From the Fogera Plain: how one man helped to build a regional industry
With few services and a lack of basic necessities, life for farmers in rural Ethiopia is challenging enough. This is to say nothing of life 4 decades ago, when Tegegne Gizachew was born in the Fogera Plain region of Ethiopia. This week’s blog traces the growth of Gizachew’s rice operation – from small-scale producer to a large-scale processor and investor – and his instrumental role in the development of a regional industry.
Tegegne Gizachew was born in the 1970s in a rural village named ‘Shina Teklehaymanot’, in the Fogera Plain region of Amhara, Ethiopia. Gizachew began primary school at the age of eight, and after 7 years of primary education his parents were able to send him to the district town of Woreta – 12km from his home village – to attend high school. In this modest achievement, Gizachew was already in the fortunate minority; few parents or guardians in the rural areas could afford to send their children to school.
Drop-out to start-up
Shortly after Gizachew’s arrival in Woreta, civil war between the then Derge government and opposition forces intensified close to the town, disrupting transportation and most of the town’s public services. The town’s schools soon closed as a result of the unrest, and Gizachew began petty trading in order to make a living – an experience that would continue to influence him even after resuming his education. Reflecting on the prospects of a college education, and the little remuneration that a civil servant in Ethiopia receives, Gizachew left high school before graduating in the 10th grade, requesting seed money from his father in order to start his own business.
His father was able to give him ETB 600 (around USD 120), which allowed Gizachew to run petty trading in grain between Woreta and its neighbouring districts, and helping him to forge a broad spectrum of business links as he travelled from town to town.
Rice expands
Until the early 1990s, rice was not a popular crop in Ethiopia, and its production was limited to ‘Producers’ Cooperatives’, who stymied the dissemination of rice seeds for non-members, and which only collapsed with the fall of the Military Command Economy system in 1990. Political change after 1991, characterised as it was by a new free market economy, created favourable conditions for the expansion of a rice market. On the production side, the collapse of cooperatives opened the door to independent producers; while privatisation at the policy level enabled the importation of processing machinery. Credit reform also encouraged the emergence of more private enterprises – like Gizachew himself – who could now engage in large-scale rice processing and wholesale trade.
After 10 years spent developing his business, and recognising a growing market for rice, Gizachew began to look further along the production chain. He discovered significant issues in the processing stage of rice production – with Woreta housing only two inefficient rice milling and polishing machines, and virtually no rice-trading presence within the town. In response, Gizachew purchased three Chinese-made rice milling and polishing machines from Addis Ababa in 2001, at a value of ETB 300,000 (around USD 30,000). The short-term returns allowed Gizachew to reinvest and purchase more machines immediately.
The pull factor
Gizachew’s decision to engage in rice processing marked a significant turning point in the growth of his business, and a growing community of relatives and independent farmers involved in rice production enabled him to expand the processing side of his business beyond his own production capacity. As a pioneer of efficient rice processing in the area, Gizachew shared his industry knowledge to others looking to invest in their own processing operations. With investment in the processing industry now flowing into the region from multiple sources, Woreta became a hub for rice processing – this in turn widened the local market for rice production, with Woreta’s now significant rice processing capacity facilitating the expansion of rice-producing farms in the Fogera Plain, and neighbouring districts.
Hundreds of workers have found employment in the district’s manifold rice processing operations – now exceeding 100 in total – a number of which have been established in the outlying, rural towns that have access to electricity. This offers an unusually prudent bulwark against the over-concentration of capital – human and financial – which so often accompanies the emergence of a regional industry. Commercialisation of the rice sector in the district has also helped the scaling-up of various individual processing operations, whose new market in retail and wholesaling has itself benefited from the explosion of rice production.
Time to diversify
Not content with the establishment of a regional industry, Gizachew began to seek opportunities elsewhere. His investments to date – in Ethiopia’s country-wide public transport sector, and housing construction in Addis Ababa – exhibit an ongoing engagement with social development and enterprise. Having installed more than 15 rice processing machines, and recently investing in more up-to-date technology for the rice sector, it appears that broadening his vision has not come at the cost of Gizachew’s commitment to Woreta and Fogera Plain.
Starting out as a small, rice producer on family plot, Gizachew now employs more than 450 full- and part-time employees. Not only has the establishment of an intra-regional value chain – from production to processing – provided livelihoods to thousands of farmers, it has also contributed to the transformation of rural food production in the region, from subsistence to commercial production.
By Agajie Tesfaye, Abebaw Assaye, Dawit Alemu and Tilahun Tadesse
Image: A’Melody Lee/ World Bank (CC BY-NC-ND 2.0)