At the end of this chapter you will be able to:
explain the roles of mining sector in the Ethiopian economy and the major constraints of the sector;
discuss the contributions and challenges of fishing and forestry sectors;
Expound the main contributions, potentials, characteristics and problems of Ethiopian agriculture;
Explain the main contributions, potentials, characteristics, distribution and problems of Ethiopian manufacturing industries;
Examine types, roles and distribution of transportation infrastructure and services in Ethiopia
Identify tourist potentials of the country and look into the performance of the sector to the socio-economic development of Ethiopia
Humans have been involved in a number of activities in order to satisfy their diverse material and spiritual needs. These activities, which are designed to satisfy the needs of human beings, are known as economic activities. There are diversified types economic activities in the world as well as Ethiopia.
Geographers classify a nation’s economy into primary, secondary, tertiary or the service sectors. Increasingly the service sectors are seen as forming a fourth or quaternary sector and a fifth or quinary sector. This categorization is seen as a continuum of distance from the natural environment.
In this section, you will learn about the major types of economic activities in Ethiopia; differentiate their spatiotemporal distributions and their contributions to the overall development of the country.
Mining involves the search for minerals from the crust of the earth. Minerals are naturally occurring organic and inorganic substances. They form important part of natural resources. Mining is important to the economy of Ethiopia. Currently, mining contributes to only 1.5 % of GDP (USD 32 billion).
As you have seen in chapter two, the Geology of Ethiopia and the Horn, mineral occurrences are associated with the geologic process. The oldest (Precambrian) rocks and the sedimentary (Mesozoic) rocks host most of the economic metallic and nonmetallic mineral deposits in Ethiopia.
So far, the developed large scale gold mine in Ethiopia is the Lege-dembi gold mine, located in the southern greenstone belt region. It is operated by private company with estimated reserve of 82 tons and an average annual production of 3.6 tons of gold.
There is also small-scale open pit mine of columbo-tantalite at Kenticha in the Adola belt. At present it is producing over 190 tons of tantalite concentrate of tantalite colombite ore per annum. Ethiopia presently supplies close to ten percent of the World production of tantalum and has a good potential for a considerable expansion of the percentage.
Soda ash is being mined at Lake Abiyata in the Rift Valley about 200 kilometers south of Addis Ababa. The reserve at Lake Abiyata and the surrounding lakes exceeds 460 million tons of sodium carbonate at salt concentration ranging from 1.1 to 1.9%.
There is also large input of construction minerals such as sand, gravel, scoria, crushed stones, aggregates, pumice, scoria, etc to the construction industry (including buildings, roads, dams, bridges etc.).
The gas fields are located in the south-eastern part of the country at Calub, Hilala and Genale gas fields in the Ogaden Basin. The gas resources potential of these fields has been assessed as 4.6 Trillion Cubic Feet (TCF).
The Mining laws of Ethiopia have been issued in 1993 and amended recently, to attract private sector investment compared to other developing countries mining codes. The total investment amount registered by the private sector to date is about 1.1 Billion US Dollars where by 95 % percent of it is direct foreign investment for the development of precious and industrial minerals. The mining stakes in Ethiopia are held by: The Ethiopian Mineral Development Share Company, a Government organization (EMDSC) established in 2000 is engaged in all mining activities in the country; the Ezana Mining Development, the Midrock Gold, a subsidiary of Midrock Gold Group, and the National Mining Corporation (set up in 1993).
It is inevitable that extraction of minerals from the earth leads to disturb the environment. When disturbing the environment there must be careful and systemic protection of the whole system of environment that assures sustainable use of the current resource and or ecosystem and that bring about either less or almost none destruction or pollution of the environment.
It is related to exploiting forest products, which include gathering of fuel wood, production of timber and charcoal, and construction of houses.
Even though the importance of forest and forest product is little in earning foreign exchange, their significance at local level is large. For instance, their contribution to the national economy in the form of GDP is about 2.5%.
