Abyssinya Export Abattoir was one of half a dozen meat exporting businesses that had been forced to close up shop for up to eight months before it began experiencing a change of fortune.
The federal government’s decision to liberalize the foreign exchange market in July, and the subsequent weakening of the Birr against the US Dollar, marked a change in trajectory for the ailing Ethiopian meat export industry.
Firms like Abyssinya were back in business, spurred on by the closing gap between official and parallel forex rates and the greater availability of legal channels for accessing forex. Industry insiders say they are seeing the light at the end of the tunnel following several lean years beset by complex problems in both demand and supply.
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“Judging from our performance over the past three months, the economic reform is bringing about a turnaround in Ethiopia’s meat export trade,” Kalifa Hussein, president of the Ethiopian Meat Producers-Exporters Association, told The Reporter Magazine.
He disclosed that revenues from meat exports since the start of the fiscal year in early July had jumped 150 percent compared to the same period last year. Exporters have shipped out 20 tons of meat so far.
“We’re beginning to make profits,” said Kalifa.
It is a welcome change.
For several decades, Ethiopia has lost out to a rampant cross-border contraband trade in live animals as up to 1,200 heads of cattle are herded out each day to neighboring countries in trailers and low-bed trucks via illicit trade hotspots that include the towns of Elidar, Galafi, Afambo, Aysha Dawale and Togochale, according to recent studies.
The available data show livestock export data revenues fell from USD 148 million in 2014/15 to USD 17 million in 2022/23. Meanwhile, experts estimate the contraband trade was valued at USD 19 million every month.
“Somalia alone exports five million live cattle, 60 percent of which are cattle smuggled out of Ethiopia,” said Kelifa.
Tewodros Tadesse, general manager of Abyssinya Export Abattoir, observes that supply-side issues, including the availability of livestock in local markets, have improved in the months following the forex reforms.
“We returned after we had gone out of business. We can now better afford to buy the animals in local markets, which had been going to middlemen who smuggle the animals out of the country in large numbers,” he said.
Tewodros disclosed supply and finance issues meant the company had previously struggled to meet even a fifth of its capacity to process 35 tons of meat at its double-line abattoir.
While at times the issue sparked heated debate between exporters and customs authorities, with the latter standing accused of failing to seal up the porous borders with checkpoints, Kelifa draws attention to the inevitability of contraband in the absence of conducive policy.
“It’s all about the market,” he said. “The local cattle owners living along border areas know they would earn much more from sending their cattle across borders than if they sold them at local markets. Prices offered by contraband traders were such that the local pastoralists who own the cattle could give their animals away even at half those offers and still profit.”
Ethiopia has the largest livestock population in Africa, with close to 60 million heads of cattle, 31 million heads of sheep, 30 million goats, over a million camels, 60 million poultry, over six million beehives, and 11 million equines, according to recently published data from the World Bank.
“That numerical advantage does not translate to actual benefits in terms of productivity and revenues,” Kelifa said, referring to the lack of commercial breeding farms in the country.
“Cattle from Ethiopia are emaciated because household farmers who owned them used them for years as plough oxen, a fact that makes cattle meat full of fiber. A further downside is that female cattle constitute 70 per cent of the total stock and females are not supplied to market for slaughtering,” said the lobby group head.
Another industry requirement is that goats and sheep must be two years or younger to be fit for exports; and sheep and goats from arid areas are in high demand.
“All these factors made Ethiopia’s advantage in the number of livestock less meritorious when it comes to actual export market destinations,” said Kelifa.
He observes that countries like Botswana and Namibia, which have only a fraction of Ethiopia’s livestock population, earn much more from exports due to the availability of commercial farms.
At current stock, Ethiopia has the potential to supply the foreign market with 200,000 metric tons of meat annually, but the annual average has never surpassed 10 percent of the figure, according to Kelifa.
There are 14 abattoirs involved in the business and their main export product so far, according to Kelifa, has been limited to sheep (mutton) and goat meat, the bulk of which is shipped in the form of full carcasses and packaged offal. (Two rendering facilities in the country turn any non-edible offal into poultry feed.)
“Beef exports had not only been unprofitable but could result in exporters incurring significant losses in revenues,” he said.
The question then is how did exporters manage to survive if, for several years, they had operated in a non-competitive market environment?
“For the local/domestic investors engaged in meat and live animals’ exports, there had always been parallel import opportunities, the proceeds of which they had used to offset the losses they had incurred in export revenues,” the Association head said.
“But foreign companies, such as the Indian Alana Group, did not have such a privilege because under the Ethiopian commercial law, foreign investors licensed to engage in meat export are categorically prohibited to engage in parallel imports business,” he said, adding the only leeway that kept Frigorifico Boran Foods Ethiopia PLC (Alana’s Ethiopia operation) afloat was its abattoir service.
“We offered abattoir services for domestic exporters,” Kelifa, who is the chief executive officer of Frigorifico Ethiopia said. “During 2022/23, meat exports business dwindled and there was a point where we even considered terminating our operations.”
