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Ethiopia is no longer Africa's basket case but fearsome problems remain

Tigrai Online
March 08, 2012

The warehouses off Bole road in Ethiopia's capital Addis Ababa are full these days - cotton, bananas and other perishable goods. You'd be forgiven for thinking this was aid sent by kind-hearted donors. You'd be wrong.

Ever since the 1984 famine brought it to the world's attention, it has been Ethiopia's curse to be the poster child for starvation.

More recently, however, it has emerged as a significant exporter of farmed produce. In the last six months of last year, the country sold almost US$100 million (Dh367.3m) worth of fruit and vegetables, according to government figures.

This year, the government expects the economy to grow nearly 12 per cent, making it one of the best performing in the world. Much of this will be driven by agriculture, which accounts for almost two thirds of Ethiopia's economic activity.

Its burgeoning food exports are by no means unique. Across Africa, investment in agriculture is growing.

"It certainly is an exciting trend," says Zin Bekkali, the chief executive of Silk Invest, a fund manager that specialises in Africa and the Middle East. "We are seeing an increase in exports not just of raw commodities but high-value processed products too."

Plenty of cheap land and low labour costs are a tempting draw. But the increase in intra-Africa trade is also helping the drive. Demand for finished food products from the emerging middle class is also having an impact.

Today, Africa is one of the world's largest importers of rice, wheat, sugar, maize and other staples. For agribusiness investors, it is a vast market waiting to be tapped.

"African countries are selling more of their produce to each other," says Mr Bekkali. "African food products are becoming more packaged, and branded. The added value off this means investors are no longer just buying into commodity production, but in an entire business."

Olam, a global food manufacturer based in Singapore, bought Nigeria's largest biscuit and sweet maker Titanium for $167m this month. And Silk Invest has bought a confectionery maker in Egypt, and plans to acquire a pasta and biscuit manufacturer in Ethiopia.

Tiger Brands, a South African food and consumer products group, is also expanding rapidly across the continent. Peter Matlare, the chief executive, told the website Moneyweb last year that "countries such as Ethiopia, which people generally speaking write off as a basket case until they go there and they understand the economics of the place, hold real growth opportunities".

And while big multinationals such as Nestlé have long had a presence on the continent, others are now joining them. Kraft, the US global food manufacturer, said recently it was going to spend a "disproportionate" amount of its investment capital over the next few years in South Africa.

Fearsome problems do, of course, remain. In spite of its newfound embrace of exports, more than four million Ethiopians still required food aid last year, thanks largely to incompetent governance. Elsewhere, protectionism, corruption and bureaucracy still provide substantial and expensive hurdles to clear to move products from one country to another.

Then there is the land issue: with investors being lured by cheap land, more and more Africans are finding themselves dispossessed of what they considered their birthright.

"In Africa, selling land is like selling your soul," says Mr Bekkali.

"It is something that must be approached cautiously. Buyers need to be sure that they are not taking land from someone who will now be homeless."

Source, The National

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