FINAL REPORT

ON

A CONSULTANCY SERVICE TO STUDY BUSINESS OPPORTUNITIES ON THE PRODUCTION, PROCESSING AND

MARKETING OF MAJOR FRUIT PRODUCTS IN ETHIOPIA

Submitted to

Addis Ababa Chamber of Commerce & Sectoral Association (AACCSA) Mexico Square, P.O.Box 2458

E-mail: addischamber@gmail.com Addis Ababa, Ethiopia

January 2017

Contents Acronyms ................................................................................................................................................ 1

List of Tables ........................................................................................................................................... 2

List of Figures .......................................................................................................................................... 2

Executive Summary ................................................................................................................................. 3

1. Sectoral Position in the Economy ..................................................................................................... 4

2. Production Status of Fresh Fruits ..................................................................................................... 6

2.1 Exporting Status of Fresh Fruits in Ethiopia ............................................................................... 9

2.2 Trends in Import Demand for fresh Fruits in Ethiopia ............................................................. 10

3. Performance of Fruit and Vegetable Processing Industry in Ethiopia .............................................. 11

3.1 Fruit Juice Processing in Ethiopia ............................................................................................ 12

4. Demand and Supply Aspect of the Sector....................................................................................... 15

4.1 Demand for Fruit Juices in Ethiopia ........................................................................................ 15

4.1.1 Demand for Apple Juice .................................................................................................. 16

4.1.2 Demand for Grape Juice ................................................................................................. 16

4.1.3 Demand for Orange Juice, Orange, Marmalade, Fruit Jellies and Jams ............................ 17

5. Future Outlook and Appraisal of Sectoral Investment Potentials .................................................... 19

5.1 Market Potentials................................................................................................................... 19

5.1.1 Domestic Market ............................................................................................................ 19

5.1.2 Regional Markets............................................................................................................ 20

5.1.3 International Markets ..................................................................................................... 21

6. Review of Government Policy and Incentives ................................................................................. 23

6.1 General Investment Incentives ............................................................................................... 23

6.2 Specific Incentive Packages: Agro Processing .......................................................................... 24

7. Role of Major Supporting Institutions ............................................................................................ 25

8. Concluding Remarks ...................................................................................................................... 26

Annex .................................................................................................................................................... 27

1

Acronyms

ADLI Agricultural Development Led Industrialization

ATA Agricultural Transformation Agency

COMESA Common Market for Eastern and Southern Africa

CSA Central Statistics Authority

EIA Ethiopian Investment Agency

FAO Food and Agriculture Organization

GTP Growth and Transformation Plan

IGAD Intergovernmental Authority for Development

MENA Middle East and North Africa

NAFTA North Atlantic Free Trade Area

SNNP Southern Nations and Nationalities and Peoples

UNCTAD United Nations Conference for Trade and Development

USAID United States Agency for International Development

WB World Bank

2

List of Tables

Table1: Area, Production and Yield of Crops for Private Peasant Holdings for Meher Season 2012/13 (

Table 2: Major Challenges and Opportunities of Fresh Fruit production

Table 3: Major Challenges and Opportunities of Fruit Exporting

Table 3: Performance of Fruit and Vegetable Processing in Ethiopia (2009/10-2013/14)

Table 4: Major Processers, Volume of Processing and Productivity

Table 5: Major Challenges and Opportunities of Fruit Juice Processing

Table 6: Volume (kg) of Apple Juice Imports of Ethiopia for the Period 2008-2015

Table 7: Volume (kg) of Grape Juice Imports of Ethiopia for the Period 2008-2015

List of Figures

Figure 1: Trends in export earnings from Fruits and Vegetable

Figure 2: Trends in Ethiopia’s fruit imports

Figure 3: Trends in the demand for fruit juice in Ethiopia

Figure 4: Value of Ethiopian major fruit and Vegetable export by category

Figure 5: World destinations for fresh fruits

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Executive Summary

Ethiopia has its sights firmly set on ensuring domestic value-addition; with a view to building the local agro-processing industry and leveraging private-sector experience to strengthen agricultural value chains. As part of this development agenda, the second Growth and Transformation Plan envisages an annual growth of 29% in export revenue and making agro-processing products and light manufacturing the main export revenue generating sectors. Accordingly, expanding agro processing industries through upgrading the fresh fruit production into the processing segment is crucial to achieve this objective.

Despite its huge potential in production of major fruits, Ethiopia has been a net importer of variety of fruit juices. Tropical fruit juices such as pineapple, apple grape, orange, banana, avocado and mixtures are becoming increasingly popular in the country. Given the huge production potential and rapidly growing domestic demand for fruit juices; fruit processing business is under developed and the private sector is not much attracted.

This study is, therefore, aimed at identifying the potential business opportunities in production processing and marketing of major fruit juices in Ethiopia. The outcome of the study will help AACCSA to extend business development service for members who wants to engage processing of major fruit juices. To reach the stated objective we use both secondary and primary data. Desk review of range of relevant literatures and data collected from CSA reports and other sources is used as a source of secondary data. Primary data is collected from major actors and supporting institutions in the chain through key informant interview. Convenience sampling is used to select representative producers, supermarkets, distributors of fruit juice based on ease of their volunteering, availability and the quickness with which data can be gathered. Data obtained through key informant interview and from secondary sources is systematically analyzed using descriptive method of data analysis.

The assessment result revealed that the production of major fruits such as banana mango Orange and papaya shows an increasing trend. As far as the status fruit juice processing is concerned, the numbers of fruit juice processors in Ethiopia are few in number with limited processing capacity. Although the demand for fruit juices has been increasing, the contribution of the existing processors such as AFRICA JUICE, Great Abyssinia, HEDAY Agro Industry PLC, MAAZA Juice Factory is estimated to be less than 1% of the total market demand. Stiff competition from importers, failure to use advanced processing technology, low demand for domestically processed juices and financial Constraint are some of the major challenges for domestic fruit juice processors.

According to ATA and USAID the overall domestic demand for fruit juice is expected to increase by 62.9 % in the year 2022 as compared to the year 2012. The future demand for fruit juices is a function of urbanization, income and change in the consumption habit of the population. Considering these factors demand for variety of juices is expected to grow in the future. Given the rapidly growing demand for variety of fruit juices, establishing a fruit juice processing plant in Ethiopia is promising business. As far as the export market opportunity is concerned Somalia and Djibouti represent current export destination opportunities while Europe, MENA, COMESA and China are longer-term, higher-value opportunities. In a nutshell, favorable agro-ecological climate for tropical fruit , relatively lowest input costs , geographic proximity to key export markets , large and growing mass-market consumer base, and favorable sector specific incentive package makes establishing fruit juice processing in Ethiopia a promising business opportunity.

