A significant portion of Ethiopia’s agricultural land remains uncultivated as many investors in the sector are misusing borrowed loans for purposes unrelated to farming, according to recent reports. This issue is becoming a major obstacle in the country’s agricultural development efforts.
More than 5,000 investors are currently involved in agricultural investment across Ethiopia, but instead of using the loans to develop the land, many are diverting the funds to other ventures. This has led to vast tracts of land, which were intended for agricultural development, being left idle.
This concern was highlighted at the National Multi-Actor Partnership Consultation and Formalization Workshop held in Addis Ababa on August 8 and 9, 2024. The event was organized by Welthungerhilfe (WHH) in collaboration with GIZ, Land for Life, ORDA, and GLAD.
Dereje Abebe, Lead Executive Officer for Agriculture Investment and Product Marketing at the Ministry of Agriculture (MoA), revealed that Ethiopia has 36 million hectares of arable land. However, only about 16 million hectares, or 44 percent, are currently being cultivated. This underutilization is attributed in part to the misallocation of loans by investors.
Of the 5,753 investors engaged in the agricultural sector, 98.6 percent are domestic, while 79, or 1.4 percent, are foreign investors. Despite this, domestic investors hold 77 percent of the country’s arable land, while foreign investors control the remaining 23 percent.
During the workshop, several challenges within the agricultural investment sector were discussed. Key issues include unstable institutional arrangements, poor implementation of responsible land governance, and the marginalization of local authorities and communities in the land identification, delineation, and transfer processes. Conflicts between local communities and investors, as well as disputes among investors themselves, were also noted as common challenges in land-based investments.
The forum emphasized that the decline in agricultural productivity is linked to the failure of responsible institutions to promptly identify and address these bottlenecks. Additionally, there is a lack of support for local communities to understand the development opportunities that come with investment. Many investors also fail to adhere to the development terms outlined in their leases.
The Ministry of Agriculture has ambitious plans for the sector. Between 2021 and 2030, the MoA aims to expand medium-to-large-scale agricultural investment from 986,492 hectares to 4.2 million hectares and to double production levels from 85 million quintals to 169 million quintals.
However, achieving these goals will require addressing the current issues in the sector, ensuring that loans are used as intended, and fostering a more supportive environment for both investors and local communities.
