Investment in the livestock sector

29. This section briefly discusses the flow of investment funds into livestock activities. Investment funds are made available from various sources including the central government, external grants and borrowings, non-government organizations (NGOs) and formal credit institutions. The following discussion attempts to provide only orders of magnitude of funding from the above sources.*

* A more comprehensive study on livestock investment in post-revolution Ethiopia is in the process of preparation by the author.

30. During 1981-89, investment budget allocations from the central government to the agricultural sector as a whole (domestic as well as external grants and borrowings) averaged about Birr 511 million annually (Birr 2.07 = US$ 1). During the same period, the allocation to the livestock sub-sector, excluding fisheries, was on average only Birr 45.6 mill. annually or 9% of the total for the agricultural sector. Out of Birr 45.6 mill., about 50% was secured from external grants and borrowings, the latter accounting for as much as 75%. The EEC, World Bank and the African Development Fund (ADF) were the major external contributors. Although information on actual expenditure was not readily available for comparison, normally the actual budget utilizations would be much lower than the above indicated budget approvals (ONCCP, 1981-1989).

31. In 1989 there were 12 NGOs administering 31 agricultural projects including livestock. According to the Ministry of Agriculture (MOA), which has, since mid-1989, taken the coordination responsibility for NGO agricultural activities in Ethiopia, these NGOs have allocated about Br 108.5 million for the agricultural sector as a whole for a duration of three years on average. Of this amount, some Br. 13 mill. or 12% of the total has been earmarked for livestock and livestock-related activities. The major NGO-supported livestock activities include veterinary services, dairy cattle, dairy goats and rehabilitation and development of pastoralists. The amount allocated to pastoral activities accounts for about 70% of the total NGO funds allocated to livestock development (MOA, 1989).

32. There are also UN (FAO and UNICEF) and other NGO-funded livestock activities under the direct supervision of the Relief and Rehabilitation Commission (RRC). During the last five-and-half years (1985-1990) about Br. 2.5 million in the form of grants was allocated both for settlement areas (27%) and rehabilitation projects (73%). Funds for the purchase of draft oxen constitute the major share of the grants, especially in the settlement areas (RRC, 1990).

33. The Agricultural and Industrial Development Bank (AIDB) and the Commercial Bank of Ethiopia (CBE) are the two financial institutions channeling formal credit to the peasant sector as well as parastatals. During 1981-89, domestic bank loans (AIDE and CBE loans combined) represented on average about 50% (Br. 516 mill. annually) of the total fund allocated to the agricultural sector (Br. 1,027 mill. annual average over the same period). Credit to individual smallholders and non registered PCs (i.e. those PCs without legal status) has so far been extended through the registered SCs on an on-lending basis. The registered PCs on the other hand are eligible for direct bank credit.

34. During 1983-88, CBE's portfolios show that loans to the agricultural sector averaged about Br. 53 million annually or 5.2% of the total to all sectors (Br. 1009 mill. Over the same period). It is believed that the lion's share went to financing oxen purchases in conjunction with fertilizer credit (CBE, 19831988).

35. In contrast to CBE, AIDB plays a major role in the financing of the agricultural sector. During 1976-89, AIDB disbursed a total of Birr 3,333 million in agricultural loans or an average of about Br. 240 mill. annually. Although this represents a relatively large injection of funds into agriculture, the state farm sector has absorbed a very high proportion. As Table 3 shows, out of the total agricultural loans disbursed during this period, the share of the state farms was about 79%, while that of the peasant sector (cooperatives and smallholders combined) was only 21%. The proportion of the total credit going to livestock development as a whole has remained low and on average accounted for only 3% of total agricultural loans. Again the parastatals took the major share with 73% of the total value of loans disbursed to the livestock sector. The peasant sector and private commercial livestock activities constituted 25% and 2% respectively. Close to 94% of livestock development loans to the peasant sector were loans disbursed for the purchase of oxen as shown in Table 4.

Table 3. AIDB, agricultural loans disbursed - 1976-1989 (Mill. Birr *)

Agriculture Sector			Livestock Sector
Total	State Farms	Peasant Sector**	Total	Parastatals	Peasant Sector**	Private (Commercial)
3332.7	2626.0	706.7	103.6	75.3	26.0	2.3

Source: Agricultural Dept., AIDB. Compiled from various Credit Operations Reports., 1976-1989.

* 1 US$ = Birr 2.07
** Individual borrowers and cooperatives; cooperatives include coffee and tea-producing cooperatives.

36. Although government policy was supposed to give priority to the financing of cooperative dairy farms, as Table 4 shows, draft oxen loans to smallholders and loans for beef fattening by the private sector have turned out to be dominant. One could not explain whether this resulted from conscious changes in policy, although the oxen loans seem to have been prompted by the availability of the IFAD credit. The loan extended for dairy development in the peasant sector (i.e. both PCs and individual borrowers) was minimal, constituting only 2% of livestock development credit to that production sector. Although no breakdown is available for the state sector, dairy development loans seem to have had a similar share in livestock credit extended to the parastatals.

Table 4. AIDB livestock loans disbursed by sector and enterprise - 1976-1989

Sector/Enterprise		No. of Loans	Value (000 Birr)	Distribution (%) within sector	Remarks
Peasant Sector
- PC dairy farms-/		30	438	2	Standard package includes 10 heifers +1 bull
- Smallholder individual dairy loans 1		10	137		On-lending by SCs, consisting of 171 heifers
- Beef fattening 1
	· PCs	26	575	4	On-lending to smallholders by SCs
	· SCs	7	436
- Draft oxen 2		69549 oxen	24400	94	On-lending to oxen smallholders by SCs
Private Commercial
by sector 1
	- Dairy		6 310	13
	- Beef fattening	20	2000	87
State Sector 1		N.A. 3	75318 4

1 Source: Agricultural Dept., AIDB, compiled from various Credit Operations Reports, 1976-1989

² Source: IFAD Agricultural Credit Project, Quarterly Progress Report, October 1-Dec. 31, 1989, Report No. 23. AIDB

³ N.A. = not available

⁴ Breakdown by enterprise not available.

37. The above brief presentation, although only broadly indicative of orders of magnitude, shows that much of monetary investment has been made in the state sector. While no detailed figures were available to make more precise estimates, the state sector's contribution to national livestock output remains extremely low in spite of the considerable investment put into it. Within the peasant sector, where individual operators contribute most to agricultural output including livestock, producer cooperatives take almost two-thirds of AIDB livestock production loans (i.e. excluding oxen loans). Two important premises underpinned government policy to support greater investment in the state sector and producer cooperatives compared to individual smallholder or the private commercial sector. These are that the state sector and producer cooperatives will have greater capacity to utilize more "modern" technologies as well as demonstrate greater efficiency deriving from positive economies of scale. There is as yet no verifiable evidence that this is borne out by the performance of these organizations over the past 15 years or so.