increase

production for domestic consumption as

substitution for imports.

Taking into account that the small-scale

producers have a market share of two

third, the total available production is

between 15,000 and 24,000 tons

annually. Ethiopia imported between

15,000 and 160,000 tons edible oil in the

period 2001-2008 and in the years before

between 10,000 and 20,000 tons. That

means that in the last 5 years the imports

are 10-15 times the domestic production.

This results in an available amount of

edible oil of less than 0.5 kg per capita in

2000 to around 2.0 kg per capita in 2009.

The increase of import suggests a

potentially large domestic market, with

rising incomes. Main import of edible oil

is palm oil. Substitution of these oils by

domestic production from especially

sunflower, soybean or maize oil seems

feasible, encouraged by high domestic

prices. Imports show large variations

between years, which can partly be

explained by food aid of specific edible

oils.

Pulses Sub-Sector

Pulses, which constitute approximately

13 percent of cultivated land and account

for approximately 10 percent of the

agricultural value addition, are critical to

smallholder livelihoods in Ethiopia.

Pulses contribute to smallholder income,

as a higher-value crop than cereals, and to

diet, as a cost-effective source of protein

What can Dutch private sector do?

Value addition is largely absent in the

Ethiopian sesame sector. There are plenty

of opportunities for cleaning, hulling and

sterilization companies and investments

for sesame and niger seed.

Moreover, there are very few oil

refineries in Ethiopia that crash oil seeds

and extract crude oils for consumption,

and most do not match a quality that can

be used for human consumption. As crude

oil mills are prohibited to continue supply

of unrefined oils, the need for oil

refineries is immense.

29

that accounts for approximately 15

percent of protein intake. Moreover,

pulses offer natural soil maintenance

benefits through nitrogen-fixing, which

improves yields of cereals through crop

rotation, and can also result in savings for

smallholder farmers from less fertilizer

use.44

Traditionally pulses, such as chickpeas,

are processed at home to make Shiro

stew. However, there are two companies

that sell humus (processed peas): La Viva

Fresh and Ambasel Trading. Additionally,

Guts Agro and several other small to

medium sized enterprises called Baltinas,

process chickpeas locally into Shiro for

local supermarkets.45

Oil millers

Sesame oil is hardly being produced

locally, since the export price of seed is

usually very attractive and sesame oil is

hardly locally consumed. It is seen as a

business opportunity to increase the local

capacity to produce sesame oil for export,

increasing added value and foreign

exchange.

The main challenges for the oil-crushing

sector in Ethiopia are to ensure adequate

and steady supply of oilseeds and to

compete with world market prices. Local

production of oilseeds and local crushing

exceeds world market prices. A great

concern for Ethiopian oil millers lies in 44 Chilot et al, 2010 45 Eyerusalem Regassa, SNV, personal

the unequal taxation of edible oils.

Whereas palm oil can be imported

without import tax and VAT, domestically

produced oil is liable to pay VAT. Another

reason for low competitiveness lies in the

high value of the Ethiopian Birr (ETB) to

the USD and Euro. IMF and World Bank

estimated in 2009 that the ETB is 40-50%

overvalued and needs gradual

depreciation. This depreciation has taken

place in 2009 by 25%. Further

depreciation of the ETB in the period

from 2010 until 2013, respectively 8.12%,

33.00%, 23.33% and 8.07% improve

export competitiveness in oilseeds and

gives more incentives for import

substitution (mainly in palm oil)46.

The association of Oil Millers in Addis

Ababa (AAOMA) increasingly looks for

ways to enhance the existing refining

capacity at the 9 bigger factories

(currently lower than 20% due to critical

shortage of oilseeds), while at the same

time promoting a cooperative, joint

refinery for 40 of its smaller members.

46 allafrica.com


Production needs a boost. There is a high

demand for more quality sowing-seeds,

pesticides and farm equipment. Similarly,

applicable machinery for non-shattering

varieties needs to be implemented for

large-scale production.

30

3.7 Export


Ethiopia exports almost all of its produce

and is the second leading sesame-

exporting country in the world47. China is

the number one importer of Ethiopian

seeds, but in smaller quantities countries

from all over the world import oilseeds

from Ethiopia, including Israel, Vietnam,

USA and Turkey.

47 Agribiz.et

In the past years, demand for sesame has

been high, but incentives for quality

production and value addition are weak.

Global production has increased, and a

price decline is anticipated with increased

competition and greater demand for

quality.48

Mr. Asrat Balcha from Ki Hedam Trading

PLC states:

“China takes large quantities, but it wants

products as cheap as possible. And sales of

organic farming cannot be sustainable

with China, as its focus is more on price

than on quality.”

