UNITED NATIONS  DEVELOPMENT PROGRAMME Emergencies Unit for Ethiopia

 
Summary

This paper is a preliminary examination of the current livestock export trade situation, the relevant policies of the various levels of government in Ethiopia, and potentials for enhancing the market development and income for the lowland pastoralists. While similar livestock marketing problems exist on all borders of Ethiopia, the situation is most critical on the Somali border because of the large production of marketable livestock and the tradition of cross-border trade for goods and consumables including food stuffs. FAO estimated that the annual value of livestock going through the Somali ports of Berbera and Bossaso amount to more than US$120 million, 80% of which is thought to be Ethiopian origin.

Under the present policy of trade liberalization, the government would like to increase acquisition of foreign "harder" currencies by requiring all traders, including livestock traders, to conduct market transactions through the "Letter of Credit" (LC). While establishing an LC is a simple matter of posting a small amount in a National Bank (Dire Dawa being the closest) and establishing a place of business, conducting business through an LC is currently impossible in the Southeast because the government of Somaliland is not internationally recognized and Certificates of Insurance are not issuable under those conditions. Never-the-less it is precisely that government which is benefiting from the currency exchange as well as the port taxes from the illegal movement of livestock.

Pastoralists are willing dealers with illegal traders because they need to market in remote areas and need consumable goods in return. However more recently even they have become agents in the movement of contraband. Just the unregulated livestock trade has, as most Somali traders will acknowledge, resulted in unnecessary losses and rising costs. These have included increasing and exorbitant prices for forage and water along trekking routes, right-of-passage taxes, bribes to waive holding requirements and obtain health certificates, use of inadequate shipping facilities including forcing animals to swim out to ships, use of non-seaworthy and improperly supplies ships resulting in loss of animals and ships, rogue operators who claim false losses and charges and finally rejection at the receiving port.

Working out economically feasible alternatives to the trekking of market livestock through Somalia and Somaliland under the present scenario seem insurmountable and unlikely to be necessary on a long-term basis. Granted it is time that Ethiopia comply with international standards of holding, testing and certifying the health of its livestock prior to export across international borders, all of which would require facilities and staff. But also since Ethiopia is now landlocked, it has become critical that Ethiopia negotiate acceptable and legal agreements with port governments, minimizing the taxes and sharing the revenue. In the case of livestock exports, the closer to the area of production the better in terms of retaining market condition and health. Whether acceptable corridors for movement of export livestock through Somalia and Somaliland to port facilities could be worked out remains to be seen but would be a most logical solution. Establishing facilities and logistics for trekking, trucking or air-freighting, whether live animals or carcasses through the national capital, would seem to be an expensive and temporary solution except for livestock produced nearby.

Finally it is clear that resolution of the problem is critical to the continued economic welfare of the Ethiopian pastoralists. Whether considering the normal annual off-take or the emergency reduction of livestock numbers necessary during the recent drought, reliable market mechanisms must be developed. It is admirable that the government has given due attention to the national and local value of the livestock produced and desires to see producers getting a larger share of the profits, but it has only exposed the problem without facilitating the solution. The importing countries should also be involved in the formulation of acceptable marketing mechanisms to adequately protect themselves while fulfilling their needs. It appears that international participants in livestock trade would benefit from further study and resolution of these problems.

 Estimates of Livestock Numbers and Livestock/Meat Production in the Lowlands

From a sample survey published by the Central Statistical Authority in 1996, it is calculated that Afar, Somali and Dire Dawa regions have a total of 31,755,000 cattle, 12,799,000 sheep, 9,968,000 goats and 247,000 camels (Table 1). Prior to that, an FAO consultant in 1985 estimated there were 5 million sheep in the pastoral lowland areas of Ethiopia. They also estimated the export of live animals and meat primarily from the lowlands (Table 2).

 Even with the addition of an estimated 2% for illegal meat export to the 468,000 metric tons exported, the total per capita production of meat in Ethiopia for the year 1980 was thought to be 14.8 kg as compared to 11.3 kg in Kenya, 18.3 kg in Sudan and 20.7 kg in Somalia. Undoubtedly the production estimated were lower for Ethiopia and higher for Somalia due to unknown amounts of illegal cross border movement of livestock. At that time livestock and livestock products was thought to account for 20% of total exports and 2% of GDP. It was concluded that if Ethiopia were to experience a marginal increase in livestock productivity and a slight increase in retail price for meat, a great increase in potential exports could be realized.