Most of the trees cut in Ethiopia today are used for domestic purposes like for;
This indicates that forest products are sold on the local markets at lower prices. The commercial exploitation of forest resources in Ethiopia is still in its infancy stage.
This is mainly because of the following major factors;
Fishing is a primary economic activity that involves harvesting of fish resources from water bodies. Fish provide an important source of protein.
Due to the presence of a number of lakes, river and reservoirs rich in fish resources, Ethiopia has great potential for fishing. However, at present there is no reliable estimate due to lack of exhaustive and systematic (regular) stock assessment.
In the two southern Rift Valley lakes, Chamo and Abaya, Nile Perch is caught in significant quantity. Nile perch is also found in major riverine fisheries. Moreover, principal physical characteristics and the recent estimate of potential yield of the main water bodies are presented in the table given below.
Most fishing activities in Ethiopia take place in fresh waters, such as rivers, lakes and ponds. In general, the Ethiopian fishing grounds could be classified as Lakes and Rivers
Lakes fishery: They account about 79 percent of the total yearly fish production of the country. The most important lakes where much of the fish production comes include Lakes Tana, Ziway, Langano, Hawassa, Abaya and Chamo. The annual maximum sustainable fish yields of our lake are estimated to be above 35,000 tons. However, presently only 4,000 tons are produced annually.
River Fishery: Most rivers of Ethiopia have high fish resources. Most fish production of the river is confined to local consumption by villagers living near and around river banks. For example, river Baro alone can supply a maximum sustainable yield of 2,500 tons per year.
Water bodies type
Fishery potential (tone/year)
Major reservoir and dams
Small water bodies
Source: Assefa, 2014
Fish as a source of human food has a long history in Ethiopia. People consume large amount of fish in big cities, around production areas and towns, especially in Hawassa, Zeway, Arbaminch, Bahir Dar and Addis Ababa.
Outside these areas, however, the domestic market for fish is small. The factors which account for this low level of local fish consumption are the following.
Like for most of Africa, Ethiopia is riddled with poverty, economic stagnation and environmentally unsustainable practices, all of which pose serious constraints to fisheries development. However, ample opportunities exist for the sector to help reverse national development challenges by making a significant contribution to poverty alleviation, economic growth, better nutrition and ecological improvement. The sector also suffers from limited human resource availability, with an acute shortage of trained personnel. This poses serious constraints on fishery management and technical and extension support services.
Improvement in fishing techniques, technology transfer to fishers, training of fishery management personnel, attraction of financial capital to the industry, fish value chain improvement, and aquaculture, can all result to increased fish production, increased trade and overall economic development of the country.
Agriculture is defined as the purposeful tending of animals and plants.
The type of agriculture practiced in any area is influenced by physical and socio-economic factors. The environmental factors like soil; climate, relief, etc. impose certain limitations on the types of crops that may be cultivated and the type of livestock that may be reared. However, in addition to such environmental factors, various socio-economic factors like farm size, type of land tenure, capital availability, transport and marketing facilities, price, government policies, etc. also influence farming patterns.
Agriculture is important for a number of reasons. It provides: basic food supplies for the population; raw materials like cotton, sugar cane, oil seeds, etc. to industries; export crops, from whose sales industries infrastructure and the like may be established; and employment for the population.
The great majority of the Ethiopian population resides in rural areas engaged in some form of agricultural activity. Agriculture is the backbone of the Ethiopian economy and therefore this particular sector determines the growth of all the other sectors and, consequently, the whole national economy. The sector is dominated by small-scale farmers that practice rain-fed mixed farming by employing traditional technology, adopting a low input and low output production system.
Therefore, in this section emphasis is given to explain to the agriculture systems of Ethiopia including its role, structure and performance, farming type and the major challenges of the sector.
Agriculture is the backbone of the economy of the country as the following facts indicate.
Ethiopia has abundant agricultural resource base due to its varied agro-ecological zones. The varied climatic conditions and contrasts in elevation allow for the cultivation of various crops ranging from cool weather crops to sub-tropical and warm weather crops. The country has extensive livestock population, with estimated 30 – 35 million livestock units (TLU) standing first in Africa and 10th in the world and numerous livestock species.
