Ethiopian sesame sector post-harvest value creation and market linkages: Lessons learned from BENEFIT-SBN
In the past 5 years, Sesame Business Network (SBN) has conducted many studies and supported several specific initiatives, with the aim to increase Ethiopia sesame value creation, to establish constructive relations between value chain operators, and to improve the income of farmers and their organisations. The programme faced many challenges that made it difficult to achieve its target of achieving 10% higher farmer income from value addition and market linkages.
A three-page lessons learned paper “Post-harvest value creation: a fundamental challenge for the Ethiopian sesame sector” was prepared in the summer of 2019, highlighting all initiatives of the past 4 years and essential factors that inhibited the sesame sector product and market development. Concerning the current context, the paper concluded that:
- farmers can get a relatively high domestic price for raw sesame and are not rewarded for producing quality sesame or investing in value addition activities;
- there are no incentives for direct supplier-buyer relations;
- sesame is an expensive input for local food processing; and
- policies for creating a more enabling business environment are missing (i.e. imported oil is subsided, domestic/local oil is taxed).
As a result, post-harvest value creation is virtually absent and mainly confined to cleaning and artisanal oil production for the local market.
- In the last 5 years the programme was successful in efforts related to yield improvement for cost price reduction, farmers’ access to input credit, marketing credit for cooperatives to operate on spot markets (taking advantage of the high ECX prices and reducing the risk of traders’ collusion), first cleaning by cooperatives and unions, artisanal oil production for local markets using poorest sesame quality and production and marketing of rotation crops. Initiatives that did not achieve their goal included direct export of unions, trade missions, sesame quality management and grading, storage and conservation, investments in cleaning and oil extraction, development of organic value chains. Under prevailing circumstances, it proved almost impossible to develop feasible business initiatives and product and value chain development proved to be an uphill battle.
- Higher value markets (Middle East, Europe, North America, Japan and Korea) have clear requirements for the appearance, aroma, taste, oil content and purity of the product. Currently, buyers from these markets are not interested to directly source sesame from Ethiopian producers, mainly because of quality and food safety problems.
- Ethiopia has comparative advantages for producing highly valued white varieties (suitable for bakery industry), tasty varieties (suitable for tahini and halva consumers) and varieties with high oil content. There are also opportunities for value added products such as hulled, toasted, roasted, and grounded sesame, oil, tahini and halva.
- The inflated ECX prices are not to the disadvantage of farmers, however without market reform value chains are not developed and Ethiopia is losing its position in the increasingly competitive international sesame market. As of recent, the Government of Ethiopia has set out to control ECX prices, so as to avoid higher than international market prices. This may create a new business context, wherein ECX prices would be aligned with the international market prices. In the short run, this would not be an advantage to the farmers. Conditions for feasible post-harvest value adding activities would however be created: cleaning, storage, tracing and certification, processing, branding and labelling, packaging, wholesale and retail of food products. An important challenge is to develop these activities in a farmer-inclusive manner, e.g. to develop cooperative business activities.
- For developing post-harvest value creation and to establish real value chains with collaboration and transactions among different operators, a package of fundamental changes is required, some of which are the following:
- Provision of export licenses for professional sesame exporters (e.g. unions and cooperatives), who are not allowed to be engaged in import business. This will create a level playing field with current local buyers. An important accompanying measure is to promote alternative hard currency sources for importing companies.
- Development of a grading system that facilitates improved traceability, quality and food safety, with additional parameters like oil content, seed size and free fatty acid, allowing for market segmentation and price differentiation according to quality.
- Promotion of direct farmer-trader/company relations and a quality-based marketing system, which starts at field and spot market level. This would be feasible if ECX prices reflect world market prices. Joint investments in cleaning and storage facilities and management would be important in this context, as food safety is a major concern.
- Tax exemption for locally produced edible oils (sesame, sunflower and others) and promotion of sesame-based consumer goods for the domestic market. In the current situation, imported palm oil is subsidized to make it accessible for the Ethiopian population, while locally produced oils are taxed. This hinders a transformation to Ethiopian production of edible oils.