Climate Change and Navigating Business Challenges

Ethiopia is currently experiencing inconsistent and unpredictable weather events, with communities facing impact of untimely rain, sometimes reduced and other times heavy rainfall, and more frequent floods and droughts.

These changes are said to be broadly linked with the impact of climate change driven by global greenhouse gas (GHG) emissions.  Despite Ethiopia emitting a relatively very small proportion of GHG emissions compared to other countries, the country is vulnerable to the impact.

The adverse effects of climate change, coupled with the low adaptive capacity of the country, affect multiple sectors of the economy. The impact is particularly felt in the agriculture sector and food security, affecting the livelihoods of farmers and rural communities as they rely heavily on rain-fed agriculture.

These challenges not only threaten farmers' livelihoods but also have a wider effect on the country's GDP, development, and rural value chains.

Recognizing this cross-sectoral impact, both public and private sectors in Ethiopia have been identified as key sources of financing, and leading actors in implementing climate actions and green growth initiatives. A joint public-private action is essential to achieve the country’s climate goals, however, significant barriers hinder private sector engagement, highlighting the need for innovative approaches and de-risking solutions to catalyze their involvement in climate actions.

Private sector: Navigating challenges 

The food manufacturing sector, like many others, is facing a significant challenge due to its reliance on agricultural products as a primary input.

Teferi Mengesha has worked in this sector for more than 25 years and currently serves as a production manager at the Rediet Food Complex in Adama. 

Teferi highlighted how their factory has been challenged due to the direct and indirect impacts of climate change over the past five years: “We have been struggling with shortages and inconsistent quality of key inputs such as wheat, which has prevented our ability to operate at full capacity. The primary reasons contributing to these challenges include agricultural product failure caused by untimely rain or crop diseases, unpredictable pricing of products in the local market, and farmers unions' control and influence over product distribution and pricing, further complicating the supply chain processes.” 

Teferi explained: “To mitigate supply shortages, we have recently started using imported wheat from Turkey, Russia, and Ukraine, which has its challenges as the market is highly dominated by a few importers with several brokers in between, resulting in a lengthy process and higher final product prices. Besides, limited access to hard currency hinders our capacity to address these challenges.” Despite these efforts, maintaining the business remains a significant concern. The factory employs over 150 permanent staff and needs to generate a minimum profit at least to cover the operational costs and sustain the livelihoods of its employees.

Abdu Ismael works as a focal person at Tadesse Endebu’s animal fattening in Adama. He has noticed a significant decline in business for the past few years, and noted that, “We used to export meat and other animal products to the United Arab Emirates market. However, there is currently no demand from that side, and we are now selling our products to the local market in Adama and Addis Ababa, instead of sending them abroad”.

Abdu highlighted: “In addition to the market decline, we face other challenges such as water shortages and unpredictable weather, which have led to a scarcity of quality forage. The rising cost of forage has worsened the situation. Furthermore, limited access to financial institutions is hindering our ability to expand and grow the business.”

Keneni Kibret is a seedling seller in Adama. She is among the many individuals benefiting from the fattening business. 

Keneni explains “We source the raw materials for compost for free from animal fattening areas, with labor and transportation being our only costs. There's a high demand for this compost, and I can easily sell it to my customers. However, despite these opportunities, I haven’t been able to expand my business or engage in large-scale compost production due to a lack of space.”

Poultry production is another promising sector in the country, that despite efforts by the government and other actors in the industry to enhance productivity, numerous challenges are forcing many business owners to shut down their businesses. 

A poultry farm owner in Bishoftu, who has been in this sector for a decade, owns around 3,000 chickens that produce 2,700 eggs daily. The farmer requested to remain anonymous. Despite the benefits of this business, those engaged in poultry farming face numerous challenges, he explains: "There are many issues in poultry production. It is a particularly sensitive sector due to its vulnerability to highly contagious animal diseases.

Last year the Ethiopian Ministry of Agriculture (MoA) collaborated with the International Livestock Research Institute (ILRI) and developed an Ethiopian National Poultry Development Strategy to guide the sustainable development of the poultry sector, recognizing its economic importance in the country.

How can the SCALA programme facilitate public-private collaboration for climate action in Ethiopia 

Ethiopia is one of the twelve countries implementing the joint UNDP-FAO programme ‘Scaling up Climate Ambition on Land Use and Agriculture sectors (SCALA), with the Ministry of Agriculture the former Environment, Forest, and Climate Change Commission being other key implementing organizations. 

The programme seeks to support Ethiopia in translating its Nationally Determined Contributions (NDC) and National Adaptation Plan (NAP) priorities into concrete and impactful climate actions, with a particular focus on engaging the private sector. The programme also aims to promote the empowerment of women and gender equality across all activities given that women are seen to be particularly vulnerable to the impacts of climate change. Programme activities include identifying barriers to women's participation in decision making and helping efforts aimed at closing the gender gap when it comes to access and control over natural resources. 

Based on the agreed project framework, the SCALA global and national teams, alongside the consultants conducted an assessment on the engagement of both public and private sectors in the implementation of priority climate actions in the agriculture sector from 22-28 August 2024. The assessment involved a serious of consultations and discussions with key stakeholders, including government institutions, private sectors, civic societies and development partners engaged in the implementation of these climate actions in the agriculture sector.

A team of 51 senior experts from the federal and regional public and private sectors engaged in the public and private sectors consultation workshop held in Adama on 23 August 2024. Discussions focused on existing and potential opportunities, risks, and barriers to private sector engagement in climate actions in the agriculture sector. The experts discussed de-risking solutions to incentivize private sector investment and identifying entry points for public-private collaboration.

What’s ahead 

The assessment conducted across the various sectors, and the feedback gathered from the consultation workshop will be used to help create awareness of climate-smart investment and highlight the roles of multiple actors in the target value chains.

The Government will also be able to use this to facilitate effective coordination between public and private sectors to create resilient agricultural systems and sustainable supply chains. The outcomes of the assessment will also inform how the public sector can create an enabling environment to help catalyze private investment in adaptation.

This collaborative approach will be crucial in enhancing climate adaptation efforts and ensuring long-term sustainability in the face of climate change challenges.