Friday, July 19, 2024
InterviewDutch firms eager for agri investment, wary of security, forex gaps

Dutch firms eager for agri investment, wary of security, forex gaps

Dutch companies play a significant role as investors and trade partners in Ethiopia’s agriculture, horticultural, and livestock industries at large, while the Dutch government is among Ethiopia’s most important partners in agricultural and logistics development.

Meeuwes Brouwer is the Agricultural Counsellor to the Kingdom of the Netherlands in Ethiopia, and has been an important mediator for Dutch investment in the country since he arrived in Addis Ababa three and a half years ago.

Brouwer recognizes Ethiopia’s potential as an attractive investment destination for foreign companies, but also notes challenges that require attention from Ethiopian authorities. These include security, unavailability of hard currency, land and revenue legislation, and its implementation, as well as administrative and bureaucratic obstacles. These issues are of utmost concern to existing and potential investors.

Brouwer discussed some of these obstacles and his outlook on the overall investment environment in Ethiopia with The Reporter’s Sisay Sahlu. EXCERPTS:


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The Reporter: How would you describe the relationship between Ethiopia and the Netherlands?

Meeuwes Brouwer: Ethiopia and the Netherlands share a longstanding relationship that spans over a century. The Netherlands has been a consistent supporter of Ethiopia in both developmental cooperation and humanitarian efforts. Currently, the Dutch government actively supports the Ethiopian government through various programs totaling over 600 million USD. These programs cover a wide range of critical areas, including food and nutrition security, water management, youth development, immigration and refugee assistance, private sector development, and sexual reproductive and health rights (SRHR), among others. This collaboration underscores the depth of partnership and commitment between the two nations in addressing key challenges and promoting sustainable development.

I see that there is a lot of communication and cooperation between the Netherlands and Ethiopia in the agriculture field, and that is on the governmental level as well as the private sector level. We have a good relationship, for example, with the Ethiopian Ministry of Agriculture, the Ethiopian Agriculture Authority, and the Investment Commission on the federal level, as well as with the Agricultural, Investment, and Land Bureaus on the regional level. So in that sense, the relations and cooperation with the Ethiopian government are excellent.

We should not forget that it is also my role as an agricultural counselor to bring Dutch business partners and Ethiopian business partners together to do trade and investments in Ethiopia in the field of agriculture. In that perspective, I want to emphasize that Ethiopia is unique because the Netherlands is not the largest investor among all the foreign investors in Ethiopia, but among all the European member states, we are the largest investor in Ethiopia.

So far, the Netherlands has invested more than one billion US dollars in the field of agriculture, and these investments are in particular in the fields of floriculture and horticulture. So that’s also a priority sector for us. The second one is the dairy sector, and the third one is the poultry sector, so we have investors in, for example, growing and exporting cut flowers and young plants, but we also have investors in the dairy farming and dairy processing sectors, as well as feed processing, hatcheries, poultry farming, and poultry processing. So the investments are nicely spread over all these sectors.

I believe the Netherlands has quite something to offer in terms of high-value input, modern technology, and knowledge transfer in the field of agriculture, and that is why we are working closely together with Ethiopia. The Netherlands in western Europe is a small country and 27 times smaller than Ethiopia, but I dare to say that the Netherlands is a “superpower” in agriculture. The reason why is that, first of all, we are well known for our horticulture sector; we are one of the leading traders and producers in fruit and vegetables in flowers; of course, the tulips are well known, but also in dairy production and export of all kinds of dairy products.

Edam and Gouda cheese are known from the Netherlands, but also the black and white Holstein Friesian cows find their origin in the Netherlands. Did you know that our small country is, after the United States, the second-largest exporter of agricultural products in the world? Last year, for example, the Netherlands exported over 100 billion euros worth of agricultural products, so that is quite something. The Netherlands is, for Ethiopia, one of the largest export destinations and one of the few countries with whom Ethiopia has a positive trade balance.

How long have Dutch companies invested heavily in Ethiopia?

We have already been investing for many years in Ethiopia; a lot came in after 2000. Many investors play an important role in trade, like supplying high-value inputs that can be vegetable seeds and cattle breeding material to increase production. But also supplying modern equipment and machinery in dairy and poultry farming and processing. 

