Information Sheet

April 2007

Ethiopia
Trends in growth of modern retail and wholesale chains and related agribusiness
Despite a population of some 75 million people, very low average per capita income creates a lack of effective demand and a lack of market outlets. There are several actors in marketing of high value commodities of livestock, fruit and vegetables, and dairy products. Traditionally, the primary actors are small-scale producers who supply products to small traders, wholesalers, retailers and consumers. In addition, farmers cooperatives and unions are prime drivers of the rural economy through the provision of credit, inputs, market outlets and information on markets and technology. However, this structure is changing due to the emergence of commercial farms and the introduction of new technologies as well as the growth of supermarkets. Ethiopias supermarket revolution began in the late 1990s, especially in bigger cities such as Addis Ababa, Bahir Dar, Mekele and Awassa although the pace remains slow in comparison with other African countries (e.g. Kenya). The growth in supermarkets has been triggered by the urban population increase, income growth of relatively wealthier Ethiopians and by the increase in expatriates (estimated at about 20,000) in Addis Ababa who prefer to shop in supermarkets. The most important supermarkets in terms of number of stores are shown in Table 1. Three of the larger supermarket groups, which also have more assorted products (both imported and local), are owned by foreigners. Novis is a multinational chain with branches in Italy and Tanzania. There are retail shops attached to petrol stations but their retailing capacity is limited to processed and packed food, often imported. It should be noted that supermarkets almost certainly account for a very small proportion of domestic sales and that the unit floor area is smaller than stores in other Sub Saharan African countries. Most consumers purchase from open markets and street vendors. In a liberalised market, retailers procure from different sources. Some supermarkets have their own farms, make contractual agreements with suppliers or work with dedicated wholesalers. For example, Fantu has its own dairy farm but also has contracts with Genesis farm for the supply of vegetables

Key points
Procurement practices are changing due to the emergence of commercial farms and the introduction of new technologies as well as the growth of supermarkets resulting in exclusion of small-scale producers Improved market information could create a win-win situation for stakeholders in the chain particularly for producers who have asymmetric information on prices and preferences of consumers Building linkages between the public and private sectors as well as small-scale producers, and developing a code of conduct could create a winwin situation in a dynamic market Locally processed products, particularly dairy, often cannot compete with imported products the quality of which is perceived to be better Meeting the demands of importing countries is becoming increasingly challenging and needs to be urgently addressed; thus frequent bans have adverse impacts on the livelihood of livestock producers while fruit and vegetable exporters must meet rising quality standards

and poultry. Almost all supermarkets retail imported fruit juice and tomato sauces from the Gulf countries and South Africa. Locally canned tomato sauces are also retailed in the supermarkets but cannot compete with imported products. In addition, the supermarkets retail high quality cheese and other dairy products from the Netherlands. Some supermarkets acquire meat from ELFORA but not necessarily at export grade, while others buy live animals and arrange for slaughter in government or private abattoirs.

This series of Information Sheets provides a summary of market changes taking place at national level within key high value agrifood commodity chains. The intention is to serve as a point for public sector, donor and private sector discussions with particular focus on securing and improving income among the rural poor through their participation in new and dynamic markets. The funding for this research and publication series was provided by the Swedish International Development Cooperation Agency (Sida)

There is an emerging trend of wholesale operations in Addis Ababa serving multiple retailers. Some of the wholesalers have their own trucks and/or hire for purchasing in bulk and distribution. However, such wholesalers are few in number.