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1. Sectoral Position in the Economy

Contributing nearly half of national GDP and half of all employment, agriculture is a key sector for Ethiopia’s rapidly growing $118.2 billion economy. Equipped with a competitive labour market and serving as a major regional hub with easy access to both the Common Market for Eastern and Southern Africa (COMESA) and the Middle-Eastern market, Ethiopian agriculture offers promising rewards for companies and a viable economic strategy through which the government can further its goals of reducing poverty and food insecurity.

To that end, the country is pursuing a collaborative and balanced approach to transforming this pivotal sector. The 5-year Growth and Transformation Plan for 2011-2015 (GTP) and the Agricultural Development-led Industrialization (ADLI) strategy both offer a long-term vision and a mechanism for aligning efforts and initiatives behind those goals. The GTP objectives focus on enhancing the productivity and production of smallholder farmers and pastoralists, strengthening market systems, improving private-sector participation and engagement, expanding the area of land under irrigation, and reducing the number of chronically food-insecure households and enhancing agro processing (Grow-Africa-Annual-Report-2014)

Ethiopia has its sights firmly set on ensuring domestic value-addition; with a view to building the local agro-processing industry and leveraging private-sector experience to strengthen agricultural value chains. Several initiatives have been put in place with these purposes in mind, ranging from the provision of fiscal incentives to the building of hard infrastructure. Expanding Agro processing industries in Ethiopia is aimed at increasing the productivity and capacity utilization of the existing industry and promotes the newly established industries. As part of this development agenda, the horticulture sub-sector has gained priority in the Growth and Transformation Plan (GTP). This policy document continues to stress the leading role of agriculture in the economic development of the country. In the fruit and vegetable sub sector the Ethiopian Government has the objective to increase the land under cultivation from 2500 ha in 2010 to 33,000 ha at the end of the GTP-period and to increase production by 47% between 2015 and 2020 (Mashindano, 2013; ATA and USAID, 2014). In relation to this, the total production of fruit and vegetable increases from 1,281.8 thousand ton in the year 2009/10 to 1,463.32 thousand ton in the year 2014/15 which shows average growth of 14%.

Ethiopia has a good potential for the production and export of high-valued fruits and vegetables that can be competitive in the international market with additional advantage in location proximity to the markets. Yet the country has been generating consistently a low export earnings from the export of fruit and vegetable relative to other agricultural products (Yabsira, 2014). In the year 2014/15 the country earned USD 47.6 million from export of fresh fruits and vegetables, 3.6 percent higher than the previous year. The rise in the value of export was due to a 3.2 percent increase in volume 0.3 percent in and international price. However, the share of fresh fruit and vegetable out of the total export was merely 1.6 percent (NBE, 2015).

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Out of the planned export earnings from the horticulture industry (1.5 billion USD) only 16.6 % (249.7 million USD) is achieved at the end of the GTP period. Comparing the average for the periods between 2004/05-2008/09 and 2009/10-2013/14 for major export commodities; the share of fruit and vegetable out of the total export earnings increases from 1.3 percent to 1.4 percent which is insignificant (UNDP, 2014). During GTP I period, the planned export earnings from the fruit and vegetable sub-sector was 371.6 million USD of which only 11.6 % of the targeted earning is collected (GTP II).

The second Growth and Transformation Plan envisages an annual growth of 29% in export revenue and making agro-processing products and light manufacturing the main export revenue generating sectors. It aims to achieve an annual growth of 24% in the manufacturing sector, and to increase the contribution of the manufacturing sector to 25% of export earnings, up from the current 10%. Accordingly, expanding agro processing industries through upgrading the fresh fruit production into the processing segment is crucial to achieve this objective. In Ethiopia, the number of fruits and vegetables processing industries are few in number and the industry is quite nascent and these firms are working below capacity (WB, 2012). Although the production and export of fresh fruits has been in increasing (Banana, Orange, Mango, papaya) Ethiopia is net importer of fruit juice and the import demand shows rapidly increasing trend. In the year 2010, Fruit juice import was 2044 tons which increases to 4525 tons in the year 2011.

According to ATA (2016) domestic demand for fruit juice has been growing rapidly and expected to increase on average by 62.9 % for the periods 2012 to 2022. The rapidly growing demand shows that segment offers good investment opportunities. As far as the potential market is concerned, there is a huge potential domestic, regional and international market for fruit juices.

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2. Production Status of Fresh Fruits

Global fruit and vegetable production has experienced a remarkable increase. Output has been growing at an annual rate of about 3 percent over the last decade. In 2011, almost 640 million tonnes of fruit and more than 1 billion tons of vegetables were harvested around the world. Strong growth rates in fruit cultivation have also been recorded in food-insecure and low-income regions such Kenya, Ethiopia, Ghana, Rwanda, Uganda, Indonesia and Viet Nam. High-value crops like fruit has been identified as one of the fastest growing agricultural sub sectors in Sub-Saharan Africa in the past two decades (FAO, 2014).

Fruits have significant importance with a potential for domestic and export markets and industrial processing in Ethiopia (de Jager and Wiersinga, 2009). The main fruit crops are banana, with 290,000 tons annually, followed by mango (70,000 tons), orange (49,000 tons), and papaya (43,000 tons). It is believed, however, that the potential fruit base is considerably higher (Groot et al., 2014). The table below shows the volume of production, area covered and productivity of fresh fruits in the year 2012/13 in Ethiopia.

Table1: Area, Production and Yield of Crops for Private Peasant Holdings for Meher Season 2012/13 (2005 E.C)

Fruit Crops Areas(ha) % distribution Production( in quintals )

% distribution Yield( qt/ha)

Avocado 8,938.24 14.42 256,331.64 5.35 28.68 Banana 36,012.19 58.11 3,025,022.32 63.11 84.00 Guavas 1,492.32 2.41 11,730.03 0.24 7.86 Lemons 754.23 1.22 55,167.50 1.15 73.14 Mangoes 8,808.64 14.21 697,507.30 14.55 79.18 Oranges 2,999.21 4.84 357,458.39 7.46 119.18 Papayas 2,752.08 4.44 386,943.15 8.07 140.60 Pineapples 215.69 0.35 * * Total 61,972.60 100.00 4,793,360.64 100.00 77.35

Source: CSA Agricultural Sample Survey, 2012/13

As shown in the above table 61,972.60 hectares of land was used to produce fruit crops in Ethiopia during the year 2012/13. The largest area is attributed to production of Bananas (58.11%) followed by production of mangoes (14.21%) of the area. More than 4,793,360 quintals of fruits were produced in the country during this period. Accordingly, Bananas, Papayas, Mangoes and Oranges took up 63.11%, 8.07%, 14.55% and 7.46% of the fruit production respectively.

The total area of land covered with Avocados, Bananas, Lemons, Mangos, Oranges, Papayas and Pineapples across the county for the 2012/2013 cropping season was 8,938.24, 36,012.19, 754.23, 8,808.64, 2,999.21, 2,752.08, respectively, which made the total hectare of land covered with this major fruit crops during the season 61, 972.60. In terms of productivity, the yield per hectar for Papaya is very high followed by oranges and banana respectively. The total estimated production of fruits from large scale commercial farms for 2014/2015 cropping season is estimated to be 1,035,819.28 quintals. According to this report in large scale commercial farms production of banana and oranges contribute the largest share as opposed to the case in peasant production system.