Already at that time it was recognized that illegal livestock trading was a function of policy formulation/enforcement, that it affected investment resources for infrastructural developments and that it posed greater incentives to the total economy of the area. The contraband trade was known to be facilitated by trans-boundary family ties and it co-existed with and was dependent on supporting commodities such as gold, chat, hides, coffee, cooking oil, timber, spices, gums and grain. At that time 90% of the trade was in Somali shillings and the Birr was discounted by 45%. Exchanges were often made for goods imported from Arabian countries because of their willingness to under-invoice, thus avoiding part of the import taxes. It was admitted by the author that the "Black market" was better organized, more efficient and more market responsive than the legal commercial market.

The author quotes the government estimated total value of livestock off-take in 1983 to be US$120 million not including camels. From that amount, an estimated 35,000 cattle and 330,000 shoats were illegally being sold into Djibouti, Somalia and the Middle East for a value of CIF US$42 million or 450% of the legal export volume. Considering the outgoing livestock as undervalued and the inflated value of the goods exchanged, he proposes an economic loss to the pastorast producers in the order of US$26 million per year plus currency differences. He concludes that the Dergue livestock marketing policy contributed to the development of the contraband market by 1) seriously distorting the livestock/goods economy, 2) not considering the interdependent components, 3) encouraging trade at less than 1/2 the foreign exchange rate and 4) not alleviating the shortage of markets, consumer goods and banking services in pastoral areas.

The policy package recommended by the consultant included

• Increased availability of consumer goods including cloth/clothing, portable radios, plastic housewares and soaps
• Increased enforcement of customs on incoming goods and confiscation of contraband at Harar, Dire Dawa, and Jigjiga together with pressure on Djibouti officials to curtail the flow.
• Increasing exports by raising the legal price for domestic meat thereby encouraging better husbandry and higher off-take, reduced domestic consumption especially of the better quality, exportable cuts.
• Development of producer stores for exchange of livestock for goods (100 kg of sugar for 4 shoats), a mechanism that was tried for a time.

The current situation regarding cross border marketing of livestock

The Southeast lowland area is remote, rugged and harsh with few basic human services, practically no infrastructures, a history of frequent droughts and famine, superimposed upon by national and civil war and clan conflicts. National and regional borders were established without consideration of pastoral migratory traditions and without territorial agreement. Without the use of maps or roads and without consideration of distant governments' agreed boundaries, the herders life consists of moving their stock from place to place using their indigenous knowledge of grazing lands and water points. The pastoralist family subsists on milk produced by nursing cattle and camels, limited cereals produced in pocket areas, and bartered rice, sugar and tea from the few scattered commercial towns. When grazing/water shortages occur and milk production stops, pastoralists need to react to the changing conditions by migrating and/or selling off stock and to buy food.

The welfare of these pastoral groups have historically been largely dependent upon the successful production of off-take from their livestock. The supply for urban markets in highland Ethiopia have as yet not required inflow from the lowlands. Instead the marketing of livestock from the East African lowlands to the Arabian peninsula in exchange for goods has occurred since traders' dhows began plying the Red and Arabian Seas. The level of income from the sale of exchanged goods is not known. However the large volume of livestock sold through coastal ports to the Arab countries, chiefly Saudi Arabia, during the Moslem celebration of Ramadan (the Haj) and Id (the birthday of Mohammed) is notable. The preferred religious custom is to slaughter in the home a "perfect" young male sheep and the "Somali black-head" has become traditional.

This has led to the establishment of traditional trekking routes which are respected by all clans (Figure 2). In this figure, an attempt has been made to indicate generalized livestock movement patterns from all surplus producing areas to urban consumption and export market centers. No attempt is made to indicate the volume or value of livestock from each area due to lack of data and changes in trade brought about by the political instability of recent years. However the value of livestock moving through the ports of Berbera and Bossaso alone have been estimated by FAO in 1984 to be US$120 million, 80% of which was thought to have been livestock of Ethiopian origin. Considering the area of the lowland plains and the rainfall contributing to available grazing, it is generally thought that the majority of livestock exported are produced in the Fafen and Jerer valleys of Region 5 and the Borena Zones of Region 4 and 5. Also noted in Figure 1 are the lesser ports that are utilized depending upon taxes and political pressures at the main ports.

