DAMBI DOLO UNIVERSITY

COLLEGE OF AGRICULTURE AND VETERNARY MEDICINE

DEPARTMENT OF AGRICULTURAL ECONOMICS
A seminar on Causes and Consequences of Low Agricultural
Productivity among Small Holders in Ethiopia
Submitted to the Department of Agricultural economics in partial
fulfillment of the requirement for course Seminar in Agro- economics

BY
Goshu Qixesa NSR/314/19

Advisor:- Gadisa .G(M.sc)

july, 2022
Dambi Dollo, Ethiopia
ABBREVIATIONS
ADLI Agricultural Development Led Industrialization

EEA Ethiopian Economic Agriculture

GDP Gross Domestic Product

NGOs Non-Governmental Organization

TFP Total Factor Productivity

 TABLE CONTENT
Contents
Page
ACRONYMS AND ABBREVATIONS ii
TABLE OF CONTENT iii
ABSTRACT v

1.1INTRODUCTION 1
1.1.Background 1
1.2. Statement of the problem 2
1.3. Objectives 3
General Objective 3
Specific Objects 3
1.4. Significant of the Study 4
2. LITERATURE REVIEW 5
2.1. Agricultural Productivity in Ethiopia 5
2.2. Agriculture and Economic Development 5
2.3. Agricultural Development Condition in Ethiopia 6
2.4. The process of Agricultural Transformation 7
2.5. Causes of Low Productivity 7
2.5.1. Agricultural productivity constraint 8
2.5.2. Farm in put Constraint and the need of Credit 8
2.5.3. Fertilizer Price, Credit and Subsidy 8
2.6. Factors affecting the success of Smallholder Farmers 8
2.6.1. Age 9
2.7. Problems associated with provision of farmer supporter serves 11
3.1. Conclusion 14
3.2. Recommendation 15
REFERENCES 16
 1. INTRODUCTION

1.1. Background
Agriculture traditional has been associated with production on farms. Agriculture is the home of
traditional people, ways and living standards anti thesis of what nation builders in developing
countries envisioned for their societies of agriculture’s was provide the only source of productivity
could be tapped to fuel the derive for mechanization.For instance, agriculture itself was often
treated as a black box from which people and food to feed them and perhaps capital could be
released (C.KEicher, 2016). The continuing importance of it in the economies of the developing
countries is reflected in the association between growth of agriculture and the economy as a
whole. The parallel between agriculture on gross domestic product growth segment that the
factors which affect agriculture performance may be linked to economy wide social and economic
policies (WB, 2018’s). Agriculture was neglected in the lardier period and it was not considered as
essential and a sector with abundant potential for investment and economic development of 1950
is recent time (Michael, 1994). Agriculture remains a back bone of developing countries. By the
same taken Ethiopia is among developing countries depending on agricultural product for her
economy development. As agriculture plays dominant role in the economy the area and the
sustainable development of Ethiopia was in any ever unthinking able without sound progress in
the expansion of agriculture was largely based on subsistence from Ethiopia house hold, whose
modes of life and work have remained unchanged (Ayele , kuris 2006.ethiopia economy).

The importance of agriculture in Africa cannot be over emphasized as it accounts for 70 percent of
the labor force, over 25 percent of Gross Domestic Product (GDP) or more than 40 percent in
countries like Ethiopia, and for a large portion of export earning in some countries or for instance
as much as 90 percent in Ethiopia, it has also potential for enhancing growth in other sectors of the
economy through increased commercialization and dynamic inter- sectorial linkage effects.
All these data indicates that agriculture in Africa has a high multiplier effect on the rest of the
economy (which ranges from 1.5 to2.7 percent). That is a one –dollar increase in agricultural in
come of more than two dollars, on average. Further historical evidence abundantly shows that
agricultural can play crucial role during the initial stage of development. What is more agriculture
is a sector essential for ensuring self-reliance in national level food availability. However,
agriculture has remained a low productivity sector by international standards.
Despite Agricultural is the main study to Ethiopian; the country seems could not feed its current
population. Because raising agricultural productivity is not an easy task, i.e. the country face low
agricultural productivity problem like soil erosion, deforestation, one grazing , poor organization
of farmers, low level of modern technology, low level of irrigation activities, usage and other
related short comings have continued to affect their sector productivity which in term influence its
output. (Befakadu, 1999/2000). Food security has become the burning issue in Ethiopia since food
security was the base for the development. To meet food self-sufficient in the short run and food
security in long- run the Ethiopia government set Agricultural Development Led Industrialization
ADLI. food security exist when all people at all times have access to sufficient safe and nutrition’s
food to meet their dietary needs and food preference for an active and health life. And for the
World Bank food is access by all people at all times to enough food for any activity, health life the
availably of food the ability to acquire it. Food in security is the lack of enough food (Ellis,
1992,PP.3l0).