Table 2 List of Major Commercial farms

Name Ownership Types of products ELFORA Ethiopian-foreign Ethiopian Foreign Live animals, meat and poultry ELAMATOT Strawberry Poultry, vegetable, meat and dairy Ethio Vegfru plc Ethioflora/Blue Nile farms Eteco ZI-Andeta plc Horticamp agro system EMA Horticulture Ethiopian plc JJ Farm plc Pirins Vegetable plc AG Horticulture plc Ethiopian Ethiopian Ethiopian Vegetable Banana Vegetable Export Wholesale Wholesale, supermarkets and export Geferssa Veg and Flower plc Mikias Farm plc Ethiopian Garlic plc Lema Milk Sebeta AgroIndustry (Mama) Ethiopian Dairy Supermarkets, retailing Ethiopian Dairy Supermarkets Ethiopian Ethiopian Vegetable Garlic Ethiopian Vegetable Wholesale and groceries Wholesale Wholesale Foreign (Indian) Foreign Vegetable Vegetable Vegetable Ethiopian Foreign-Ethiopian Ethiopian Ethiopian Ethiopian Vegetable Vegetable and fruit Vegetables Vegetable Vegetable Export Export and wholesale Export and wholesale Wholesale Supermarkets and export Supermarkets, wholesale and export Wholesale Export Market chains Supermarkets, retailing, export Supermarkets, export Genesis Supermarkets and groceries

Table 1 List of Supermarkets Supermarket Branches Novis Supermarket 3 Bambis Supermarket 1 Felix supermarket 2 Showa Supermarket plc 2 Fantu supermarket 4 Shi Solomon Supermarket 4 Hadiya Trading Enterprise 1 Seven Eleven Supermarket 1 Leonardo Supermarket 1 Negash Supermarket 1 Abrico Supermarket 2 Addis Supermarket 1 Abadir supermarket 2 Shoppers Mart 3 Friendship supermarket 1
Source: Compiled by the authors, 2007

Ownership Foreign (Italian) Foreign (Greek) Foreign (Israel) Ethiopian Ethiopian Ethiopian Ethiopian Ethiopian Ethiopian Ethiopian Ethiopian Ethiopian Ethiopian Ethiopian Ethiopian

For fresh fruit and vegetables, there are three types of local food retailers in Addis Ababa and other big towns in the country: local groceries who buy fresh produce from wholesalers and private farms; street vendors who are the secondary market for poorer grades of produce; and supermarkets who procure from wholesalers and commercial farms. In addition, there are food service buyers who supply schools, hospitals, churches, military, etc. The public sector was dominant in fruit and vegetable production and marketing and is still an important player. The parastatal Etfruit is the primary marketing enterprise for production from state farms and, until recently, undertook all state farm export marketing. In Addis Ababa, Etfruit has over 35 retail outlets and over 20 other retail outlets throughout the country. The number of private commercial farms is growing. There are over 200 private commercial farms, mainly concentrated in Oromiya and southern regions of Ethiopia where agricultural production is more promising. The main private commercial farms, their ownership, key products and market channels are listed in Table 2. The largest commercial farm is ELFORA which is owned by an Ethiopian-born Saudi citizen. This growth in dynamic markets and the establishment of commercial farms has begun to impact on the wider market chain impacting in turn on the small-scale producers and the traditional retailers.

Gadco Enterprise plc Awassa Green Wood plc

Note: This list is not definitive and does not include floricultural operations Source: Compiled by the authors, 2007

There are various actors in the Ethiopian highland and pastoral production and marketing systems including producers (pastoralists, agro-pastoralists, and highland livestock holders), small and large scale traders, exporters, local butchers, fattening and holding stations, abattoir agents, and abattoirs. Diagram 1 illustrates the value chain in pastoral areas, which account for 90% of live animal exports. The main marketing channels in Afar region of Ethiopia include the following: live animal export to Djibouti, mainly for the Gulf market; exported cattle and shoat meat, slaughtered and packed at the Nazreth, Modjo and Debre Zeit-based private abattoirs and exported to the Gulf, Egypt, Central Africa