48 SBN, 2014

31

Figure 8. Oilseed Export from Ethiopia in 2012 (Precise Consult (Sesame Deep Dive Analysis)

2013)

The Sesame Business Network is trying to

help various cooperatives to sell to

European importers. At the moment most

cooperatives are too weak to sell to

Europe. They lack basic business

knowledge and European market

knowledge. The government wants

organic seeds to be bought directly from

cooperatives. The product from ECX is not

organic and lacks traceability. The policy

of the government is for cooperatives and

companies to add value to the seeds,

before they export. However, the

cooperatives currently do not have the

capacity yet to reach a quality level that

meets European demands. Export to

Europe therefore currently mainly takes

place via investor farmers and processors

and through ECX.

32

The following chart shows the institutional sesame export structure:

Figure 9. Ministry of Trade, 2013

The Dutch development agency CBI,

specialized in making companies in

emerging economies ready to supply to

high-end markets like the EU, has a

program with 12 oilseed exporters in

Ethiopia. CBI takes an approach that can

make exports to the European Union

market happen for these companies within

2-3 years. Lessons from the 2008 defaulting

on contracts are being taken into account

to shape these companies to create the

potential to export to Europe. Out of the

12, seven exporters want to export without


With plenty of arable virgin and fertile

lands in Ethiopia and an ever-increasing

demand for organic oilseeds and pulses in

Europe, there are opportunities for good

organic and sustainable oilseeds and

pulses products. Dutch companies can

invest in the production of certified,

organic oilseeds and pulses.

Export Support and Regular

follow-up Structure

National Export coordinating committee

Customs & Logistics support coordinating sub-committee (Revenue & Customs Authority)

Supply and marketing coordinating sub- committee (Ministry of Agriculture)

Infrastructure support coordinating sub-committee (Ministry of Industry)

Credit facilitation sub-committee (Ministry of Finance and Development)

Regional export support

coordinating committee

33

interference of the ECX, while the other 5

trade through ECX. Jim Fitzpatrick from CBI

states:

“Sesame always had demand from Europe;

linseed is now becoming an interesting

prospect as well. The consumption of

linseed has gone up high in recent years

worldwide. Sesame and some pulses have a

volatile world market but the market for

linseeds is not. And increasingly, companies

in Europe are looking for exporters in that

sub-sector.”49

Most companies importing sesame are also

active in import of other oilseeds and pulses

like white-pea beans. According to Rene de

Baaij, colleague of Jim Fitzpatrick at CBI,

quality is not the issue with imports from

Ethiopia:

51 Jim Fitzpatrick, CBI, personal

“Logistics, default on contracts and import

duties, relationships on long term contracts;

basic, general business practices are the

major hurdles. Some Ethiopian producers

seem to expect that European importers will

just line up to buy, but that is not the

case.”50

Pulses Sub-Sector

The most important export pulses include

haricot beans, chickpeas (large type), faba

beans, lentils and field peas. Ethiopia

exports pulses to many countries in Africa,

the Middle East, Europe, Asia and America.

Pulses, especially the haricot peas, are

exported through major cooperatives from

Tsehay Union in Amhara and Mercha Union

in Oromiya. Chickpeas, on the other hand,

are exported with contact based linkage

between large size business and small

farmer’s organizations (unions) such as

between ACOS Ethiopia P.L.C. and their

suppliers (see boxed text on page 15). At

the moment, most of the ACOS exports are

to Europe in the gap where Mexico cannot

meet European demand.51

50 Rene de Baaij, CBI, personal 51 Eyerusalem Regassa, SNV, personal

34

3.8 Access to Finance


Shortage of working capital in both

primary cooperatives and unions is a

chronic problem that limits the size and

profitability of sesame marketing by

cooperatives. As there are limited loan

facilities available at primary cooperative

level, farmers are obliged to enter into

contract with informal moneylenders

with an estimated annual interest rate of

up to 400%.52 The credit supply of

informal moneylenders is infamous

especially for this sector.

52 GDC, 2014

The challenge is acknowledged at

multiple levels, but large-scale concrete

actions to tackle this issue have not been

performed. Lack of working capital has

not, however, affected purchase of seeds

or fertilizers. Seeds are readily available.

Especially for sesame, most farmers use

seeds from previous seasons, or can easily

get them from the Ethiopian Institute of

Agricultural Research. Other oilseeds,

specifically niger seeds, can be purchased

from local seed producing cooperatives.