Without extensive verification, the current marketing costs and profits for illegal marketing through the port of Berbera were obtained from interviews with traders (Table 3). It appears that port taxes and shipping costs are among the largest expenditures incurred by traders and could be reduced although it was reported that Hargesia is considering additional passage taxes. In spite of these large costs, one can see the large profits that successful traders can make. In the recent past, loose regulations and standards have resulted in growing competition, increasing corruption, lack of proper animal care, high losses on ships including sinking and increasing rejection of animals at the receiving port. All these have led to trader losses some of which have been pushed back to Ethiopian producers.

An alternative legal mechanism that could be considered is the direct marketing of live animals to recognized ports. Highland sheep are being trucked from fattening/quarantine stations of Nazreth, Awassa and Debre Berhan to Addis Ababa for about 10 birr/head. Trucking sheep from Jigjiga to Addis Ababa would cost 30 birr/head and would require stop-over on the way for feed and water. Live air charter shipment to Jeddah costs US$16,000 for 800 - 25 kg animals or $20/head.

Shipping from as far as Metahara to Djibouti is possible in one day and costs 16 birr/head by truck and 23 birr/head by train. Large ships carrying 2500 head to Saudi ports charge US$ 6.50/head plus $2.00 port tax and $2.70 handling. Both methods of live shipment would require 21 day holding while obtaining a certificate of health but could be done simultaneously with fattening.

A second alternative of direct marketing is that of carcass or "chilled meat". This eliminates the 21-day holding period and reduces death loss to about 1.5% but requires slaughter and refrigeration facilities. Air freight costs for chilled meat currently costs 45 cents/kg to Riyad and Dubai and 34 cents to Jeddah. There is a current demand for 25 tons/day but air freight availability is limited to 30 tons 2 days/week. In addition there is a $50/shipment cost from the importing embassy for processing documents to certify slaughter by Islamic requirements. This service is not available outside Addis Ababa but could be waived by Ethiopian National registration with the Arab League. The current profit margin for carcass marketing is in the order of 5-10% and slightly higher during the Haj.

Current government policy and enforcement of cross-border trade regulations

Since establishment of the border of Somalia with Ethiopia, Ethiopia has not been able to fully capitalize on the potential market for livestock without involving the people, the overland routes and the ports of the coastal areas. More recently, with the desire of the Ethiopian government to liberalize legal trade and foreign currency generation concurrent with the power vacuum in the government of Somalia, cross border marketing of livestock has become chaotic, corrupt and intertwined with the illegal, duty-free importation of goods ranging from soap and sugar to televisions and satellite dishes. Customs and military officials have been frustrated in spite of extreme measures utilized.

Top government officials have said "We are going to do business as never before". To the pastoralists in Southern Ethiopia, who have freely and without legal hindrance, trekked their livestock to Somali coastal ports for thousands of years, the enforcement of regulations has resulted in a new and rather harsh reality. For in the words of one customs agent, "the border with Somalia is closed to all illegal trade whether incoming or outgoing. Furthermore there currently is no legal way to cross the border with livestock for sale." , i.e. there are no licensed traders, no holding facilities, no health certifying veterinarians, no recognized direct trucking routes to the ports and no recognized Somali ports. For the pastoralists who annually produce an offtake of about US$100 million in cattle, camels and sheep/goats, this is indeed a whole new way of doing business.

And it seems, in fact, that they and/or their traders are willing to risk their cattle as well as their own life rather than consider alternative legal marketing outlets. Serious problems have developed relating to public acceptance and cooperation with the new policy. Pastoral families or clans move about freely with their livestock in large trans-border areas as the availability of grass/water supplies change. Entire areas extending from interior Ethiopia to the Somali coast may be familiar to and be utilized for livestock grazing by one clan (See Figure 2). When control and confiscation of contraband was exercised on the main routes, traders took to the ‘off-road’ movement of both goods and livestock in both directions with trucks, camels and on foot. Moving market livestock between and among grazing stock, government soldiers became so frustrated that shooting erupted and traders began shooting back. Shot livestock were sometimes slaughtered to feed the troops and captured goods were returned to the authorities. Eventually bribing of soldiers was attempted.

Still at this time illicit cross border trade is thriving. Livestock can be seen grazing passively while merchants size up their chances and select routes for slipping across the border. The town of Warder, the refugee camp at Hartishek and to a lesser extent other border towns have become ‘mercatos’ of warehoused contraband waiting to cross into legal territory. For instance, mini-satellite dishes are commonly available for 2,500 birr in Hartishek and "any electronic wish can be ordered from Hargeshia in a matter of 6-8 days". The recently erected customs clearing house on the road near Kebri Beyah stands as a joke to illicit traders.

