"Emerging Demand for Tractor Mechanization in Ethiopia", presented by Guush Berhane, at NSD/IFPRI workshop on "Mechanization and Agricultural Transformation in Asia and Africa", June 18-19, 2014, Beijing, China

1. ETHIOPIAN DEVELOPMENT
RESEARCH INSTITUTE
1
Emerging Demand for
Tractor Mechanization in Ethiopia
Guush Berhane
IFPRI/Ethiopia Strategy Support Program
Mechanization and Agricultural Transformation in Asia and Africa
Sharing Development Experiences
June 18-19, 2014
Beijing, China

2. Outline of presentation
1) Motivation
Too much focus on low-potential, densely-populated, fragmented-land
story
The ‘three Ethiopia’ and what we don’t know so far
2) Recent developments and land potential in Ethiopia: major investments
in road (& soon railway!) connectivity.
3) Case study: the conditions for mechanization and emerging trends -
consistent?
4) Recent public and private experimentations on mechanization.
4) Challenges for mechanization and way forward.

3. Motivation

4. Is the evidence consistent with the conditions for mechanization?
1) Mechanization determined by
Land-labor ratio (the demand for labor from non-agricultural sectors)
 Demand for agricultural products,
when labor is abundant and land is small and fragmented, mechanization is
not profitable (Binswanger, 1986).
2) Mechanization will contribute little to growth in densely populated
countries where land constraints are binding (labor is abundant relative to
labor) and labor is not moving out from agriculture – it will only inefficiently
substitute labor or animals.
3) Mechanization is unlikely to be derived by wage increases in countries with
high proportion of its population living in agriculture even if the rest of the

5. Is the pessimism in recent literature about land potentials,
commercialization, and mechanization real?
1) Portraying relatively land abundant African countries (e.g., Ethiopia) as land
constrained, swamped with population pressures of “disturbing scenarios of
Malthusian proportions”
- Focus on selected drought-prone, densely populated areas and ignore the bigger
(national) picture – the ‘three Ethiopia’
- Neglect huge land resources and irrigation potentials.
- Misleading conclusions (policy makers, donors, and some of us researchers).
2) The same literature (in fact, same people) challenge commercial mechanized
farming, romanticizing it as ‘land grabbing’, ‘elite capture’, ‘the new neo-
colonialism’, etc.

6. What you find and don’t find in the
literature about Ethiopia

7. Ethiopia: basics
Landmass of 1.14 million square KM.
Land-locked but very close to the
sea, middle east and European
markets; and importantly, one of the
gates to Africa!
Complex agro-ecology:
Elevated central plateau (1000 –
3000 masl, often pleasant climate
throughout the year –average temp
between 18 – 25 degree C;
Largely unutilized lowlands (both
wet and dry)
 Beautiful mountain terrains but rendering efforts to provide access to markets
and services difficult.

8. Agriculture - main stay of the economy
• Provide 80% of employment, 80% of foreign exchange, and 40% of GDP
• About 14.7 million farm households,
• Crop production: 13.5 million ha
• Grazing land: 2million ha
• Average land holding per household : 1.25 ha
• Agriculture production is mainly rainfed.
• Two rainy seasons (June – September (Meher season) and February – May
(Belg season)
• Substantial irrigation potential but realized is limited,
(12 major river basins, ground water resources, and fresh water lakes)

9. The central highlands the most densely populated but still few areas
> 300 persons per square km.
 Close to 50% of the
country’s poor people live
in these food deficit,
central highland areas
 The central
highlands, densely
populated and
mostly food deficit
areas are the most
researched parts of
‘Ethiopia’ that most
people know:
 Vast sparsely
populated areas

10. 1) Moisture deficit zone.
Covers 32% of land, 47% of population, and 39% of permanent crop
output. Rainfall is generally below 600 mm/year
2) High rainfall zone.
Covers 24% of land, 43% of population, and 51% of permanent crop
output. Rainfall tends to exceed 800 mm/year.
3) The lowland zones.
Covers 44% of land but 10% of population, and currently produces
only 10% of crop output.
Further classified as the pastoralist (eastern and south eastern parts)
lowlands and the high potential western lowlands
Rainfall is lower than 600 mm/year in the pastoralist eastern lowlands.
Ethiopia is more than the food deficit, densely populated, highlands