Ethiopia has a total land area of about 113,000,000 hectares. There is no comprehensive survey of land use pattern in the country but some estimates suggest that about 12.6million hectares, 10.3% of the total area, is intensively cultivated, and a further 15.3million hectares (12.5%) is moderately cultivated. High forest and wood land areas account for 6.9%, while grassland for 30.5% of the total area.
The highlands of Ethiopia are easily distinguishable from their lowland counter parts as far as the pattern of agricultural land use is concerned. The highlands do not only produce a variety of crops due to their improved environmental conditions as well as due to the variety of agro- ecological zones caused by altitudinal variations, but they also practice an elaborate system of land preparation and crop rotation.
The number of crops grown decreases as one moves from the central highlands to the peripheral lowlands. The highlands are, thus, more diversified than the lowlands. Cereals (teff, wheat, barley, maize, sorghum, etc,) .
Livestock contribute 30-35% to agricultural GDP and 13-16% to overall GDP. These figures are considered as an underestimate since they do not consider the value of manure (fertilizer, fuel) and transport. The livestock sector contributes about 13% of the total value of agricultural export. The contribution of hides and skins from the livestock exports is the highest (more than 95%).
These basic attributes are:
The farmers have developed complex farming systems and cropping patterns in response to the diversified physical environment (both climate and soil).
Based on the dominant corps cultivated or animals reared and the main implements used in cultivation, there are five major farming systems as presented below:
1. Highland mixed farming system: the highland areas of over 1500 m.a.s.l are characterized by “dega‟ and “woina dega‟ agro- ecological zones. The major characteristic feature of the farming activity is the integration of crop and livestock production.
2. Lowland mixed agriculture: lowland agriculture is practiced in the mountain foothills and the lower valleys below 1500m.a.s.1. The region is characterized by hot and dry conditions (450-800mm of rainfall) and shallow soils with poor water retention. Lowland agriculture is common in the Rift Valley and northern areas of Awash River.
3. Pastoral complex: This type of agriculture is practiced in the arid and semiarid lowlands of Ethiopia where average annual rainfall is less than 500mm by nomadic and semi-nomadic peoples of Afar, Somali and Borena zone of Oromia and lowlands of the Southern Region of southern Omo and Lake Turkana area. Almost all the camels, about ¾ of the goats, ¼ of the sheep and about 20% of the cattle are raised by pastoral communities. About 90% of the live animals exported come from pastoral areas.
4. Shifting cultivation: In Ethiopia shifting cultivation is practiced by some ethnic groups living in western and south western fringes of the Ethiopian highlands and lowlands or Benishangul-Gumuz, Gambella and Southern Regions where population density is low and livestock rearing is limited in some areas due to tsetsefly infestation (trypanosomiasis).
5. Commercial agriculture: Commercial agriculture is a modern farming practice involving the production of crops or animal products for market by using some degree of mechanization and hired laborers. Mechanized farms were concentrated in the Awash valley, Arsi, southern Shoa, and Humera-Metema by the time many of which were nationalized (1975) and converted into state farms. New coffee and tea farms were also created during the Dergue.
Currently, the economic reform permitted the participation of the private sector in large scale commercial farming.
The major obstacles to the development of this sector include:
Land degradation: because of the rugged topography, about half of the cultivable land of Ethiopia is exposed to various level of soil erosion. The soil in many areas has lost some biological productivity and physical properties needed for optimal plant growth.
Variable rainfall: Ethiopian agriculture is heavily dependent upon unreliable rainfall which may produce surplus only in years of favorable weather. The rain sometimes comes early or late; and at other times it falls short of the required number of falls.
Land fragmentation: The increasing population size of rural Ethiopia and the limited total land area, especially, in the high land farming area has been the cause for declining percapita landholding
Land tenure insecurity: Uncertainty about the possible communalization of land and continuing land redistribution erodes the incentive to invest in permanent conservation and improvement on individual holdings. And, land is the collective property of the Ethiopian people and is not subject to buying and selling deal at the current government.
