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USAID has a visible presence in Ethiopia as it works on and supports many public and private endeavors mainly in Agriculture but also in health and education. Now USAID is taking on new energy projects like the Power Africa Initiative. Capital’s Eskedar Kifle sat down with Dennis Weller to talk about how things are going for USAID in Ethiopia, their relationship with the private sector and the upcoming Ethiopian Agribusiness Investment Forum on January 16th 2014.
Capital: Give me an overview on what USAID does and the projects it is involved in.
Dennis Weller: USAID has been here for a number of years, we are one of the major donors here. A big part of our program is implementing the US president’s initiatives and the single biggest area we are investing in is health; one of the newer projects under president Obama is called Feed the Future, that is where our present sector investments are going through. Feed the Future is about enhancing food security, when I look at food security, it’s not thinking about just investing in the highlands but also the pastoral areas and supporting the safety net and some of the emergency food needs for people here as well.
I think it is also worth noting that we are in other fields, besides health and agriculture, education is another large area that we are investing in particularly in primary school. We did a survey a couple of years ago with the government and it was amazing to see that the literacy in schools was fairly low, in fact it was worse than it was 10 years earlier. The quality of education is an important part of development not just as kids develop but also to provide the foundation so they can get skills and provide good workers and a skilled labor force as Ethiopia develops.
Capital: Tell me more about Feed the Future.
Weller: Feed the Future is a program that focuses on food security and doesn’t try to work everywhere or on every type of produce but instead it looks at certain geographical areas, specific crop commodities and livestock value chains so that we can have a transformational impact in those areas or with those particular commodities. We work with nine different value chains, five of which are commodity crops like coffee, sesame, chickpeas wheat and maize and also with livestock; dairy and hides as well.
Our Feed the Future program is about USD 50 million a year, it has been going on now for about three years here. It has kind of been in the startup phase in the first year and a half. Then we started to see the momentum with jobs being created, through exports and new investment loans going into the agribusiness.
A lot of our work with farmers is in the highlands but we also work in the pastoral regions of Somali and Afar, including a slaughter house in Jigjiga (Somali). We also have a resilience program because every couple of years Ethiopia goes through a drought. To improve the hardiness of the people so they are able to thrive during times when there is little to no rain is important. If we and other partners are dumping food aid and other assistance during times of drought it is not sustainable.
That is why we are working with livestock in these pastoral areas as well so it is not just the highlands. Some of our value chains are in cattle and hides. Ethiopia has the largest cattle herd in Africa and it is a really an opportunity for us.
Agriculture as you know in Ethiopia is the engine of growth right now, we would like to see more industry here but for the time being 80 percent of the people live in rural areas and agriculture remains people’s livelihoods, it is important to improve the productivity of the sector if we are going to see poverty reduced and nutrition improved and people becoming economically better off.
Capital: How do you make decisions about which sectors to get involved in? Do you look at the country’s needs or do you have your own selected criteria?
Weller: As far as the value chains we were talking about, when we are working under the Feed the Future program, we look at a couple of things. We conduct what we like to call ‘deep dives’ which is going in and looking at what are going to be the most impactful investments for reducing poverty and improving nutrition. To reduce poverty you have got to have a crop or commodity that is making money for farmers out there. So we look cost benefit analysis, we look at what commodities will actually transform more farmers, something that has a fairly broad impact. Different diagnostic tools help us to determine what we should be investing in and then we match that up with, of course, the government’s plan, the Growth and Transformation Plan. That is how we have selected our different value chains.
Our focus is more on the market linkages and not necessary putting a lot of money into production or on farm investments but more the market linkages, both after the commodity is produced and some of the market linkages to get people started like fertilizers or better quality seeds into the production system so that farmers can grow more maize, wheat and such.
Capital: On one hand you have your own (US) foreign policy and on the other you have the way the Ethiopian government does things. How do you balance that? Does it affect USAID’s decision or its work?
Weller: It does. I think we look at countries that are investing in their own people and putting their national assets into the right things, those who have a good policy environment and those we see as good development partners, that’s where we focus much of our investments, but not exclusively because, we also work in other countries; with fragile environments. We are in a neighborhood here that has fragile countries around it that we can’t abandon or just ignore but the kind of investment we would put in there is much different from the king we would put in Ethiopia.
If we invest in sesame warehouses here or the Ethiopian Commodity Exchange; to improve that or to improve the market access, or with seed companies like pioneer Du Pont to put in a verity of seeds, we wouldn’t necessarily do something simlar in countries that basically do not have markets or do not have roads or have a private sector that can really take these investments and do something with them.
So we do tailor our investments to countries depending on the environment.
Capital: Can you give me an example of a USAID project that has actually been successful in changing people’s lives?
