Can Digital Innovation Unlock Ethiopia's Fertiliser Impasse?

Jul 15 , 2023
By Matiwos Ensermu (PhD)

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Like the Nile coursing through its landscape, Ethiopia's agricultural reform agenda is full-flow. But for it to achieve its lofty goals, it must first untangle the intricate fertiliser logistics, using digitalisation as its sword, writes Matiwos Ensermu (PhD), (ensermujalata@gmail.com) an associate professor of logistics and supply chain management at the Addis Abeba University.

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In the rugged highlands of Ethiopia, vivid discontent is underway. Long associated with poverty and famine, it is a country set to transform the agricultural sector into a modern, efficient powerhouse. It is a Herculean task: agriculture makes up a colossal 38pc of the GDP, providing livelihoods for 64pc of its workforce.

Ethiopia's agricultural sector, the leviathan, is being tamed by an ambitious economic reform agenda. The federal government has slashed duties on imported agricultural machinery and supplies, aiming to modernize farming practices. The measures already bear fruit: the country's grain harvest has noticeably improved.

However, beneath this optimistic vision lie the machinations of a multifaceted problem.

While yields are on the up, one significant bottleneck threatens to undo this progress. Fertiliser, the lifeblood of farms, is in short supply. Last year, the country imported 1.8 million tons of fertiliser for 660 million dollars. This year, the bill is expected to reach one billion dollars for a reduced quantity of 1.5 million tonnes.

The devil, as always, is in the details. Due to lack of foreign currency, the delay in issuing Letters of Credit (LCs) by the Commercial Bank of Ethiopia (CBE) has thrown a wrench into the fertiliser logistics. Though the Ethiopian Agricultural Business Corporation is responsible for procuring and delivering to the port of destination, supplying the already delayed shipment of fertiliser to the inland destination is the obligation of the state-owned enterprise.

The state-owned Ethiopian Shipping & Logistics Services (ESL), responsible for transporting the fertiliser from ports in Djibouti to the cooperative warehouse of over 100 destination points and stopped short of last-mile delivery to the farmer in the rural heartlands, which is the fault line, has been unable to meet delivery timelines.

The consequences have been severe. Farmers in the populous states of Amhara and Oromia are faced with a difficult choice: buy fertiliser from unregulated markets at inflated prices or wait for government supplies that may arrive too late for planting season.

The situation has drawn widespread criticism from local media and legislators, further straining the country's social fabric.

Speculators, who prey on this artificially created scarcity, inflating prices and further complicating fertiliser distribution, have compounded the impact of these delays. Consequently, farmers are caught between a rock and a hard place, forced to pay exaggerated prices or risk missing the crucial planting season.

Fertiliser logistics involve a plethora of entities, from the Ministry of Agriculture and the Ethiopian Agricultural Business Corporation to the Ministry of Transport and Logistics, Ethiopia Maritime Authority, NBE, CBE, ESL, and regional unions and cooperatives. These are key players in centrally coordinating the logistics and financing fertilise procurement. It is a bureaucratic labyrinth that complicates even the simplest of tasks.

An ambiguous value proposition from the regional unions and cooperatives further exacerbates the issue. Their role in the fertiliser logistics chain is unclear, leading to further inefficiencies and frustrations. The last-mile delivery, from regional warehouses to the farmers themselves, has become the Achilles heel of the operation.

Digitalization could be the panacea for this complex problem. It can enable real-time tracking of the movement and storage of fertilisers, providing decision-makers with critical data. It also helps to prevent corrupt practices, ensures accountability, and facilitates the swift resolution of logistical bottlenecks.

Ethiopia can draw on the experiences of Nigeria, which faced a similar problem.

In 2011, under the leadership of the then Minister of Agriculture, Akinwumi Adesina (PhD), now president of the African Development Bank (AfDB), Nigeria introduced an electronic wallet system for fertiliser delivery. The digital system ended four decades of corruption in the Nigerian fertiliser industry by enabling the direct provision of subsidies to farmers through their mobile phones.

The system has since been adopted in several other countries, including Afghanistan.

In Ethiopia, digitalisation of the fertiliser supply chain could employ similar schemes. Telebirr, or digital payment systems offered by other commercial banks, could be utilized for payment confirmation, reducing fraud and corruption.

But to implement this, policymakers would need to focus on improving digital literacy among farmers, equipping them with the knowledge and tools to leverage these technologies.

There is a role here for the private sector too.

Given its relative efficiency and ability to innovate, the Ministry of Agriculture could outsource fertiliser logistics to third-party logistics service providers. Companies with the necessary competencies could take up the mantle of last-mile delivery, removing this burden from the government's shoulders.

Increasing the role of private importers in the fertiliser industry could also be beneficial. With adequate oversight and within the bounds of subsidy schemes, private importers could augment the efforts of the Ethiopian Agricultural Business Corporation, mitigating the risks of supply shortages.

A more sustainable solution, however, would be to invest in domestic fertiliser production. Through public-private partnerships, Ethiopia could reduce its reliance on imported fertiliser, saving precious foreign exchange.

This discontent is not just about fertilisers. The authorities should continue to encourage mechanization and modernization in agriculture. Smart farming techniques, advanced equipment, and superior farming practices can help Ethiopia's farmers produce more, earn more, and ultimately, lift themselves out of poverty.

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PUBLISHED ON Jul 15,2023 [ VOL 24 , NO 1211]

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