As it turns out the customs agent is right, there is no legal way of taking livestock across the Somali border or for that matter most other borders of Ethiopia. First, there are no certifying veterinarians or holding facilities along most existing roads where animals can be examined, vaccinated and certified. In fact, most veterinarians do not have proper forms or lab facilities to certify. Further the central government has handed down the responsibility to the regions to provide vets and facilities for certifying cross border transactions, vets and facilities which most bordering regions would be hard pressed to supply even if they passed along the costs. In the words on one veterinarian, this is the model to be patterned after in the future as regions develop cross border marketing.

As for currency transactions, at first sight there seems to be no impasse to doing business across the Somali border. Previous Franko Valeuta arrangements required the traders to make their own currency trade arrangements. Under the present government trade arrangement through the establishment of Letter of Credit (LC), the National Bank of Ethiopia will honor any internationally recognized country's currency. Therein lies the first problem in that the government and currency of Somalia and Somaliland is not internationally recognized. Secondly, ships sailing from Berbera and Bossaso are not insurable by Lloyd's of London so it is not possible to get accompanying Certificates of Insurance so no trader is guaranteed payment on his shipment. The National Bank is operating in Dire Dawa and is considering other branches including Jigjiga so establishing merchant licensing is no constraint to traders. The Commercial Bank of Ethiopia which is operating in Jigjiga, Gode and possibly opening additional branches, will honor payments to licensed LC traders but operating thorough Somalia/Somaliland is not possible until a recognized government is established.
 
Regulatory agreements, physical mechanisms and logistical facilities to enhance livestock marketing

In light of present cross border trade restrictions, temporary or intermediate-term alternative market mechanisms need to be worked out logically and logistically, ideally with the assistance of the concerned government bodies and the educated participation of livestock merchants. It is reported that quarantine holding pens are being constructed in Somaliland so that livestock can legally enter foreign ports with certificates of health. With the amounts of grassland and fodder available in the Jigjiga plains and down the Shebelle River floodplain, it would appear that similar holding pens could even better accommodate livestock in Ethiopia. Traders are aware of the market advantages of conditioning/health certified animals in terms of 1) international quarantine restrictions and acceptance at ports of entry, 2) market premiums for conditioned animals and 3) increased survival of animals due to better health and body reserves ("condition") prior to shipping. The time appears to be approaching when the concerned authorities i.e. Ethiopian and Somalia/Somaliland, should willingly participate in resolving the issues.

To philosophize a little about the issues, if Ethiopia were in fact to focus restrictions on livestock movements upon the long-term control of animal diseases and maximization of livestock revenue, it would be better to consider cooperative international legislation that recognizes the clan or 'degan' boundaries of the lowland people without regard to the physical border. The regulation of livestock movements among clans and through corridors to markets is much more critical to the interests of limiting disease spread than the enforcement of a man-made border. From this aspect there is little communication among nations and regions much less among zones with regard to the presence and likely movements of livestock diseases. The response to the occurrence and spread of the "camel disease" (a rare virus in combination with the bacterial disease, pasteurellosis) last year in Afar, Oromia and Somali regions was entirely in the form of reactionary treatment rather than to informed control of the spread.

In considering possible physical marketing mechanisms, the live or carcass shipment by air from Jigjiga area is unlikely to materialize in the near future since adequate airstrip facilities do not exist even if abattoir and refrigeration facilities were constructed. Exchange of livestock for Ethiopian produced sugar, which was successful in the past, is not likely to be a viable alternative since flood damaged refining facilities in the Awash river basin are thought to require 3 years to repair.

However some animal marketing mechanisms that were conceived by the Dergue government could be adapted to a limited extent. Considering the recent progress toward resolving the conflict in Somalia/Somaliland and the establishment of stable governments, it would appear that the most logical, long-term plans would consider the formation of legal mechanisms of trans border trucking in cooperation with these governments. Considering the cordial relationship that the government of Ethiopia has with the Somaliland authorities, it would appear that acceptable corridor routes could be established, fees standardized, taxes shared and international quarantine standards observed if priority attention were given to the cooperative resolution of these issues. In this case holding and shipping facilities would need to be established in Ethiopia, as close to the area of production as possible