1.2. Objectives
General Objective of the Seminar
 To determine the main causes and consequences of low productivity among smallholder
farmers in Ethiopia
Specific Objectives
 To review the failures to low productivity among small holders of Ethiopia.
 To review come up for production consequences for policy markers among small holder
farmers of Ethiopia.
 To review the supporting policies and institutions that can lead to more effective
management of community and household farmers in Ethiopia directly and through
technological change.
 2. LITERATURE REVIEW

2.1. Agricultural Productivity in Ethiopia

Agricultural productivity is measured as the ratio of agricultural output to agricultural
input. While individual products are usually measured by weight, there varying densities
make measuring over all agricultural output difficult. Therefore,output is usually
measured as market value of finally output, which excludesintermediates product such as
corn feed used in the meet industry. This output value may be compared to many
different types of input such as labour and land(crop yield) these are called partial
measures of productivity.
Agricultural productivity may also be measured by what is termed total factory
productivity (TFP). This method calculating agricultural productivity compares an index
of agricultural input to an index of out puts, this measure of agricultural productivity was
stablished to remedy the short comings of the partial measure of productivity; notable
that it is often hard to identify the factory cause them to change.
Agriculture is the dominant sector in Ethiopia accounting for 80% of employment, more
than 45% of the national income and 90% of the total foreign exchange earnings.
Smallholder family farms cultivate approximate to 95% of the total cropped land and
produce more than 90% of the total agricultural output (Mahelet, 2007).
2.2. Agriculture and Economic Development
Literatures on agricultural development show that agriculture was not considered in earlier period
as an important contributor to economic growth but this view of agriculture in economic
development in satirical prospective (Eicher and Stez, 1960).
Their explanation showed that as the economy of one country develop with the structural
transformation the share of agriculture sector to national product declines. According to labor can
be transferred from subsistence agricultural sector to industrial sector with out any loss of
productivity because the marginal productivity of labor from agriculture is zero and industrial
sector can absorb all surplus labor from agriculture (Lewis p, 1954).
This assumption was based infinitely elastic supply curve. However in early the analysis by other
economists such as Jorgensen(1961)and others showed that food storage could stock off- growth
in non farm sector by making its labor supply less than in finite elastic(EicherandStazz,1999).
These economists concluded that in the early stage of development a country probably needed to
make some net investment in agricultures to accelerate growth of agricultural surplus which is
used as a potential base for a development. Most development economists of the 1950s viewed
agricultural as a passive sector with it importance decline as industrial growth absorb increased
source of production sand employment. In1960s how ever several economist including Johnson
and mellor,1960stressed the fundamental rule the agricultural development and the importance of
understanding the process of agricultural growth, since agricultural play dominant role in the
economy of Ethiopia’s, its real and sub stain able development is un thinkable without the sound
progress in the expansion of agricultural product’ it was in agricultural sector that the bottle neck
for long term economic development will be won(Todaro, 2003).

2.3. Agricultural Development in Ethiopia

Agriculture is the main stay of Ethiopian economy. The sector is dominated by small farmer who
has been adopting low input and output in mixed farming with traditional technologies.
Agriculture is a foundation of the country’s food production that contributes to food security. It
accounts for about 50 percent of the GDP provides employment for about 85percent of the
population, supplies about 90percent of the export earnings and generates about 70percent raw
materials for domestic medium and large scale industries (Bulletin Facts about Ethiopia,2004,pp,
71).
Although agriculture has still remained to be the most important determinate of the country’s
economic development, its performance had been of a very low level of productivity relatively to
the investment made especially during the period of Dergue. How ever since the launching of the
economic reform program of 1990s a number of positive factors including good weather peace and
stability in the country, the introduction of coherent policies and strategies, the expansion of the
cultivated area and increased use of improved technologies contributed to dramatic increase in
production of food grain of peasant sector compared with any years in the past (Ethiopian
economic agriculture EEA, 2000).
Agriculture is the leading sector in the Ethiopian economy, the diversity of climate, soil and
topographic conditions give unextremely large range of cropping. Despite these potentials the
contribution of agriculture to economic development has persistently less than anticipated due to
in ability to increase production significantly through agricultural re organization and the
introduction of modern farming technique.