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(Congo Brazzaville); live animal trade of cattle and shoats to neighbouring regions within the country, particularly Amhara and Tigray regions as well as Harari for local consumption; live camel exports through Amhara and Tigray regions and mostly into Sudan; and local consumption and use, almost solely for cattle and shoats, with a small number of female camels being consumed for wedding ceremonies. In the case of northern Somali, the value chain constitutes the following market channels: live shoat and cattle export into Somaliland; shoats purchased by export abattoirs, and the domestic market within northern Somali region. In both Afar and northern Somali livestock traders of varying sizes constitute the major segment of the value chain. The smaller livestock traders are specialised in the domestic market, while the larger traders are mainly engaged in higher value export markets. The other important actors in the value chain are the suppliers of animal feed, though in limited volume. The suppliers include agro-pastoralists, flour mills in Dire Dawa and Addis Ababa, an oil processing factory in Harar and other towns. The major poultry production system, contributing more than 90% of total national output of poultry meat and eggs, is characterised by production of a small number of low yielding local chickens (30-80 eggs/hen/year), with a flock size of 5-6 per family and offered little or no additional inputs except provision of household shelter. Production is predominantly for home consumption and there is almost no attempt to increase the scale to a commercial level. The bulk of poultry marketing involves the producers and intermediaries as well as retailers. Traders buy chicken and eggs in the markets and sell to small shops, groceries and some supermarkets. There is now a shift in procurement with some supermarkets buying from large scale processing plants. ELFORA and Genesis are the two major companies with processing plants that supply retailers in Addis Ababa. Retailers prefer to obtain supplies from these farms due to reliability in quality and continuity of supply. Dairy products are channelled to consumers through both formal and informal dairy marketing systems. The formal marketing system is dominated by the government-owned Shola Dairy of the Dairy Development Enterprise (DDE) and the private Mama Dairy of Sebeta Agro Industry. The processing plants obtain milk either from their own farms or collections from commercial farms and small-scale farms in peri-urban and rural areas from indigenous and crossbred cattle. Until 1991, the formal market of cold chain pasteurized milk was exclusively dominated by DDE, which supplied 12% of the total fresh milk in the Addis Ababa area. To-date, milk processing plants in Ethiopia are very limited in number and capacity. In Dire Dawa, Sebeta Agro-industry, with a brand name of Mama milk, pasteurizes milk and manufactures dairy products from its farm and collections in Sebeta, Sululta-Fiche and Debre Zeit milk shed areas. The dairys capacity is 30 tonnes per day and current processing capacity averages 8 tonnes. It has milk-chilling centres in three sites along its collection routes and within Addis Ababa.

The informal market dominates the system and involves direct delivery of fresh milk by producers to consumers in the immediate neighbourhood and individuals in nearby towns. Both commercial (urban and peri-urban) and small-scale (rural) farmers use the formal and informal channels to sell milk and dairy products. The small-scale milk marketing system (rural, urban and peri-urban) can be characterized as traditional. In the highlands, peri-urban dairy farming systems use both formal and informal markets. The informal marketing subsystem dominates where producers sell directly to consumers. Traditional rural milk marketing practices concentrate on surrounding areas within walking distance. In the lowlands, milk is sold through the traditional methods where women or children sell directly to consumers travelling long distances. Market access in the lowlands is a critical factor in dairy marketing. Those pastoralists who reside closer to towns have the advantage of selling liquid milk as compared to those households living far away. Depending on region, butter tends to be sold more by wealthier households further from the market while fresh milk is sold relatively more by poorer families residing closer to market. Due to poor handling and high perishability, milk and dairy products are of low quality with a limited range of products available in the country (liquid milk, butter, Ayib, Ergo, etc.). The traditional system of milk production has low levels of technology in controlling contamination and the spread of micro-organisms and hence contamination is high. The absence of bulk transport in the small-scale milk marketing system has a great affect on the overall milk supply. This risk is minimized in areas where formal milk marketing is operational, small-scale processing units are functional in the vicinity and consumers are in the neighbourhood. The other problem is that milk and dairy product distribution centres are not developed to assist in proper handling and storage of the product in an appropriate environment prior to sale. Access to market and volume accepted at the market are main factors constraining milk output. The need for diversification of the product range is crucial to both extend the shelf life of the milk and to make available different products for the consumer according to their purchasing power. Domestic production and consumption of fresh fruit and vegetables is thought to be growing although there is a lack of data and the increasing use of irrigation and multiple cropping is playing a role. There are four categories of fruit and vegetable farmers: smallholders, small and medium sized commercial farmers, commercial producer/exporters, and state farms. The wholesale market in Addis Ababa is the major source of fresh fruit and vegetables for local retailers (groceries and street vendors) and institutions (schools, hospitals, military etc. through the Greater Addis Ababa area). Some larger grocery stores in Addis stock some non-traditional vegetables e.g. zucchini, Chinese cabbage, broccoli. One source suggested that the supply of these vegetables is insufficient and that supplies come from a small number of producers close to Addis. Weekly demand for these higher valued vegetables in 2004 was estimated at about 7-10 tonnes.

