5 August 2017

Ethiopia: New Directive Breaks Ground to Incentivize Commercial Farmers

The Board of the Ethiopian Investment Commission (EIC) has approved a directive that was designed to incentivise commercial farmers by providing lower lease fees and extended contract periods.

The directive that was approved last week was drafted by the Ethiopian Horticulture Development & Agriculture Investment Authority (EHDAIA), which was established six months ago after the merger of the Ethiopian Horticulture Development Agency and the Ethiopian Agricultural Investment Land Administration Agency (EALAA).

The Authority worked on the draft for the past three months before it was sent to the EIC Board for approval two weeks ago. Then, the Board gave notice of the approval of the directive to the Authority last Thursday.

"We sent the approval notice for six institutions in commercial farming," said Belachew Mekuria (PhD), deputy commissioner at EIC.

The Authority, the Ministry of Agriculture & Natural Resources (MoANR) and the Ethiopian Horticulture Producers & Exporters Association (EHPEA) are among the institutions which received the approval notice.

"The amendment came to effect mainly to attract more investors in commercial farming by expanding incentive packages," said Adugna Debella (PhD), deputy chief executive officer (CEO) of EHDAIA.

The directive focuses on extending lease contract periods, lowering lease contract fees and reducing procedures which the investors go through to get the farms. The amended directive replaces the former one that was issued in 2008 during the establishment of the former Ethiopian Horticulture Development Agency.

It works for commercial farms - mainly for cotton farms, dairy farms and cattle ranches.

"The directive also aims to formalise the lease agreements entered between commercial farmers and farmers," said Adugna.

Previously, commercial farmers were mostly in rural regions with a lease period of 30 years and farms which were in urban areas were leased for 15 years. But the new directive puts all the farms in the federal system and the lease period is three decades all across.

It has also reduced the lease payment to almost zero, according to Adugna.

The former directive stated that a tenant for horticulture farms had to pay 42 Br a square metre for farms in the rural areas and 69 Br in the urban areas, but this has been lowered to one Birr and two Birr, respectively.

Also, the new directive gives the mandate of processing commercial land only to the Authority in contrast to the previous directive, where investors were getting land from the regional investment offices and the former Agricultural Investment Land Administration Agency.

"We already established a dedicated office to manage leasing cases," said Adugna.

Yemane Seifu, president of the Commercial Farmers Association in Gambella Regional State with over 200 members, cherishes the amendment of the directive but he has reservation on the centralisation system.

"If the Authority does not establish offices in the regional state, the process of getting land may be extended, and this might be a challenge for the investors," said Yemane.

Commercial farms were introduced to Ethiopia four decades ago when the government piloted state and research farms. There is 11.5 million hectares of land covered by commercial farms, of which cotton farms have the lion's share, followed by oil seed and maize.

Ethiopia

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