2.4. The process of Agricultural Transformation

Historical prospective suggest that the agricultural transformation involved through four
stages that are roughly definable (Timmey, 1998, pp, 280).
In the first stage, the surplus created in the earlier stagy, is transferred which make substantial
contribution to economic growth. This contribution comprises product contribution and factor
contribution in the second stage, agriculture is progressively integrated macro economy via
improved infrastructure and market equilibrium linkage.
In the third stage, signifies a fully develop agricultural in industrial economics where the role of
agriculture is little different from the role of the steel housing or insurance sector. In the fourth
stage, the world population increasing at an alarming rate from the time to time, but natural
resource land is fixed. Because of these different models was developed all of which emphasis on
how to increase the productivity of agriculture to sustain the Needs for increasing world
population. (Timmer, 1993).
2.5. Causes and Consequences of Low Productivity
The agriculture and development sector is the ranked national priority of developing countries.
This expected as the sector contributes over 80% of employment. Close to 80% of the population.
Live in rural areas and derive much of their livelihood from the land through crop and livestock
production, fishing, forest and other natural resources. However, the majority of LDCS live in
rural areas that are characterized by low agriculture productivity, low incomes, limited
employment, opportunities, and poor social and economic infrastructures. (Alemayehu seyom,
1993).
The greatest majority of the grain populations are poor and their agricultural activities are
generally characterized by low productivity. The major obstacles facing agriculture and rural
development of Ethiopia include technological back wardens, the shortage of skilled manpower,
and fragmentation of farm holding, limited infrastructure, and limited supply of modern inputs,
adverse weather conditions, drought, and depletion of resources, inefficient. Marketing practices
and Ethiopian economy of agriculture (EEA), 1966).

2.5.1. Farm in put Constraint and the need of Credit

In put constraint or un able to get input in accordion where the farmer is unable to obtain
necessary in put required foe. farming for in put constraint is aggravated if there is credit constrain
a farm house is said to be credit constrained only when it would like to borrow is greater than
lenders allow, or if it is preferred and exceeds the amount of lenders are willing to supply (Ducker
and Rosenthal’s, 1993).In Ethiopia, smallholder farmers cultivate about 95% of the total cropped
land and produce more than 90% of thetotal agricultural output. The average land holding size of
1.18 hectares per farm household (CSA,2007/08) in Ethiopia meets the conventional meaning of
small farms (less than two hectares perhousehold). Even far beyond that the smallholders in
Ethiopia are known for their resource constraintssuch as capital, inputs and technology; their
heavy dependence on household labor; their subsistence-orientation; and their exposure to risk
such as reduced yields, crop failure and low prices (Betre, 2006;Mahelet, 2007).

2.5.2. Fertilizer Price, Credit and Subsidy

The price of fertilizer is characterized by greater variability, for e.g., in 1993, following the
devolution of Ethiopian birr by 140 percent (made in october1993). Fertilizer price increased by
64percent (Mullat Demeke, and Andre coroppensted 1996). And the government introduced
subsidy 15percent but the price was still 40percent above 1992 level. The subsidy was aimed at
assisting poor farmers because small farmers living at poverty level need protection from the
world market (Osman, 1995).
2.6. Factors affecting the success of Smallholder Farmers
The constraints and problems that have been discussed above are some of the main causes slowing
down the progress of smallholder farmers towards success, mainly determined by how the
initiative is implemented. However, there are other factors that have been found in other studies.

