Ethiopia has a diverse agroecology, endowed with abundant agricultural resources. Agriculture accounts for 40% of the GDP, 80% of exports, and an estimated 75% of the country’s workforce. While coffee is Ethiopia’s largest foreign exchange earner, it is also Africa’s second largest maize producer. Despite growth in industrial farming, smallholders – most of whom concentrated in the country’s highlands – account for an estimated 90% of agricultural output and area.
Owning comparatively small areas of land and confronting by mounting land scarcities, Ethiopia’s smallholders are especially vulnerable to land degradation and food insecurity. This is currently being exacerbated by climate change and rapid population growth.
The government of Ethiopia began actively attracting land-based investors in the early 2000s in order to modernize the agricultural economy and diversify exports. Large areas of land, particularly in its more scarcely populated lowlands, have since been and allocated to large foreign investors. Investors, especially of Indian, Turkish and diasporic origins, began developing large industrial estates for crops such as cotton, sugarcane, wheat and rice.
The development of many such estates involved conversion of forests, wetland and wildlife-rich grasslands. The need for irrigation infrastructure contributes to worsening water pollution and seasonal water scarcities. Since much of the land earmarked for investment is located in marginalized agropastoral areas where tenure rights are comparatively insecure, involuntary displacement was widespread, with few affected communities rarely consenting to and being compensated for land loss. The consequent declining availability of pastureland exacerbated local food insecurities and intercommunity resource conflicts.
Key initiatives and commitments
The Ethiopian Investment Commission provides technical and bureaucratic support to land-based investors. While it also monitors investors’ social and environmental performance, it currently lacks the necessary resources to effectively support investors with addressing adverse impacts and adopting more responsible business practices and models.
Despite many land-based investors withdrawing from Ethiopia for failing to meet their land development targets, the government of Ethiopia continues to incentivize and support industrial agriculture, albeit for smaller areas of land. Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH has also begun developing a land investment monitoring system and is training government and investors on responsible agricultural investment. Numerous initiatives to strengthen smallholder-agribusiness relationships are also underway, including SNV’s 2SCALE initiative.