King Cotton Feeds Royal Textile Hopes

Trade minister Kassahun Ayele said recently that "if the textile industry cannot be profitable in Ethiopia, it cannot be profitable anywhere." He was referring to Ethiopia's low paid and skilled labor force in the textile industry, but also the advantageous climatic conditions in Ethiopia for growing cotton. Ethiopia does consider cotton a "significant opportunity" for export.

As the general manager of the investment authority pointed out, "cotton is one area of production that is well integrated in Ethiopia's economy." Besides the domestic demand of 50,000 tons of lint cotton for Ethiopia's textile factories, only a portion of which is met by local supply, the export potential for cotton is enormous as well.

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History of cotton
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Ethiopia is considered one of the original hearths of cotton production. Although Ethiopia has exported cotton since before the reign of Haile Selassie, the socialist Derge regime (1974-91) attempted a "great leap forward" in Ethiopia's homegrown textile sector.

To accomplish this, the regime expanded the amount of land under control of the state cotton plantations and built huge new textile factories to supply lint, yarn and fabric for the centrally-planned economy.

During the early years of the socialist regime, the sector became the largest contributor to gross national product and a major employer. The sector began falling apart, however, under the contradictions of central planning. Fabrics were designed with little regard for individual consumer taste and the mills operated with little regard for efficiency.

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The fall and rise of cotton production
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After the downfall of the Derge, the new government announced its intention to convert state farms and mills to private ownership. Because of prolonged neglect, the lack of competition, and outdated technology, the sector was ill-positioned to meet international standards of quality and competitiveness.

When the government halted all subsidies for the textile factories, they were forced to cut production or go defunct. As a consequence, they have been forced to cut back on their production activities. Cotton production declined as well without ready-made clients in the textile sector.

State farms have been made into autonomous "agricultural development enterprises (ADE)" with no further access to state funding to cover operation and maintenance costs. The production of lint cotton in particular has fallen to just five kilotons per year from over 30 kilotons in the early 1980's. Production fell so dramatically that the United States donated $31 million in cotton to the twelve firms within the Ethiopian textile sector in 1994-95.

There are signs that cotton production is finally on the increase again. Local ginneries and textile factories now have considerable stocks of domestic cotton, as much as 15-20 kilotons. A new cotton gin in Gondar has an overflowing warehouse of raw cotton.

In fact, much of the recent growth in cotton production in Ethiopia is from small-scale farmers, who cultivate about 42,000 hectares annually.

More private plantations are springing up in southern Ethiopia (where an American has applied for a license to grow cotton) and the northwest corner of the country between Gondar and Humera. There is a huge potential for the expansion of cotton cultivation near Ethiopia's river system, particularly along the Omo-Gibe, Baro-Akobo, Blue Nile, and Tekeze rivers.

Even the three major cotton-producing farms, all located near the Awash river, are showing signs of rejuvenation in advance of their expected privatization next year. Below is a short description of the state-owned plantations.

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Agricultural enterprises today
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Middle Awash -- The middle awash ADE is located 260 kilometers from Addis Ababa, just past the town of Awash in the rift valley. Private owners began growing cotton near the Awash river in the 1960's and within ten years there were 30 small farms cultivating cotton, along with fruits and spices, using the Awash river as a source of irrigation. In 1975, all these farms were nationalized.

The Middle Awash ADE was a conglomeration of five of the largest farms. Three have been returned to their former owners. The other two contain 5,000-6,000 hectares of cotton and another 1000 hectares of bananas. The enterprise employs about 1000 permanent and 300 part-time workers. The average yield is about 250 tons per hectare.

Farming is mechanized on the plantation, though harvesting is done manually. Planting occurs in mid-april and harvesting is done in mid-september. Gravity irrigation is practiced with field canals and furrows. The enterprise uses fiat tractors with 80-130 horsepower, along with various implements and heavy-duty machines. The plantation has its own ginnery, a continental 88 model with two gin stands and a capacity of 22 bales per hour. The company sells primarily to local textile factories, oilseed mills, and traders. According to a study of the Ethiopian textile sector in 1996, the middle awash ADE made a profit in 1995 for the first time in years, has a negative net worth, negative liquidity and heavy debt.

Tendaho -- Another large cotton plantation is situated in the Afar region of northeast Ethiopia -- Tendaho ADE. This is the oldest mechanized cotton-growing farm in the country. The headquarters is in Dubti, about 580 kilometers from Addis Ababa on the main road to the Eritrean port of Assab. Tendaho was originally established as a share company in 1960 between the Ethiopian government and Mitchell Cotts group. A ginnery was built on-site in 1964. Just before nationalization in 1975, the plantation had grown to 10,000 hectares. After the present government came to power, the plantation was split into two cotton farms, totally 8000 hectares.

The enterprise can product 53,000 quintals of lint cotton, 10,000 quintals of planting seed each year. The ginnery has six imperial lummus 88 and two lummus 128 gin stands. There are also 12 linter machines. Like the Middle Awash, Tendaho showed a profit in 1995 for the first time in years, but still has significant debt, a negative net worth and negative liquidity.

North Omo -- The third major state-owned cotton plantation in Ethiopia is North Omo ADE, located in Arba Minch, 500 kilometers south of Addis Ababa. The North Omo ADE was established in 1981 and consists of the Arba Minch (1950), Sille (1957), and Abaya (1964) farms, the Arba Minch ginnery (1984), and the Omo Basin Higher Farm, an Ethio-Korean joint venture merged with the enterprise in 1986. In addition, the North Omo ADE merged with the much smaller South Omo ADE in 1994. The ADE employs 1,670 workers. In addition to cotton, the plantation grows bananas and rotates with corn crops. Production is solely for the state-owned domestic textile factories and edible oil mills. North Omo is considered unprofitable, with questionable net worth, and negative liquidity.