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Oilseeds business opportunities in Ethiopia

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Oilseeds business
opportunities in Ethiopia
Oilseeds business
opportunities in Ethiopia
Commissioned by
Ministry of Agriculture, Nature and Food Quality, the Netherlands

Authors
J. Wijnands (LEI)
J. Biersteker (Consultant for Ethiopian-European business linkages in oilseeds)
R. Hiel (Schuttelaar & Partners)

The Hague
May 2007
Foreword

Oilseeds are a mainstay of the rural and national economy in

Ethiopia. After coffee oilseeds are the second largest export
earner for the country and already more than 3 million
smallholders are involved in its production. Exports actually
consist of sesame and niger seed, for which there is a
growing demand in the world market. But also castor,
linseed and safflower have good export potential. The
growing demand in the world market for these specialty
products and the available capacity to expand production
could make oilseeds turn into one of the engines of
economic growth of Ethiopia. The Netherlands is the largest
importer and processor of edible oils in Europe. It markets a
broad range of oils products, not only for the food industry,
but also for cosmetics and industrial purposes. The edible
oils cluster in the Netherlands harnesses a lot of embedded
technical, organizational and market knowledge. And in
addition to processing, it offers a wide range of supporting
services. This leading position makes the Netherlands an
interesting partner in realizing further growth and
development of the Ethiopian oilseeds sector.

The main purpose of this market study is to provide Dutch

companies with information on the state of the art of the
Ethiopian oilseeds sector and to put forward suggestions for
both Dutch and Ethiopian businesses on possible areas for
cooperation. The Ethiopian Pulses, Oilseeds and Spices
Processors Association and the Netherlands’ Product Board
for Margarine, Fats and Oils (MVO) have been actively
involved in carrying out this market study. The study must be
considered as a first initiative in assisting Dutch and
Ethiopian companies in exploring business opportunities.
The next step is the agro-mission to Ethiopia from
September 24 to 28, 2007. This mission will have a special
program on oil(seeds). Moreover Mr. Jaap Biersteker is
available as a consultant to assist companies in exploring
how to make business options more concrete (contact
details in this report). Financial support for this study came
from the Department of Trade and Industry and the
International Research Programme of the Netherlands
ministry of Agriculture, Nature and Food Quality, and from
the Ethiopian Program on Support to Business
Organizations and their Access to Markets, supported by the
Netherlands, which makes also the services of Mr. Biersteker
available. I trust this study will contribute to further develop
the oilseeds sector to the benefit of Ethiopia and the
Netherlands.

G e e r t We s t e n b r i n k
Counsellor Agriculture, Nature and Food Quality,
Royal Netherlands Embassy, Addis Ababa
Table of contents

Executive summary 7

1. Introduction 8

2. Country profile of Ethiopia 9

2.1 General 9
2.2 Agriculture 10

3. The Ethiopian oilseeds chain 11

3.1 Introduction 11
3.2 Cultivation of oilseeds 11
3.3 Collection and trade 12
3.4 Oilseed crushing and oil refining 13
3.5 Organisation and structure of the chain 13
3.6 Investments in the oilseeds chain 14
3.7 Price formation 14

4. Oilseed markets 15
4.1 Introduction 15
4.2 Domestic use and import/export 15
4.3 Ethiopian opportunities for specialty oilseeds 17
4.4 Institutional environment 20
4.5 Opportunities for production growth 20

5. SWOT analysis of the Ethiopian

oilseeds business 21

6. Conclusions and recommendations 23

Acknowledgements 25

Contact 26

References 27

List of companies/organisations/ spots

visited on fact finding mission 28

Appendix 1 Costs of the sesame value chain 29

Appendix 2 Additional fact and figures 30

5
6
Executive summary

In this study the business opportunities for Dutch Investments in hulling facilities for sesame seed
companies in the Ethiopian oilseeds sector are explored. Sesame seed hulling is aimed at raw materials for the bakery
Opportunities for setting up sustainable export chains industry. The value added of hulled sesame seed compared
should mutually benefit Dutch companies as well as the to untreated seeds is USD180-200/ton. At the moment no
Ethiopian oilseeds sector in particular and the Ethiopian hulling facilities exist in Ethiopia.
society in general.
Organizing local crush and bottling of sesame oil.
European crushing of sesame seed is limited. It is likely that
Ethiopia has an attractive portfolio of high value specialty the European sesame oil demand will grow, especially for
oilseeds for export markets. It is in the top 5 producing use as ‘wok’ oil. Volumes are small but highly profitable.
countries for sesame seed, linseed and niger seed. Mostly sesame oil is sold in 250g-bottles for households
In addition, specialty seeds like safflower seed and castor and some in larger packaging to caterers. Transport from
beans are grown in Ethiopia. Most other oilseeds produced Ethiopia can be organized via IBCs for Europe and other
in Ethiopia (soybeans, cotton seed, rapeseed etc.) are destinations
commodities. For these commodities it will be difficult
for Ethiopia to compete on the world market due to its Setting up organic chains
relatively low volumes, low quality and high handling Due to the low levels of inputs and the use of virgin new
and transport costs. These oilseeds are important for areas, oilseed production in Ethiopia is near organic
local consumption. standards. The potential of exporting sesame seed under
the organic farming label to Europe is seen as a prospect
Oilseeds are the second export earner of Ethiopia. Growth by many stakeholders in Ethiopia. Thanks to coffee basic
and improvement of the oilseed sector can substantially knowledge and experience on organic production and
contribute to the economic development at national, certification is available. Some Dutch companies are already
regional level and at family level. Oilseeds are considered active in this field and public private cooperation for organic
as high value export products by the Ethiopian government. oilseeds could play a role in accelerating the development of
The government enhances the oilseeds sector by this niche market.
investment incentives (e.g. duty and tax income exemptions
from 2 to 8 years for foreign investments). Exploration of opportunities for linseed and safflower seed
Linseed is mainly used for domestic consumption in Ethiopia.
Many smallholders and a limited number of large farms Linseed is of increasing importance for the food industry in
grow oilseeds. Oilseeds are cash crops on subsistence farms. highly developed consumer markets due to the specific
Production is characterised as labour intensive, low-input non-saturated fatty acids. As Ethiopia is the 5th world
and rain-fed. The potentials to increase the production are producer of linseed, export opportunities should be further
huge. Productivity per ha for most oilseeds can be doubled explored. Safflower can be a dual-purpose crop: seeds as
with higher input levels and improved technologies and oil crop and the petals for extracting dyes. If high in linoleic
seeds. New virgin areas are fertile and offer good (C18:2) setting up a supply chain to European users might
opportunities for organic and sustainable oilseeds be possible.
production. Opportunities for oilseed export are not fully
exploited yet because of inefficient marketing, improper
cleaning and sometimes poor contract discipline. The
attractive portfolio of specialty oilseeds offers business
opportunities for both the Netherlands and Ethiopia
especially in the following areas:

Investments in cleaning facilities for sesame seed

Ethiopia has sesame seed varieties that are suitable for a
wide range of applications. Highly developed consumer
markets in Europe and elsewhere demand high purity levels
(>99.5%) for bakery applications. Up-to-date cleaning
machines are available in Ethiopia, but still have a very
limited capacity.

7
 1 Introduction

The aim of this study is to explore the business

opportunities for Dutch companies in the Ethiopian
oilseeds sector. Opportunities for setting up sustainable
export chains should benefit Dutch companies as well as
the Ethiopian oilseeds sector in particular and the
Ethiopian society in general.

The findings of an extensive desk research of the

Ethiopian oilseeds sector were checked and fine-tuned
by field research in Ethiopia in February 2007. Important
actors in the oilseeds chain, warehouses, seed cleaning
facilities and oilseed crushing and refining plants were
visited. In addition, stakeholders from the institutional
environment were consulted. Furthermore, Dutch
companies importing oilseeds from Ethiopia were
interviewed by telephone in order to map their
experiences and ideas about prospective opportunities
for the Ethiopian oilseeds sector.