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Diagram 1 Livestock Marketing Value Chains in Pastoral Areas

Source: Adapted from Saperstein and Farmer (2006)

There are over 150 wholesalers in the Addis Ababa fruit and vegetable market who procure directly from small-scale producers via their own agents or local independent traders. The wholesalers own their own small trucks for transport from farm gate to the Addis market. They tend to purchase on a cash basis when buying directly from individual farmers but will operate on consignment or even contract basis when buying from commercial sized operations, cooperatives or unions. There are also wholesale agents who travel with transport owned or arranged by wholesalers and buy directly from producers. They deliver produce to wholesalers and may often sell directly from truck to retailers and other buyers. The number of agents is not known but each wholesaler would have at least one or possibly more. The other actors are the local traders who are independent of the wholesalers. Local traders will arrange or rent trucks to transport produce from farm gate to sell on the Addis wholesale market and also to local retailers but volumes are very small and the numbers involved are unknown. In 2004, a new association was established the Ethiopia Fruit and Vegetable Marketers Association. Cooperatives and Unions provide inputs to small-scale producers as well as buy produce from them and sell to local traders and agents. Some sell to commercial growers/exporters for export. They do not sell produce directly in the Addis Ababa wholesale market.

Trends in production and regional and international export

According to FAO data (1999), domestic meat production has been increasing annually at a rate of about 2% for beef, 0.7% for mutton, while goat and camel meat output has remained static over the last five years. Beef accounted for 65% of total red meat production, mutton around 19%, goat meat 13% and camel meat 2.5%. FAO data suggest that consumption was stable for the years 2000 and 2001. The Middle East is the traditional market outlet for countries in the Horn of Africa including Ethiopia. Some studies indicate that the importing Middle East countries prefer the lowland livestock for consumption. However, recent exports of live animals to the Middle East have fallen substantially since these countries imposed bans on imports of live animals from the Horn of Africa due to prevalence of certain diseases such as Rift Valley Fever. Although the ban is triggered by a disease outbreak, most likely the ban has been also prompted by a number of other factors, e.g. change in consumer preferences and greater demand for high quality products with adequate guarantees of food safety. Meanwhile supply conditions in Ethiopia remain virtually unchanged to meet the rapidly changing market conditions in the importing countries. The features of the Middle East Markets are: buyers markets, dominated by influential personalities; personal relationships and close follow-up; stringent health requirements with possibility of rejection at port of destination; frequent import