Weller: I think we see a number of these. I think we can look at particularly the commodities of sesame and coffee. These are areas Ethiopia is well known for and is exporting already but there are certain market linkages that are not there so we help traders go to trade shows to basically demonstrate Ethiopian Coffee (as a brand) and increase sales and the benefit from those sales also benefits the farmers.
We have seen improved seeds that are out there now that we have helped and supported Ethiopia in promoting, so you see yields increase and seeing those yields increase translates into increased incomes for farm households.
We see a lot of on the ground improvements in the agricultural sector and we have seen a lot of growth in the sector in the last 10 years and a lot of that is because of the investments the government and partners have put in the agriculture sector. Not just seed or trade shows but the sort of technology that goes into improving farms. The Agricultural Transformation Agency (ATA) is a good example, we and others are helping them take some of these technologies and improve them so that not just 10,000 but a million farmers can benefit from these improved technologies.
Capital: Are you involved in energy projects in Ethiopia?
Weller: When we look at the private sector, yes, agriculture has been the major sector for investment but that is not the only sector. In health and energy we have put money into private sector organizations. The newest of President Obama’s initiatives is the Power Africa Initiative. Unlike some of the other areas we talked about, working in over 20 countries in Africa, many of those countries are Feed the Future countries, for energy there are just about six countries that are part of the Power Africa Initiative and Ethiopia is one of them.
So yes, we are investing in private sector energy and it is a big area that Ethiopia is investing heavily in. We all see that it is part of Ethiopia’s future; not just because it is creating more energy for domestic use so you have more people with access to energy and private business that can access good reliable energy to help business grow and also to export as well.
The focus of our energy program is really transaction based. So many of Africa’s energy investments start out on a pretty good path and then they head into some roadblocks and fail. This is really to help unblock some of these constrains; whether it is on the policy side or the private sector side or getting access to credit, that sort of thing, to help promote more of these deals and make sure that they are seen through rather than having them stalled or stopped half way through.
Capital: The Agribusiness Investment Forum is around the corner, what will be the main focus of the forum?
Weller: A lot of what we have been doing, I talked about the value chains, is working with existing firms and existing private businesses and kind of taking them from where they are to kind of scaling them up, molding their businesses and making them more efficient, improving export, improving their access to credit and creating jobs. I think we have created close to 34,000 jobs this past year through these different projects with a target of 250,000 jobs by 2016.
The Ethiopia Sustainable Agribusiness Incubator (ESAI) is a project we have with Precise Consult. The aim is to really take newer firms that are just coming into the market because we all see the importance of the private sector and how you promote it and what we often hear from medium and larger sized firms is that we need to out source to some of these smaller firms to get some of our supplies and inputs but there is nobody out there.
So we are looking at these business plans from these newer entrants from the private sector and kind of helping mentor them and match them with credit and helping them look at other suppliers that might be part of their operations as well.
So really we are promoting those newer industries and are coming into the market that are so important for the growth of Ethiopia’s private sector.
I think the incubator project is modeled after the more successful international incubator projects in Chile. It is a model we have looked at and invested a couple of millions into.
Capital: USAID has been here for a while, what are some of the persisting challenges Ethiopia is facing and what are some of the positive changes you have seen?
Weller: I would like to start with the positive. Obviously in the last 20 plus years we have seen a major shift to a more market based approach. As the government office says, 25 years ago even your Enjera came from the state. Now we see more of a private sector, it is still fairly small; we still think it needs much more support and much more growth.
The private sector is going to be what transforms Ethiopia, so whatever can be done to get this private sector to grow quickly and more robustly, whether it is access to credit, facilitating services, logistics of importing or exporting is something that is important and I think the government is really focused on that and has started to work on that more and more. Perhaps not as much as some of us would like but I think the attention is there.
Having a policy frame work in place that basically says we do want to improve growth in Ethiopia, and that growth will translate into reducing poverty, that is the important part of what Ethiopia has done. I get excited about it. I work in Ethiopia to see that sort of development driven mentality.
Regarding some of the constraints we have, which are the same in all countries, particularly the private sector, figuring out how to get imports in here, logistics, the financial constraints are all challenging issues; getting loans from banks is something that is easer for medium and large firms and for the small firms I talked about it is nearly impossible sometimes because of the strategic requirements the private bank system puts on them, for example, collateral.
So those are some of the things that I do think are making things difficult for the private sector to move. And then we look at some of he objective indexes as well like the World Bank’s Doing Business Index where Ethiopia is still not doing well. Ethiopia has a lot of room for improvement.
Capital: Do you think Ethiopia should join the World Trade Organization?
Weller: I think Ethiopia’s aspiration is to join the World Trade Organization and we support that. I am not sure if Ethiopia is quiet there yet, there have been a number of questions about this from different countries and I think the country is doing its best to address some of these constraints.
International trade is important, not just for the United States but certainly for countries like Ethiopia because it provides connectivity to the global market, that is what is going to benefit the people and reduce poverty in the long run