The Netherlands is well known for its transfer of knowledge and for providing practical training to farms. Ethiopia counts around 100 investments (PLCs) related to the Netherlands. Of these 100 investments, I would say over 80 percent are investing in agriculture in the agri-food chain. Most of them, at least 85 percent, are investing in the Oromia region, and the others are investing in Amhara and then Sidama. These are the regions where most of our investments are residing.

What are some achievements, especially concerning knowledge-sharing and skill transfer to the locals?

I think to start with, for example, the flower farms here. These flower farms grow cut flowers like roses but also summer flowers, but also part of the investors are growing young plants, and they do grow floriculture products for export, so that means that in the Netherlands, for example, a year ago (2022), around 200 million US dollars on the flowers were exported by Ethiopia, which means hard currency coming into the country. After coffee, the flower sector stood at second, as the second largest foreign currency earning sector in Ethiopia.

As you know, Ethiopia has a limited source of hard currency, so for that reason, the flower sector is important, but not only for that, but also for the employment of tens of thousands of direct jobs. I would say that for all the Dutch investors, over 90,000 jobs are created here in Ethiopia. A large part is in the flower sector because these growing flowers require lots of employment, and most of them are also women.

It’s important for the community because most of these investors are also clustered in a way. For example, in Ziway, you see many rose growers from the Netherlands, and in Koka, you see many companies that are growing young plants for export, but we also have clusters of investors in Bishoftu, Holeta, Sendafa, and also around Bahir Dar in the northern part.

Dutch companies in Ethiopia have made significant strides in knowledge-sharing and skill transfer, particularly in agriculture. They’ve introduced training programs covering modern techniques, sustainable practices, and quality control in the horticulture, barley, and livestock sectors, among others. Dutch expertise in horticulture has enhanced greenhouse cultivation, crop management, and post-harvest methods, boosting yields and quality of flowers, fruits, and vegetables.

The Netherlands is renowned for its diverse scholarship programs across various educational levels. Ethiopians have greatly benefited from these opportunities, gaining access to quality education and skill development. These initiatives have significantly contributed to fostering academic exchange and capacity-building between the Netherlands and Ethiopia.

The EU is set to tighten inspections for the false codling moth for all shipments from Ethiopia and Kenya. Any updates on this issue?

It is a very important topic for Ethiopia, not only for the investors but for Ethiopia as a nation. Thanks to the Dutch investments in floriculture, the large export of floriculture products counts at almost 600 million on a yearly basis, and part of that is the export of roses. So what happened? I was there in September 2022 when the Ethiopian government received a letter from the European Commission that said: ‘Listen, Ethiopia, you export roses to the European Union, and when these roses arrive in the European Union, our European inspectors check if there are pests or diseases.’

So they sent one letter to the Ethiopian government saying that lately they had found this false codling moth in their roses, not only Ethiopian roses but also roses from Kenya and Uganda. The warning letter of the European Commission stated that the false codling moth is a very serious moth, and it can have a negative impact, for example, in Europe, on the production of citrus fruits like oranges and lemons. So you can understand that member states in Europe would like to keep this moth outside the European Union because it has a negative impact on production and also on exports.

This is a risky moth, and since that letter, I must say that the Ethiopian government, through its Ethiopian Agricultural Authority, which is supervising this moth together with the private sector, and the Ethiopian Horticulture Producers Export Association (EHPEA), took serious actions.

Meetings were held in Addis with rose producers and authorities to chart the way forward. EHPEA provided training, while additional inspections were conducted by the authority. Rose growers implemented extra measures to train and capacitate employees, as well as put regulations in place. Collaboration extended to Kenyan government offices and the private sector, acknowledging the regional impact. Regular reports were sent to the European Commission in Brussels to update on ongoing activities.

Ethiopia has done a good job so far, and I meant the Ethiopian government and private sector. For example, in 2022, in Europe, they found 23 cases of the false codling moth in roses from Ethiopia. In 2023, the number of findings was reduced to eight cases. So it shows the European Commission and its member states that Ethiopia is doing its best to avoid this false codling moth found in roses.