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bans; high demand for quality products at competitive prices; high preference for credit sales even though risky; less preference for letter of credit or advance payment; preference for Boran steers, Sudanese Blackhead, Somali Blackhead and Awash sheep; and preference for 8-12kg sheep and 7-7.5kg goat carcasses. In addition, the Middle East importing countries require that halal slaughtering is followed by exporting abattoirs. Ethiopia has 6 export and 92 municipal abattoirs but an estimated 82% of the cattle marketed and 95% of the sheep and goats sold are slaughtered unofficially at the household level. This is due to the lack of slaughterhouses, especially in the regions. The meat processing enterprises have been privatized and most are now owned by ELFORA which is engaged in the export of chilled and canned meat. The capacity of chilled meat and mutton at 24,240 tonnes in 1999/00 far exceeds actual exports of 1,977 tonnes, valued at Birr 32.7 million, during the same year. Although the figures may lack accuracy, they indicate the position of meat exports by private companies (Ayele et al, 2003). Data on the value of canned and frozen meat indicate a substantial growth, rising from Birr 9.7 million on 2001/02 to Birr 67.8 million in 2003/04. There are four major private meat exporters in Ethiopia namely HELIX, Luna, Modjo and ELFORA. These companies have their own abattoirs in Debre Zeit and Modjo towns south east of Addis Ababa. They mainly export to the Gulf countries. Exports of live animals are below most companies capacity (12% performance in 1999/00). The reasons for the poor performance of the live animals and meat export are: lack of capital; high operational costs due to long inland transportation to the ports and high freight rates and high port charges; lack of well maintained quarantine, holding grounds and stock route facilities; Government bureaucracy with the Letter of Credit procedures, clearing houses and transport arrangements; shortage of cold storages; lack of standard materials such as packaging; high internal service charges, fees and taxes; lack of information on export markets; and a shortage of trained human resources. ELFORA is involved in both export and domestic trade of meat. It has abattoirs and meat processing plants for export of chilled meat and also supply of fresh meat to local retailers. The export demand has a spillover on the domestic market. For instance, there is high demand for meat in the Middle East markets particularly during Ramadan which affects the supply and the prices of meat in the domestic markets. One controversial issue in live animal and meat market is that even if the supply of live animals goes up and price goes down accordingly, the price of meat in butcheries remains the same (high). This is an issue of discussion among the consumers in Addis Ababa and other big towns in the country. Small-scale farmers produce 2.1 million tonnes of vegetables from 261,095 ha while the State Farms produce 18,080 tonnes from 880 ha (Sissay 2004). Total fruit production is almost 500,000 tonnes, of which the State Farms account for approximately 10% of production. Paniluton (2004) estimated that some 50,000 small-scale farmers are involved in horticulture production. They typically cultivate horticultural crops as supplements to their main crops of cereals, pulses and oilseeds. Ethiopia exports fresh fruit and vegetables but

the contribution to export earnings is small; thus horticultural products share in total exports from 1994 to 2001 was 6% in volume and below 2% in value terms. There are three categories of exports: relatively high value perishable produce to Europe; exports of low value produce mainly from around Dire Dawa to Djibouti, and processed and fresh produce to Middle East countries including Saudi Arabia and Yemen as well as Sudan. As yet, Ethiopia has no significant exports of processed fruit and vegetables. Ethiopia exports approximately 25 different product types but a small number of product types dominate. Thus potatoes, tomatoes, onions, legumes and green beans dominate vegetable sales, each with several thousand tonnes being exported annually. The first four products are sold predominantly to Djibouti, and would not find EU market. Quality and price of produce shipped to Djibouti would not enable them to be exported outside the region. Major export item to the EU is green (bobby) beans, which now exceeds 5,000 tonnes per year. Exports are dominated by one State Farm (UAIEE) and one private company (Ethioflora); both have EurepGAP certification. EU exports have been assisted through the provision of air freight capacity through the producer formed Ethio-Horti Share Company, which organises regular horticulture freight shipments, particularly for the rapidly expanding cut flower sector.

