7 February 2018

Ethiopia: Revisiting Ethiopia's Half Year Export Performance

The export sector has remained the main earner of foreign currency, with which Ethiopia buys essential foreign products it is not able to manufacture, extract or grow at home. Export goods, thus, play a pivotal role not only in advancing the domestic economy, but also in enabling the country to import.

Recently, Ministry of Trade disclosed that Ethiopia has obtained 1.35 billion USD in the first half of the 2017/18 fiscal year, surpassing the figure of the same period previous year by 114.28 million USD. Ethiopia, however, had set a plan to secure 2.2 billion USD in the reported period, which in that regard has showed a 38.7 percent shortfall.

Sectors' performance in the export trade

Concerning sectors' contribution in the export, agriculture has extended its hegemony by contributing over 75 percent of the total revenue followed by manufacturing and mining. In the reported period, Ethiopia has secured over 1.4 billion USD from agricultural commodities.

Coffee remains Ethiopia's leading foreign currency earner, generating over 381 million USD. This performance is largely attributed to quality reform programs that has been implemented in the sector since last year. Furthermore, the close engagement of government and stakeholders in coffee production and marketing has brought significant results in increasing the volume of coffee export to over 107 tons.

Ethiopia has gained laudable result in attaining over 117 percent of the plan in oilseeds export, bringing in over 215 million USD. The government's close engagement to support smallholder farmers to produce more sesame to the world market and the increasing global demand for the commodity are the major factors behind the success.

In addition, the regulation that requires exporters to enter into contracts to purchase and export large quantities of oilseeds in a timely manner has contributed significantly for the achievement. Overall, tea, coffee, processed leather and khat were the agricultural commodities the country was successful in attaining 75-99 percent of the respective plans. Electronics, spices, processed fruits, flower, vegetables and fresh meat are among the commodities Ethiopia has achieved 50-74 percent success.

Live animals export performance was not as impressive as the crop export due to contraband trade, quality and logistical issues, limiting the revenue to 38 million USD in the first six months of the 2017/18 fiscal year.

Regarding manufacturing sector; which brought in a total of 223 million USD in export earning to the country, leather and leather products as well as textile and garment were the leading performers.

Gold has remained the major commodity, racking in 47 million USD of the total 58 million USD revenue secured from the mining sector, which is largely challenged by contraband trade and illegal smuggling of precious metals.

Challenges and prospects of the export sector

According to economic experts, export quality and supply gaps coupled with the international price fluctuation and contraband are among major factors that have reduced Ethiopia's export revenue. They noted that shortcomings witnessed in fully implementing manufacturing goals, lack of inputs as well as managerial and technical skill gaps are also barring the sector from playing the desired role in the national economy.

Cognizant to the problem, the government has taken various measures, including establishing the National Export Coordinating Committee, which comprises various ministries and other pertinent governmental stakeholders to enhance Ethiopia's export competitiveness and diversify commodities.

The country is implementing quality reform programs in major exportable commodities, including coffee and sesame that have the lion's share in foreign currency earnings. The government has also been hugely invested in the establishment and expansion of agro-processing industrial parks that would have a paramount importance in enabling Ethiopia to export value-added items to international market.

Besides enhancing the competitiveness of agricultural commodities in the global market, the agro-processing industrial parks would have a pivotal role in creating the linkage between agricultural and industrial sectors, thereby accelerating economic transformation.

Furthermore, the incumbent is hugely engaged in conducting commodity quality and safety inspection tests, providing support for stakeholders in the agricultural value chain as well as controlling smuggling and alleviating input supply shortage in the manufacturing industry.

Concerning mining, the government has offered attractive incentive packages, including tax holidays, loan, custom clearance and logistics for competitive foreign companies with the desired capital, technology and expertise. Local mining firms have also been assisted in building their capacity through loans and other incentives with a view of making them competitive in the global market.

Furthermore, special missions have been given to Ethiopian embassies and consulate generals to identify market potentials in their respective countries and conduct trade missions, bazaars, exhibitions and promotions to seek new markets for country's exports and consolidate the existing ones.

The government and other stakeholders need to make close engagement to increase country's export volume and diversify commodities whilst giving particular attention to improve agricultural commodities quality, which supply the majority of foreign currency, the economic experts advised.

In regards to the manufacturing sector, due attention should be given to enhancing the participation of domestic investors in the manufacturing industry, as providing them export incentive packages would play a pivotal role in stimulating the sector's performance.

Also, stiff control need to put in place in border areas and both government and private organs are expected to closely work with Federal Police to control illegal smuggling of precious minerals.

All in all, the active engagement between the government and stakeholders in the export sector is crucial in enhancing Ethiopia's export sector in years to come, the experts remarked.

Ethiopia

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