11.  More than 50% of food
produced in food
surplus areas
(where food availability
per household is 70%
higher than the national
average)
 See also rainfall
distribution map
There is, at least, ‘three’ Ethiopia in terms of production potential …

12. 56 million hectares of arable land (potential) not cultivated yet.
Is the pessimism justified?
Land potential and cultivated
Area
(millions, ha)
Share
of arable land
Total land 111.5 -
Arable land 74.3 100%
Under cultivation 18.0 24%
Irrigable (potential) 3.7 -
Already under irrigation 0.16 -
Available for commercial farms
(% total & arable land) 3.0 4%
Source: Ministry of Agriculture, 2013

13. How accessible is this land? Why has not been used so far?
Cultivated
(24% of arable)
Sparsely populated,
high potential,
western lowlands,
recently targeted for
large commercial
farms
Recent
irrigation
schemes

14. Recent Critical Investments:
Game Changers?

15. 1. Road connectivity: 1984

16. 1. Road connectivity: 1994

17. 1. Road connectivity: 2007
(old data)

18. SOURCE: IWMI (2010)
2. Ground Water Potential
Recently
identified,
new irrigation
structures
Recent private
sector led
mechanized
agriculture:
sesame,
cotton, etc

19. Are the conditions for
mechanization in place & is the evidence
consistent?

20. 1. Agriculture role declining but still substantial
34
36
38
40
42
44
46
48
2004/05 2005/06 2006/7 2007/8 2008/9 2009/10 2010/11
Share of Agriculture to GDP overtaken by
services Sector
Agriculture Service
Source: MoFED, 2012

21. 2. Declining share of (projected) rural population but likely to stay high
86.31 83.82
79.6
74.6
68.9
0
10
20
30
40
50
60
70
80
90
100
1994 2007 2012 2017 2022 2027 2032 2037
Percent
Rural populationSource: CSA, 2014

22. 3. Landholdings: average 1.25 ha/farm (AGP data)
44.3
30.5
20.3
3.3 1.5
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
upto 1 1.0 - 2.0 2.0 - 5.0 5.0 -10.0 above 10
%ofhouseholds
Land size (ha)

23. Case study
Tractor Mechanization
the evidence from a recent trip to the field

24. The ‘Ethiopia’ you probably have never heard of!
Growing demand for mechanization in ‘relatively’ land abundant regions

25. Recent evidence of mechanization even from national datasets that sample
small farms – evidence that there are around 12,000 tractors in the country
698 700 741
5,479
0
1000
2000
3000
4000
5000
6000
Small tractor Hand-held
motorized tiller
Motorized water
pump
Improved oxen
driven plough
Numberofhouseholds

26. Evidence that mechanization completely substitutes labor or animal
power may not be tenable. Animal traction is combined with tractors.
Evidence that mechanization is not an “either” “or” process. Both small and large
farmers can mechanize if rental markets are allowed to flourish

27. Why combined use of technologies?
Small farmers (< 10 ha), tractor is used when the rains are late and
land is dry and hard at first-plowing (Tractor renting is relatively
expensive at $ 65/ha only for plowing)
Medium farmers (10 - 20 ha) that own tractors also own oxen, or else
hire-in oxen for second-plowing, harrowing, and labelling. The thriving
tractor renting-out markets make opportunity cost of tractors use for
own farms high (sometimes even for the large farmer).
Large farmers (> 15 ha), owning tractors, rent-in and operate large
farms (up to 100 ha and beyond) are fully mechanized.

28.  This farmer has 10 ha of land, a
tractor, co-owned with his
neighbor, and 3 pairs of oxen.
 Farmers believe that oxen
plowing is more effective to
take out weeds and has
peculiar advantages to smooth
the soil.
 But, also tractor is used for
harrowing and labelling during
planting (often with large scale
operations).

29. Proudly in the field – touching base of realities

30. Why combined use of technologies?
Consistent with what
has been observed in
other countries (e.g.,
China), both tractors
and tractor derivers
move across districts.
Small tractors
covering large areas –
making tractor (and
driver) rents high!