Backward technology: In Ethiopia the smallholder farming is characterized by dependence on traditional tools and farming practices. Low application of modern inputs fertilizer pesticides, and improved seeds) poor animal breeds etc. also characterize the Ethiopian small holder farming.
Industrial development in Ethiopia is extremely backward. The contribution of the industrial sector to the Gross Domestic Product (GDP) over recent periods is only 11.7 percent. The backwardness of the industrial sector is an indication of the low-level development of the Ethiopian economy. In the modern world development is equated with industrialization.
Manufacturing is a process of changing commodities to consumable forms. In this process there is an addition of value. In other words, the value of commodities is more after the undergone manufacturing. Manufacturing is, therefore, a higher-level economic activity than the production of primary materials.
The total number of persons employed by various manufacturing industries was reported as over 329,000 in 2015/16.This represents a continually increasing trend in the number of employees working in all industries over the last five years.
Gross value of production by manufacturing sector worth about 113 billion Birr in 2012/13 and value added generated is estimated to reach 32 billion Birr in the same year, which was about 4% of the value addition to the entire economy in the same year.
It is possible to identify two types of industries in Ethiopia. These are the traditional or cottage industries and the modern manufacturing industries.
Cottage industries have a long-standing place in Ethiopian history. Though the time of their inception is not clearly known, various kinds of weaving, woodcarving, pottery, metal works, basketry etc. are known for a long time. A peculiar feature of the cottage industries in Ethiopia is that they remain static; i.e., they existed with little changes and refinement throughout their long period of existence.
The development of manufacturing activities is measure of the development stage of countries. In Ethiopia manufacturing industries are at a low level of development. Most of the manufacturing industries are light industries i.e. industries that process consumer goods like textiles, food, tobacco etc. Heavy industries that manufacture capital goods are very small.
Despite the attention given to manufacturing in the GTP plans, the sector is not expanding as expected.
Historically, manufacturing establishments have been concentrated in a few large towns. In 1995/96 the top ten towns accounted for about 85 per cent of the total number of establishments and 79 per cent employment; where in the same year Addis Ababa alone accounted for about 67 per cent and 60 per cent respectively. This concentration has shown a modest decline and in 2009/10 the top ten towns share reached 60 percent and 62 per cent of the total number of Manufacturing industries establishments and employment respectively. The share of Addis Ababa also correspondingly declined to 40 per cent and 46 per cent respectively in the same year. New industrial towns such as Burayu, Sululta, Sebeta, Mojo, and Ambo are emerging around the capital city. Four of these were among the top ten industrial towns in both 2003/04 and 2009/10.
Some of the current regional capitals such as Hawassa in the south, Dire Dawa in the east, Mekelle in the north, and Bahr Dar in the northwest are also among the top ten towns hosting a substantial number of industrial establishments.
There could be many reasons as to why industries concentrate in and around specific towns and regions in the country. The agglomeration of industries in towns and specific regions mentioned above is explained by the availability of infra-structural facilities. In the case of the Addis Ababa-Adama industrial area, the Addis-Djibouti railway, proximity to the port of Djibouti, and availability of social service facilities are important. Political decisions could also influence the spatial distribution of manufacturing industries. The question of industrial location and regional equity requires a complex planning activity involving correct location policies and resource availability, each of which must be based on thorough and interdisciplinary examination.
The agro-processing industries, leather products and the textile and apparel sectors have been designated as top priority manufacturing industries in the latest five-year development plan (2015 to 2020). The main reasons include:
Contributions of Industrial Parks in Ethiopia
Ethiopia has adopted different policies for the development of industry over the past century. The industrial policies have distinctive features when looking at the guiding vision (policy), ownership structure, and market orientation. Broadly, they can be characterized as the import substitution and private sector-led (from early 1950s to 1974); the import substitution and state- led (from 1974 to 1991), and the export-orientated and private sector-led from 1991.