Implications of market change to procurement practice

The number of private commercial farms and supermarkets is increasing. At the same time, the preference of consumers is changing. Accordingly, procurement practices are gradually changing. Supermarkets are increasingly looking for reliable and sustainable supply channels that ensure that quality standards are maintained. The retailers, particularly the supermarkets, depend on wholesalers and commercial farms. Supermarkets prefer to make the arrangements with farms usually commercial farms for several reasons including quality assurance, timely deliveries, quality standards and safety; and agreed prices that do not vary significantly over time. For instance, ELFORA and Genesis supply poultry, packed meat and vegetables (Genesis) to supermarkets. Producers lack information on the distribution of fruit and vegetables in Addis Ababa and the preference of the consumers. Similarly, retailers including supermarkets have limited knowledge of farm gate prices etc. This lack of market information has affected both small-scale producers as well as relatively large-scale commercial farmers. For instance, there is a private commercial farmer in Awash called JJ commercial farm (Indian) that is ready to supply to supermarkets but the farm has been unsuccessful in establishing suitable contacts. A USAID project plans to provide information to producers and retailers to create win-win conditions. Thus there are structural weaknesses in the linkages between the producers and retailers and weak or none existent vertical linkages between retailers and agri-processors. The dairy processing plants obtain milk either from their own farms or collections from commercial farms and small-scale

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farms in peri-urban and rural areas from indigenous and crossbred cows. Some of the supermarkets buy Mama milk from DDE, while others make arrangements with other private companies. The bigger supermarkets import dairy products (cheese and butter) mainly from the Netherlands and consumers believe that the quality is better than local produce although prices are not comparable. The demand for imported dairy products is high among the expatriates and the elites in Addis Ababa and there is preference for imported dairy products among those consumers who can afford them. This is linked to the agro-processing technology in Ethiopia which is of a low level of development and outputs cannot compete with the imported processed produce. Some small-scale farmers are organized in cooperatives which collect milk and processes it to make butter using technology. The butter is purchased by traders who have wholesale shops in Addis Ababa. The larger supermarkets also import fruit juice the quality of which is perceived to be better. There are some private companies which buy fruit from the producers and make juice or tomato sauce. For instance, a private company called ECOPIA plc collects fruit and vegetables from the producers at farm gate prices and prepares orange juice and tomato sauce and distributes to retailers such as supermarkets and groceries in Addis Ababa. However, the products are not competing (quality as perceived by consumers) with those imported from other countries affecting the direct purchases from producers. Livestock producers have limited direct market access. The market infrastructure is poor and small-scale traders usually purchase directly from farmers and sell to the exporting abattoirs and exporters. The direct sales of livestock by the producers are also affected by high taxes on animals at the local markets discouraging both the sellers and buyers. Thus, the trend is that supermarkets and even wholesalers do not deal directly with the producers. Wholesalers acquire goods from producers through traders which means there is a long marketing chain and that producers are remote from their final product market destination. In some instances, producers fail to get markets for their products and traders take advantage by paying lower prices. Generally, small-scale producers are being excluded from direct involvement in marketing their products. Despite all the challenges, some farmers try to penetrate the market by organising themselves into cooperatives. The box below provides a case study.

Case Study
Alfagewa Irrigation and Marketing Cooperative
A group of farmers located about 30 km west of Debre Zeit (a town 47 km south east of Addis Ababa) developed an irrigation scheme for production of cash crops. The farmers were successful in producing cash crops but the problem was lack of access to markets producers could not get market outlets for their products and the farm gate prices provided by wholesalers were very low. To confront this problem, the farmers established a cooperative which is called Alfagewa Irrigation and Marketing Cooperative. The cooperative then started to think of different strategies to get market outlets for their products. One strategy was to ask for land in the Debre Zeit. Now, the cooperative has managed to established shops in the town of Debre Zeit. The cooperative has a well furnished office in Debre Zeit and Oxfam GB is assisting in linking production and marketing through training and also provision of some financial assistance. Currently, the cooperative is supplying fruit and vegetables to wholesalers, groceries and supermarkets at good prices resulting in improved livelihoods for its members. Also the cooperative has managed to attract NGOs to operate in its locality and some NGOs are already assisting the community in the health and education sectors and some changes have been observed in service deliveries.