CSA (2015) estimation report on area and production of crops in Ethiopia showed that total estimated areas of land covered with major fruit crops in the peasant holdings of the country will be 90,070.83 hectares in 2014/2014 meher cropping season which shows an increment of 45 % relative to the year

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2012/2013 . Regional distribution wise, estimation for 2014/2015 meher cropping season show that S.N.N.P.R alone will share about 59% of the total land usage for major fruit production in Ethiopia, followed by Oromia region, which share about 30% of the total area coverage. According to this report, estimated production of major fruits in Ethiopia for the cropping season 2014/2015 is about 7,062,090.47 quintals, of which estimated production in S.N.N.P.R and Oromiya, respectively, will share 66% and 26% of the total fruits production in the country. The same source also indicated that banana alone will share about 68 % of the total fruit production in the country, followed by mango (13%) and avocado (8%). However, the total production contribution to the country’s total crop production is less 2%. Moreover, the total fruit production in the year 2014/15 shows an increment of 47 % relative to the total production in the year 2012/13.

Table 2: Major Challenges and Opportunities of Fresh Fruit production

Name of

producer

Type of fruit

produced

Challenges Opportunities Target

Market

LUNA

Fruits PLC

Table Grapes,

green beans,

snow peas

-Limited and seasonal demand for

Table Grapes

-Post-harvest loss of 15-20% during

transportation and sales process

-Lack of commitment and technical

skill of employees

-High competition in the market and

selling price is mainly determined by

buyers bargaining power

-Absence of insurance coverage for

losses during handling and

distribution

- Import barrier for seeds and

chemicals which are not registered by

Customs Authority

-Huge potential demand

for variety of fresh fruits

in the domestic as well as

international market

-Investment incentives

provided by the

government

-Export(UK)

-Fresh Corner

-Consumers

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Name of

producer

Type of fruit

produced

Challenges Opportunities Target

Market

Etfruit Orange,

Banana,

Mango, Papaya,

Pineapple, etc

-Stiff price competition in the market

-Seasonal fluctuation of fruit

production

-High pre and post-harvest loss

(around 25 % during sales process and

1% during transportation)

- credit constraint and logistics

problem such as convenient

warehouse

-failure to use advanced technology

-Favourable weather

condition for all year round

fruit production, high

demand both in the local

and international market

-Availability of skilled

manpower for supervision

and quality control in the

market

-Existence of insurance

coverage for losses

occurred during

transportation and theft

-Export to

Djibouti,

Somalia and

Sudan

-Domestic

wholesalers,

retailers and

consumers

Source: Key Informant Interview

Many studies revealed that the country's potential for the production of a wide range of fruits with its abundant land for cultivation and labor throughout the year .From the above analysis we can also reiterate that the productions of major fruits show an increasing trend and the country has a very high potential of fresh fruit supply. The persistent increase in the production of major fresh fruits and very high market demand for major fruit juices such as orange juice and concentrates, papaya, mango and apple is a clear indicator of existence of huge business opportunity in fruit juice processing industry specifically in banana, mango, papaya and orange juice. As far as regional production of fruits is concerned SNNP has relatively high and all year supply followed by Oromia. Hence, establishing processing plants in these regions is an opportunity to take the advantage of abundant and all year round supplies of fresh fruits and reduce postharvest loss.

According to FAO post-harvest losses in developing countries can range from 15 percent up to 50 percent. Limited knowledge about post-harvest handling of fruits and absence of processing industries in the nearby area results in very high the post-harvest losses of fruits in Ethiopia (ILRI, 2011.) To reduce the losses of variety of fruits, it calls for a close integration of the beneficiaries along the value chain, processing fresh fruits into fruit juices, access to post-harvest technologies and efficient supply chain management. The above assessment indicates that starting up a company engaged in production, harvesting and processing of fresh fruits will be profitable and best way to utilize the fruit production potential of the country.

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2.1 Exporting Status of Fresh Fruits in Ethiopia

It is known that Ethiopia has strong potential for the production and export of fresh fruits that can be competitive in the international market with additional advantages with location proximity. Major fruit crops with a high significance for the local and export market include pineapples, bananas, mandarin, avocados, guava, citrus fruits, mangoes, passion fruits, grapes, and papayas recently appeared as major parcels for the export market (EIA, 2012). The major export markets for fruits for Ethiopia are the surrounding countries Djibouti, Sudan and Somalia and the main products exported to these countries is non-graded fresh fruits. Whereas, higher valued fresh produce that includes graded and pre-packed are exported to the United Arab Emirates, United Kingdom and the Netherlands. Here is should be noted that about 85% of the fruits and vegetables are exported to Djibouti and Somalia while the second export market destination is the Emirates (Yabsira, 2014)

The share of fresh fruit and vegetable out of the total export earning has been consistently increasing since the year 2009/10. As shown in the figure below the export earnings from fruit and vegetable is increased by 183% in less than a decade. Ethiopian fresh fruit exports have been increasing rapidly over time indicating momentum in continued trade. As shown (Appendix II) the value of export of banana (fresh/dried) shows an increasing trend for five consecutive years (2011 to 2015). Its average contribution reaches around 39 % of the export earning of the country from fresh fruits followed by export of citrus fruit (fresh/dried) which is around 29 %. Export of fresh papayas and Melons is the least contributor of the country’s export earnings (2.6%) for consecutive five years. According to ATA (2016) Somalia and Djibouti represent current export destination opportunities while Europe, MENA, COMESA and China are longer-term, higher-value opportunities. The volume of fresh fruits export to these countries has been raised considerably; however, average value per unit of exports has shown little change despite the boost in export volume. The increasing trend of export value shows that the international market demand for exported of fresh fruits from Ethiopia .Therefore, the country’s export earnings from the sub-sector would have been very high if investors are engaged in processing and exporting of fruit juice products.

Figure 1: Trends in export earnings from Fruits and Vegetable

Source: National Bank of Ethiopia (2014/15)

5.29.2 9.4

12.616

12.715.9

12.4 10.5

30.15 31.01

43.1 43.9 45.9 45.2

05

101520253035404550

Annual Ethiopian export earnings from fruits and vegetables in million USD

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Table 3: Major Challenges and Opportunities of Fruit Exporting Name of the

exporting firm Type of fruits

being exported Major Export Destinations

Challenges Opportunities

Almeta Impex PLC Table grapes, Strawberry,

UK, Saudi Arabia

-Seasonal Price fluctuation and lack of market demand for some type of fruits. -Post harvest loss due to long process of freight forwarding services and absence of enough cold storage -Licensing procedure and capital constraint are main challenges to start and run the business.