Similarly, fertilizers can be purchased free

from import tax and are subsidized by the

government.53

Banks cannot easily invest in small-scale

producers, but microfinance institutes

have an increasing reach. However, they

may find it difficult to reach everywhere

with sufficient credit and primary

cooperatives sometimes are not strong

enough to handle their loans.54

Furthermore, the working capital loan

disbursed through the loan guarantee

scheme of Regional Governments is not

timely production-wise in the case of

Tigray and insufficient to meet the sizable

demand of cooperatives in both the

Tigray and Western Amhara region. Even

so, commercial banks realize the

importance of working with cooperatives

provided these cooperatives fulfill the

basic requirement set by commercial

banks.55

53 Oscar Geerts, SBN-network, personal 54 Oscar Geerts et al, 2015 55 GDC, 2014

35

Pulses Sub-Sector

For pulses, availability of inputs such as

quality seeds, fertilizer and credit is

crucial for an efficient and effective

marketing system. However,

consultations with primary cooperatives,

unions and government officials indicated

that only about 1 percent of primary

cooperatives and 10 percent of the unions

have access to credit. This suggests that

aggregating and trading activity is limited

by constrained access to finance, at least

for smaller marketing actors. Larger

traders in the major cities, however, are

able to access formal credit to finance

their business.56

3.9 Challenges in the Value

Chain


Although Ethiopia’s major export product,

the oilseeds sector is for the largest part

far from efficient. The major challenges

for a sector that wants to be world market

competitive are:

Access to finance for small-holder

farmers and primary cooperatives

(see Chapter 3.8)

Infrastructural challenges include

insufficient or limited rural feeder

roads and transportation and very


limited modern warehouses and

facilities.57

Some of the challenges related

with production include low level

of improved input utilization; high

postharvest loss, high dependency

on rainfall58 and limited

availability of inputs like quality

seeds and fertilizers.

Storage facilities need to be improved in many cases; vulnerability of storage to pest, moisture and to rodents is common.59

Unreliable contracting due to

volatile sesame prices on the

world market.

Lack of institutional capacity:

there is a quality check through

ECX-trading, but it is not infallible.

However, there is an office and

mechanism for complaints when it

comes to quality; still complaints

are not processed in a timely

manner. Inside trading and

hedging are other problems that

exporters have to deal with when

trading through the ECX.

Insufficient functioning of the ECX.

The ECX aim is to streamline the

purchase of sesame and to provide

producers with better prices for

their sesame.

57 Getahun, 2013 58 Getahun, 2013 59 Wijnands et al, 2009

36

Dr. Daniel Dauro from ATA states:

“Producers can sell either to

cooperatives or certified traders or sell

to the ECX. It shortens the value chain

and creates more transparency.”

One key challenge commonly is

access to traceable and

homogeneous raw sesame seed.

This has mainly to do with ECX

sourcing, which reduces access to

traceable, homogeneous and high

quality raw sesame seed for

processing.60

The ECX’s website is open to the

entire world. This has created a

problem of foreign buyers gaining

the upper hand. Ethiopian

exporters do not have much

bargaining power on the

international market because of

that.

For oilseeds processors: lack of

spare-parts and skilled manpower

for the maintenance of processing

machineries in the country.61

60 Precise Consult, 2013 61 Precise Consult, 2013

Pulses Sub-Sector

The pulse values chain in Ethiopia is far

from efficient and fraught with

challenges. It is not well integrated, does

not function as a unified system in a way

that maximizes the welfare of all actors

involved from production up to

consumption and it is filled with informal

actors and multiple traders and middle–

men.62

Some of the major challenges within the

sector are:

Lack of continued supply because

of low productivity as a result of

crop failure because of limited use

of improved inputs, small

fragmented plots, marginal soils,

limited use of improved varieties

and inadequate farm management

practices.63

62 Eyerusalem Regassa, SNV, personal 63 Chilot et al, 2010


The ECX has been playing an important

role in market transparency, quality, and

aggregation for exports. So far, exporters

associations and other relevant agencies

have been assuming the responsibility of

tracking both domestic and international

markets. This gives opportunities to

provide adequate market to the exporters

and farmers. The new tracking options

will increase the business opportunities

for traders.

37

Lack of seed supply, while the

seeds that are provided by the

Ministry of Agriculture are not the

type that are in high demand for

export. The ministry and the

Ethiopian Institute of Agricultural

Research (EIAR) do not supply

tailored-made packages or

different varieties to producers of

a specific type of pulse.64

Agro-climatic conditions: while

agronomic practices such as the

timing of plowing, fertilizer and

insecticide applications, crop

rotation, and weeding and

harvesting are critically important

to achieve optimum productivity,

many farmers are unaware of their

benefits. Limited knowledge of

best practices for overall

agronomic practices and post-

harvest management has resulted

in poor quality, low yielding

pulses.65

64 Eyerusalem Regassa, SNV, personal 65 Chilot et al, 2010

Across the value chain the

perception about quality of

products is low, including a lack of

concerns relating to food safety

standards and working conditions.

The complexity of the chain

implies that: (a) the quality of the

product is reduced through

excessive handling; and (b)

multiple middlemen separate

producers and exporters, so

smallholders are unknowledgeable

about the quality and type of

demands in end markets.66

Prevalence of mixed varieties in

supply that negatively impacts on

the quality of export products.