Report structure

Chapter 2 provides general background information on

Ethiopia. Chapter 3 describes the Ethiopian oilseeds chain
from cultivation, collection and trade to oilseed crushing
and refining. In addition, organisation and structure of the
chain are discussed. Chapter 4 deals with the Ethiopian
oilseed markets, growth opportunities for specific
oilseeds and the institutional environment. Based on the
information of chaper 3 and 4 the strengths, weaknesses,
opportunities and threats (SWOT analysis) of the
Ethiopian oilseeds chain are analysed in chapter 5.
Conclusions and recommendations for enhancing
business opportunities for the Ethiopian oilseeds sector
in general and between Ethiopia and The Netherlands
specifically are the subject of chapter 6.

8
2 Country profile of Ethiopia

2.1 General Ethiopia’s politics takes place within the framework of a

federal parliamentary republic. Federal legislative power
Key Figures is vested in both the government and the two chambers
Population: 79.4 million. Growth rate 2.5% (2006). of parliament. The Ethiopian People’s Revolutionary
Capital: Addis Ababa, 2.4 million inhabitants Democratic Front (EPRDF) is the main party in the
Land Area: 113 million ha, 27 times the Netherlands government. In the election of 2005 the EPRDF got almost
(2006) 60% of the seats in the parliament, despite the loss of 150
Agricultural land: 20% of the land is cultivated as seats to the opposition.
agricultural land.
GDP: 11.8 USD billion (EVD, 2006) Ethiopia has a good main road infrastructure, although
GDP-growth: 9% in 2004/2006 and 5% (2000-2005) with 21 to 31 km per 100,000 ha the road density is quite
Origin GDP: Agriculture 42%, Industry, 11% and services low considering the African average is 50 km per 100,000
47%. ha. The main roads converge on Addis Ababa. In recent
GDP per head: 112 USD; Sudan 434 USD; Kenya 427 USD; years, telecommunication and information technologies
The Netherlands 23,300 USD (2004) have dramatically improved. Large investments are made
Literacy: male 45%, female 35% (2003) to improve further road, rail and ICT infrastructure. The
Inflation: 12% (2005-2006) bulk (98%) of international trade is handled by Djibouti.
Main exports: Coffee, oilseeds, chat, pulses
Export destinations: Djibouti (14%), Germany (12%), China (9%) Ethiopia has started negotiations to join WTO. This
Japan (8%) (2005) liberalises the economy and improves the international
Main imports from: Saudi Arabia (27%), US (14%), China (8%); business climate. Table 2.1 provides some information on
Italy (5%) (2005) doing business in Ethiopia, compared to the neighbouring
Source: CIA, CSA, 2007 and EVD, 2007 countries and Egypt. Kenya performs slightly better, but
Ethiopia performs better than Sudan and Egypt. Dutch
entrepreneurs active in Ethiopia indicate that, although
Regions of Ethiopia procedures are quite bureaucratic, they do function.
In case of problems, higher governmental officials are
always willing to assist in solving unforeseen problems.
In general the government is very keen on economic
growth and welcomes foreign investments. The package
for foreign investors is quite attractive (see paragraph 4.4).
Furthermore Ethiopia is actively working on further
improvement of the business climate.

Table 2.1 Selected business indicators in 2006:

Ranking out of 175 countries
Indicator Ethiopia Kenya Sudan Egypt
Overall ease of business 97 83 154 164
Starting a Business 59 24 92 169
Dealing with licenses 79 68 164 144
1 Addis Ababa (city); Employing workers 146 115 29 141
2 Afar; Registering property 83 33 143 159
3 Amhara; Getting credit 118 60 142 118
4 Benishangul-Gumaz; Protecting investors 31 127 93 144
5 Dire Dawa (city;) Paying taxes 149 145 165 83
6 Gambela; Trading across borders 79 67 158 157
7 Harari; Enforcing contracts 55 120 151 120
8 Oromia; Source: World Bank. Doing Business in 2006
9 Somali;
10 Southern Nations, Nationalities and People’s Region and
11 Tigray

9
 2.2 Agriculture

Agriculture employs 80% of the labour force and

accounts for 42% of the GDP, mainly at smallholdings.
The highlands are highly fertile, but are threatened by
overpopulation causing deforestation and erosion.
Most of the farming is rainfed and droughts might cause
famine.

Coffee, oilseeds, chat, and pulses are the main export

products. The export based flower industry is booming.
Good growing conditions, low costs and government
investment incentives attract Ethiopian growers as well as
those from other countries such as the Netherlands, Israel
and India. The Ethiopian government has indicated that
the oilseeds sesame seed, niger seed, and safflower seed
are high-priority export crops.

10
3 The Ethiopian oilseeds chain

3.1 Introduction 3.2 Cultivation of oilseeds

This chapter describes the Ethiopian oilseeds chain. Ethiopia has altitudes from below sea level up to more
Figure 3.1 presents the Ethiopian oilseeds chain. Section than 4,500m above sea level with very different climates.
3.2 discusses the Ethiopian oilseeds cultivation (types, This enables Ethiopia to grow a wide range of oilseeds,
quantity, geographical dispersion, yields and use of in which it has a long tradition. It ranks among the top 5
inputs). Section 3.3 deals with collection and trade and world producers of sesame seed and linseed and is an
role of cooperatives. In section 3.4 the oilseed crushing important producer of niger seed. Groundnuts, safflower,
and refining industry is analysed (quantities, quality, food rapeseed and many other oilseeds are produced on a
safety aspects). Section 3.5 describes the organisation limited scale.
and structure of the Ethiopian oilseeds chain. Section 3.6
provides information on investment(plans) in the The production of oilseeds is presented in table 3.1.
Ethiopian oilseeds sector. Paragraph 3.7 discusses price The production of sesame seed, niger seed (also known as
formation. noug or neug) and linseed was much higher in 2004/5 and
2005/6 than in previous years thanks to favourable
Figure 3.1 Oilseeds and oil chain weather conditions.
Producers
Table 3.1 Production of oilseeds (1,000 tons)
Collecting Middle men 00/01 1/
2 02/03 03/04 04/05 05/06
Linseed 6 51 43 77 152 126
Brokers/Wholesalers Niger seed 12 84 85 119 187 147
Sesame 19 39 36 61 115 149
Oil milers Groundnuts 2 13 11 21 29 34
Saffflower 6 4 2 5 7 6
Retailers Rapeseed 15 17 20 29 36 24
Total (above) 60 208 197 313 526 486
Local consumers Exporters Cottonseed 26 26 37 37 N.A. N.A.
Soybeans 26 27 27 27 125 146
Source: CSA; Cottonseed and soybeans FAOstat

Oilseed production regions

The production regions of oilseeds are summarised in

table 3.2. The main production regions are Tigray, Amhara
and Oromia and Beneshangul

Table 3.2 Regional production of oilseeds in 2005/06 (x 1000 tons)

Regions Nigerseed Linseed Groundnuts Safflower Sesame Rapeseed Soybeans

Tigray 4 5 0 0 49 0 0
Amhara 60 19 1 5 49 18 0
Oromia 73 100 25 0 37 6 3
Beneshangul 7 0 6 0 13 0 0
Others 3 2 2 1 1 0 1
Ethiopia (total) 147 126 34 6 149 24 4
Source: CSA Agricultural Sample Survey, 2006

11
 Yields Holdings with 2-5 ha cultivate more than 50% of the
oilseeds area; Holdings with 1-2 ha almost 30%. Besides
In figure 3.2. yields (in tons per ha) are presented for smallholders there are a limited number of large
several oilseed crops For most crops yields are below 1 commercial farmers (> 100 ha). The share of the latter is
ton /ha, except for soybeans. For linseed, rapeseed and less than 2%. About 3 million farmers in Ethiopia are
sesame seed an indication of the potential yields involved in oilseeds cultivation. Total oilseeds production
according to FAO is given. These higher yields can be is 500,000 - 600,000 tons. Total oilseeds area is estimated
achieved with improved farm practices on smallholder at 800,000 ha. Virgin lowland areas in the North West and
level. Improvement means better seeds, fertilisers, crop South West offer opportunities for expanding production.
protection and farm management in general.

