Tuesday, 31 January 2012

Teaming up for a better future – UNIDO helps oilseed processors in Ethiopia get their business back on track

Oilseeds – the second largest export commodity in Ethiopia, have been a vital part of the country’s economy. But things changed in 2007, when the Ethiopian Government enforced a ban on seed oils in response to the high commodity prices. The move put oilseed producers on the cutting edge. Even veterans in the business, like Reduan Musa—with 30 years of experience in oilseed processing — suffered hardships and sustained losses.

In the city of Adama, in central Ethiopia, where he has his business, imported oils substituted locally produced oil, and the government distributed wheat and edible oil to the urban and rural poor at subsidised prices. Export earnings fell from USD 210 million to USD 190 million due to lower unit prices and a drop in production.

Ethiopia’s edible oil sector continues to face many problems including unhealthy price competition among processors and farmers, limited knowledge on oil standards, high product loss and little diversification in seeds varieties. “Once upon a time, there were few competitors, enough market share and few challenges, but today the business is complicated,” says Reduan Musa.

Endalkachew Nigatu was in the oil seeds processing business for three years before the Government enforced the ban on seed oils. Following another three years of hardship, in 2010, Endalkachew went from victim to catalyser of Adama’s oil seed industry. He helped organize local oilseed entrepreneurs—many skeptical of what could be done— to participate in a workshop supported by three UN agencies aimed at identifying an action plan to enhance the edible oil value chain.

The Edible Oil Value Chain Enhancement Programme—which is funded by the Spanish Government— is a three years initiative jointly implemented by UNIDO, the International Labour Organization (ILO) and the UN Food and Agriculture Organization (FAO) in the Amhara and Oromia regions in Ethiopia. The programme aims to increase the productivity and competitiveness of Ethiopia’s oilseed producers, boost the capacity for processing oilseeds and improve access to local and international markets by integrating the private sector into the edible oil seed production value chain.

Within the framework of the programme entrepreneurs began sharing information about oil seeds, creating networks with other stakeholders in the sector and collaborating to solve common business bottlenecks through the new-found Adama Edible Oil Producers Cluster Association.
In May 2011, fifty micro, small and medium producers got together to form the Right Edible Oil Producers (REOP) plc. Later, thanks to the processors initiative, Adama’s oilseed brokers joined the entrepreneurs and sat in on REOP’s meetings.

“We all had the same problems and we came together to solve them,” says Tamirat Katsala, a 36-year-old oil processing business owner.
The oilseed processors also participated in a series of training courses and visits to Bahir Dar, Debre Zeit and Addis Ababa-based processing factories.
Thanks to the training, Adama-based processor and father of two, Demelash Negusse, 35, learned how to better use and repair his five machines, thus increasing his yield.            

“Before this project we did everything traditionally, now we know how to use, set, and clean machineries, and we can generate more oil from the same quantity of seeds,” says Endalkachew.

The programme also helps farmers improve the quality of their production to meet higher standards.  “The training changed our way of thinking. We now pool our resources and are thinking about establishing a large common refinery,” adds Endalkachew.

Among other things, the project has also provided  the much needed infrastructure, including office space and equipment, and helped facilitate a dialogue between the private sector and the Government. The relation with local authorities has improved through consultations and producers are now invited to participate in meetings and workshops.

“From the feedback we are receiving from the field, the project is highly appreciated by the Federal  and regional Government, the beneficiaries and other stakeholders,” says Dejene Tezera of UNIDO’s Agribusiness development branch. He adds that although UNIDO is the lead implementation agency, the project is an important example of how cooperation can lead to successful implementation with maximum impact. This view is also shared by the local oilseed processors in Adama.

”Producers from other cities now want to join the project and they are asking for membership in REOP. Big factories are calling to get contracts for oil supply, but we want to see the project’s outputs first,” says Endalkachew.

“Right now, no one knows our product and there is no recognition from the community,” explains Tamirat Katsala. REOP plc. members agree that with the yield of the oil seeds and the capacity of technical staff improved, the next step will be to move to a common site to produce higher quality branded oil.

By Elisa Sabbion and Eva Manasieva
Posted January 2012

To download a fact sheet on the project, click here