The constraints and opportunities for industrial development are indicated as follows:
High logistics and transportation cost
Relatively cheap electricity charge in comparison to other African countries
Limited research/study and action on export incentives and market
Low labor productivity
Relatively cheap labor force & increasing number of trained employees
High cost of imported raw materials
Access to wide market ( large domestic market, COMESA, AGOA, EBA opportunities, China market etc.)
Limited compliance to the international requirements and market
Competitive incentive packages which include export incentives
Underdeveloped rural infrastructure in the potential areas
Integrated Agro-Industrial Parks (one stop shopping for all the services, economies of scale, extension services, development of common infrastructure)
Weak supply chain integration, market institutions and information system
Global attention due to its remarkable economic growth and credit worthiness
Tertiary economic activity involves the distribution and provision of goods and rendering services. Tertiary institutions include wholesale and retail outlets, banking and other financial services, governmental and educational services, medical facilities, and much other business and service functions upon which we depend daily.
In this section, discussion will be made on the three of the service activities in Ethiopia: transportation and communication, trade and tourism.
Transportation is a service or facility by which persons, manufactured goods, and property are physically carried from one location to another. Transportation, it is usually said, is the lifeline or the blood vessel of an economy. This is why we invariably see a well-developed transportation network in well-developed economies.
There are five different types of transport in Ethiopia. These are:
This includes the use of pack animals (donkeys, mules, horses, camel) and goods carried by humans. In rural Ethiopia where modern transport systems are very few, it is obvious that they make immense contributions. Even in urban areas like Addis Ababa, modern means of transport has not totally done away with the traditional means.
Today most passengers and goods in Ethiopia are transported by road transport. In Ethiopia road transportation is relatively a recent phenomenon. The radial patterns of network development with the center being Addis Ababa, exhibits administrative integration rather than economic integration. This, however, does not mean that the roads were not used for economic purposes.
Major roads include:
No 1: north east from Addis Ababa 853 km via Adama and Awash to Bure on Eritrean border
No 2: north from Addis Ababa 1071 km via Dessie, Mek’ele and Adigrat to Axum
No 3: north west from Addis Ababa across the Blue Nile at Dejen and again at Bahir Dar east around Lake Tana 737 km to Gondar. Designated part of the Cairo-Cape Town Trans-African Highway 4 (TAH 4)
No 4: west from Addis Ababa 445 km via Nekemte to Gimbi
No 5: west from Addis Ababa 510 km via Jimma to Metu
No 6: south west from Jimma 216 km to Mizan Teferi
No 7: south from Mojo 432 km via Shashamane and Sodo to Arba Minch. Part of road between Mojo and Shashamane is designated part of the Cairo-Cape Town Trans-African Highway 4 (TAH 4)
No 8: south from Shashamane 214 km via Awasa to Hagere Mariam. Designated part of the Cairo-Cape Town Trans-African Highway 4 (TAH 4)
No 9: south from Adama 77 km to Asella
No 10: east from Awash 572 km.
The Addis Ababa–Adama Expressway was completed in 2014 as the first expressway in Ethiopia. In December 2015, construction began on a second expressway between Awasa and Mojo, where it will connect to the existing expressway.
In addition, the Ethiopian Roads Authority (ERA) has undertaken a three year project to upgrade over 370 km of roads in the country. Contracts have been signed with the Ethiopian Defense Construction, China Railway Engineering, Eney Construction, China Wuyi, Yotek Construction and FAL General Contractor.
The major advantage of rail transport is that it helps transport bulky products. For more than a century, Ethiopia was served by an international meter gauge railway, from Addis Ababa to Djibouti City in Djibouti.
Recently a new railway line of 750 km length connecting Addis Ababa to Djibouti, was officially inaugurated in Djibouti in 2018.
The other important railway is Addis Ababa Light Rail Transit. It is the first light rail and rapid transit in eastern and sub-Saharan Africa.