In the Plan for Accelerated and Sustained Development to 3.3 Collection and trade
end Poverty (PASDEP) the Ethiopian government aims at
doubling the oilseed production between 2005 and 2010. On local level small villager traders, cooperatives or
The growth should be achieved mainly by higher yields agents are involved in collection and trade. On regional
per hectare. Until now farmers have practiced a low input, and national level, also NGOs and the State are engaged
rainfed agriculture. Most of them do not use any fertiliser. in this process. A market study from 1998 indicated that
The average fertiliser consumption is only 7 kilograms per approximately one third of the grains (including oilseeds)
ha. Also the use of improved seeds is very limited. Due to are sold directly to the consumers by the farmers, 60% of
deforestation in some areas use of manure as fuel is the oilseeds are traded by 10% of the largest traders and
causing ‘soil mining’. In the lowland areas in the North 80% of the small traders have a share of 20%. The big
West and South West, oilseeds are cultivated on virgin estates and commercial farmers seldom practice direct
land and there seems to be less need for fertilisers. marketing to consumers. Their buyers are exporters
Due to the low input levels, oilseed production in Ethiopia and/or processors.
is near organic standards. This is the case for most
smallholders and large commercial farms. Cooperatives seem to work well in the coffee sector.
Discussions with farmers revealed that the use of fertiliser Several times that raised the question whether
is hampered by availability, lack of credit facilities, cooperatives might work in the oilseed sector.
uncertainty about economic returns and risks. In some Cooperative members need a shared strategy, higher
cases there is also the belief that fertiliser use will damage benefits than without a cooperative, willingness to share
the soil in the longer term. An extensive programme with power and the avoidance of opportunism. The latter
on-farm trials, demonstrations and training is required. means that irrespective of the market price, especially in
The farm school programme in which farmers themselves the case of higher prices, all of the products have to be
play an active role in testing and demonstration is handled by the cooperative. During the fact finding
worthwhile to consider in this respect. mission we got the impression that opportunism of

Figure 3.2 Oilseeds, yield per ha

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00
Linseed Oilseeds, nec Rapeseed and Sesameseed Soybeans
Mustardseed
93-95 96-98 99-01 02-04 Pot. low Pot. high

Source: FAOstat

12
several actors in the chain is hampering cooperatives. • internal audits (planning and execution)
The government’s involvement in present cooperatives • traceability and recall procedures.
is not seen as favourable.
Some of the visited companies showed a willingness to
In a 2006 survey by SNV the number of traders and improve quality standards. However, lack of finance, little
wholesalers in 10 market towns were estimated. demand for high quality in the domestic market and the
The major market for oilseeds is Addis Ababa, with costs of quality systems hamper developments.
approximately 50 main traders and over 300 wholesalers.
This is 3 to 4 times as much as in the other 9 cities.
3.5 Organisation and structure
of the chain
3.4 Oilseed crushing and oil refining
During the fact finding mission interviews were held with
Most of the oilseeds are crushed locally, without any sesame seed traders/brokers in the Gondar and Addis
refining. In rural areas crude oil is preferred for cooking Ababa region. From the discussions it became clear that
purposes. The number of processors of refined oil was small farmers are generally in a weak position. They only
estimated by the visited industry at 9. The production of have very small volumes - a few hundred kilos - , are fully
refined oil in Ethiopia is very limited (about 20,000 tons). dependent on traders and mostly sell immediately after
harvesting, which is when the supply is abundant and
More than 1,000 small crushers (mostly with Chinese/ consequently the prices are relatively low.
Indian machines) are operational on village level. These
local crushers, with a very limited capacity, have low Many commercial farmers with large areas of land deliver
hygiene standards and high risks of contamination with directly to the cleaning or exporting companies, due to
mineral oil. The working environment is far from ideal. their volume. At the start of the season farmers and
Safety risks (e.g. slippery floors, no protection on belts traders agree on bonuses above the market price.
etc.) for employees have been observed at most of these These bonuses depend on the volume, quality and
establishments during the fact finding mission. purity of the seeds.

Only a few larger crushing or refining companies seem to However, many smallholders in the Ethiopian oilseeds
have adequate safety and hygiene standards compared to chain depend on middlemen, due to the small quantities
European industry standards. One refiner, Addis Modjo, involved. This complicates tracking out the origin of the
is working on a long term project of continuous product and meeting the requirements of highly
improvements. Addis Modjo is HACCP certified and developed consumer markets. Europe and other highly
expects to be ISO certified by late 2007 for its refinery developed consumer markets increasingly demand more
plant. This company says its crushing unit in Bahar Dar information on production, origin, storage and quality
also meets high standards. aspects. This requires professionally managed supply
chains with tracking and tracing systems.
The crushing or refinery unit of MULAT was also visited.
Given the available equipment good products are Seed cleaning and information on origin are of great
manufactured, although mineral oil contamination is importance for sesame seed production. Farmers and
possible. This risk can be reduced by investments. The traders blend different seed types, such as Humera,
refinery processes semi-refined products for the local Gondar, and Wellega, with particular qualities. This
markets. The refinery unit was in an acceptable condition. decreases the overall value of the seeds: tracking the
origin of the product and matching the particular qualities
The larger crushing or refinery companies might have of the seeds with the specific requirements of the end
potentials for European buyers of oils. The smaller users are hampered.
crushing plants do not meet the European standard of Cleaners remove impurities such as straw, dead seeds,
refined oil and their technologies need improvements. soil and pods, resulting in up to 99% or 99.5% purity.
Up-to-date cleaning machines capable of 99.5% purity
The implementation of BRC procedures is still a long way are available (e.g. at Ambasel), but the total capacity is
off in Ethiopia at present. limited and does not meet European demand. We have
BRC demands among others: seen Austrian cleaning machines and understood that
• a fully implemented HACCP system some others use Swedish equipment. Machines with
• a written BRC statement understood by company lower cleaning results, below 99.0% purity, are often
employees locally made.
• full commitment by the company board
• regular updates on quality reporting to board Transport of oilseeds from the producing region to the
• specification procedures (raw materials and end port of export, mostly Djibouti, is mainly done by truck.
products) Several of the visited exporting companies have well