-All year round supply of variety of fruits at the farm gate. -Reliable service from Ethiopian Airlines

Luna Fruits Plc Fresh vegetables

UK, Saudi Arabia

-Very good supply of vegetables

Jittu Horticulture PLC

Fresh Fruits Middle East -Seasonal fluctuation of fruit supply, foreign exchange constraint and lack of market demand for some fruit varieties. -Stiff competition in the international market especially from US and Asian exporters -Standard requirements, licensing procedure and capital requirements and high freight charge are major constraints to become fresh fruit exporters.

-Availability of cold storage services at a competitive price. -Attractive incentive packages provided by the government for investors.

Source: Key Informant interview

Fruit and vegetable exporters who are commercially known and legally registered are very few in number. Ethiopian fruit exporters are unable to offer the right quality, variety of fruits that the export market demands. Externally, fruit exporters are hindered by lack of credit facilities and seasonal inputs supply constraint, time taking customs procedure and stiff competition in the international market followed by lack of infrastructure such as freight forwarding and cold storage. Therefore, taking the necessary remedial measure for the stated problems and supplying standardized fresh fruits will enable the country to reap the potential benefit from exporting fresh fruits in the international market.

2.2 Trends in Import Demand for fresh Fruits in Ethiopia

Although export of fruits from Ethiopia has been increasing recently; the average share of fruits and vegetables out of the total export earning of the country is less than 2 % (Annex I). Given very high domestic market demand, the country has been importing fresh fruits from abroad. As shown in the figure below, although the production and value of export earnings from fruits shows an increasing trend; Ethiopia has been a net importer of fruits with import growing on average by 30 % from the period 2010 to 2012. The import volume in 2009 is more than 8 times the volume of export. However, the export

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volume of fresh fruits is increased by more than 50 % in the year 2012 relative to 2009. From the figure depicted below, we can reiterate that the domestic demand for fresh fruits outweighs the domestic production and it has been also increasing with the increase in urban population. Therefore, there is a huge potential opportunity for investors to engage in producing variety of fruits and sell to domestic processors, consumers as well as export to regional and international market.

Figure 2: Trends in Ethiopia’s fruit imports

Source: ATA and USAID, 2016

3. Performance of Fruit and Vegetable Processing Industry in Ethiopia

The food processing sector contributes a major part to a gross value of the combined manufacturing sectors, with the total manufacturing value of 16 billion birr. Taking in to account a population of above 90 million the consumption of processed food comes to about UDSD12 per capita per year. It is well known

12

that processing plays an important role in the conservation and effective utilization of fruits. It converts perishable fresh products to more durable processed products in cases of sluggish markets for the products. By generating rural employment and foreign exchange earnings the sector contributes its share towards the development of the country. Thus, the production and processing of horticultural crops like fruits are given a high priority by the Government and various incentives have been provided for investors investing in this subsector (FAO, 2014). Ethiopia has a comparative advantage in the processing of horticultural products due to its favorable climate for the production of a variety fruits and vegetables. Furthermore, access to regional and international markets due to its proximity to European and Middle Eastern countries makes the country favorable for investors in the sector.

Table 3: Performance of Fruit and Vegetable Processing in Ethiopia (2009/10-2013/14)

Industrial Group Indicator 2009/10 2010/11 2011/12 2012/13 2013/14 Production, processing and preserving of Fruit Vegetable and meat

Number of establishments (Private and Public) 10 10 19 21 41

Gross value of production(IN’000 BIRR) 475,093 640,445 2,624,182

1,625,300

2,289,763

Value added at Market Price (IN’000 BIRR)

120,692

98,155

353,104

72,549

589,543

Number of Persons employed 1994 2716 3759 3052 3510

Number of female employees 293 579 830 709 904

Source: CSA, Survey of the manufacturing and Electricity Industries, Annual Issues

As shown in the above table, the number of small and large scale fruit, vegetable and meat producing and processing industries which are both publically as well as privately owned was 10 employing around 1994 persons during the year 2009/10 and it increases to 41 in the year 2013/14 and the numbers of temporary and permanent workers increased to 3510. Hence, the sub-sectors contribution to overall employment creation is increased by 76 % and the female workers participation in the subsector is also increases drastically. Moreover, the number of small and large scale fruit, vegetable and meat producing and processing industries has reached around 41 out of which 19 are publically owned, 10 are PLCs and the remaining are individually owned(9), partnership(2) and share company(1). The paid up capital of 36 industries is above 1000000 birr and and the remaining 5 establishments do have paid up capital of less than 250,000. Overall, these industries hire more than 3500 employees. From this we can reiterate that the contribution of the sub-sector to employment and value addition has been increasing and the number of small and medium fruit and vegetable processing industries also increases following the various incentive schemes provided by the government and growing market demand.

3.1 Fruit Juice Processing in Ethiopia

To date, major proportion of the fruit juice consumed in the local market is imported, mainly from Saudi Arabia and European countries. These juice-packing countries, in turn, import the majority of their raw material inputs from Ethiopia. The production of fruit juices is in its infancy, but demand in the urban area has been increasing.. Fruit processing is, however, limited mainly to extraction of fresh juice which is sold on the local market. Previously, Merti processing factory was the only plant producing fruit juice for the local market by using domestically produced fruits. Meanwhile in 2009 africaJUICE Tibila Share Company,

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a joint venture between africaJUICE BV of the Netherlands and the Ethiopian government, took operational control of Tibila Farm in Ethiopia’s Upper Awash Valley and started producing passion fruit, mangoes, papayas, and other tropical fruits has built a new fruit-processing facility with state-of-the-art processing, sterilization, and packaging equipment. The processed juice is exported through the port in neighboring Djibouti to markets in Europe and the Middle East. The company directly employs 2,400 people and programmer’s goal is to develop and support over 1200 hectares of out growers, organized as cooperatives, to supplement the supply of fruit to the processing facility and extend community participation (EIC, 2011).

Great Abyssinia, producer of Prigat Juice, also appears to be the company producing juice from imported concentrates. The existing facility, which was established to produces Prigat Juice in mango and strawberry flavors. In addition to this, it produces carbonated soft drinks of Splash Brand series. This series includes flavors of coffee cola, orange, and passion fruit orange, malt pineapple, fresh lemon and apple. This facility has a capacity of producing 13,500 bottles per hour and it is operational for 22 hours with 400 employees. Great Abyssinia’s new investment is going to be in Sendafa on 25,000 square meters of land and the expansion is going to be made in three phases. The first phase is expected to be concluded in a year time and expected to have a production capacity of 36,000 bottles in an hour. Upon completion of all phases the company’s production capacity is going to increase to 100,000 bottles per day.