31. The research team with the proud model farmer, his son & a DA
 2002: He started small, first
renting-in tractors for his 20 ha
plus;
 2004: bought an old tractor and
started to expand by renting-in
land; and renting-out the tractor;
 2008: bought brand new tractor
(USD 25, 000, now, valued at USD
70,000).
 2012: bought combine harvester
(USD 125,000), plans to buy one
more!
 Now: operates > 100,000 ha land;
owns 3 big trucks, house in town,
floor mills, 5 pairs of oxen etc…

32. Mechanization seem to have increased use of chemical fertilizers, improved
seeds, and productivity Yield: wheat up to 5
tones/ha (1.6
tones/ha); Barely up to
3 tones/ha (1.4
tones/ha);
Fertilizer and improved
seeds applied;
USD 50,000 total
annual gross revenue
(crop sales, renting,
etc);
As a result, harvester
pays back in 7-10 years

33. If the rental market functions properly, land size does not matter
whether or not mechanization follows large or small power
machines

35. A number of
experimentations going on
in Ethiopia recently

36. 1. Public Sector: Adama Agricultural Machinery Industry – power tiller &
tractors from china
Very recent efforts to introduce power-tillers (imported from China)

37. 1. Public Sector: Adama Agricultural Machinery Industry – water
pumps

38. 2. Private Sector: some private importers/dealers mainly serving investors
 A number of private importers and
dealers already in business
 They supply tractors and other
machines to state (sugar) farms, unions,
commercial investors,
 They are not allowed to import and
stock them at their sale points; rather
they are dealers of specific
manufacturers and import on behalf
the investors
 A 35% duty is levied for all those that
do not have the investment license,
including small farmers.
 Recently, importers are allowed to stock
tractor imports at bonded warehouses
for 3 months; otherwise, sell at the 35%
tax.
 Importation process takes 4-6 months

39. The key messages
1) Contrary to recent literature pointing to Boserupian, or even Malthusian proportions,
enormous land potential (potential to increase national food supply);
Intensification and other income increasing strategies in the highlands (high value fruits);
Mechanization key instrument in this process (increases in fertilizer, improved seed, yield)
Emerging demand for mechanization (not just tractors: planters, harvesters, threshers)
Policy support during this incubation period critical
2) Is the pessimism in recent literature about land potentials, commercialization, and
mechanization then real?
NO! Key potentials and endowments are not taken into account; There is no problem with
being pessimist. The problem is conclusions derived from those analyses neglecting
important information (simplistic assumptions) can be misleading.

40. The key messages
2) Is the evidence consistent with the conditions for mechanization?
Not all. Also some new conditions.
- Climate change – rainfall has become more variable – planting & harvesting
unpredictable and time constrained
- Maintaining oxen has become very expensive (like Bullocks in India), but at the
same time mechanization has come with more animal feed (straw).
- Wages risen, labor became more scarce (% terms), seasonal, (reason: schooling,
massive infrastructure construction; migration in & outside of the country);
- Increased demand for food (agriculture becomes profitable)
Although, too early to claim that mechanization has taken off in Ethiopia, there is
certainly a clear evidence of demand for mechanization, regardless of farm size.
Rural population is declining, share of agriculture to GDP has declined and wages
have risen recently, but not to the level of deriving mechanization. On the other
hand, as in Bangladesh and other places, emerging demand for mechanization in

41. • Policy level
Potential heavy gov’t involvement at different levels: strategic focus
on promoting public sector import of tractors et al, which may
undermine potential private players (technology choices!);
Tractor import policy also complicated by foreign exchange rationing
and strategic public interests in this sector;
Tractor import is limited to those that are licensed commercial farms
and completely prevents small farmers that are unlikely to get these
licenses.
A new strategy is being designed – hopefully will address these issues
Challenges for mechanization in Ethiopia

42. • Financing of mechanization
Limited access to loans and collateral required by banks limits
smallholder (or even large holder) mechanization;
No insurance for large scale farmers, risk may limit expansion;
• Technical
Limited local technical skills & maintenance capacities
Limited technical capacities to adapt machines to local conditions
(limited knowledge of local context).
Farmers limited knowledge and opportunities to exploit additional
benefits of tractors or power tillers (young farmers emerging recently!)
Challenges for mechanization in Ethiopia

43. Thank you