13
 maintained or new IVECO trucks. The distance between 3.7 Price formation
the production regions and Djibouti is about 1,000km: for
instance, the distance from Bahir Dar in the Amhara Little on the marketing costs was mentioned during the
region is just above 1,000km and from Addis Ababa fact finding mission. Transaction costs in the Ethiopian
between 910 and 950km. Although road density is very oilseeds chain are generally high due to:
low in Ethiopia, most of the main roads are in good • The large number of suppliers and buyers. Producers
condition. Transport costs to Djibouti port are indicated (farmers) sell to a local collector, this collector in general
as USD35 per ton. During the discussions in Ethiopia sells to another larger broker and this process is
several times levels of USD20 per ton for transport were repeated a few times
mentioned. • Finding information on quantities and prices.
• Negotiating on contractual agreements (price, purity,
Refining capacities are heavily under-utilised, mostly quantity, delivery time).
only 30 to 40% of the full capacity. The oil refining industry
is confronted with competitive imports of refined oils: For export products world market prices are in general
palm oil from Malaysia and soybean oil, often donated leading. Ethiopia has to compete on the world market
as food aid. with a number of other suppliers (see chapter 4).
The world market prices are therefore the starting point
in price formation. Each link in the chain has costs and
3.6 Investments in the oilseeds chain will lower the return for the previous link in the chain.
The price of oilseeds at farm gate will be the end result.
During the mission investment possibilities for hulling, Low world market prices will result in very low farm
organic and better cleaning facilities for sesame were prices. In appendix 1 an estimate of the cost structure
mentioned. Some smaller crushers are considering to of the sesame seed chain can be found, adopted from
improve or even build new facilities. One Ethiopian Seifu in 2004.
company wants to invest in a new crushing and refinery
facility. They have approached banks with a business plan Until now market orientation in Ethiopia is weakly
and are now in process of obtaining land. developed. Market studies on the Ethiopian oilseeds
Potential European customers mentioned the lack of good sector are scarce. A better knowledge of applications by
cleaning facilities (although a few units of excellent buyers and end-users would benefit the chain. Selected
standards exist). Hulling is another issue, as this cannot be seed varieties can be grown, answering specific demands
done in Ethiopia at present. Clearly both improved and for selected purposes. Characteristics such as colour, oil
enlarged cleaning and hulling facilities (for European content, fatty acid composition, taste and so on, are
investors as well as Ethiopian entrepreneurs ) should be hardly known. Too often, oilseeds are still handled as a
considered, and a few are already looking into this in commodity.
more depth as an opportunity. The chain organisation can definitely be improved.
Traceability, sufficient high quality seed cleaning capacity,
Investment in chain organisation is inevitable to gain hulling facilities and quality-certified processing and
higher prices for the oilseeds. Almost all buyers of the refinery plants are important in this respect.
high income countries demand tracking and tracing
systems. Some stakeholders are developing a certified
chain in organic sesame seed. This demands a system
to guarantee the organic production method.

14
4 Oilseed markets

4.1 Introduction 4.2 Domestic use and import and export

In this chapter the Ethiopian oilseed market will be Oilseeds are the second Ethiopian export product. Sesame
discussed. Growth opportunities for specific oilseeds are seed is the main oilseed export product. Niger seed, as
dealt with extensively in paragraph 4.2. The institutional second, is exported mainly to the US as bird seed. All other
environment is discussed in paragraph 4.3. Information oilseed crops (soybeans, groundnuts, cottonseed etc.)
on opportunities for production growth is given in grown in Ethiopia are almost entirely used domestically.
paragraph 4.5. Reliable figures of domestic use are not available.
The oilseed crushing and refining industry produces for
the domestic market. Most of the oil is consumed as crude
oil. Ethiopia is a net importer of refined oil, mainly refined
soybean and palm oil. Table 4.1 provides detailed
information. Refined oil is mainly used in the urban
regions. Palm oil is mainly imported from Malaysia,
Singapore and the United Arab Emirates. Italy is the major
supplier (75%) of soybean oil, followed by Turkey (10%).
The peak in 2003 is the result of food aid.

Table 4.1 Import (tons) of edible oil by Ethiopia

1997 1998 1999 2000 2001 2002 2003
Soya bean oil,refined 39 4 1,050 6,582 815 1,507 74,240
Groundnut oil,refined * * * * 40 * *
Virgin olive oil 2 7 * 30 21 40 64
Other olive oil,fractions 17 23 * 16 110 93 65
Oil from olives 1 89 29,895 432 334 466 253
Sun-,safflower oil,refined * 360 1,410 1,315 774 260 36
Maize oil, refined,fract 55 * 244 78 22 112 410
Rape,colza etc.oil,crude * * * * * * 1
Rape,colza oil,refined * 421 * 200 199 17 *
Sesame oil, fractions * * * 2 78 10 *
Linseed oil,refined.frct 1,542 3,928 6,088 4,885 6,144 684 4,906
Palm oil, crude * * * * 500 500 *
Palm oil,refined,fractns 1,126 * 1,162 4,776 4,644 5,610 26,937
Coconut oil, refined 1,062 112 33 52 533 534 728
Palm kernel oil, crude * * * 76 * * 36
Palm kernel oil,refnd, * * * 37 542 * 28
Castor oil, fractions * * * 4 * 7 4
Fixed veg.fats,oils, other 303 10 455 499 10,507 5,285 2,297
Total 4,147 4,954 40,337 18,984 25,263 15,125 110,005
Source: ITC/WTO

15
 Figure 4.1 Major exporting countries of sesame seeds (in tons)
300,000

250,000

200,000

150,000

100,000

50,000

0
India Sudan Ethiopia Nigeria China Myanmar Tanzania, United
Republic of
1997 1998 1999 2000 2001 2002 2003 2004

Source: ITC/WTO database

Figure 4.1 shows that Ethiopia is an important sesame in the past 2 years. Ethiopia is the main supplier of sesame
seed exporter on the world market. In 2005 and 2006 seeds to Israel with with a market share of around two
Ethiopian exports further increased, whereby China came thirds. On the Turkish market the Ethiopian share is
up as a new market. Export of sesame seed has grown in around 20%. In the past years Ethiopia gained market
double digits each year from 1998 to 2006: 50,000 tons in share in the Middle East (especially Yemen) at the cost
1998 and more than 100,000 tons in 2006. In the second of Sudan. In the Middle East sesame seeds are used for
half of 2006 the main export markets for Ethiopian sesame topping on breads and baked goods and in ethnic dishes
seed were China, Israel and other countries in the Middle as well, such as tahini paste, halvah and oil. They mainly
East and Turkey. The EU had a market share of 8%. use mixed coloured sesame seed which they clean and
put in mixed form on their bakery products or for the
production of oil.
Figure 4.2. Ethiopian exports (quantity) of sesame
seed in the second half of 2006 The major importers of Ethiopian sesame seed in the
Others EU are Greece, Germany, the Netherlands and the UK.
8% In Europe several trading houses purchase sesame seeds
EU China
26% and resell the seeds to buyers all over the world.
8%
When the trading houses doubt the quality, they first
USA transport the seeds to Europe, clean them and often
6% sort them by colour.

Japan is the biggest world importer of sesame seed.

Sesame oil, particularly from roasted seed, is an important
Middle East
20% component of Japanese cooking and traditionally this is
Israel the principal use of the seed. Japanese are very critical of
20% quality. Many traders in Japan have their own cleaning
Turkey
installations where they also separate the sesame seed by
12% colour. Because of quality problems in the past, Ethiopia is
not an important exporter for Japan. However, it seems
Since recently China does not produce enough sesame that via China the volume of Ethiopian oilseeds exported
seeds to meet its own demand. This has led to a strong to Japan is increasing.
increase in Ethiopian sesame seed exports to this country

16
4.3 Ethiopian opportunities Sesame seed
for specialty oilseeds
Sesame is used in a wide range of applications. The most
Most oilseed crops - soybeans, cotton seed, rapeseed etc. - important are:
grown in Ethiopia are also grown in many other countries 1. Edible oil. The oil is almost odourless with a distinctive
in large volumes, where they are called commodities. nutty sweet flavour. Roasted sesame oil resists
For these commodities, it will be very difficult for Ethiopia rancidity due to the antioxidants formed during seed
to compete on the world market due to its relatively low roasting. Sesame oil is especially important in the
volumes and high handling and transport costs. Far Eastern cuisine, mainly Japan and China.
The Ethiopian production for these crops is mostly less 2. Confectionary, biscuit and bakery industry. Mostly
than 0.1% of the world production. To achieve a beneficial hulled clear white sesame is required for bakery
market position on the world market huge efforts are products. Hulled sesame sticks to the bread or roll,
required, which will be out of scope for Ethiopia in the while maintaining the white colour after baking.
near future. These crops, however, can be of high Roasted sesame has a nutty taste.
importance for the domestic market, as food crop. 3. Tahini industry. Tahini, a traditional Middle Eastern
The focus of this paragraph is on the potential of specialty paste, is made from hulled sesame seed and is rich
oilseeds for export markets. Most potential for the in protein .
Ethiopian oilseeds sector concerns the following specialty 4. Halva industry. Halva is a sweet made of 50% tahini,
oilseeds: sesame seed, safflower seed, linseed, niger seed boiled sugar and some other ingredients.
and castor beans. These crops will be discussed below. 5. Sesame flour and sesame seed sprouts.
As sesame seed is by far the most important Ethiopian 6. Pharmaceutical ingredients.
export oilseed crop, it will be discussed most extensively. The main Ethiopian sesame seed production regions are
The market value of these different crops is primarily situated in the North West and South West. The North
determined by their applications, which will be discussed West regions have the highest yields per ha. More than
in detail. 600,000 farmers with an average acreage of 0,3 ha are
involved in sesame seed production. This results in many
collectors gathering quantities suitable for trading.