Government Policies and Support

The overall development strategy of the Ethiopian government is Agricultural Development-led Industrialization (ADLI). Smallscale farmers are expected to play the leading role in agricultural marketing. The government will facilitate appropriate conditions through provision of necessary infrastructure, land and new technologies to enable small-scale farmers attain relevant market information and to compete with commercial farmers, cooperatives and the modern private sector (PASDEP, 2007). The Ministry of Agriculture and Rural Development (MoARD) has been re-organised to direct, coordinate and regulate agricultural marketing activities. The agricultural strategy indicates that there will be greater market interaction on the part of the farmer. Other objectives include enhancement of research and extension; increased application and diversification of inputs; introduction of new products; expansion of irrigation; encouragement of service cooperatives, fostering of contractual production and trading between farmers and traders. The strategy also states that production tools and equipment for agriculture will be promoted and rural roads will be constructed which will facilitate agricultural marketing. At the same time, the strategy supports and encourages commercial farming. The Livestock and Meat Authority (LMA) was established within MoARD to support the domestic and export market for these products, and is now merged with the Department of Agricultural Marketing. The other marketing institution is the Ethiopia Export Promotion Agency (EPA) which is a department within the Ministry of Trade and Industry. This agency plays an important role in awareness creation among exporters of various agricultural products and provides assistance on the production of exportable commodities. The agency with sizeable donor support also supports market promotion and identifies export markets.

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MoARD has been introducing irrigation schemes to support smallscale producers for increased cash crop production. In addition, some donors are funding directly irrigation projects particularly for cash crop production. A recent dramatic development has been the growth of Government encouraged FDI, especially in the floricultural sector, where in 2005 some 44 foreign companies and over 50 Ethiopian companies had invested in the sector. An Ethiopian Investment Authority (EIA) was established to serve as a one-stop shop for investors and has played an important role in facilitating foreign investment especially in agriculture. Alongside investment promotion, its functions include the provision of information and the receiving and approval of investment applications and permits. Other government initiatives to improve the investment environment include the creation of an investment code, establishment of federal and regional Investment Agencies, liberalization of foreign exchange and the introduction of export incentive schemes as well as making substantial funding available through the Development Bank. Other policies introduced aimed at increasing exports include the introduction of duty draw back, duty free importation, income tax holidays, customs warehouse facility, export guarantee scheme, voucher system, retention scheme, and an overseas loan guarantee scheme.

Import ban Ethiopia has high livestock potential as well as the proximity the Middle East market where there is demand for live animals and fresh meat which provide the opportunity to develop exports. However, importing countries have their own import quality and product demands including animal health i.e. frequent bans on import of live animals and meat due to the prevalence of animal diseases, such as foot and mouth and Rift Valley Fever. Such bans have an adverse impact on the national economy as well as on the livelihood of the livestock producers. Demands of the importing countries are becoming increasingly challenging and need to be addressed urgently. Building linkages and developing a code of conduct There is a lot be done to create the linkage between the private sector and small-scale producers which at the moment is rather fragmented and not systemized. The case study shows one model of relationship between the producer and the retailers which is supported by the government policy. The public sector can play a role in mobilizing the different economic actors and create a win-win strategy in the market dynamism by providing credit facilities and market information. A code of conduct between the public and private sectors as well as the producers could play a crucial role to create win-win situations and opportunities for small-scale producers which may warrant consideration. Foreign Direct Investment (FDI) There exist limitations in implementation of FDI supportive measures and it has been realized that the current schemes are not enough and further measures are required.

Emerging implications for small-scale producers and opportunities for public and private sector intervention
Changes in procurement system The procurement system is changing with the increase of private farms and supermarkets as well as changes in consumer tastes. The supermarkets prefer to buy from commercial farms and wholesalers instead of directly from small-scale producers some retailers even have contractual agreements with private farms. Small-scale producers are facing market problems for their products and lose some of the perishable products before they are sold. There are some initiatives by the some farming communities who organize themselves in cooperatives and make contacts with retailers. Technology Processed products including dairy cannot compete with imported products by the supermarkets, whose quality is perceived to be better. Domestic processing technology is still at its infancy stage which affects both commercial and small-scale producers. In addition, there is a lack of cold storage and cold chain facilities and training to improve quality, product handling at all stages of the market chain and thus allow better market access. Asymmetric market information Market conditions could change if producers and others in the market chain have the information and this could be a win-win situation. Producers need to be knowledgeable and communicate constantly with their buyers and vice versa. Currently, the actors in the chain particularly the producers have asymmetric information on prices and preferences of consumers which stops them from diversifying and improving their products. For instance, live animal and meat exporters have agents or distributors in importing countries. However, most of them have little knowledge about the market structure, rules and regulations, as well as consumers tastes and preferences in the importing countries.