Similarly, prevalence of storage

insects and pests seriously affects

quality of export products.67

Limited storage facilities have

constrained the efficiency of

market actors involved in pulse

aggregation and trading. Lack of

adequate storage facilities

contributes to post-harvest crop

losses at about 15 to 20 percent of

all pulse production.68

Lack of reliable information on

prevailing international market

prices for all ranges of

commodities. In terms of market

information, market participants

typically have either no or flawed

information on prevailing grain

prices, supplies, stocks and inter-

66 Chilot et al, 2010 67 Kassahun, 2013 68 Chilot et al, 2010


Improved planting materials are scarce

and most of the farmers are sowing last

season crops of their own and yield is not

satisfactory. The existing private sector

and state owned seed agencies cannot

satisfy the seed demand. Improved

planting material multiplication is one of

the areas of attraction. This would be an

opportunity for sellers of seed.

38

regional grain flows. A source of

market information for importers

and exporters is limited.69

Mechanization of pulse production

is seen as a farfetched & ambitious

plan by most experts involved in

this sector. This connects to the

lack of government attention that

is given by the Ethiopian

government to the sector, which

favors support of cereals

production.70

Limited market access leading to

less commercialization (as the

production areas are further away

from main urban centers and

seaports, leading to limited access

to both domestic and international

markets).71

69 Chilot et al, 2010 70 Chilot et al, 2010 ; Eyerusalem Regassa, SNV, personal 71 Chilot et al, 2010

39

Chapter 4: Institutional context

4.1 Sector policies and

regulations

a. Oil Seeds Sub-Sector

The Government is dedicated to clarifying

policy and reducing bureaucracy for

potential investors through the

development of a Project Management

Unit housed in the ATA. Efforts to

increase access to financing, improve

infrastructure along sesame supply

chains, improve the security and

reliability of high-quality raw materials,

and build the capacity of cooperatives and

smallholder farmers are already

underway. The Government is also

committed to improving key

infrastructure in order to facilitate

agribusiness activity, as part of its five-

year Growth and Transformation Plan.

These investments include increased air

connectivity, improved road networks,

and expansion of the electricity supply.

b. Pulses Sub-Sector

In recent years, to develop the potential of

the sector to supply high quality products

for both the domestic and export market,

various policy initiatives have been

undertaken to increase the

competitiveness of smallholder farmers.

These policies paved the initial path for

private sector participation in the pulse

sector, contributing to improvements in

production and exports. The initiatives

seek to promote improved pulse

production technologies with high

yielding varieties, adoption of

recommended fertilizer application rates

and crop protection practices, and the

promotion of pulse export trade and

financing incentives to enhance the

competitiveness of pulse exporters. In

large part, these farm level efforts have

fallen short of achieving the key goals of

increasing smallholder productivity,

maintaining steady and high quality

production, and ensuring consistency in

export volumes, primarily because of the

lack of inputs and effective agencies to

implement a cross-sectoral vision for the

sector.72

c. Challenges with regulations

Regarding the pulses sector, a general

problem seems to be the limited focus of

the Ethiopian government for the sector,

despite its potential for export and

foreign currency inflows. Eyerusalem

Regassa from SNV states:

“The Ethiopian government has a clear

focus on cereals production, and research

centers are very much geared in that

direction. Support of pulses production

receives minor attention”

For oilseeds specially, an important

government policy is the duty-free import


40

of edible oils from abroad, for example

palm oil from Malaysia. According to Dr.

Daniel Dauro of ATA, this constrains local

production of edible oil from oilseeds

especially:

“The duty free importation of foreign oils is

hindering local production. Palm oil is not

taxed, while locally produced oil is. This

should make it affordable to the majority

of the population, since there is such a

huge deficit of edible oil production in

Ethiopia itself.”

4.2 Public sector partners

a. Research and Education


Research (EIAR)

The agricultural research in the Ethiopian

Institute of Agricultural Research (EIAR)

is divided in federal research institutes

and several regional research institutes.

Recently, the focus has been shifted to a

more thematic and interdisciplinary

approach and to the impact on the

sector.73

The EIAR has divided up and allocated its

resources among its major centers across

Ethiopia to specialize in one specific

study.74 Such examples include:

EIAR in Humera and Werer

for Sesame Seed

73 Wijnands et al, 2009 74 Daniel Dauro, ATA, personal

EIAR in Debre Zeit for

Chickpeas and Lin Seed

EIAR in Holeta for Horse

Pea, niger Seed and Rape

Seed

b. Ministry of Agriculture

The government also formulated a plan

for accelerated and sustained

development to end poverty (PASDEP) by

promoting, among other things,

commercialization of agriculture and

growth of private sector and

infrastructure (especially roads, energy,

and irrigation). Towards the goal of

reducing poverty and food insecurity in

the country, it is imperative that growth

in the agricultural sector is proportional

with the growth in domestic demand for

food. Significant investments are being

made to address these underlying causes

of chronic food insecurity in Ethiopia

through programs like the Agricultural

Growth Program (AGP).

