In a small village in Arsi in Oromia Region, 180 kilometres from Ethiopian capital Addis Ababa, Meti Feyisa grows wheat, barley and beans on three and a half hectares.
About four months ago, Meti received 62.5 kilogrammes of barley seed from Diageo, one of the four leading breweries. Diageo bought Meta Brewery from the Ethiopian government a few years ago.
A few kilometres from Meti’s farm, Hule Abdurrahman, a father of nine, grows the same barley variety — Holker — on half hectare. Holker is a favourite of the breweries because its protein content is suitable for malt. This is the first time Hule is growing barley through Diageo sponsorship.
“I expect to harvest 15 to 17 quintals after four weeks,” he said.
At the current market price, the farmers sell a quintal of Holker and malt barley varieties at $10 more than they do those used for food.
“Farmers are now shifting from producing barley varieties for food to malt barley,” said Feleke Gezahegn, who is in charge of seed production, preparation and dissemination at the state-owned Ethiopian Seed Enterprise, which commands over 70 per cent of the seed market in the country.
Following the expansion of existing breweries and opening of new plants, the factories are now focusing on sourcing malt barley locally. For example, Diageo has given 6,300 farmers across the country fertiliser, pesticides and technical support for free.
“We are doing this as part of our vision to source 70 per cent of our malt from local farmers by 2015,” said Omondi Kasidhi, head of agriculture business development, Diageo-Meta Brewery Ethiopia.
“In addition to reducing the foreign exchange spent on importing malt, we want to increase the income of farmers by buying their crop at a price that is 20 per cent above the market price,” Mr Kasidhi said.
However, small-farm agriculture, which is mostly rain-fed, is itself a bottleneck for the industries that depend on the farmer. But if a company wants to import agricultural inputs from abroad, getting hard currency from the banks is not easy and often takes over six months.
The breweries — which are encouraged to export at least 20 per cent of their beer — cannot fully source their input from the local market. According to current estimates, the seven brewery plants in the country import $25 million’s worth of barley malt every year.
Arsi is also known for producing long distance athletes such as Haile Gebreselassie, Kenenisa Bekele and Tirunesh Dibaba. Asela Malt Factory, the single plant in the country supplying malt to all breweries is also found in this area.
“Unnecessary competition between us [seed producers] and the breweries is causing shortage of barley malt seeds,” Feleke said.
“We are both using smallholder farmers for production of improved barley malt seed. When we offer farmers a higher price, say by 15 per cent, as an incentive to produce the basic seed for us, breweries offer better incentives and buy the crop, which we would have used as seed. This results in a malt barley seed shortage. We need to work closely with the breweries to avoid this unhealthy competition,” he said.
This sums up the dilemma of the Ethiopian government: Even as it tries to woo investors into the country, smallholder farmers who are expected to supply upcoming factories with raw materials — wheat, barley, rice, for example — cannot seem to produce enough. This is a matter of concern for a country that made $3 billion from exports but spent $13 billion in imports in its 2013/14 financial year.