2.6.1. Age
According to Dlova, Fraser and Belete (2004), age is one of the factors that can affect the
probability of a farmer being successful in farming. Results from the study concluded that older
farmers are less capable of carrying out physical activities while younger ones are capable. In this
study, Dlova et al (2004) concluded that younger farmers are more ready to adopt modern
technology. Thus because younger people may be more adaptive and more willing than older
people to try new methods, age is expected to be an influencing factor. Be bridge (1984) also
concluded that as farmers get older, they often become more conservative and reluctant to accept
risk, they work fewer hours and have fewer non-farm employment opportunities.

2.6.2. Gender
According to Bebridge (1984), a profile of best farmer characteristics was found and significantly
more of the best farmer heads of households were men who were managing the farm. This is also
true according to Dlova et al (2004), who found that it was expected because males are physically
capable of coping with farming practices. Women are also expected to perform domestic chores in
the manual demands of household. The exclusion of married women from decision-making
activities of the farm even though their husbands were not farmers had an impact on the ability of
the females to be successful (Dlova et al, 2004). This means that males would be more likely to
succeed compared to females.
2.6.3. Education and Training
The best farmers were the educated and most of them had some vocational training (Bembridge
(1984). To be an entrepreneur with parameters that determine the scope of an enterprise in rural
situations, the smallholder farmers must be familiarized with the principles of business economics,
record keeping and they should become proficient in managerial skills (Nompozolo, 2000). Thus,
Dlova et al (2004) found that the higher the level of education, the more successful the farmer
was. A sound educational background can reinforce natural talent; it can provide a theoretical
foundation for informed decisions. Entrepreneurial success requires formalized knowledge of
functional aspects like marketing, purchasing, supply chain management and finance (Rwigema
and Venter, 2004). Therefore, education is likely to improve managerial ability in terms of better
formulation and execution of farm plans; and acquiring better information to improve marketing
ability. However, Nompozolo (2000) suggests that education and training should go hand in hand,
education being the primary motivator and initiator. Thus, Dlova et al (2004) conclude that the
probability of a farmer becoming successful improved when the farmer had some type of
vocational training. Doni (1997) states that any agricultural development initiative should start
with training of the targeted farmers before other support services are provided. Such training
should continue through extension support as part of the project implementation.

2.6.4. Access to Off-farm Income

Access to income can affect the probability of a farmer becoming successful (Dlova et al 2004).
The probability of success in farming should be directly related access to other sources of income.
According to Dlova et al (2004), those farmers who have access to other sources of incomes made
better use of all existing factors of production while farmers who have access to little alternative
income under-utilized some of their factors of production due to inadequate operating capital.
Bembridge (1984) found out that even though the best farmers derived ten times the income from
farming as did average farmers, they were still dependent on outside income for 37% of their gross
earnings compared to the 90% in the case of average farmers.
2.6.5. Household Size
Normally, the larger the family size, the more likely the farmer is to become successful as
the household has more labour to work on the farm. However, this would only work if all
family members are old enough to perform the farm work, otherwise if the household
size consists of a majority of young children who cannot be used as family labour, it will
not work. However, according to Dlova et al (2004), farmers with bigger families were
less successful than those with smaller family sizes. This situation is explained by the fact
that the increased use of the family income to feed, clothe and educate a larger number of
children may leave limited funds for meeting farming expenditures because of the high
household

2.7. Problems associated with Provision of Farmer Support Services

The characteristics of a successful smallholder farmer are not only determined by what is
embodied in the farmer himself, there are other external factors which will affect the success of
the smallholder farmers. According to Kirsten et al (Undated), policy characteristics such as one
sidedness, export orientation, research priorities, low agricultural investment, external influence,
role of the price mechanism is underplayed, mediocre support services and lack of continuity in
policies have emerged and lead to the conclusion that these policies were not perfectly formulated
and applied thus they do not address the targeted problem. That factor In addition, Doni (1997)
suggests such as information sources, uncertainty and compatibility of the development objectives
are factors that led to the Farmer Support Programmer being rendered unsuccessful to some
extent. It therefore follows that the factors affecting the success of smallholder farmers after
intervention start right from the implementation stages of the initiative.