What is the impact of this moth on investors and their investment?

I think now that they have convinced Europe that Ethiopia is doing its best in trying to tackle the false codling moth. Ethiopia still has to continue to work hard on even reducing the number of findings of the FCM to zero. If Ethiopia does not succeed in reducing FCM, the EU might decide to close its borders for Ethiopian roses, which is a worst-case scenario.

Of course, this is an additional investment for investors. But the investors are happy to make them. Most farms are now investing more in their staff and putting the right procedures in place. They are also working closely with the Ethiopian government and their association. These are all costly but good steps.

Do you think the worst case scenario is likely?

I don’t think so, but it depends on the authorities and the private sector in Ethiopia. What I see in your beautiful country is that Ethiopia (authorities and private sector) is going in the right direction and is working hard. But you know you have quite a number of, I believe, over 60 rose growers in Ethiopia, not only the Dutch but also Ethiopian rose growers. In case one grower doesn’t take care so much and exports its roses to Europe and the EU inspectors still have findings of the false codling moth, yeah, that is quite a dangerous situation.

Who are the main Dutch investors in Ethiopia in this sector? Are there any new investors aspiring to come to Ethiopia?

I already explained a bit about the flower sectors in Ethiopia in different parts of the country, but in dairy farming, we have investments in dairy farming and processing, which are located in Bishoftu. The investors producing genetic poultry material, animal feed production, and poultry egg production are located in the surrounding areas of Bishoftu and Debre Birhan. We see opportunities in these livestock sectors; investments are going on, as are their imports of modern technology and high-value inputs, which play a crucial role in the development of the dairy and poultry value chains.

About the investment climate, I see that the existing companies may continue to invest. I see, for example, flower farmers extending their farms to bigger farms, but they also sometimes take over another flower farm a bit further away. For example, in certain areas, like the surrounding area of Bahir Dar, they started new investments in floriculture. But we also see the agro-processing industry investing in animal feed, dairy, and poultry.

These agro-processors invest in the capacity of their products, so this is a good sign. However, there are also quite a few challenges. Unfortunately, that will not really help to improve the investment climate and will also not help to attract new investors.

Concerning the question of new investors’ planning, at this moment most of the investments are from the existing investors I told you about; the new ones are only a few in food processing. We have some interesting companies that want to invest. When I speak with the agribusiness in the Netherlands, I notice there is interest in doing business in Ethiopia because Ethiopia has huge potential, especially in these three sectors of horticulture, poultry, and dairy.

So there is interest among potential Dutch investors, but they’re also very cautious because they also hear the stories from the existing investors that there are quite several challenges, and these challenges are, first of all, the security situation in Ethiopia, and that is also a concern for the existing companies.

I don’t have to tell you about the security situation at this moment, but yeah, if there are roadblocks or if there are attacks on investors’ compounds, the local workers don’t feel safe. For example, attacks on compounds and trucks of companies when they are underway are a real concern. I realize it is not easy to solve overnight, but I just want to mention this, and I believe I’m not the only one who is saying this.

A Dutch company suspended its operation in Bahir Dar last year. What happened to this company?

In Bahir Dar, we try to promote investments and export, especially in horticulture, because the area has quite good climate conditions. In August last year, there were around four farms in horticulture (not only flowers). If I understood correctly, it was not only foreign investors. One of them was a Dutch investor, and the Dutch company was almost ready to finalize the whole investment to export flowers. I think it took only two or three months and then they would be ready for export, and then at a certain moment the riots came, and there was a youth group that on the first day looted the farm, and not only the Dutch farm but also Ethiopian farms were in the surrounding area, and four or five of them in total burned down the whole thing, and everything was gone.

Why was there no security from the government to protect these farms? When I am an investor in Ethiopia, I have to take measures, but the government should also protect the investments of foreign companies. So that’s a bit of the discussion going on, but it might be that we lost that investment in Bahir Dar, which is, of course, a very sad story.

I think we both, from the Ethiopian side and the Dutch government side, have the same interest we want to boost; we want to promote investments here, but of course, such stories will not help attract new investment.

Did the company return to business?