AGP Sesame Activities

AGP- (Agricultural Growth Program-

Agribusiness and Market Development)

uses a value chain approach to strengthen

the agriculture sector, enhance access

to finance, and stimulate innovation

and private sector investment. The

project was able to:

Reach over 750,000 farmers,

influenced farm-gate sales

worth $100 million, and

facilitated approximately $90

million in agribusiness loans

41

Help farmers achieve export

sales worth over $120 million

and make investments of $4

million

Build lead farmer networks

delivering training in agricultural

skills, helping farmers with over

150,000 hectares to use improved

techniques and management

practices

Achieve, through training and

strategic investments, increased

the capacity of 51 farmer

cooperative unions representing

over 2,550 primary cooperatives

and 1.9 million members

c. Development Partners

Agricultural Transformation Agency

(ATA)

The ATA coordinates in identifying

bottlenecks in the sectors and proposing

solutions enacted by the relevant

stakeholders, which in this case are the

Ministry of Agriculture (MoA) and the


Research (EIAR).75 Dr. Daniel Dauro

illustrates:

“ATA has been focused on this sector since

its establishment. We work with

researchers, ministries and other

stakeholders in the sector.”

Some of the key strategies the ATA has

put forward are:

75 Daniel Dauro, ATA, personal

Sesame Sector Strategy: Sesame

production and marketing is an important

agribusiness sector in Ethiopia. The crop

is selected as one of the six priority crops

in the Agricultural Growth Program

(AGP). Although it already has a

significant turnover, the sector has

substantial potential for further growth

and development.

Chickpea Cluster: ATA is developing a

strategic roadmap to address systemic

issues in the chickpea value chain, while

also recommending a set of immediate

interventions.76The ATA is looking

forward with an agricultural cluster

approach. Each region is now equipped

with an Agriculture Commercialization

Cluster (AAC) secretariat, with the support

of ATA under the direct supervision of the

regional government. The Program is

focused on strengthening access to

markets through capacity building efforts

of selected cooperative unions, helping

them to secure forward contracts with

large local and international chickpea

buyers.77 The ACC looks furthermore for

successful pilots. The lessons learned from

the C4C program, for example on large size

chickpea (ACOS Dube), has been taken up

by the chickpea cluster of Oromia,

facilitated by Oromia ACC.78

SNV

SNV Ethiopia, in partnership with Agriterra,

is implementing the Cooperatives for

76 Agribiz.et 77 Eyerusalem, Regassa, SNV, personal 78 Eyerusalem, Regassa, SNV, personal

42

Change (C4C) program, which seeks to build

the capacity of cooperative unions and their

member cooperatives in output marketing,

improve their business performance and

enable them access more profitable

markets. The program will achieve this

through the establishment of pilot business

arrangements with buyers and service

providers, an increase in inputs,

technologies and other services, and

building critical capacities to meet the

market requirements, ultimately resulting

in improving the livelihoods of smallholder

farmers’ households in Ethiopia. The

program works with 16 farmer cooperative

unions in Amhara and Oromia across

cereals, pulses and oilseed crops.

Key Activities

Establish business clusters around

the business relation between

union and buyer involving public,

research, private and financial

actors.

Develop business clusters and

implement action plans

Conduct sub-sector, value chain

and market analyses and share

with stakeholders.

Operational finance and

investment capital opportunities

for the unions developed and

innovation risks (e.g. value

addition) by unions/processors

are shared by the investment fund.

Develop, test and finance service

models involving service providers

for gender inclusiveness, informal

and private improved seed supply,

appropriate technologies,

public/private extension

modalities, and business and

financial services.

Jointly undertake baseline, mid-

term and end-term reviews, and

develop 20 case studies in support

of the agricultural cooperative

development strategy.

Sesame Business Network (SBN)

The SBN is largely an informal innovation

network in northwest Ethiopia that is

driven by local entrepreneurs and other

stakeholders working in the sesame

production and business sector. Building

blocks of the SBN are Sesame Business

Clusters (SBCs). Participation in the SBCs,

and within the SBN, is voluntary.

Improved performance and benefits are

the motivation for stake-holder

participation.

The overall goal of SBN is: stakeholders of

the SBN jointly develop more competitive,

sustainable and inclusive sesame value

chains. To achieve the overall goal of the

SBN, the following specific objectives are

pursued:

Sesame business clusters are

vibrant, provide internal

services and navigate their

business

Farmers, linked to agro-input

and financial markets, improve

production, yields and quality

Sesame chain actors create

more added value and more

43

profitable access national and

international markets.

Stakeholder networks

exchange and learn, and

address strategic sesame

business challenges.