Ethiopia being a landlocked country does not have direct access to such areas. Presently, the Red Sea through the port of Djibouti is very important for Ethiopia’s external trade. Because of the nature of the topography over which Ethiopian rivers flow, Ethiopian rivers with the exception of Baro and Omo in their lower courses, cannot be used for transportation. On some of the lakes like Tana and Abaya there is small-scale transportation. The contribution of inland waterways to the Ethiopian economy is very small.
The other transportation mode, fairly recent in appearance and modern in its constitution, is air transport. Air transport is the fastest means of transportation from one place to the other. It has reduced distances by minimizing the travel time. It is very essential for a country like Ethiopia, where the topography is difficult for communication. There is no problem of laying the track for airways. The problem with air transportation is that they are expensive and cannot be used for transporting bulky products. EAL serve some forty-five cities and towns in the country. The reputed Ethiopian Airlines also gives impressive international service.
There were an estimated 84 airports in 2005, only 14 of which had paved runways as of 2005. The Addis Ababa Airport handles international jet transportation. It is the main hub of Ethiopian Airlines, the national airline that serves destinations in Ethiopia and throughout the African continent, as well as nonstop service to Asia, Europe, North America and South America. The airport is also the base of the Ethiopian Aviation Academy. As of June 2018, nearly 450 flights per day were departing from and arriving at the airport. In 2018, about 12 million passengers were carried on domestic and international flights.
over 3,047 m: 3
2,438 to 3,047 m: 5
1,524 to 2,437 m: 5
914 to 1,523 m: 1 (2003 est.)
over 3,047 m: 3
2,438 to 3,047 m: 2
1,524 to 2,437 m: 13
914 to 1,523 m: 27
under 914 m: 23 (2003 est.)
Communication is the process of conveying messages to others. An effective communication system plays a vital role to: accelerate the pace of development, enhance closer social integration, and to promote the basic aim of economic activities. Some of the communication services that are commonly used in Ethiopia include radio, television, internet, satellite, print publications, fixed and mobile telephones, and post offices.
The contribution of transportation to a country’s development is high. Its share of contribution to the GDP of a country is incontrovertible, though the nature and extent of the contribution varies from country to country. Transportation plays important economic, social and political roles some of which are indicated hereunder:
Trade is a process of exchange of products involving change in ownership of commodities. The development of trade in a country depends on the development of production activities. Trade basically arises when regions or persons complement one another with their products. A country carries out two types of trade. These are internal trade and external trade.
As the Ethiopian economy is an agrarian economy its merchandise (visible) export is determined by agricultural products. According to the data from National Bank of Ethiopia/NBE/, for all study periods the export structure of Ethiopia has been characterized by greater concentration of few traditional exports such as coffee, oil seeds, and pulses and chat.
Alike the commodity structure, the country’s exports has been concentrated geographically with largest proportion of exports destined to limited markets. The major export destinations for Ethiopian goods show that Asia accounted for 39.8 % of Ethiopia’s export earnings followed by Europe (28.7%). On the other hand, about 20.9 % of Ethiopia’s export earnings originated from markets in Africa.
Looking at the direction of trade by individual country, five countries (China, USA, Netherlands, Saudi Arabia and Djibouti) are important which account for 39% of the Ethiopia’s export between in 2015/2016.
With regard to imports of goods, during 2017/18, Asia accounted for 64.2 percent of the total imports of Ethiopia followed by Europe (19.3 %).Ethiopia’s total imports with the U.S.A accounted for 9.4 percent of the total import bill.
Tourism comprises the activities of persons traveling to and staying in places outside their usual environment for not more than one consecutive year for leisure, business and other purposes. UNWTO (2002)As one of the developing countries, Ethiopia and its tourism is becoming an important sector contributing a great deal towards the social, cultural, and economic development aspects of the country. Though tourism development is still unsatisfactory, an international tourist arrival in Ethiopia has shown a considerable growth. Likewise, the contributions of tourism income to GDP as well as export earnings are growing in recent years.