Ethiopia: Natural Resource Exploitation and Emerging Investors1

Abstract

Natural resource governance accelerates development. Ethiopia, a low-income country, passed land legislation in the 1990s and subsequently exhibited exceptional economic growth and human development improvements. From 2004 to 2014, Ethiopia’s average annual GDP growth rate was about nine per cent. Nevertheless, over 80% of the population remain food insecure. Using a literature review and interviews, this case study examines Ethiopia’s economic and social development through a land governance lens. It aims to document the flaws in Ethiopia’s regulatory framework that hinder vulnerable communities from leveraging the benefits of greater foreign direct investments (FDI) and resultant economic growth. The case analyzes Ethiopia’s agricultural governance framework and the impact of FDI-driven large-scale farming on smallholder communities, and concludes with suggestions for alternative investment approaches. The case study reveals that Ethiopian government legislation and resultant macroeconomic growth has yet to deliver inclusive and stable economic gains for many of the vulnerable smallholder communities. There is a need to advance further regulation and policies that not only protect these vulnerable communities, but also enhance economic and trade incentives for potential foreign investors.

Natural resource degradation tendencies in Ethiopia: a review

“…Based on experts' opinion, about 20% of the agricultural land in Ethiopia is subject to irreversible soil productivity loss due to water 2011, Turner II et al (2007) erosion. Each year, around 1 billion tons of topsoil is lost because of soil erosion alone where the situation is further aggravated by forest and livestock losses (Berry 2003).…”

“…Grain production loss due to land degradation in that particular year was estimated to have been sufficient to feed more than four million people. Similarly, Berry (2003) estimated that degradation of land, and other nonsupportive land management practices cost the country (via loss of soil and essential nutrients) about 3% of the agricultural GDP or $106 million in the year 1994. On the whole, the annual cost of land degradation is about $4.3 billion in Ethiopia, representing 22.5% of the GDP (Gebreselassie and Kirui 2015).…”

“…Attributable to the huge livestock population, there is high pressure upon animal fodder in Ethiopia. Nationwide, livestock density data revealed that the current stocking rats on grazing/pasturelands are well above the optimum rates (Berry 2003). According to Sonneveld et al (2010) grazing demand calculation, livestock needs to consume 2.5% of its body weight for a sustained growth, which in turn results in a consumption of 6.25 kg of forage dry matter daily for each TLU.…”

“…The scarcity of grazing lands and derived livestock feed has forced the widespread use of crop residue to feed livestock. When crop residues are removed for feed and cow dung issued for fuel, the soil will lose organic matter and nutrients (Berry 2003;Belay et al 2015). This contravenes in the natural soil nutrient cycle and seriously depletes soil quality, intensifies erosion, and eventually reduces soil productivity (Tesfa and Mekuriaw 2014).…”