Thursday, August 23, 2012

Ethiopian Horticulture Producer-Exporter

Karuturi Global, the world’s largest producer of cut roses, has been in Ethiopia since 2004, and calls Ethiopia an “ideal location” due to “favourable government policies and environmental conditions, a flood-safe geographic location and abundant availability of low-cost labour, coupled with its proximity to the global markets”.
Marc Driessen, a board member of the Ethiopian Horticulture Producer-Exporter Association and owner of Maranque Plants, a flower exporter with 16 hectares of greenhouses employing 1,000 people, arrived to set up his business in Ethiopia in 2004.
“I was one of the early birds and got great help from the government, including really cheap land.”
Meles took a personal interest in floriculture, he says, having been impressed by neighbouring Kenya’s successes. Driessen claims to have visited Meles’ office on seven separate occasions, “He was the guy taking the telephone the moment you had problems, doing his utmost best to get the flower sector going.”
Driessen is optimistic about the industry’s prospects after Meles though, and feels Desalegn will maintain a stable investment environment, and keep other ministers in line.
The state dominates Ethiopia’s economy, and has in recent years tried to make flower producers use more Ethiopian suppliers. As to whether a shift to nationalist economic policies could now happen, Driessen says.
“I am not worried that we will get a problem. I think it’s very important for the country that we are here, because foreign exchange reserves are very low – as exporters we never have problems.”
Driessen claims 70 per cent of the $5m profit his company will make this year will be spent in Ethiopia. “I started with $500,000 in 2005, that was my first year’s earnings and I thought it was fairly small, but the central bank said it was a lot of money to bring in.”
The flower industry contributed $212m in foreign exchange earnings last year from the export of 2.1bn flower stems – up from $300,000 in 2001. For a country which spent much of the 20th century in virtual economic isolation and in 2010 had a total export value of only $2.5bn, this is no mean feat.
Agriculture accounted for 42 per cent of Ethiopia’s GDP, 80 per cent of employment and 85 per cent of export earnings in 2011 according to the African Development Bank, and it is at the centre of its development strategy.
The government, which owns all Ethiopia’s land, has leased 3.5m hectares since 2005, and intends to increase this to 7m by 2015. Agribusiness investors are moving in, and diversifying the crop mix. Karuturi Global, for example, announced intentions to begin growing maize, sugar, rice and palm oil, having acquired 1,000 square miles of land in 2011.
All is not necessarily rosy for the future of Ethiopia’s agribusiness though. As in Kenya, NGOs and trade unions have complained of poor wages and working conditions on some horticulture estates.
While government claims the land it is leasing to foreigners is unutilised, international NGOs have called it a land grab. ”Villagization” programmes, through which the Ethiopian government intends to eventually resettle 1.5 million people in areas of significant land investment, have been criticised by Human Rights Watch.
A cautionary tale is provided by recent events in Africa’s mining industry. Even if the government remains friendly to foreign investors, the local population and workforce may not if the benifits aren’t percieved as being shared fairly.
Peter Barnhoorn, director of the Dutch company Afriflora, which produces 700m rose stems in Ethiopia per year, tells beyondbrics of the importance for his company of maintaining good relations with the local community.
“In any country there are good entrepreneurs and bad entrepreneurs. We have tried to go with the people, not against the people.”
This has involved employing all-local management, paying higher wages and reducing water and fertilizer use – policies which enabled Afriflora to attain Fair Trade certification.
“Since we started giving schools and giving hospitals the working relations with the people have been getting much better. It is giving more than what it costs.”

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