2.7.1. Information Sources

According to the findings of Doni (1997), there are aspects which influenced participation and the
level of understanding of the farmer support programmer. The most important reason for not
participating in the farmer support programmer was lack of information and clarity on the
programmer. This means that dissemination of information is an important factor that determines
farmer participation in any development initiative. Farmers should understand what is embodied in
the initiatives. It should also be noted that to some extent the understanding of farmers depends on
their level of education and experience in business. These are factors that ultimately affect the
success of the farmer. The level of understanding of the farmer support programmer even among
participants was poor. Lack of understanding is a reflection of poor clarity on the information
given to farmers by implementing agencies. It is important to note that smallholder farmers may
not be able to directly access development initiatives due to some infrastructural constraints
discussed above. It is in this case that the role of extension officers becomes very significant in
fully disseminating information between the government and smallholder farmers. The role of
extension officers actually determines sustainability of development initiatives in the long run
(Oettle & Koelle, 2003). It is the knowledge the farmers gained and understood from extension
officers that will enable them to be sustainable and succeed in the future.

2.7.2. Uncertainty
The importance of information dissemination discussed above leads to uncertainty on the
outcomes and conditions attached to those benefiting from development initiatives if it is ignored.
Coetzee, Kirsten & Van Zyl (1991) suggest that good intentions in development often result in
failures and pain for those at the receiving end due to an ignorance of the risk factors inherent in
financial transactions. There is the concrete fact that the lender can never have the same
information on the potential and circumstances of the borrower, than the borrower himself. Thus,
as far as formal credit is concerned, where a selection criteria is used, farmers are not certain of
their outcome probably because of the dynamic nature of the farming business such that they do
not seek credit even when the initiative is available. A study done by Spio (2002) shows that
households do not seek formal credit for reasons such as, they are not aware of the availability of
formal credit, they lack profitable investment opportunities, and they may be too timid to request
formal loans because of the cost of borrowing. Doni (1997) also came up with the same
conclusion that farmers may not participate because they are afraid of debt. A conclusion is made
that this was due to uncertainty on the part of the farmers as to whether they would be able to
produce enough to meet their debt commitment.
It is pointed out that the default rate for the credit facility in this study was extremely high as
some farmers thought that the facility was a government grant and they were not obliged to pay it
back. In these situations where farmers lack information and are uncertain, their repayment
patterns are assessed and their loan requests are rejected. This affects the ability of farmers to
succeed especially in the long run.

2.7.3. Compatibility of the Development Objective

The compatibility of any development objective with the needs of the farmers in their areas is
important. Doni (1997) suggests that the farmers in the area did not regard development of
agriculture as a priority and yet this was one of the main objectives of this initiative. This means
that one of the main problems associated with development initiatives is that the needs of the
farmers are not assessed. A top-down approach is used instead of a bottom up approach, which
ensures that farmers are subjects of their own development. A needs assessment is therefore
essential so that intervention is appropriate to the needs the farmers regard as important. It is
important to clearly define a farmer in the developing areas (Doni, 1997).
It is believed that the reasons for failure of most of the agricultural development initiatives are
linked to failure by development planners to clearly define the target population they are planning
to develop. Therefore a distinction should be made between rural people who live in rural areas
through preference or circumstances and those who live there because they want to derive their
livelihoods from agriculture. Coetzee & Vink (1991) suggest that a demand driven service can be
accomplished if institutions can identify the nature of their demand, their target clients and the
characteristics of their rural financial markets. This entails a flexible approach acknowledging the
different services required for the broad spectrum of farmers in the agriculture sector.
 3.CONCLUSION

3. Conclusion
In Ethiopia, agricultural productivity is affected by both man-made and natural factors
which deteriorate the yield and productivity of this sector from year to year. The major
obstacles includes technological backwardness, the shortage of skilled manpower, and
fragmentation of farm holding, limited infrastructure, limited supply of modern inputs,
adverse weather conditions, drought, and depletion of resources etc. The characteristics
of a successful smallholder farmer are not only determined by what is embodied in the
farmer himself, there are other external factors which will affect the success of the
smallholder farmers. And the most important reason for not participating in the farmer
support program was lack of information and clarity on the program including
governments, NGOs and development practitioners are needed to remove the existing
bottle necks growth of low productivity among small holder farmer in Ethiopia.The
importance of information dissemination discussed leads to uncertainty on the outcomes
and conditions attached to those benefiting from development initiatives if it is ignored.
Suggest that good intentions in development often result in failures and pain for those at
the receiving end due to an ignorance of the risk factors inherent in financial transactions.
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