CBI

Currently CBI is running four Export

Coaching Programs (ECPs) in Ethiopia. An

ECP guides the participating small and

medium enterprises in the different

phases towards exporting to the

European market.

CBI is working on a program that started

in 2013 and will run until the end of 2016

with focus on export development and

promotion to the EU market with 12

selected exporting companies and the

EPOSPEA.

The CBI ECP program will focus on

“exporters” like exporting companies and

processors. These entities have a

“trading”, logistical, commercial and value

addition role in the value chain.

The most important area of cooperation is

export development, cost price reduction

and quality improvement. The former is

CBI’s core competence; the latter two

ones are for SBN a major area for

development.

With CBI, SBN could focus most

on perspectives for establishing

more direct relations between

exporters and producers, which

are now actually ‘living in

different worlds’, with the ECX

system in between them. These

measures will result in better

traceability and quality in trade

in the value chain. It will

however raise transaction

costs.79

The focus of collaboration could

be on the 12 exporting

companies, members of

EPOSPEA, participating in the

CBI coaching program, of which

7 are interested in value

creation (processing) and to

open a supply chain outside the

ECX system.

The focus would be on

developing new value chains

and innovative business

models, for which there are

several options:

Linking farmers’ cooperatives

to processors as suppliers of

sesame for processing and

export.

Linking of cooperatives and

Unions to exporters. This would

imply another role for

exporters, e.g. handler and

service provider.

Both Private companies and

Unions (farmer-owned business

organizations) could be

member of EPOSPEA, as they

are part of the Ethiopian

sesame production, processing

79 Oscar Geerts, SBN-Network, personal

44

and marketing system. Their

exporting modalities remain

part of the ‘sesame marketing

landscape’.

CBI has included a train-the-trainer

component in activities with the

EPOSPEA. The idea is that the participants

will be available for EPOSPEA, but can

also be hired through other organizations.

ECX

In 2008/09 Ethiopian commodity

exchange was established with the

objective of institutionalizing commodity

trade like coffee, sesame and other

products. ECX has established a directive

that dictates how and on what basis

sesame transactions are undertaken. The

directive includes specifications and

criteria’s that cover various aspects of

sesame transaction.

ECX has established its outlets at major

sesame production areas to which

farmers and cooperatives directly provide

their product and first stage transaction

takes place at these outlets. Relative

closeness to major production areas and

access to road facility are the major

requirements to establish outlets. The

raw sesame collected in these outlets then

supplied via licensed providers to the ECX

market from where sesame processors

and exporters buy. ECX classifies the

sesame it trades as reddish, whitish or

mixed based on color and as Wollega and

Humera or Gondar based on where it’s

produced.

4.3 Private sector partners

Ethiopian Pulses, Oilseeds and Spices

Processors Exporters Association

(EPOSPEA)

Most major Ethiopian oilseed and pulses

exporters are member of the Ethiopian

Pulses, Oilseeds and Spices Processors

Exporters Association (EPOSPEA). This

association is working hard to improve its

market information system. EPOSPEA

also organizes workshops together with

SNV and the Private Public Partnership

(PPP) on Oilseeds to share knowledge

within the supply chain in order to better

anticipate on critical market issues.

45

Chapter 5: Business opportunities

In this Business Opportunities Report, the

opportunities for Dutch and European

companies in the Ethiopian oilseeds and

pulses sectors are explored. The aim is to

set up sustainable export chains, improve

production and processing and increase

exports that benefit Dutch companies as

well as the Ethiopian oilseeds and pulses

sectors in particular. The identified

business opportunities in this report are

derived from desk research and

interviews with the companies listed in

the annexes.

5.1 Vision

The Ethiopian oilseeds and pulses sector

has a potential for European businesses

involved in the production and processing

of oil crops, extraction of food oils, trade

and investment. The Dutch and European

state-of-the art technology and solution

based mentality, the advanced quality of

seeds, the elaborate trainings on

sustainable production and the

experience in marketing and business

management could be beneficial to the

Ethiopian oilseeds and pulses sector. On

the other hand, the high quantity of

available arable land, the good climate for

oilseed and pulse production and the

improved infrastructure and diversity of

varieties could be an opportunity for

European companies to start doing

business with the Ethiopian oilseeds and

pulses sector.

At the moment, there are still challenges

to overcome. In this chapter possible

business opportunities are highlighted,

but they need further individual research

by the Dutch and European companies. In

the next paragraph, an analysis of the

strengths and weaknesses will be

provided and consequently followed by

opportunities for the related European

actors. Besides initiatives from NGO’s and

some frontrunner companies, there is still

much potential to focus on sustainable

production and processing of Ethiopian

oilseeds and pulses. Already several

European organizations (e.g. CBI,

Agriterra, SNV, Sesame Business Network

and Royal Tropica Institute etc.,) are

active in providing information and

trainings on this topic.