No, it’s still in the discussion, as I heard yesterday, and they have not decided yet if they will restart again. It could be an option, but you can understand that the investor is very disappointed. The sad point in this case is that the farm was not only planning to produce horticultural products but also exporting them. So the security situation is a real challenge. The second one is the limited hard currency available for investors. These investors, of course, do their best to buy as much material as possible, like inputs and technology, here in Ethiopia. Also, as the Netherlands Embassy, we are in favor of what we call import substitution.

However, certain things, like special inputs and technology, like feed additives for animal feed, are not available, as are good-quality packaging materials for the flower industry. When these flower farms export flowers to Europe, it should be a nice and solid box. Especially the investors that export have to import certain technologies and inputs.

There were quite strict procedures on forex, the so-called twenty-eighty rule, and last year in August we saw a very positive change for the producer-exporters companies like flower companies, which changed instead of 20 percent into 40 percent. That helped, and that was a good positive move. But, still, you know there are also investors here that are not producing for export but for the Ethiopian market itself, and for that, 20 percent is still very low. This, at a certain moment, will reduce further investments. In the beginning, they will continue with their operation, but if they are not allowed to import their necessary input and technology because there is a lack of hard currency to import, they will not be able to restart their operations.

Do you think the worst case scenario will happen?

What we noticed is that the existing farmers want to extend the farm, so they need more land or other places. What I noticed from the beginning when I arrived here was that it takes a long time to get additional land. The second is that the rules and legislation are not always transparent, and that’s because they’re not transparent on the compensation to the farmers and the amount of the lease rate. There are a lot of discussions going on, and investors are paying huge compensation.

I think there should be reasonable and fair compensations, reasonable and fair lease rates, and, of course, it should be a win-win for everyone, but what we have seen, and that is, I think, also because the rules and negotiations are not transparent, We got a ridiculous demand for the amount of compensation. And the land in that area was more expensive than in our tiny country of the Netherlands, where we have one of the most expensive lands in the whole of Europe, and that strikes us.

The Ministry of Agriculture and they’re working hard at the federal and regional levels on the new land regulation and proclamation, and on the regional level, I think that part is going well, but when it comes to the local level of the municipality, most of the issues, problems, and challenges we face are with us as embassy because these companies come to us, and that is hard on the municipality.

Suddenly we see unrealistic requirements to get the land, and of course, this sometimes takes quite a long debate and discussion, and that, of course, will discourage further investments in Ethiopia.

What is your message to Ethiopian officials about the land and other issues affecting investors?

The land is always a sensitive emotional topic in every country. But I think the conclusion is to have more clear and transparent rules on that to make the procedures shorter and also to have a bit more alignment at the federal and regional levels. I think that part is also important, but also to have supervision and alignment at the local and municipal levels, especially at the local level, where there are challenges.

The infrastructure challenge encompasses several facets, including securing access to water, addressing the cost and availability of electricity, and ensuring transparency and clarity in regulations. There’s also a need for expedited procedures and heightened focus at the local municipal level. Many issues faced by the embassy originate at this level, simple things such as obtaining cement for constructing greenhouses or concrete foundations. Clear legislation is crucial, as investors often encounter ambiguity and unexpected expenses. Clarity in regulations encourages investor confidence and compliance.

How do you see Ethiopia’s commitment to the agriculture sector?

I am quite positive about the future developments of these three sectors in Ethiopia, but for horticulture, there will be more and more exports.

A few weeks ago Ethiopia and the Netherlands signed a subsidy arrangement and a grant arrangement to finance the new cool port facility near Modjo. It’s a project of 25 million euro, over 10 million will be a subsidy from the Netherlands and I think this is a fairly crucial step in developing the horticulture sector because if we have there over one and a half to two years let’s say so this could work facility and at the same time we could also try to establish in the region where fruit and vegetables are growing like Hawassa, Ziway, Bahir Dar or Dire Dawa.

If we can have certain regional helps for cooling and storage facilities as well so the farmers and cooperatives can bring fresh fruit and veggies over there then it goes to the clean port facility in Modjo and from there it goes in cool containers on the railway to Djibouti for export, I think this is a development what is happening in Ethiopia. And I think this gives possibilities for farmers but also employment and hard currency. So that is one step.