As the demand for fruit juices has been increasing rapidly; shops and supermarkets exclusively sell expensive imported juices (Groot et al., 2014). The processing industry is quite promising. Accordingly, new mango juice factory, Seka Agro Processing Plc – is being built in Southern Regional State. Seka is aiming to produce a total of 407,100ql of raw mango. Out of this, 50pc is planned to be processed for concentrates. The company will target the East African and Middle Eastern markets, for fresh juice and concentrate, respectively.

Table 4: Major Processers, Volume of Processing and Productivity

Name of the processing plant

Ownership Input Source Major products Current production

Merit Processing Factory

Private-owned

Own Commercial farm Orange Juice and Marmalade

It depends on the market demand

AFRICA JUICE Share Company

Own Commercial Farm and Out growers scheme

Passion fruit juice and Mango Puree (Producers and Processors)

Great Abyssinia Privately Owned

Imported Concentrates

Prigat Juice in mango and strawberry flavor

120,000 bottles per day and planning to produce additional 100,000 bottles per ay

Petram PLC/ MAAZA Juice Factory

Privately owned

Domestically produced fresh Mango and Imported semi process mango pulp

Maaza Mango (Mango Nectar)

30,000 litter/day and 180,000 litters/ week

THEDAY Agro Industry PLC

Privately Owned

Commercial farmers Passion Fruit, Strawberry and Mango

200 tones/year and the company is producing at its full capacity

Source: Key Informant Interview

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As shown in the above table, the numbers of fruit juice processors in Ethiopia are few in number with limited processing capacity. Although there is all the year round production of variety of fruits and increasing market demand for fruit juices in the domestic market the processing industry in at its infant stage. The fastest growing population and the highest rate of urbanization in Ethiopia together with a growing middle class drive a surge in fruit juice demand. According to ATA and USAID the market demand for fruit juice in the year 2018 is estimated to be 10,844 tones which show an increment of approximately 34% relative to the demand in the year 2012. Given the consistently increasing demand, the contribution of the existing processors is estimated to be less than 1% of the total market demand. From this we can conclude that establishing fruit juice processing plant in Ethiopia is untouched and promising business opportunity.

Table 5: Major Challenges and Opportunities of Fruit Juice Processing Name of

Processing plant Major challenges Opportunities Major

Customers Maze Juice Factory -Time taking customs clearing process

-Stiff competition from importers such as Rani juice -Failure to use advanced processing technology

-High Market demand -Government Incentive Packages -Availability of better logistics, warehouse facility

-Domestic consumers -Supermarkets -Wholesalers

Merti Processing Factory

-Producing below its full capacity due relatively lower domestic market demand -Very high competition from importers

-No fresh fruit supply shortage -Availability of reliable packing and container service -Existence of production and processing plants in one location

-Domestic consumers -Supermarkets Wholesalers(LUNA and EtFruit)

THE Agro Industry PLC

-Stiff competition from fruit juice importers -Financial Constraint to expand the processing plant -Shortage of supply of strawberry fruits in the Market -Absence of enough local packing industry

-Investment incentives -Growing market demand

-Supermarkets Wholesalers(LUNA and EtFruit)

Source: Key informant Interview

From the above table, we can understand that even though there is a huge potential market and attractive investment incentives provided by the government for investors the number of fruit juice processers are few in number. The fruit processing industry in Ethiopia is very weak, considering the substantial amount of fruit that is grown in the country. This is attributed to various reasons. One of the reasons for this is the highly developed processing industries in other countries which are able to export into countries like Ethiopia and sell the final product at low cost. Indeed, there was a number of imported, long-life fruit juice brands available throughout Ethiopia and is certain to act as a competitive entry barrier for domestically produced juice. Apart from the very high competition from the importers long customs procedure, low domestic market demand for some fruit juices, credit constraint, existence few packing industries, seasonal shortage of some fruits and use of outdated technology are main challenges for already established fruit processing industries in Ethiopia.

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4. Demand and Supply Aspect of the Sector

4.1 Demand for Fruit Juices in Ethiopia

Upper Awash Agro Industry (Merti) was the only domestic producer of fruit juice mainly orange juice and marmalade. Currently a few fruit juice processors started to process fruit juice including apple, mango fruit juices. However, the demand for fruit juice by far outweighs the supply.

Figure 3: Trends in the demand for fruit juice in Ethiopia

Source: ATA and USAID, 2016

As shown in the above figure, the total domestic demand for different variety of fruit juice was around 8,122 tons in the year 2012. The total demand is expected to increase to 10,844 tons in the year 2018 which shows growth rate of 33.5 % as compared to the demand in the year 2012. Similarly, the domestic demand for fruit juice is projected to grow to 13,230 tons in the year 2022 which shows increment of 22 % relative to the demand in year 2018. The overall domestic demand for fruit juice is expected to increase by 62.9 % in the year 2022 as compared to the year 2012. The domestic demand for different variety of fruit juices has been drastically increasing. Specifically, the demand for imported juices shows increasing trend as the domestic production doesn’t satisfy the growing demand. The demand for fruit juices on the local market is high as indicated by the volume of imports. This is a strong indication of the existence of promising potential investment opportunities in processing fruit juices in Ethiopia.

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4.1.1 Demand for Apple Juice

Table 6: Volume (kg) of Apple Juice Imports of Ethiopia for the Period 2008-2015

Source: Ethiopian Customs Authority

As shown in the above table, the total import demand for Apple juice for the period 2008-2015 is 1,123,433 kg. The average import demand for Apple juice for the same period is 140,429 kg. The highest import demand is registered in the year 2012 which is 367,560 kg and the lowest import demand is registered in the year 2008 which amounts 82265 kg. The future demand for processed and canned apple juice is a function of urbanization, income and change in the consumption habit of the population. Considering the above main factors demand for apple juice is expected to grow.

Prefeasibility assessment conducted by SNNP Regional State Investment Expansion Main Process (Industrial Projects Services) shows the potential business opportunity of establishing a plant processing apple juice and syrup with a capacity of 300,000 kg per annum in Ethiopia. Accordingly, the total investment requirement is estimated at Birr 5.94 million, out of which Birr 2.5 million is required for plant and machinery. The average demand for fruit juice for the year 2000-2005 was estimated at 328,000kg per annum. The demand is expected to reach at 534,000kg by the year 2017. The project is financially viable with an internal rate of return (IRR) of 21 % and a net present value (NPV) of Birr 3.88 million discounted at 8.5 % (http://www.southinvest.gov.et/PotentialsIPSPage1.htm). This analysis reiterates that the demand for apple juice has been increasing in the country and this shows that there is a promising market demand if one is engaged processing of Apple juice in Ethiopia.

