Trends of Formal and Informal Livestock Marketing in Ethiopia
Trends of Formal and InformalLivestock Marketing in Ethiopia By Tadesse Kuma Paper presented on the ESSP-II/ EDRI Workshop on the theme: Taking Stock of the Economy of the Livestock Sector in Ethiopia Jupiter International Hotel, Addis Ababa November 4, 2011
outline Background Trends of formal and informal livestock trade Routs of cross-border livestock trade Why informal trade? What need to be done?
Background Livestock continues to be a significant contributor to economic and social development in Ethiopia at the household and national level; On a national level, livestock contributes a significant amount to export earnings in the formal market (250mln USD), and the informal market (~300mln USD), 10-13% export earning; Livestock have multiple uses aside from income generation: sources of food (meat and milk), services (transport and traction), manure (for soil fertility management and fuel), and serve as store of wealth; Livestock for pastoral community …
Trends of formal and informal LSM (1)(a). Formal livestock marketing For many years the export of livestock and livestock products has been Ethiopia’s second most valuable source of foreign exchange, after coffee; Hides and skins have been by far the most important formal livestock product (account for about 70%), Live animal and meat export remained small until very recent.
Trends of formal and informal LSM (2) Fig. 1: Trends of Livestock Export (000 USD) 140,000 by major group Live Animals 120,000 Animal Products 100,000 Leather & Leather Products Value (000 USD) 80,000 60,000 40,000 20,000 - 20… 19… 19… 19… 20… 20… 20… 20… 20… 20… 20… 20… 20… 20… 2011 Source: Ethiopian Custom
Trends of formal & informal LSM (3) 2250000 Fig. 2: Trends of formal livestock export (000 2000000 USD) 1750000 Coffee Value (000 USD) 1500000 Livestock 1250000 1000000 Total Export 750000 500000 250000 0 2003 1997 1998 1999 2000 2001 2002 2004 2005 2006 2007 2008 2009 2010 Despite a radical growth in the total national export value in the recent years, the relativegrowth in the earning from livestock products remained virtually stagnant
Trends of formal & informal LSM (4) (b) Informal livestock marketing there is significant informal cross-border trade in live animals, which substantially increases livestock’s export importance.; Although the statistics on volume of informal livestock trade is shaky, it has considerable volume Table 1. Estimates of informal livestock exports Source of data Reference Cattle (head) Sheep period (head) FAO 1993 1987/88 150,000 300,000 World Bank 1987 1987 225,000 750,000 MEDaC 1988 1998 260,000 1,200,000 Belachew and Jemberu 2002 2001 325,000 1,150,000 GebreMariam, Amare, Baker & 2010 375,000 Solomon, 2010
Routs of cross-border tradeLittle (1996), identified 4 routs1. Eastern Ethiopian via Somaliland (port of Berbera),2. Southeastern Ethiopia or northeastern Kenya, - The average daily castrated bulls cross the Ethiopian border estimated to be 250, 150, 400, 450, 200, and 450 (year 2004 _ 2009) (Sintayehu, 2010).3. Eastern Ethiopian or via Somali4. Ethiopia-Djibouti cross- border trade;5. Ethio-Sudan cross-border livestock trade (Metema)
Why informal trade?Key factors contributing to large volumes ofinformal trade: Requirement for export licenses, Quarantine, banking clearance for remitting foreign exchange, Minimum weight restrictions, Better prices across the border; High transportation and transaction costs; readily availability of consumer goods prohibition on Ethiopian livestock and meat export to ME; Financial and non-financial advantages to informality (, tax evasion, black market foreign exchange rates).
Why informal trade? Cont…Challenges There is only limited understanding of the nature, magnitude, and value of the range of cross-border livestock and livelihood activities in the border regions of the country; Ethiopiais not generating adequate benefits from its livestock sector;
What has to be done? The first and most important action is to understand the sector through conducting an in-depth analysis of the existing marketing chain; Designing an alternative marketing system which would benefit all actors in the chain, particularly the livestock producers; Indeed, farmers have no reason to trek their animals for days, if they have efficient and reliable livestock market with low transaction costs at their nearest location;
What has to be done? Cont… Improving rural road networks, market information system, and other related infrastructures and services are indispensable; The establishment of linkages between producers’ and traders’ cooperatives; Strengthening meat processing plants, and private abattoirs The power imbalance at market sites between producers and traders and brokers needs also target efforts