Table 4.2 Ethiopian production regions of sesame seed (2005/2006)

Farms (number) Area Production Yield (kg/ha)
ha ton % ton %
Tigray 104,680 60,148 0.29 49,215 0.33 818
Amhara 210,344 62,279 0.30 48,970 0.33 786
Oromia 210,010 57,745 0.28 36,998 0.25 641
Beneshangul 66,446 23280 0.11 13,131 0.09 564
Others 9,749 1,701 0.01 547 0.00 322
Ethiopia 601,229 205,153 100 148,861 100 726
Source: CSA Agricultural Sample Survey, 2006

17
 Characteristics Ethiopian sesame seeds also previous chapter). In this case it is important that high
food safety standards are assured. The value added of
In Ethiopia a large number of sesame seed varieties exists. hulled sesame seed compared to untreated seeds is
Three varieties are well known: Humera, Gondor and USD180-200/ton.
Wellega. The characteristics of the three main export
varieties are mentioned in table 4.3. The Humera variety is Europe imports sesame seed mainly from India thanks to
appreciated world wide for its aroma and sweet taste. attractive pricing, better cleaning facilities, hulling and
better general trading terms. With better basic quality
The Humera type has good uniform white seeds, which seeds Ethiopia has strong possibilities in entering this
are quite large. This makes it very suitable for bakery market. If Ethiopia wants to be a major player in Europe
products. The Gondor type is also suitable for the bakery further investments in more advanced cleaning facilities
market. For this market a high level of seed purity is and hulling operations will be required.
demanded, which has sometimes proven to be
problematic for Ethiopia. The major competitive European crushing of sesame seed is limited. It is likely
advantage of the Wellega type is its high oil content. Type that the European sesame oil demand will grow,
and quality are very important. White seeds, with a white especially for use as ‘wok’ oil. Volumes are small but
to golden colour, are mainly used in raw form because of highly profitable. Mostly sesame oil is sold in 250g-bottles
their aesthetic value and are mostly priced higher than for households and some in larger packaging to caterers.
mixed seeds (yellow to dark brown) which are generally It is understood that one processor in Ethiopia, Addis
crushed into oil. The oil content in sesame seed varies Modjo, might be able to deliver products suitable for
between 40-52%. European customers. A local crusher in Bahar Dar might
offer opportunities as well. Exports could be considered in
The buying price of sesame for export is largely 1 ton packaging for redistribution in Europe.
determined by the evenness of colour, taste, dryness and
purity. These are important purchasing criteria for traders. Due to the low levels of inputs and the use of virgin new
Hulled seeds and bleached hulled seeds have a higher areas, oilseed production in Ethiopia is near organic
market value than untreated seeds. The purity of the standards. The potential of exporting sesame seed under
sesame seed is specified in terms such as 99-1. The 99 in the organic farming label to Europe is seen as a prospect
the figure means that in each 100 grams of sesame seed, by many stakeholders in Ethiopia. As far as the mission
no more than 1% contains impurities such as dirt, knows there is now only one exporter of certified organic
branches, stones etc. The 1 indicates that no more than sesame seed. The higher prices at several markets are
1% are black seeds. indeed challenging. Thanks to coffee basic knowledge and
experience on organic production and certification is
Growth opportunities for export to Europe available. Further growth of organic chains might have
prospects. Some Dutch companies are already active in
Europe is a large user of sesame seed for bakery this field and public private cooperation could play a role
applications. If Ethiopian farmers and traders manage to in accelerating the development of this niche market.
prevent blending of different types with the mentioned
distinct Humera, Gondar or Wellega qualities and provide Next to this it is worthwhile to explore possibilities of
adequate seed cleaning up to 99.0 -99.5%, sales to Europe demand driven certified chains production for other niche
could significantly increase. As mentioned in the previous markets, e.g. ingredient markets for bakeries.
chapter, up-to-date cleaning machines are available in
Ethiopia, but still have a very limited capacity. Linseed
Linseed is mainly used for domestic consumption in
Sesame seed hulling is aimed at raw materials for the Ethiopia. Linseed is of increasing importance for the
bakery industry. During the fact finding mission several food industry in highly developed consumer markets
stakeholders mentioned investment plans in hulling (see due to the specific non-saturated fatty acids.

Table 4.3 Main export types of Ethiopian sesame seeds

Varieties Local name Market name Characteristics Main applications
t-85 Hair hair Humera Whitish larger seed Bakery
Sweet taste, sweet aroma Tahini
48-50 % oil content Confectionary
High productivity
High possibility of shattering losses
kelafo-74 Delello Gondor White, good uniformity of seed Bakery
Mehado 80 Wollega Wellega Small seed
High oil content 49-56%
Not so sweet Oil

18
Table 4.4 Main characteristics of linseed
Oilseed Ingredients Application Producers
Linseed Drying oil
32-43% fat Used mainly in making paints, varnishes, linoleum, World production 2.9 million tons.
soft soap and printer’s ink. Increasing interest as Canada (38%), USA (17%), China
ingredient in edible oil for human consumption. (17%). Ethiopia is the 5th world
producer with 125,000 tons (4%).

Table 4.5 Main characteristics of safflower

Safflower Drying oil
Seeds: 32-40% oil Contains a higher percentage of essential unsaturated fatty acids and a lower percentage of saturated fatty acids
than most other edible seed oils. Used in salad and cooking oils, margarines, liqueurs, candles, and as a drying oil
in paints, linoleum, varnishes and wax cloths. The flowers are a source of yellow and red natural dyes.

As Ethiopia is the 5th world producer of linseed, export to the US and counts for a third of Ethiopia’s American
opportunities should be further explored. Major importers exports. Ethiopia uses the niger seed for oil extraction for
of linseed are Belgium, Germany and US. human consumption (as a cooking oil). A few years ago
traders from Singapore, the US and Europe discovered
Linseed oil is applied in larger volumes within Europe, and niger seed and started to buy from Ethiopian exporters
this trend is likely to continue. and ship it to the US. The US is a major market for niger
Little is known about the varieties grown nor about the seed and buys almost 60% of the world production.
chemical structure of Ethiopian linseed. If the fatty acid The market value as ingredient for the edible oil industry
profile meets buyers requirements, a supply chain could is unknown.
be set up. Crushing of seed to oil can be considered in the Niger seed is being investigated in Europe now to explore
Netherlands, Germany or Belgium. the opportunities for applications in food products.

