It's Time to Invest in Ethiopia's Forest Sector
A version of this blog first appeared in The Reporter. To learn more about the economic potential of Ethiopia’s forest sector, read the new report Trees, Forests and Profits in Ethiopia.
Billions of bees are hard at work in Kaffa, producing honey and beeswax for a business that employs 3,500 people. Another company in Addis Ababa harvests bamboo to build furniture, contributing $2.6 million (91 million birr) to the national economy. Together, forest products like these, grown by businesses and communities, add more than $2.6 billion (91 billion birr) to Ethiopia’s GDP.
It’s clear that trees are crucial to the future of Ethiopia, but forest cover has fallen to 15.7% today from 40% two centuries ago. That devastation, though, isn’t irreversible. Local communities have grown millions of trees and bamboo clusters since the 1980s to restore their farms, forests and pasture. For decades, the yearly soil and water conservation campaigns also rewarded local people that care for the land.
Recently, Ethiopia’s government scaled up this commitment through its pledge to the pan-African AFR100 Initiative to restore 15 million hectares of land by 2030. And through the ambitious Green Legacy campaign, Prime Minister Abiy Ahmed (PhD) led millions of people to plant 9 billion trees since 2019. This number will rise to 20 billion in the coming two years.
We know that 73% of Ethiopia’s land could benefit from more trees, but how can the government, communities and companies turn this opportunity into economic wellbeing?
Investing in Forests Can Bring Prosperity to Millions
The opportunity is clear: Demand for wood and forest products in Ethiopia is expected to increase by 27% over the next 20 years. Today, 12.9% of national GDP already comes from forests, and an estimated 57 million people — more than half of the country’s population — work full- or part-time in the forest sector. Of them, more than 11 million rural households rely almost exclusively on forests for their sustenance.
That number is expected to rise, as the COVID-19 crisis could threaten the jobs of an estimated 1.5 million Ethiopians, primarily the urban poor. Many of them will migrate back to their rural homelands and need new jobs and opportunities to make ends meet. Fortunately, the forest sector can help fill that gap, and the government is on board.
The National Forest Sector Development Program (NFSDP) includes targets to create 630,000 full time jobs in rural areas by helping people manage tree nurseries, plant seedlings, protect forests and market forest products. The forest sector also plays a major role in Ethiopia’s Climate Resilient Green Growth (CRGE) Strategy, which lays out a path for the country to become middle-income by 2025. Key to that vision is protecting the remaining 17.35 million hectares of forest and restoring forest cover to 30%.
A new report from the Environment, Forest and Climate Change Commission (EFCCC) and World Resources Institute, Trees, Forests and Profits in Ethiopia, shows that we can help meet these economic targets by sustainably managing trees across 1 million hectares of existing private/communal and state-owned production forests and establishing 310,000 hectares of new forest plantations. Creating those new plantations would require a significant private investment of $638 million (23 billion birr), but could deliver a $1.91 billion (69 billion birr) return, or $3 for every $1 invested.
The potential is clearly there, but how can we reach that ambitious goal?
Restoration Businesses Are Blazing Forward
Two commercial forestry enterprises run by the governments of Oromia and Amhara are realizing this opportunity. Oromia Forest and Wildlife Enterprise and Amhara Forest Enterprise engage smallholder farmers through an out-grower scheme, creating jobs and generating annual revenues of $10.5 million (364 million birr) and $4.5 million (164 million birr), respectively. There is enormous potential to scale up similar enterprises. The country has approximately 26.8 million ha of suitable land for new commercial forests, and 190,000 ha of state-owned plantations in different regions available for development or improved management.
Private entrepreneurs in Ethiopia are also at work, restoring land to turn a profit and reducing pressure on standing forests. They are creating green jobs, including for women and young people; sustainable value chains; and reliable markets that rural households can tap into to increase their incomes.
Thousands of farmers grow bamboo in Ethiopia, but many of them lack access to a manufacturing facility that can provide them a steady income for their crop. SA Bamboo Works, based in Addis Ababa and founded by Addisu Hailu, is one of the few Ethiopian bamboo manufacturing companies that produces for the local and international markets. The company has an average annual revenue of $2.8 million, employs 300 people in its furniture factories and sources its raw bamboo from hundreds of individual farmers and cooperatives. The bamboo seedlings that they plant also help restore the land, holding water in the soil and halting erosion in its tracks.
It’s not just bamboo. Honey means profit, especially as demand for tej and other products increases worldwide. Apinec Agro-Industry in Kaffa produces and processes honey and exports to the United States and Europe while supplying Ethiopian Airlines and local supermarkets. Founder Wubishet Adugna Hailemariam’s company employs 27 people and has trained hundreds of farmers to keep bees. The company is supplying farmers with improved beehives to replace the cut down tree trunks used to make traditional beehives. Apinec is also distributing tree seedlings to farmers to increase forest cover in local woredas.
These businesses are pioneering how to turn Ethiopia’s large forestry sector into a real industry that can propel the country forward. What do they need to scale up their work?
A Shining Future For Ethiopia’s New Restoration Economy
First, we need to boost government capacity to mobilize private investment. The government does not yet have a coordinated system in place to show investors where land is ready for private investment. Public-private dialogues helped forge early connections between government agencies and private investors, but more work is needed.
Second, we need to introduce policies and regulations that help people access finance, working through EFCCC to mobilize funding from international lenders. A new department in the Development Bank of Ethiopia, or an entirely new bank, could support the forestry and agriculture sectors and provide loans and other financial services to people restoring land.
Third, we need to remove bottlenecks that prevent profitable companies from growing. One major constraint is the lack of land, knowledge and connections needed to work effectively with smallholder farmers and manage forests. Businesses and cooperatives are also disconnected from national and international markets, and they need help accessing private investment.
Finally, we need to provide more training opportunities for entrepreneurs. Many people don’t know how to convert their ideas into a profitable business model. Expertise within Ethiopia isn’t tailored to respond to the specific priorities of restoration startups and doesn’t reach the wide range of potential entrepreneurs in universities and within regions. Programs like the Land Accelerator training program, which Addisu and Wubishet attended, could help bridge that gap.
The people of Ethiopia have shown in recent years that they want to grow trees and protect forests. Now, it’s time to help them make that dream a profitable reality and build a vibrant new forest economy.