5.2 Strengths and

Weaknesses Analysis

Below we have created an overview of the

strengths, weaknesses and related

opportunities for Dutch and European

companies in the Ethiopian oilseeds and

pulses sector. The information listed

below is obtained from the previous

chapters and the interviews with Dutch

and Ethiopian companies and

organizations active in the sector.

46

•High quantity of arable land in Ethiopia. 45% of the total 112 million hectares is arable, but just 1% was irrigated in 2011.

•High quality soil •The prevalence of diverse agro-climatic zones makes Ethiopia a number one choice for production of a wide array of pulse crops. (Kassahun, 2013)

•Large diversity of varieties of sesame seeds (organic) including the world famous Humera type

•Cheap labor and high rural population •Research in progress for the development of non shattering mechanisation •New warehouses have been established by the government (quality control) •Dutch hulling companies are present in Ethiopia called Sellet Hulling (joint venture with Dutch Tradin Organic) and Dipasa Agro.

•ECX will play an important role in market transparency, quality, aggregation for exports, but is also a weakness for the producer regarding the listing of prices

•The CBI programme trains 12 exporteurs in oilseeds and pulses, the Sesame Business Network is improving access to finance together with TerraFina and capacitating Primary Cooperatives and Unions together with the Cooperatives 4 Change Program from SNV and Agriterra

•The government started economic restructuring and investing in road, telephone, and railway infrastructure

•The Ethiopian government focuses on doubling the agricultural production through the ambitious Growth and Transformation Plans

Strengths

•Default of contracts by Ethiopian sesame suppliers in the period 2006 - 2008 •Middle men are able to set speculative prices in various parts of the value chains

•Low quantity of HACCP certified products •Some Ethiopian producers do not meet the codis alimentaris (food security standards)

•EU standards are difficult to be reached for producers and processors •Still mostly use of backward technologies (e.g. oilmillers) and production methods (row planting still has to be developed and use of fertilizer is very limited)

•Distribution networks need to be further developed •Packaging and bottling machinery not present •The price of the raw sesame is almost equal to the price of crushed/processed sesame seeds, which means there is a low potential for value addition

•Increasing demand for palm oil •The fragmented smallholders need to unify to be able to produce more in Ethiopia

•The indigenous production needs more attention (Eric Daniels, ED Organics) •Particular legislation/regulation hinders the sector •Administrative hassle for exporting oilseeds (experienced by ED Organics) •Volatile commodity market (surplus oil and demand for by-product) •Prices not determined by supply and demand, but by speculative brokers

Weaknesses

47

5.3 Opportunities

In this paragraph the strengths and

weaknesses are converted into

opportunities for European actors in the

oilseeds and pulses sector. The

opportunities are divided into four

categories; producers, processors, traders

and investors. Some of the opportunities

are relevant to multiple players. More

information regarding the listed

opportunities below can be found in the

previous chapters.

Producers

Among others, SBN, SNV and

Agriterra are focused on

improving the production side of

the Ethiopian oilseeds and pulses

sector. This means more quality

products and varieties for buyers.

There is a high demand for more

quality sowing-seeds, pesticides

and farm equipment. However, the

sector lacks financing. Special

seeds, like niger seeds, could be

sold as bird feed.

Applicable machinery for non-

shattering varieties needs to be

implemented for large-scale

production.

Production needs a boost. This

could be done by improving the

technology of production and

processing equipment (Eric

Daniels, ED Organics); New areas

that can be cultivated on large

scale with cheap and abundant

labor.

Improved planting materials are

scarce and most of the farmers are

sowing last season crops of their

own and yield is not satisfactory.

The existing private sector and

state owned seed agencies can not

satisfy the seed demand. Improved

planting material multiplication is

one of the areas of attraction. This

would be an opportunity for

sellers of seed (e.g. Rijkzwaan or

Bejo Zaden).

The demand for organic oilseeds

and pulses in Europe, specifically

in the Netherlands, is growing. It

would be interesting to produce

more certified organic oilseeds

and pulses. Arable virgin and

fertile lands are available that offer

good opportunities for organic and

sustainable sesame production.

New areas that can be cultivated

on large scale with cheap and

abundant labor.

High imports of palm oil, capacity

for oil processing is present, but

not fully utilized

Cooperatives are providing regular

quantities of produce. This still has

to be improved, but several

initiatives to raise awareness on

the advantages of supplying to

cooperatives have been started.

Special seeds, like niger seeds,

could be sold as bird feed.

48

Applicable machinery for non-

shattering varieties needs to be

implemented for large-scale

production.

Processors

Opportunities for cleaning, hulling

and sterilization companies for

sesame and niger seed. The overall

production capacity of especially

hulling and sterilization is still less

than 10% of all exports;80

Adulteration of oilseed. Oil seed

cleaning facilities have an

important role to facilitate the

local and exportable oil seed

cleaning and form a large business

opportunity.