Safflower Castor beans

Safflower can be a dual-purpose crop: seeds as oil crop Castor beans are collected from areas in Ethiopia where
and the petals for extracting dyes. SNV is presently they grow naturally or without being managed. The leaf
involved in an Ethiopian safflower project. The petals can of the castor plant is identified as one of the best for silk
be picked some weeks before harvesting the seeds. worms. The oil is rich in ricinoleic acid and is a highly
Furthermore, the crop can be grown after cereals, as a valued oil for a wide range of technical uses. Castor oil is
second crop. The major exporters of safflower seeds are: also being studied for use as a potential treatment for
USA, Australia, China and India. The top 3 importers are cancer. Further research will be needed to identify the
Japan, the Netherlands and Belgium. export potential of castor beans from Ethiopia.
To judge the application possibilities in Europe, the exact
chemical composition must be established. If high in Castor oil is primarily imported from India and distributed
linoleic (C18:2) a supply chain might be possible to via Rotterdam for European customers. In Europe over
European users. Safflower primarily competes with 100,000 tons are used annually, making this an interesting
sunflower seed oil, which is widely used in European prospect for Ethiopian production. Logistics in Ethiopia,
edible products (margarine, frying, cooking oil etc). and distribution via IBC Intermediate Bulk Containers of
Samples need to be tested to verify the application 1 ton might offer potential. Local Ethiopian production
potential and value of product to European buyers. must be set up for this. As castor beans are a ´wild crop´,
collection and production in Ethiopia need more study.
Niger seed (noug, neug) Apart from the ´wild crop´, the question of cultivation
Niger seed exports have since 2002 passed coffee exports needs to be investigated.

Table 4.6 Main characteristics of niger seed

Niger seed Drying oil
30% oil Higher grades have a pleasant aromatic odour and are used for food. Extensively grown in India
There has never been a widespread use of this oil in the Western Hemisphere. and Ethiopia.

Table 4.7 Main characteristics of castor beans

Oilseed Ingredients Application Producers
Castor Beans Nondrying oil, In the past medicine, acts purgative. Now industrial, World production about 1.2 million
35-55% oil water resistant, for coverings of airplanes, food container, tons. Main producers are India and
insulations, high performing engines (Castrol oil). Brazil. Ethiopian production
Quick drying oil, if dehydrated, for paints and varnishes. unknown.

19
 4.4 Institutional environment Remittance of Funds and Investment Guarantee
and Protection
The Government started economic restructuring, invests Foreign investors are entitled to make the remittances out
in road, telephone and railway infrastructure and wants to of Ethiopia (from e.g profits, interests and proceeds from
become a member of WTO. Land is state owned and can sale of an enterprise) in convertible foreign currency at
be leased from the government. To encourage private the prevailing rate of exchange on the date of remittance.
investment, the Ethiopian Government has developed a In Ethiopia both the Constitution and the investment Code
package of incentives under Regulations No.84/2003 for protect private property. Ethiopia is also a member of
domestic and foreign investors engaged in new MIGA (Multilateral Investment Guarantee Agency), which
enterprises and expansions, across a range of sectors. issues guarantees against non-commercial risks to
The incentives that are available both to foreign and enterprises that invest in signatory countries. Besides,
domestic investors are mentioned below. Ethiopia has signed bilateral investment promotion and
protection treaties BITs (Bilateral Investment Treaties) with
Customs Duty Exemption a number of countries.
A 100% exemption from the payment of import customs
duty and other taxes levied on imports is granted to Ethiopian Exporters Association
investments in capital goods and construction materials
necessary for the establishment of a new enterprise or for All major Ethiopian oilseed exporters are member of the
the expansion or upgrading of an existing enterprise as Ethiopian Pulses, Oilseeds and Spices Processors Exporters
well as spare parts worth up to 15% of the value of the Association. This association is working hard, supported
imported capital goods. Such investment capital goods by SNV, to improve its market information systems.
may be transferred to investors enjoying similar The association also organises workshops together with
privileges. SNV to share knowledge within the supply chain in order
Exemptions from customs duties or other taxes levied to better anticipate on critical market issues.
on imports are granted for raw materials and packing
materials necessary for the production of export goods.
All other goods and services destined for export are 4.5 Opportunities for production growth
exempted from any export and other taxes levied on
exports. Sesame seed and to a lesser extent niger seed are cash
crops for subsistence farms. There is a good potential for
Income Tax Exemption and Loss Carry Forward increasing the cultivation area. New areas are virgin,
Any income derived from an approved new fertile and offer good opportunities for expansion,d.
manufacturing, agro-industrial or agricultural investment Most new areas are in the lowlands. . A bottleneck seem
is exempted from the payment of income tax ranging to be that the new areas less attractive for settlement .
from 2-8 years depending on area of investment, export The main challenge for new areas is to grow products with
volume and the location in which the investment is an increased added value, which can cover the additional
undertaken. Income derived from an expansion or cost of development and logistics.. In those new areas
upgrading of an existing manufacturing, agro-industrial organic farming of oilseeds is a major possibility.
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%.
Business enterprises that suffer losses during the tax
holiday period can carry forward such losses for half of
the income tax exemption period, after the expiry of
such a period.

20
5 SWOT analysis of the Ethiopian
oilseeds business

In this chapter an analysis is given of the Strengths, that with transfer of new technologies and providing
Weaknesses, Opportunities and Threats (SWOT) of the inputs productivity of the sector can be strongly increased.
Ethiopian oilseeds sector. This SWOT analysis focuses on
business opportunities with the Netherlands. Entrepreneurship and ambitious oilseeds exporters
association
During the mission in all different links of the oilseeds
The Dutch are buying oilseeds and oils and fats in highly chain real entrepreneurship was identified. Although
competitive world markets, based on trade and quality market orientation needs to be improved, many ambitious
standards of highly developed consumer markets. entrepreneurs are anxious to intensify business relations
Therefore the benchmark for the SWOT analysis of the with market parties abroad. EPOSPEA, the Ethiopian
Ethiopian oilseeds sector is its position on the world Pulses, Oilseeds and Spices Processors Exporters
market. In chapter 6 conclusions and recommendations Association is working hard, supported by SNV, to improve
will be given - derived from this SWOT analysis - for its market information systems.
enhancing business opportunities for the Ethiopian
oilseeds sector in general and with the Netherlands in Available land and labour
particular. Virgin fertile new areas are available and can meet
organic certification standards. These new areas can be
Strengths cultivated on a large scale. Labour is cheap and
abundantly available. However, new areas seem to be
Diversity of rather unique oilseed crops less attractive for settlement. Most new areas are in the
Ethiopia has altitudes from below sea level up to 4,500 lowlands. The government is very supportive in issuing
meter above sea level with very different climate zones. land to investors.
This enables Ethiopia to grow a wide variety of oilseed
crops. Several oilseeds are grown in Ethiopia which can Attractive Investment Package
be considered as specialty high value seeds on the Oilseeds are priority export products. The government
international market (sesame seed, safflower, linseed, enhances investments in the oilseeds sector with an
niger seed and castor beans). These oilseeds provide a extended package of investment incentives.
good base for acquiring or expanding a profitable
position on the world market. Other oilseed crops Weaknesses
(soybeans, cotton seed, rapeseed etc.) grown in Ethiopia
are commodities. For these commodities it will be very Lacking international market orientation
difficult for Ethiopia to compete on the world market due International market orientation is insufficient.
to its relatively low volumes and high handling and Little information from the interviewed stakeholders is
transport costs. These oilseeds are important for local retrieved on the requirement of final customers in highly
consumption. developed export markets. Only with a stronger market
orientation, a clear strategy to attain access and growth
High quality of sesame seed of specific target markets can be realised.
Ethiopia has high quality sesame seed varieties that are
suitable for a wide range of applications. The Humera High transaction costs
variety e.g. is appreciated worldwide for its aroma and The oilseeds chain starts with a very large number of
sweet taste. If Ethiopian farmers and traders manage to smallholders, each producing a very limited quantity.
prevent blending of different types with distinct qualities This requires additional efforts from middlemen, brokers
and provide adequate seed cleaning up to 99.0-99.5% and traders to collect sufficient large quantities, meeting
more added value in export markets can be realized and the required export volumes. Costs are involved in each
new markets can be created. transaction, lowering the price for the farmers.