4.1.2 Demand for Grape Juice

Table 7: Volume (kg) of Grape Juice Imports of Ethiopia for the Period 2008-2015 Year 2008 2009 2010 2011 2012 2013 2014 2015 Total Average

Import 7776 5171 3025 3733 21124 3695 2775 20117 67416 8427

Source: Ethiopian Customs Authority

As shown in the above table, import of grape juice has shown a general increase although there is a fluctuation in some years. The total demand for Grape juice for the period 2000 to 2015 is 67,416 kg. The average import demand for Grape juice for the same period is 8427 kg. The highest import demand is registered in the year 2012 which is 21,124kg and the lowest import demand is registered in the year 2010 which amounts 3025 kg. This shows that the consumption of imported grape juice in the country is increasing at a faster rate As urbanization expands and income rises there is a shift towards more expensive foods such as fruit juices. The future demand for grape juice is mainly a function of urbanization, income, price and change in the consumption habit of the population and taste and preference of consumers. Considering all these factors, demand for grape juice is expected to grow.

Prefeasibility assessment conducted by SNNP Regional State Investment Expansion Main Process (Industrial Projects Services) shows the potential business opportunity establishing a processing grape juice with a capacity of 100,000 kg per annum Ethiopia. The total investment requirement is estimated at about Birr 6.03 million, out of which Birr 2.5 million is required for plant and machinery. The average

Year 2008 2009 2010 2011 2012 2013 2014 2015 Total Average

Import (Kg) 82265 103309 129312 113146 367560 178473 135 000 149368 1123433 140429.13

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demand for the period 2000-2006 was estimated at 114,000 kg per annum. The demand is expected to reach at 204,000 kg by the year 2017. The project is financially viable with an internal rate of return (IRR) of 17% and a net present value (NPV) of Birr 884,820 discounted at 8.5% (http://www.southinvest.gov.et/PotentialsIPSPage6.htm).

4.1.3 Demand for Orange Juice, Orange, Marmalade, Fruit Jellies and Jams

Table 8: Volume (kg) of Orange Juice, Marmalade production and Imports of Ethiopia for the Period 2008-

2015

Year Domestic Production Import Market Demand 2008 - 128694 128694 2009 1,824,000 102129 1926129 2010 3,892,000 500985 4392985 2011 1,998,000 989047 2987047 2012 2,867,000 565975 3432975 2013 1,304,000 259324 1563324 2014 2153413 2153413 2015 378175 378175 Total 11,885,000 5,077,742 16,962,742 Average 2,377,000 634717 2120342

Sources: Ethiopian Customs Authority, CSA Survey of Manufacturing and Electricity Industries, Annual Issue

During the period (1999/00-2004/05), the average domestic production was 15,700 Kg while the average imported amount was 128,700 kg. The yearly average total apparent consumption during the same period was 144,400 kg, implying that local production constitutes only about 11% of the aggregate supply.

In contrast, as we can see from the above table, the overall market demand for orange juice, orange concentrates, marmalade, fruit jellies and fruit Jams for the period 2008-2015 is around 16,962,742 kg out of which 11,885,000 kg is domestically produced and the remaining 5,077,742 kg is imported from abroad. The local production constitutes the major share (70 %) while the remaining (30%) is imported from abroad. From this, we can reiterate that the increasing demand for orange juice, orange concentrates, marmalade and fruit jams enhances the domestic production over and above the import demand from the period 2004/2005 onwards.

Following the government incentive schemes, Upper Awash Agro Industry (Merti) is producing and supplying the orange juice, marmalade and concentrates which contribute a lot in reducing the import demand in recent periods. The future demand for agro-industrially processed orange and mandarin juice is mainly a function of urbanization, income, taste and preference of consumers. As income rises and urbanization grows there is a shift towards more expensive but conveniently packed and available foods. Having considered all the above mentioned factors, demand for orange juice and marmalade is expected to grow in the near future

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Prefeasibility assessment conducted by SNNP Regional State Investment Expansion Main Process (Industrial Projects Services) shows the potential business opportunity for establishing a plant processing orange and mandarin juice with a capacity of 180,000kg per annum in Ethiopia. Accordingly, the total investment requirement is estimated at Birr 6.22 million, out of which Birr 2.5 million is required for plant and machinery. The average demand for the period 199/00-2004/5 is 144,000 kg. The demand is expected to grow by 259, 000 kg in the year 2017. The project is financially viable with an internal rate of return (IRR) of 17% http://www.southinvest.gov.et/PotentialsIPSPage6.htm

Recent prefeasibility assessment conducted by ATA and USAID (2016) shows that developing a tropical juice processing plant in Ethiopia is a promising opportunity. The potential Greenfield investment in a juice processing plan which costs $20 million investment and having a capacity to produce 40,000tonnes/year could yield an 18-25% IRR over 5 years. Moreover, the establishment can accommodate up to 2500 formal employees at full capacity.

In a nutshell, the CSA Manufacturing Industries Survey data shows domestic production of only for orange juice, orange concentrates, marmalade, fruit jellies and jams. In the absence of data for domestic production of other fruit juices, the import data obtained from Customs Authority is used to assess the increasing demand for variety of fruit juices in Ethiopia. The future demand for processed fruit juices is a function of urbanization, income and change in taste and preference of the population. Considering the above main factors demand for fruit juices is expected to grow. The various policy incentive schemes, increasing production of fresh fruits in the country and consistently increasing domestic as well as international market demand shows investing in fruit juice processing in key area of business opportunity both in the short and long term.

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5. Future Outlook and Appraisal of Sectoral Investment Potentials

5.1 Market Potentials

5.1.1 Domestic Market

Fresh and processed Fruits have a large domestic market in Ethiopia, significantly higher than the exported volumes. The size of the Ethiopian population is currently estimated at about 90 million. This is a strong indication of the existence of large potential demand for fresh as well as processed fruit juices in the country. The size of the domestic market for fruit and fruit juice has been increasing with the expansion of urbanization and increase in average income. Main markets for fresh fruit in Addis Ababa are Piazza, Mercato and Mesalumia. These markets have all kind of clients; wholesalers, retailers and consumers are sourcing their fruit at these markets. Approximately 50% of the supply originates from smallholder producers or farmers’ cooperatives. Similarly, for the processed fruit juice the domestic demand shows an increasing trend. According to ATA and USAID (2016) domestic demand for fruit juice has been growing rapidly and expected to increase on average by 62.9 % for the periods 2012 to 2022. Tropical fruit juices (pineapple, apple grape, orange, and tomato, and banana, avocado) and mixtures are becoming increasingly popular in the country.

Table 9: Major Challenges and Prospects of Fruit Juice Market Name of the

Super Market Type of Fruit Juices

Available Target Markets Major Challenges Major

Opportunities

Addis Super

Market

Mango and

Pineapple Juices

(80 % Domestically

Produced and 20%

imported)

Consumers(more

demand for

domestically produced

juices relative to the

imported once

- Poor quality of

domestically produced

fruit juices (Customers

prefer the thicker once)

-No supply problem

for domestically

produced fruit

juices.