In a “Feed the Future: Meat & Live Animal Market Price Brief,” USAID said citing a report by the Ethiopian Meat Producers and Exporters Association that “…the existing meat processing facilities are generally operating at less than 10 percent of full capacity for two reasons: one, export abattoirs are unable to procure suitable quality and quantity of live animals for the export market, and two, there is high demand for meat in the local markets. Hence, export abattoirs are competing with the meager domestic supply of live cattle and sheep and goats.”
“The export market price for sheep and goat meat is between $5,450 and $5,600 per ton. This is equal to $5.50 per kilogram (ETB 230/kg) in Addis Ababa, compared to the range of $5-10 per kilogram on local markets (ETB 230-210/kg), which is significantly higher. Many of the abattoirs are on the verge of collapse due to lack of domestic supply and high illicit live animal trade along border areas,” it reads.
Kelifa hails the recent macroeconomic reforms for preventing the imminent collapse.
“It came to our rescue and to the rescue of the entire meat export business in Ethiopia,” he said. “There is no sector that benefits from this policy as much as meat export does. It came as a windfall, and, although it is a bit too early to make a full assessment, meat exporters have changed instantaneously from being losers to winners in the game.”
Kelifa has set his eyes on expanding business as quickly as possible, especially in the Middle East. Saudi Arabia and the United Arab Emirates (UAE) account for close to 90 percent of Ethiopia’s meat exports.
“Demand is always in good shape. It was the supply side we had issues with. Much of that seems to be resolved now,” he said.
Exporters have seen the value of their products double in local currency terms.
“Previously, exporters had to sell a kilo of mutton and goat meat for six USD. Multiply that by 57, the official rate before the new policy was introduced, and you get 342 birr. Domestic butcheries sold a kilo of mutton or goat meat for double that amount. And if we go out with a price tag, say, of as high as 10 USD, no one will buy from us in our export destinations. Such was the problem we had faced. And add to that the shortage of cattle supply brought about by the illicit trade in live animals; the challenge was huge,” Kelifa said.
He observes the Birr’s sharp fall against the US Dollar over the last few months has enabled exporters to set competitive prices and reap real profits.
“Even beef, which previously was largely consumed domestically, we now have the chance to send abroad,” said Kelifa.
He explains that one of the processing lines at Frigorifico Ethiopia’s facility was meant to be dedicated solely to beef and camel meat.
“We never utilized the cattle line because we stopped exporting beef. We will restart now,” said Kelifa.
A recently published OECD-FAO Agricultural Outlook assessment covering the past year anticipates a worldwide growth in livestock populations to the tune of two billion cattle, a billion pigs, 32 billion poultry, and nearly three billion sheep.
“Global meat trade is set to expand over the medium term, driven by rising demand linked to per-capita income growth in Asian countries and population-driven increases in Sub-Saharan Africa,” the Outlook said.
But, according to assessment, animal disease outbreaks could pose significant uncertainties.
According to Kelifa, health requirements at destination markets have always posed challenges for Ethiopian exports. But Saudi Arabia and the UAE are less stringent in their requirements than other markets such as China and Europe, which demand source countries be free from diseases such as Rinderpest and Foot-and-mouth disease.
“In Ethiopia most animals come from household farmers and it is very difficult to ensure the traceability,” he said, adding destination markets require exporters to supply them with information as to the age of the animal, what it has been fed, and what medicines have been administered to it.
“All this calls for the need to expand commercial breeding farms so as to better streamline the meat and live animals export business,” said Kelifa.
He sees an opportunity to expand into markets in Asia and places like the Seychelles. His company has already begun exporting meat cubes (de-boned meat packaged in the form of cubes) to buyers in the Seychelles. The trade is particularly lucrative as it involves sea transport, which costs only 10 percent of the fees exporters pay when sending their goods by air.
However, only five percent of total meat exports move via sea transport.
Kelifa explains the proximity of the key Middle Eastern market makes using air transport feasible in the interest of saving time.
“In the future we will be exporting both by air and ship cargo as destinations for Ethiopia’s meat exports expand to include far off areas such as more and more countries in Asia,” he foresees.
But for Tewodros that comparative advantage has not been the major factor that limits Ethiopia’s export destination to the Gulf Countries.
“If most of the factors limiting our competitiveness such as supply, finance and quality issues are addressed, we could go far and wide across global markets using ships as the primary transportation mode,” he said. “And it’s cheaper.”
Exporters who spoke with The Reporter Magazine, including Tewodrwos and Kelifa, all agree that expanding commercial grade breeding, strengthening sanitary and health measures, enhancing traceability and optimizing the mix of meat types offered for export such as pig and camel meats will take Ethiopia comfortably into the future global meat and live animals markets.
In a recent development, the Ethiopia-Djibouti (standard gauge) Railway Company announced that it began to use its wagons for live animal exports from the central south city of Adama in Oromia Regional State. CEO Takele Uma said the approach would maximize the use of Ethio-Djibouti Railway’s open wagons, which were previously used only for imports.
Business people engaged in meat exports call for more attention to value addition on live animals at local factories in view of both maximization of profits and the expansion of local employment.