Yields at a good level Contract discipline and reconsideration of

Despite the traditional way of farming with low inputs, payment by l/c
yield levels for oilseeds as sesame seed are on the same Doing international business means complying with
level as other producing countries (and in some cases international trade rules on contract discipline and quality.
even higher). From FAO and other studies it is identified Ethiopia has to regain name as reliable exporters in this

21
 field. Some Dutch importers have had problems on Healthy fatty acids
contracts executions, once the markets increased in value. Ethiopia may respond to the demand for healthy oils with
It is important to realise ‘contract is contract’ for creating high levels of unsaturated fatty acids by producing these
a sustainable business environment with European types of oilseeds. Several oilseed crops in Ethiopia match
partners. The demand of payment by l/c (letter of credit) the demand for healthy oils.
is only hampering business. This should be reconsidered.
Other payment guarantees can be developed, which are Demand for organic products
much easier for all involved in the chain. Due to the low levels of inputs and the use of virgin new
areas, oilseed production in Ethiopia is near organic
Farm production technologies and inputs standards. Because the international market for organic
Availability of inputs like quality seeds, fertilisers and products is growing, real opportunities can be identified.
other complementary inputs and credit facilities is limited. Some Dutch companies are already investigating the
The aim should be enhancing an efficient and effective possibilities for setting up an organic chain. Public-private
input market system. Seeds are traditionally selected and partnerships could play a role in accelerating these plans
sometimes mixed. It is unclear whether new varieties and initiatives in Ethiopia.
(bred or imported) are suited for the growing conditions
in Ethiopia. The low levels of fertiliser use might result in Threats
soil degradation and unsustainable farming systems in the
long run. Consumer preference on local markets poorly developed
The Ethiopian consumer markets are still in the infant
Storage facilities stage. This results in general in poorly developed quality
Storage facilities need to be improved in most cases. standards and thus in products not suited to developed
Creating a demand driven supply chain for high high income export markets. Specific chains aiming at
demanding markets requires storage capacity which specific export market should therefore be further
complies with quality assurance systems. Vulnerability developed, to acquire more export market power.
of storage to pest, moisture or rodents should be Revenues of these exports can be used for further rural
banned out. development. It means that the Ethiopian oil seeds sector
- especially the refineries - needs to understand the quality
Most oilseed crushing and refining plants do not meet requirements of the end users, which differ considerably
European quality standards from the domestic user.
Most processors do not meet the European quality
standards on safety and hygiene. The industry is Availability of capital
confronted with high imports on refined oils for use in Land is state owned and farming is largely based on
urban areas (palm oil from Malaysia and soybean oil often manual labour. Collaterals at farms are therefore almost
donated as food aid). These imports cause large problems not available. A well functioning credit system would
to local refineries. Refining capacities are heavily under- enhance the production of cash crops: to buy improved
utilised. In urban areas consumers prefer imported seeds and other inputs.
packaged, refined edible oil for prices not outrageously
higher than local bulk oil. Subsistence farming
Many smallholders are still focused on food security.
Opportunities Oilseeds as one of the cash crops are generally grown only
to have enough capital to buy some necessities of life.
Economic restructuring Food security needs to be enhanced, so that growers feel
The Government started economic restructuring, invests more comfortable growing oilseeds.
in infrastructure (road, telephone and railway) and
planned to start WTO-membership negotiations.
The latter means a more open economy, which might
attract foreign investors. At this moment several economic
incentives are already available for sectors producing
export priority products. Oilseeds are among them.

Increase in demand
Economic development of China and other emerging
countries will increase the demand for edible oils and
oilseeds on the world market. The increasing use of oils
and fats for the production of bio energy also leads to
higher demand. For these reasons, in the medium and
longer term relatively high prices for oilseeds and oils
and fats can be foreseen.

22
6 Conclusions and recommendations

In this chapter conclusions and recommendations are lacking inputs can be exploited for high value export
given for enhancing business opportunities for the markets.
Ethiopian oilseeds sector in general and between Ethiopia • To be able to realize sales of vegetable oils to highly
and the Netherlands in particular, derived from the SWOT developed consumer markets major investment in quality,
analysis in chapter 5. hygiene and food safety measures are needed.
• Work on more advanced production methods at farm
level. Field experiments and dissemination should be
Conclusions enhanced. The risk of soil degradation in the long run has
to be avoided. The focus on high priorities oilseed crops of
• Ethiopia has an attractive portfolio of specialty oilseeds the Ethiopian Institute of Agricultural Research should be
for export markets. It is in the top 5 producing countries on a par with export market opportunities.
for sesame seed, linseed and niger seed • Work on better contract discipline. Doing international
• Opportunities for export are not fully exploited because business means complying with international trade rules
little is known about the characteristics of the Ethiopian on contract discipline and quality. Ethiopia has
oilseeds in relation to high demanding export markets. to regain name as reliable exporter in this field. It is
• Blending, inefficient marketing, improper cleaning and important to realise ‘contract is contract’ for creating
sometimes poor contract discipline complicates further a sustainable business environment with European
exploiting market opportunities. partners.
• Oilseeds are the second export earner of Ethiopia. • Reconsider payment by l/c. The demand of payment
Smallholders in remote areas mostly grow oilseeds. by l/c only will be hampering business. It should be
Growth and improvement of the oilseed sector can considered to readdress this. Other payment guarantees
substantially contribute to the economic development can be developed which are much easier for all involved in
at national, regional level and family level. the chain.
• The oilseeds chain is fragmented and many
smallholders and middlemen are involved, decreasing
efficiency and chain responsiveness. Business opportunities with the Netherlands

Recommendations The oilseeds and oils and fats industry in the Netherlands
can be considered as the gateway to Europe and many other
In order to create high value export chains, it is strongly destinations. Intensifying business with Ethiopia is
recommended to focus on the speciality oilseed products. beneficial for Dutch traders and investors in the field of
Recommendations for the Ethiopian oilseeds sector in specialty oilseeds. Investments in the following product-
more detail are: market combinations could be of interest.
• Improve market intelligence: competitive power can be
increased by knowing the markets: the buyers as well as
the competitors.
• Improve the knowledge about the product
characteristics of the different oilseeds. Characteristics
as colour, oil content, fatty acid composition, taste etc.
determine the applications. These characteristics should
be matched by final consumer products, such as the
increasing demand for healthy fatty acids. By knowing
this, it is possible to create more added value.
• By investment in advances technologies and by
implementing codes of conducts (e.g. BRC) and food
safety standard more added value can be generated.
• Prevent blending of different types of sesame seed with
distinct qualities and provide adequate seed cleaning
up to 99.0-99.5% in order to create more added value in
export markets.
• Support and facilitate organic oilseeds. The benefits of

23
 Product Market Opportunity
Sesame seed with higher purity level ( 99.5+ %) Bakery applications Investment in cleaning facilities
Hulled sesame seed Bakery applications Investment in hulling facilities
Specially flavoured sesame seed oil Different food purposes (e.g. ‘wok’ oil) Organizing local crush and bottling.
(e.g humera type) Transport via IBCs for Europe and
other destinations
Organic sesame seed Organic food applications Organizing organic chains from
farmer to end user
Linseed with high omega 3 and 6 fatty acids Applications in specific healthy food products Identify specific varieties with
highest amounts of omega 3 and 6.
Setting up export chains
Castorbeans Wide variety of technical applications Identify opportunities for organizing
collection. Identify main
characteristics. If cost competitive
with India, setting up export chains
to Europe and other destinations
Safflower seed Applications in specific healthy food products If high C18:2 level, identify
opportunities for organizing export
chains

24
Acknowledgements

During our fact finding mission in Ethiopia we met

numerous Ethiopian entrepreneurs, government
officials and representatives of non profit organizations.
Important parts of this study could not have been done
without their cooperation. We would like to thank them
for their time and inspiring input.