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Key references and resource papers

Ayele Solomon, Assegid Workalemahu, M A Jabbar, M M Ahmed and Belachew Hurissa (2003) Livestock Marketing in Ethiopia: a review of structure, performance and development initiatives. ILRI SocioEconomics and Policy Research Working Paper 52, ILRI and LMA, Addis Ababa Belachew Hurissa and Hargreaves S (2003) Livestock Export Zone Study 1st September 13th October 2003. Report for CAPE Unit, AUIBAR, Nairobi Coppock D L (1994) The Borana Plateau of Southern Ethiopia, Synopsis of Pastoral Research, Development and Change (1980-1991), International Livestock Centre For Africa, Addis Ababa, International Livestock Centre For Africa, Addis Ababa, Ethiopia Diagnostic Trade Integration Study (2004) Ethiopia: Trade and Transformation. Addis Ababa, Ethiopia Ethiopia Plan for Accelerated and Sustained Development to End Poverty (PASDEP), 2007. Ministry of Finance and Economic Development (MoFED), Addis Ababa, Ethiopia Dearden P, Greenhalgh P and Havis E (2002) Horticulture Exports from Ethiopia and EU Supermarket Sourcing. DFID, London Greenhalgh P and Orchard JE (eds.) (2005) Establishing Quality Control and Certification Systems of Agricultural Export Products in Ethiopia Vol. 2 Commodity Profiles. Natural Resources Institute, UK Panlibuton H (2004) Mid-term Assessment Report: Final Report Smallholder Linkages Programme (SHLP) ACDI/VOCA Ethiopia Washington DC Saperstein A and Farmer E (2006) Livestock Value Chain Analysis Report for Afar and Northern Somali Regions of Ethiopia. Pastoralist Livelihood Initiative, ACDI/VOCA. USAID. Addis Ababa, Ethiopia. Sissay H (2004) Fresh Fruit and Vegetables: Production and Market Study. Ethiopian Export Promotion Agency. Product Development Market Research Directorate, Ethiopia

For further information contact

Protase Echessah Regional Advisor Resource Centre for Rural Development (RRD) Embassy of Sweden Nairobi Kenya T +254 20 4234000/33 protase.echessah@foreign.ministry.se

Bill Vorley Regoverning Markets Team Leader International Institute for Environment and Development (IIED) 3 Endsleigh Street London WC1H 0DD UK T +44 (0)20 7388 2117 bill.vorley@iied.org

About the authors

Mohammed Mussa is an economist at MMA Development Consultants, Ethiopia. mmussa@ethionet.et Peter Greenhalgh is a UK-based freelance consultant and market economist. pgreenhalgh46@yahoo.co.uk

About the series editor

Felicity Proctor is the outreach leader for the Regoverning Markets Programme and a Visiting Fellow at IIED, UK. felicity.proctor@iied.org

This publication is an output of the Regoverning Markets programme, which is a multi-partner collaborative programme funded by the UK Department for International Development (DFID), the International Development Research Centre (IDRC), ICCO, Cordaid, the Canadian International Development Agency (CIDA), and the US Agency for International Development (USAID). The programme analyses the growing concentration in the processing and retail sectors of national and regional agrifood systems and its impacts on rural livelihoods and communities in middle- and low-income countries. The views expressed are not necessarily those of the funding agencies.

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