Trends of Formal and Informal Livestock

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 AbabaNovember 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.

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Fig. 1: Trends of Livestock Export (000' USD) by major group

Live Animals

Animal Products

Valu

e (

000' U

SD

)

Source: Ethiopian Custom Authority, 2010/11

Trends of formal and informal LSM (2)

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

0

250000

500000

750000

1000000

1250000

1500000

1750000

2000000

2250000 Fig. 2: Trends of formal livestock export (000 USD)

CoffeeLivestock Total Export

Va

lue

(0

00

' U

SD

) Trends of formal & informal

LSM (3)

Despite a radical growth in the total national export value in the recent years, the relative growth 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 period

Cattle (head) Sheep (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 & Solomon, 2010

2010 375,000

Routs of cross-border trade

Little (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 Somali

4. Ethiopia-Djibouti cross-border trade;

5. Ethio-Sudan cross-border livestock trade (Metema)

Why informal trade?

Key factors contributing to large volumes of informal 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;

Ethiopia is 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

Than

k yo

u!!