Most of the oil mills have got

cottage industries that crash oil

seeds and extract crude oils for

direct consumption. This is

unhealthy and below the

standards for human consumption.

In general, there are very few oil

refineries in Ethiopia. As crude oil

mills are prohibited not to

continue supply of unrefined oils

the need for oil refinery is

immense.

Potential for the production of oil

extracts for the local market (e.g.

oilcake)

Refining companies work at 20 per

cent of their capacity, so

opportunities abound for

processing companies to expand.


Traders / importers

Transport is improving in the next

few years. A new railway to

Djibouti is being constructed, more

railway lines are on the way and

quality road infrastructure is

increasing rapidly, including an

already finished highway between

Addis Ababa and Adama.

Easierandless time-consuming

transport willsoonbeavailable.

Providing adequate market to the

exporters and farmers. The ECX

will play an important role in

market transparency, quality, and

aggregation for exports. However,

exporters associations and other

relevant agencies assume the

responsibility of tracking both

domestic and international

markets. The new tracking options

will increase the business

opportunities for traders.

Quality, because four warehouses

provide organic varieties

Ethiopia could be interesting to

Dutch/European importers to

produce sesame seed as a new

origin country.

Investors

There are not enough local credit

facilities for farmers;

49

Investments in the organic

oilseeds and pulses value chain

The high quantity of available

arable land is interesting for

investors interested in the

production of oilseeds and pulses.

Improving the proficiency of the

suppliers, by training and

providing them with better

technology

Various initiatives and programs

from NGO’s and civil society.

There are already some joint

ventures active in the sector (e.g.

Selet Hulling)

The Ethiopian government focuses

on doubling the agricultural

production (AGP)

50

Interviews

1. Asrat Balcha, General Manager - Ki Hedam Trading PLC. Interviewed by Dawit Kidane on May

1, 2015

2. Daniel Dauro, Ph.D. Director – Pulses and Oil Seeds Value Chain Program Agricultural

Transformation Agency. (2015) Interviewed by Auke Boere and Dawit Kidane on June 23,

2015

3. Assefaw Yohannes. General Manager – Ethiopian Pulses, Oil Seeds and Spices Processors

Exporters Association. (2015) Interviewed by Auke Boere and Dawit Kidane on June 23, 2015

4. Rakeb Abebe. Managing Director – GAWT International Business P.L.C. Interviewed by Dawit

Kidane on June 23, 2015

5. Eyerusalem Regassa. Value Chain Development Advisor – SNV Ethiopia. Interviewed by Auke

Boere and Dawit Kidane on June 24, 2015

6. Hareg Atakilt. Marketing Officer – Kalme P.L.C. Interviewed by Dawit Kidane on June 24,

2015

7. Kassahun Bekele. General Manager and CEO – ACOS Ethiopia P.L.C (2015) Interviewed by

Dawit Kidane on July 03, 2015

8. Jim Fitzpatrick. Rene de Baaij. CBI (2015) Interviewed by Auke Boere and Dawit Kidane on

July 7, 2015

9. Oscar Geerts. SBN (2015) Telephone Interview by Dawit Kidane on July 07, 2015

10. Peter Keijnemans. Mostert Oilseeds. Interview by Wannes Dolfen.

11. Rolf Leutscher. Cebag. Interview by Wannes Dolfen.

12. Bas van Drooge. PUM. Interview by Wannes Dolfen.

13. Eric Daniels. ED Organics. Interview by Wannes Dolfen.

14. Thijs Pasmans. MVO Nederland. Interview by Wannes Dolfen.

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Websites

Agribusiness Support Facility - http://agribiz.et/

Agricultural Transformation Agency - http://www.ata.gov.et/programs/value-chains/pulses/

CBI - http://www.cbi.eu/market-information/oilseeds

Ethiopian Pulses, Oilseeds & Spices Produces & Exporters Association (EPOSPEA) -

http://epospeaeth.org/

Embassy of the Kingdom of the Netherlands in Ethiopia - http://ethiopia.nlembassy.org/

Ethiopian Ministry of Agriculture - http://www.moa.gov.et/home

Sesame Business Network (SBN) - http://sbnethiopia.org/

SNV Ethiopia - http://www.snvworld.org/en/countries/ethiopia/

http://www.worldbank.org/en/country/ethiopia/overview

http://agribiz.et/

http://www.ata.gov.et/programs/value-chains/pulses/

http://www.cbi.eu/market-information/oilseeds

http://epospeaeth.org/

http://ethiopia.nlembassy.org/

http://www.moa.gov.et/home

http://sbnethiopia.org/

http://www.snvworld.org/en/countries/ethiopia/

business opportunity report: oilseeds and pulses

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