If I come back to an example of the horticulture sector, and not only talk about flowers, but also fruits and vegetables, they have huge potential in Ethiopia, in particular for export.

I think the authorities are also trying to promote avocados, which is a good example of promoting the production and export of avocados. Here in the Netherlands, we can play a role in that, and we already do so because, as I told you, besides having good commercial relations, we also have good government relations, and we have quite several ongoing development corporation programs in Ethiopia. One of them is, for example, HortiLIFE.

In this regard, last year we launched a new HortiLIFE program. The program will cost around 35 million euros in the coming years to support Ethiopian smallholder farmers and cooperatives and so grow better-quality fruit and vegetables. And if they are of good quality, they are not only good for Ethiopian consumers but also a potential source for export.

We also have a dairy program for this, which is implemented in close collaboration with the government. It was launched last year in autumn, and so approximately 45 million euros for the coming years, where we support a small holding dairy from the dairy cooperatives but also in the group of a bit bigger specialized commercial dairy for us, and if we look back because this is the second phase of this project, and if we look back in the last few years, what has been reached is that the production of cows has increased significantly.

 We have seen that the quality of the milk farmers and dairy products has improved quite a lot, and if we focus on that and try to add demand and supply of milk to the farmers and the processes more together, we can really boost the Ethiopian dairy sector.

Tell me about coffee. Any investments? And your take on the recent EU stringent parameters on coffee imports from Ethiopia. How significant is this to the Netherlands’ coffee import from Ethiopia?

Last year we had a Dutch mission of Dutch companies of importers but also processors of coffee, and in the Netherlands, they were interested in seeing what Ethiopia has to offer in coffee, so there is a growing interest in coffee products from Ethiopia.

With regard to the EU ruling, it is still a bit hard to say at this moment because also here like the False Codling Moth problem, it is also up to Ethiopia how they can apply to the requirements of the EU. From what I understand, there should be mapping of the many coffee growers that they should with satellite images that can show that there has not been the deforestation taking place and I think Ethiopia is working on that and authorities are working on it.

Smallholder coffee farms might be really challenged. If you look at the exports, I think the exports from Ethiopian coffee to the Netherlands are around 9 million dollars, but Germany is a much bigger market. I can inform you that I’m also in contact with the German embassy and the EU delegation to follow the developments here in Ethiopia and how Ethiopia manages to implement them to prepare itself for the new EU regulation. In the discussion, we see that this is a challenge.

What can you tell us about skill transfers from Dutch companies?

We have established field schools, for example, for students to have practical learning and experience; the same is also true in dairy, so young generations of students will be trained, but the private sector is also training workers, for example, on their farms as well.

At the farm level, they try to tackle these issues in the greenhouses, and they train their workers on how to monitor, how to deal if there are any issues with products, and how to deal with their health. So training and job skills are very important; they’re also important for our embassy’s tasks.

Training and the transfer of knowledge are definitely part of our program, and investors also play a role in that sometimes some of the workers have experience in the Netherlands to get some training.

Anything else you want to add?

Our embassy here in Addis Ababa is one of the largest embassies we have in the world. I think it is also one of the biggest here in Africa that’s very important to the Africa Union, and that’s also to Ethiopia, which is really a priority country for the Netherlands. That’s why we are here; that’s why we are here with many inventors; that’s why we are here with developed corporation programs; that is what I want to emphasize.

For the private sectors that are here, the investors, we always say that if you are here, you should produce sustainably, so you should work together with the community, you should communicate with the community, you should have a good social and environmental stance, and so responsible business conduct is something that we create. For some of the investors, especially the exporting companies, they know that when exporting flowers or other products to Europe, the importers and clients, such as supermarket chains in Europe, are very strict in all these things. No child labor, less pesticide use, paying minimum wages, and others. So as you can see, the market is also following investors and exporters closely. Hence, investors are more conscious of their social, sustainable, and environmental responsibilities when doing business, for example.

But producers of flower and food and vegetable farms who are not in compliance with these heavy requirements in this import required soon or later are out of business but still know that responsible business.

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