Agriculture: Ethiopia’s sweet and sour harvests

May 4, 2015 • Digital Farming

The sugar plant at Wonji-Shoa is chugging along, but the government’s 10 other projects – estimated to cost more than $5.5bn – face problems of their own.

The tiny, street-side coffee shop run by Senait Ashagre encompasses little more than a short table covered with little ceramic cups, a ring of plastic stools and a clay coffee pot resting on hot coals.

This is the only factory in Ethiopia so far that does power generation

Senait, 23, tries to stay open seven days a week. But a few times a month, she runs out of an essential ingredient – sugar – and is forced to close.

“I get 2kg of sugar each month from the local government for about 15 birr ($0.74) each, but that’s not enough. So I usually have to buy five more kilograms from the shops, and those cost 32 birr,” she says.

“It’s stupid we have to wait in a queue to buy sugar,” says one customer, a young rickshaw driver. “We produce it right over there!”

He is pointing toward the Wonji-Shoa sugar factory, which began producing at nearly full capacity this year.

It is run by the Sugar Corporation, a government-owned entity that is spear-heading one of the most ambitious development projects in Ethiopia’s history.

On top of three working factories, another undergoing testing and another project still under construction, the government is building no less than 10 new sugar facilities across the country.

In the main, these projects are being financed by agreements whereby the corporation hires Chinese contractors in exchange for loans from China’s state-owned banks.

Five years ago, when these plans were announced, the cost was roughly projected at $5.5bn.

Today the Sugar Corporation is working on a new cost evaluation that will be significantly higher.

Mother of all industries

Of all the massive public investments Ethiopia has made in recent years, these projects are uniquely far-reaching – and not only geographically.

According to state minister for industry Mebrahtu Meles: “The sugar industry is the mother of all industries.”

The factories can generate their own energy and produce ethanol for clean fuel; they can bring small- scale farmers into the fold of industrial development; and they can generate foreign exchange.

Outside the Wonji-Shoa headquarters on a Tuesday morning, two speakers are blasting a song about the factory, with voiceover from a man with a microphone stationed behind the main doors.

That day’s broadcast informs workers that this year’s output goal is 160,000tn, with the plant having produced 34,921.5tn so far.

The upper level of the building houses the office of Furo Beketa Berisso, Wonji- Shoa’s general manager.

“The production level is greatly increasing this year,” he says, noting that the facility processes more than 6,000tn of cane and churns out at least 600tn of sugar each day.

In the coming years, extra machinery should double the plant’s capacity.

In a giant room for the first stage of sugar extraction, the roar of machinery forces Tsega Kifle, Wonji-Shoa’s deputy general manager, to shout.

“This is the only factory in Ethiopia so far that does power generation,” he yells, explaining that bagasse, a cane by-product, is burned to generate steam.

At full capacity, the factory should use about 10MW and supply another 20MW to the grid.

As sugar is such a hot commodity – and cheaper in Ethiopia than neighbouring countries – smugglers some- times spirit sacks away to the border to turn a quick profit.

Foiling far-flung rent seekers is tough work for a corporation whose management methods are decidedly top-down.

The Addis office is in charge of supplying sugar to the government wholesaler, which pays 11 birr/kg before tax.

Demand is greater than supply, so free-market principles have been set aside for a system of regional quotas and price caps.

They called a meeting and told us not to farm anything on our land because it would be for sugar.

The Sugar Corporation splits its revenue, giving 49% to the factories for operational costs while the remaining 51% gets deposited into the Sugar Industry Development Fund.

In a couple of years, some of that income will begin to repay the Chinese loans. Sugar exports are “in our short-term plans,” says the Sugar Corporation’s deputy director of finance, Mesfin Melkamu Girma.

With a few factories scheduled to commence production this year, he says they will provide enough to meet domestic needs and then some.

But given Ethiopia’s track record, banking on ambitious goals is a risky businesses.

All 10 of the new factories were meant to start working this year, but most will not.

Reports indicate that the country produced around 300,009tn of sugar in 2014, far short of the 2.3m tonnes the corporation once hoped to see for the year 2015.

Now that it is churning out sugar crystals at a healthy clip, Wonji-Shoa has become a role model for the new factories springing up.

But with even nearby customers like Senait complaining of shortages, it is clear that some system adjustments are still needed.

Gesturing to thousands of kilos of sugar in the Wonji-Shoa storeroom, deputy manager Tsega says Ethiopia “has no problem with supply. It’s only distribution.”

The trade ministry doesn’t share that opinion and had to import an extra 160,000tn of sugar last year.

The 10 new factories – and the plantations, dams and irrigation they require – are harbingers of the transformation Addis officials hope to see across Ethiopia: a shift away from small-scale farming; more production of processed goods; and an emphasis on modernisation over tradition.

The price of progress

In pursuit of these goals, the government has been known to act with a strong hand.

The Kuraz sugar project in the southern Omo Region, which encompasses a dam, an irrigation scheme and five factories, has been criticised for displacing tens of thousands of people to make way for plantations.

Of Wonji-Shoa’s 17,000 employees, about 10,000 are outgrowers who retain nominal control over their land but cultivate sugar cane for the factory. These farmers get inputs and are paid a small salary every two weeks.

Shushay Legesse, Wonji-Shoa’s project manager for agricultural expansion, says these farmers get 50 birr per 100kg of cane they harvest minus the cost of the inputs, leaving them with around 14 birr per 100kg.

“If we bought the land, where would they live?” he asks.

“So in order [for them] to be part of the industry, we get them involved in sugar cane production.”

But outgrower Mengistu Regasso, 50, wants to go back to his life of farming maize. “They forced us into this,” he says.

“They called a meeting and told us not to farm anything on our land because it would be for sugar. But for a few years afterwards, the land was totally undeveloped.

There are outgrowers whose life has improved, but there are others whose lives have not. They are not looking after us.”

The government disagrees. Despite quotas that squeeze Senait’s business, plantations that disrupt Mengistu’s livelihood and loans that create extra liabilities for a cash-strapped administration, it argues that industrialisation, employment and foreign currency revenue are worth it in the long run.

“The government looks at this industry as strategic. It’s centre stage to spur the growth of other industries,” says state industry minister Mebrahtu.

“So we are borrowing from other countries. We are investing from our own budget. That way we can jump-start the process of industrialisation.”

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