Abadir Shopping

Centre

Imported Fruit

Juices (Grape juice,

Mango Juice,

Crambery)

-Consumers -Supply constraint for

domestically produced

fruit juice(such as

Yammi Juce, Mazza

mango)

-Existence of very

high and

consistently

increasing demand

for fruit juice

(especially for

imported once

although the price is

relatively higher)

-Low competition in

the market

Source: Key Informant Interview

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5.1.2 Regional Markets

Beyond the domestic market, by virtue of its membership of the Common Market for Eastern and Southern Africa (COMESA) embracing19 countries with a population of 400 million, Ethiopia enjoys preferential market access to these countries.

Ethiopia’s trade with neighboring countries is likely to present a major business and economic opportunity in the coming few years. This is possible by bilateral and multilateral trade agreements under the auspices of COMESA and IGAD. However, a more important factor is the planned transport corridors in the region. There are established road linkages with Ethiopia Djibouti, Sudan, and Kenya and to parts of Somalia. New projects are on the way to link the country to the emerging market of South Sudan, which Ethiopia can also reach via river transport on the Baro. Perhaps the most interesting is the Nairobi-Addis Ababa highway. When complete, it will represent one of the largest business opportunities in Africa, linking Ethiopia’s over 90m population with 130m consumers in the East African Community.

Somalia is the largest prioritized commodity export market for Ethiopia followed by Djibouti. Specific to the fruit sub-sector Djibouti is the largest importer of fresh fruits. With an Increased expatriate and military presence in Djibouti there appears to be opportunities for supplying fruits and fruit juices with higher-value (and higher quality). The country has been importing fruit juices from France and imports up to 15 tons of fresh produce per week. COMESA is the potential regional market for Ethiopia fruit and fruit juice export. However, the average horticultural export value of the country to COMESA member countries for the period 2010-2014 is only 80 million USD. As shown in the figure below, Although Djibouti and Somalia represent the largest export destination and opportunity Ethiopian fresh fruits products such as Banana, Mango, Green bean and tomato, less than 0.1 % of these exports in the processed form. This shows that given Djibouti imports packed fruit juices from French; the country is a potential market for fruit juices processed from Ethiopia.

Figure 4: Value of Ethiopian major fruit and Vegetable export by category

Source: ATA and USAID, 2016

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5.1.3 International Markets

Data from FAOSTAT (Statistics division of UN's Food and Agriculture Organization) shows that global fruit and vegetables consumption increased by an average of 4.5% per annum between 1990 and 2004, a rate that exceeds the world population rate, indicating that global per capita consumption of fruit and vegetables has also risen.

The global fruit juice, nectar, & soft drinks market was valued at $149 billion in 2014, and sales are expected to grow at 2.7% from 2013-2018 (ATA and USAID, 2016). The global tropical fruit juice market has been exhibiting strong growth in recent years. Recent figures from Business Insights/Agranet. Com has valued the global fruit juice market at US$79 billion in 2009. They predict compound annual growth of 3.4%, which brings the business to a total of US$93 billion by 2014. Europe remains the largest market for juices valued at US$38 billion. The European juices market is valued at USD$48 billion by 2014 which shows a 5.2% Annual compound increase (ITC, 2014).

Ethiopia’s proximity to the Middle East also offers potential market opportunities. The country also qualifies for preferential Access to European Union market under the EU’s Everything-But-Arms (EBA) initiative and to USA markets under the African Growth and Opportunities Act (AGOA) and the Generalized System of Preference (GSP). Thus, most Ethiopian products can enter into these markets quota and duty free. Furthermore, abroad range of manufactured goods from Ethiopia are entitled to preferential access under the Generalized System of Preference (GSP) in USA, most countries of the EU and other developed countries. No quota restrictions are placed on Ethiopian exports falling under the 4800 products currently eligible for GSP treatment (UNCTAD, 2014)

According to ATA (2014) Middle East and North Africa (MENA) region, West Europe, South Europe and China have been identified as feasible longer-term higher-value potential export market opportunities for the Ethiopian fresh as well as processed fruit juices. In both Europe as well as in the Middle East there is a high and growing demand for fruits. The objective of importers to diversify sourcing from main suppliers like Kenya provides an opportunity for Ethiopia. For European importers Ethiopia is very interesting in order to have a year round delivery of fruits and fruit juices.

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Table 10: Potential International and regional market opportunities

Source: ATA and USAID, 2016

As shown in the table above, in terms of state of trade relations, ease of transport and ease of market requirements COMESA is the most preferred market for Ethiopian horticultural product exports and potential market for processed fruit juices. However, in terms of demand for Ethiopia’s priority crops there is a very high demand in Western Europe followed by MENA, South Europe and China. Similarly, Ethiopia imports a great horticultural product from Western Europe followed by MENA and Southern Europe. From the above table we can reiterate that the Europe and COMESA are potential markets for Ethiopian horticultural and processed fruit juice products.

As shown in the pie chart below European Union is the main export destination for fresh fruits followed by NAFTA and Asia. The locational proximity and the very high demand for Ethiopian priority crops shows Europe is the potential market for Ethiopian fresh and well as processed fruit juices.

Figure 5: World destinations for fresh fruits

Source: Yamlaksira, 2014

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6. Review of Government Policy and Incentives

The Ethiopian government has formulated the five year Growth and Transformation Plan (GTP) to carry forward the important strategic directions in maintaining a fast growing economy in all sectors. Accordingly, priority is given to agricultural development through its policy document entitled GTPI and GTPII. This policy focuses on the development of agriculture both as a source of production for direct consumption and of raw materials for industrial processing. Thus, production and processing of horticultural crops have been placed by the Government in the list of high priority areas and various incentives schemes have been provided for investors engaged in Agro processing (EIA, 2012). In relation to this, the government is establishing Integrated Agro Industrial Parks and involves a policy of supporting regional states and cities to develop international standard industry parks.

The Government has already begun to invest heavily in the necessary supporting elements for these Integrated Agro-Industrial Parks, to develop the necessary infrastructure, research center development and agriculture extension services as well as consider the required market development and micro financing needs. Some 17 agro-processing locations have been identified. Bahker in Tigrai, Bure in Amhara, Ziway in Oromiya and Sidama in SNNP are among those expected to be in the first round of development as their feasibility studies have been completed.(http://www.mfa.gov.et/-/agro-industrial-parks-the-focus-to-transform-ethiopia-s-economy). Apart from the establishing agro industrial parks government provides general and sector-specific incentive schemes to investors who want to engage in the agro processing industry.