During the past government, it was intended that the Livestock and Meat Marketing Cooperative would operate rotational grazing and fattening facilities during which time animals would be vaccinated, conditioned and processed for shipment primarily either to the Dire Dawa slaughterhouse, to the Djibouti port or to consumer markets in Northern Ethiopia. The Dire Dawa slaughter house still processes a limited number of animals for local and Djibouti consumption. Trucking animals to the Dire Dawa facility from Jigjiga, Fik and further south could be feasible, enabling chilled meat air freighting and would eliminate the 21-day holding period especially if Islamic slaughter could be documented and certified. Carcass shipment could be chartered in a manner similar to the present chat charter. The effect of a private abattoir presently said to be under construction in Djibouti remains to be seen, though holding in Ethiopia would still be a legal requirement before movement to that abattoir.

The following marketing centers (enclosed livestock selling/buying areas) have already been constructed and are receiving recognition by herders and traders for regularly scheduled selling of livestock.
 

• Livestock produced in the lowlands East of Dire Dawa and North of Jigjiga, which are moving through Borema to the port of Berbera, could, until that movement is legalized, be held for processing in the Jigjiga area for trucking to the train or road leading to Djibouti. Facilities constructed in the Jigjiga area could then be utilized for either movement to Djibouti or through Borema/Hargeshia.

• The largest off-take production area, the Fafen, Jerer, Daketa and Erer valleys, which are currently moving through Hargeshia to Berbera, could be gathered into holding areas around Fik, Garbo and Degeh Bur for trucking through Jigjiga to Dire Dawa. Facilities constructed in these areas would be adaptable not only to the above also to future legal trucking through Hargeshia.

• Production from southeast areas of Warder, Boh and Kebri Dehar would be more difficult but not impossible to truck north, especially after upgrading of the road to the Calub gas fields. In addition to holding, processing facilities, the roads would need to be repaired and maintained. It should be possible to truck from these areas to Dire Dawa in one day.

• Production west and south of Kebri Dehar usually moves south of Gode along with that from Kelafo-Mustahil-Ferfer through Belet Wein and on to Mogadishu. Therefore holding and processing facilities would need to be constructed possibly in the Ferfer-Mustahil area because of forage availability unless live or carcass shipment were to develop from the presence of the Gode airstrip.

• Production north and west of Dollo has historically moved through Luug and on to Mogadishu or Kismayo. However insecurity in these port areas is thought to have disrupted this corridor and the author does not know the volume or port currently utilized.

• Production north of Moyale is reported to be bypassing the town and the required export regulations to trucks waiting along the road to take livestock to slaughterhouses in Nairobi. Considering that the main center of livestock trade for Borena is in the Mega area, construction of facilities should commence in the area.

The Dig Reley Facility

Under the former Ministry of State Farms, a 21-day holding facility was constructed between Kebri Bayah and Degeh Bur at Dig Reley. The 10 km x 10 km fenced area is ideally located on the main road, between two wadis and not far from Garbo, a major center of production and producer marketing. Still existing at the site are a number of structures that could be rehabilitated. A borehole with submersible pump, concrete water storage tank and some water troughs are still present. Two sixteen room staff dormitories and a 4-room office were planned and the foundations still exist. Also the boundary lines are still cleared and numerous cement posts are lying about.

The former Jigjiga Sheep Breeding Station

Located 18 km east of Jigjiga, a 5000 ha area was designated for crossbreeding to the larger Tanzania black-head sheep. A smaller facility is now being completed by the government for this purpose west of Jigjiga. However walls of the school, 4 houses, an office and stores still exist as well as the borehole and a birka pond. With the consent of the local people, a smaller area could be fenced, shades constructed and a holding area, conditioning facility developed. Forages from surrounding cultivated lands could provide the needed feedstuffs.

The former Hare Sheep Fattening facility

Located 5 km northwest of Jigjiga is a facility still occupied by the Livestock and Meat marketing Board. Although previously fencing 3000 ha, the current facility only utilizes the compound areas with shaded pens, offices and staff houses. Livestock confiscated from illegal border crossings are being held here at present. With the completion of the 500 ha Jerer Dam and Irrigation Project, sufficient forage should be available to establish a confined cattle finishing facility. This would also fulfill the 30 day holding requirement for cattle prior to exporting.
 

The designations employed and the presentation of material in this document do not imply the expression of any opinion whatsoever of the UN concerning the legal status of any country, territory, city or area of its authorities, or concerning the delimitation of its frontiers or boundaries.