25
 Contact

Geert Westenbrink
Agricultural Counsellor
Royal Netherlands Embassy
Old Airport Zone, P.O.Box 1241,
Addis Ababa, Ethiopia.
Telephone: +251.(0)11.3711100
Fax: 3711577
E-mail: [email protected]
Mobile: +251911306586

Ingrid Korving
Ministry of Agriculture, Nature and Food Quality,
the Netherlands
Department of Industry and Trade
P.O. Box 20401
2500 EK The Hague
Telephone: +31 70 378 47 97
E-mail: [email protected]

Jaap Biersteker
Consultant for Ethiopian-European business
linkages in oilseeds
Telephone: + 31 75 628 74 34
E-mail: [email protected]

Jürgen Koch
Program Coordinator
Support to Business Organizations and
their Acccess to Markets
P.O. Box 40675
Addis Ababa
Telephone: +25101654386/87/89
Fax: +25101654388
E-mail: [email protected]
Website: www.business-ethiopia.com

26
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EIA (2006). Investment opportunity profile for edible oil Wikipedia (2007). Ethiopia.
production from maize in Ethiopia. Ethiopian Investment http://en.wikipedia.org/wiki/Ethiopia, retrieved January
Agency, Adis Ababa. 22nd 2007.

EVD (2007) Online landenpublicatie Ethiopië. Willett W.C., and A. Ascherio, 1994. Trans fatty acids: are
EVD, Den Haag. www. evd.nl. the effects only marginal? In: American Journal of Public
Ienica (2007). Castor. Retrieved 4 April 2007: Health, May, 84(5), 722-4.
http://www.ienica.net/crops/castor.htm

MoFed (2006). Ethiopia: Building on Progress. A plan for

accelerated and sustain Development to End Poverty
(PASDEP). Volume 1: Main text. Ministry of finance and
Economic Development (MoFED), Addis Ababa.

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 List of companies/organisations/ spots visited
on fact finding mission

• Mr. Itana Ayana - ITAB

• Ethiopian Pulses, Oilseeds & Spices Processors Exporters Association, Mr. Genetti

• Ambasel - mr Solomon a.o.

• Ali ABdul ALi Import Export

• Commercial farmers supplying Ambasel

• Visit trading market in Gondar with brokers

• Adjo Modjo

• Mulat Abegaz Gen. Export enterprise.

• Alpha Tradin Partners - mr. Tewodros Yilma

• Ethiopian Grain Trade Ent. mr Biru Lede

• Min. of Agriculture - mr Assefa Mullugeta

• Investment authority- mr Mohamed Seid

• US AID – mr Humphreys and Sherry a.o.

• 2 small local crushers near Nazareth

• Gonda Import Export Enterprise

• Dutch Embassy

• SNV

• Ethiopian Institute of Agriculutural Research,

Director General

• Meeting with members of Ethiopian Pulses, Oilseeds & Spices Processors Exporters Association

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Appendix 1 Costs of the sesame value chain

Seifu (2004) made an estimate for export of sesame seeds, which is presented in the table below:
birr/ha birr/quintal (= 100kg)
Type of costs High market price Low market price
Land clearing 150 21.43 21.43
Weeding 420 60.00 60.00
Harvesting 360 51.43 51.43
Trashing and packing 36 5.14 5.14
Seeding, spraying, guarding, 30 4.29 4.29
Land preparation (tractor rent) 140 20.00 20.00
Local seed 4 Kg/ha 15 2.14 2.14
Chemicals 180 25.71 25.71
Bags 100 kg 45 6.43 6.43
Loading and unloading 42 6.00 6.00
Store rent (1 birr/qt per month) 14 2.00 2.00
Food expenses for labourers 150 21.43 21.43
Transport expense from farm to Village market 91 13.00 13.00
Land rent 29 4.14 4.14
Salary expense 240 34.29 34.29
Total cost 1942 277.43 277.43
Farmers margin (depends on world market price) 1500 214.29 13
Producer price 491.71 290.43
Packing 1.00 1.00
Loading and unloading 5.00 5.00
Store rent 3.00 3.00
Storage loss (2%) 9.83 5.81
Loss in transportation& handling (1%) 4.92 2.90
Assemblers margin 15.69 15.69
Assembler Wholesale Price 531.16 323.83
Municipality fee 0.68 0.68
Loading and unloading 4.00 4.00
Transport 15.00 15.00
Seed cleaning (input 95% purity) 7.60 7.60
Bag 6.18 6.18
Miscellanous and cost impurity 13.28 8.10
Store rent (0.43*three month) 1.23 1.23
Transport: Gondar-Djibouti 40.38 40.38
Standard fee 2.38 2.38
Forwarding 23.75 23.75
Interest (7.5%, three months) 12.11 8.12
Exporter’s margin 10.14 10.14
FOB Price (100 kg) 703.02 475.13
Source: adapted from Seifu, 2004

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 Appendix 2 Additional fact and figures

Export (tons) of oilseed by Ethiopia

1997 1998 1999 2000 2001 2002 2003
Groundnuts, in shell * * * * * * 104
Groundnuts, shelled 79 69 4 30 65 110 109
Soya beans * * * * * 182 71
Cotton seeds * * * * 3063 1244 60
Sunflower seeds * * * 1 13 1 115
Sesame seeds 49,373 49,147 28,227 31,044 42,992 68,620 71,345
Rape or colza seeds * * * 60 19 2 119
Mustard seeds * * 160 130 180 240 162
Safflower seeds * * * 1 * * 2
Linseed * * * * 5 2 3
Castor oil seeds * 179 * * 40 3 *
Oilseeds other 1,919 4,429 11,135 11,252 29,079 19,939 23,137
Total 51,371 53,824 39,526 42,518 75,456 90,343 95,227
Source: ITC/WTO

Export (tons) of sesame seed by Ethiopia

1998 2001 2002 2003
Israel 5180 16976 17290 14150
Turkey 143 10546 11514
Yemen 2069 5749 6960 9859
Egypt 17606 3577 9247 2587
Japan 6180 3802 3241 3886
Jordan 807 1993 2029 5822
Greece 4,083 1,369 5,311 2,993
Saudi Arabia 1301 1159 1552 5426
Switzerland 1592 1953 3206 2973
Netherlands 1205 518 1454 1599
Others 4951 5753 7784 10536
Total 49147 42992 68620 71345
Source: Adapted from ITC/WTO

World imports of sesame seed

Growth
Share 97-04
2001 2002 2003 2004 02-04 (%)
Japan 80209 94320 90225 66478 0.16 -0.8
Korea 71248 64510 67582 43607 0.11 3.2
Us 51599 45044 34707 39168 0.08 7.3
Turkey 29219 48456 23421 16153 0.06 10.5
Taiwan (Province of China) 27742 13566 25323 26084 0.04 -1.6
Germany 21168 21493 19929 21099 0.04 8.1
China 4457 5470 45149 10710 0.04 44.1
Egypt 67789 39989 13866 3445 0.04 -15.4
Netherlands 35475 15948 16901 17601 0.03 -4.7
Israel 22504 22166 20312 4570 0.03 8.0
Greece 19529 19777 12205 9780 0.03 -5.6
Mexico 23175 9905 17121 13629 0.03 8.9
Syrian Arab Republic 21365 31962 1731 4557 0.02 2.4
Saudi Arabia 29035 17671 10880 3720 0.02 12.4
Yemen 8545 10374 9977 0.02 22.4
Source: ITC/WTO

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