6.1 General Investment Incentives

o Customs Duty exemptions are provided for investors (both domestic and foreign) engaged in eligible new enterprises or expansion projects such as manufacturing, agriculture, agro-industries, generation, transmission and supply of electrical energy etc.

o 100% exemption from the payment of customs duties and other taxes levied on imports is granted to all capital goods, such as plant, machinery and equipment and construction materials.

o An investor granted with a customs duty exemption will be allowed to import capital goods duty free indefinitely if his investment is in manufacturing and agriculture.

o An investor entitled to a duty-free privilege buys capital goods or construction materials from local manufacturing industries shall be refunded the customs duty paid for raw materials or components used as inputs for the production of such goods.

o Exports at least 60 percent his products or services, or supplies the same to an exporter as production of service input will be exempted from the payment of income tax for additional 2years.

o Income derived from an expansion or upgrading of an existing manufacturing, agro-industrial or agricultural enterprise is exempted from income tax for a period of two years if it exports at least 50% of its products and increases, in value, its production by 25%.

o Duty paid at the port of entry and locally on raw materials used in the production commodities is refunded, 100 percent, upon exportation of the commodity processed (EIC,2015)

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6.2 Specific Incentive Packages: Agro Processing

Specifically for those who wants to invest in the processing of fruit and/or vegetables: they will have privilege of income tax exemption depending on the region where they want to invest. Accordingly, those investors who want to invest in Addis Ababa and Special zone of Oromia surrounding Addis Ababa they will be exempted from income tax for three years. On the other hand those who want to invest in other areas of the country the income tax exemption privilege will be for five years (Embassy of FDRE, 2015).

Income Tax Exemption and Loss Carry forward

o Any income derived from an approved new agro industrial or agricultural investment is exempted from the payment of income tax ranging from 2 to 8 years depending up on the area of investment, the volume of export and the location in which the investment is undertaken.

o Income derived from an expansion or upgrading of an existing agro industrial or agricultural enterprise is exempted from income tax for a period of two years if it exports at least 50% of its products and increases, in value, its production by 25% (de Jager and Wiersinga, 2009).

Incentives applicable to industrial parks (Manufacturers)

o Zero tax o Exempted from income tax up to 8 - 10 years o Exempted from duties & other taxes on imports of machinery, construction materials, spare

parts, raw materials & vehicles o One-stop-shop for government services o Land lease term: 60-80 years at zero charge for factories & residential quarters

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7. Role of Major Supporting Institutions

Apart from the policy incentive schemes, Ethiopian Investment Commission, Ministry of Agriculture, Development Bank of Ethiopia are major supporting institutions which facilitates investment in the agro processing. The existence of the Investment Promotion Commission in the country is essential to provide clear, relevant and credible information about the political, social, economic and regulatory frame work of the country. The agency play great role in doing aggressive investment promotion about the business opportunities in the country and handle investment project inquiries in a timely and competent manner. The following table shows the major supports provided by the respective institutions:

Table 11: Role of major Supporting Institutions Major Supporting Institutions Main Support

Ministry of Agriculture -Providing training on variety selection, reducing post-harvest loss,

adopting new technology in producing and processing fresh fruits.

Ethiopian Investment Commission

-Providing guarantee and protection for investors in the sub-

sector(Both for domestic and foreign investors)

-Providing Incentives such as duty free import of capital goods and

construction materials, ,income tax exemption, Infrastructural

development

-Facilitated land access with low lease price

-Special support package dedicated for those who wants to engage

in agro processing industry through industrial park clusters.

Development Bank of Ethiopia

The Ethiopian Development Bank (EDB) is the key institution

financing the expansion of the agro processing .The loans have

favourable conditions compared to the general commercial loans,

with a grace period and at relatively low interest rates. The debt

equity ratio for these loans is 70:30 for startups and 60:40 for

expansion of existing projects

Source: Key Informant Interview

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8. Concluding Remarks

Why Invest in Fruit Juice in Ethiopia? Favorable agro-ecological climate for tropical fruit: Ethiopia has no winter, offering the unique

opportunity to become a core year-round supplier of tropical fruits. The Upper Awash valley in particular

can easily produce fruit all year round. Most land available for tropical fruits is suitable for organic

certification.

Some of the lowest input costs in the world: Processing costs in Ethiopia are highly competitive due to

low input costs for water, electricity, and land costs. Electricity costs are half of Kenya’s and likely to fall

further due to government investments. Labor costs are a major advantage; with a minimum wage half

of Tanzania’s and less than one-fourth of Kenya’s. Horticulture land is less than one-third of Kenya’s and

slightly higher than Tanzania’s,

Geographic proximity to key export markets: Ethiopia's proximity to Middle-Eastern markets by sea

freight lowers costs, but more importantly, increases shelf-life versus other producing countries,

particularly for 100% juice products. For retailers, shelf-life is critical to profit margins, and a major selling-

point: Ethiopian producers can get juice on shelves only 5-7 days after production, whereas Latin

American or Asian producers can take 2-3x as long.

Large and growing mass-market consumer base: Ethiopia has the second-largest population on the

African continent and is one of the five fastest-growing economies in the world. But today, Ethiopians eat

an average of only 400g of chicken meat per year, versus 4kg in Kenya and over 40kg in the US. With rising

incomes, accelerating urbanization, and changing tastes and preferences, Ethiopia is becoming one of the

world’s last major under-tapped markets (ATA and USAID, 2016)

High Rank in Ease of Doing Business: Ethiopia is placed 125th in global rankings and 11th out of 47 in sub-

Saharan Africa in the Ease of Doing Business report. The country is particularly well ranked with respect

to contract enforcement, getting credit, and trading across borders In relation to procedures required to

start a business the number of days required to complete the pre investment procedures shows an

improvement. Accordingly, it took only one day to obtain business license, obtain a certificate if

competence, to open bank account and obtain tax identification number (WB, 2014).

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Annex

Annex I Value and Share of exported Fruits and Vegetables (In million USD)

Year Fruit and Vegetable Total Export value Share of Fruit and Vegetable

2000/01 5.2 384.4 0.014 2001/02 9.2 388.6 0.024 2002/03 9.4 475.0 0.020 2003/04 12.6 596.9 0.021 2004/05 16.0 841.6 0.019 2005/06 12.7 962.3 0.013 2006/07 15.9 1167.5 0.014 2007/08 12.4 1427.7 0.009 2008/09 10.5 1288.5 0.008 2009/10 30.15 1908.9 0.015 2010/11 31.01 2693.8 0.011 2011/12 43.1 3029.5 0.014 2012/13 43.9 2907.6 0.014 2013/14 45.9 3133.0 0.014 2014/15 45.2 2792.0 0.015 Average 12.83 1599.8 0.015

Source: NBE annual report 2014/15

Annex II

Major fresh fruits export trend (in thousand USD) to the ROW

Fruit type Major export destination 2011 2012 2013 2014 2015 Total Fruits nes, fresh United Arab Emirates,

Netherland 577 1151 820 1548 1117 5213

Bananas fresh or dried Djibouti, Somalia 688 860 2926 3407 3480 11,361 Citrus fruit, fresh or dried

Djibouti 1813 1673 1631 1730 1534 8381

Melons & papayas, fresh

Djibouti 151 94 120 218 174 757

pineapples, mangoes, avocadoes, guavas

Djibouti 572 406 612 725 783 3098

Grand Total 28810 Sources: ITC calculations based on UN COMTRADE statistics.