Ethiopia

In terms of economic policy, Ethiopia still follows the model of a developing country: the government centrally administers and manages economic activities. Both the direction of economic policy and the economic structure are currently undergoing radical changes. The Ethiopian government has announced – and partly already implemented – reforms that are intended to lead to better general conditions for the private sector and to more economic growth and employment. They include plans to gradually open up the economy and introduce more competition, especially in sectors that have been dominated by state-owned enterprises (e.g. logistics and telecommunications). Together with the World Bank and the French Agence Française de Développement (AFD), KfW Development Bank is supporting this drive for economic reform on behalf of the German Federal Government. The partners agree on reform measures with the Ethiopian government and support them with financial assistance and expertise. The goal is to create better overall conditions for economic development and more and better jobs. KfW is also contributing to the development of the financial sector by helping the Ethiopian Development Bank to provide loans specifically for small and medium-sized enterprises. As part of the Special Initiative for Training and Employment, KfW is also promoting job creation by supporting projects and entrepreneurial initiatives that are particularly relevant to employment.

Special initiative for Training and Employment

More and more Ethiopian children and young people have enrolled in school in recent years; many of them now go on to attend universities or complete vocational training. Technical experts and engineers, in particular, are urgently needed. But Ethiopia’s vocational training facilities and universities have only been able to partially fulfil their role. Practical relevance and links with industry are often lacking. Moreover, companies often cannot afford to train new employees themselves or hire expensive foreign specialists. This slows down technological development and innovation.

For this reason, KfW Development Bank is supporting the government in developing and implementing a new vocational training strategy. The aim is to provide better training for young people, including many women and refugees – especially in technical and agricultural professions. In more than 90 vocational schools, KfW has already contributed to equipping workshops and providing teachers with ongoing training so that they are more qualified for better job opportunities. In addition, there is a push for networking vocational schools more closely with the private sector – for example, by locating vocational schools in industrial parks and offering modern training courses, such as industrial and medical technology.

Project information – Vocational training (PDF, 171 KB, non-accessible)

Most Ethiopians are small farmers living in rural areas. The fertile Ethiopian highlands are an important farming region. But more and more land is being destroyed by persistent droughts followed by heavy rains and plagues of locusts, as well as by unsustainable farming practices. Climate change and strong population growth have compounded this development. The low yields can usually no longer guarantee self-sufficiency. Food is often in short supply and malnutrition and malnourishment are common. To put a stop to this development and protect livelihoods in the important farming regions of the Ethiopian highlands, KfW has been supporting the Sustainable Land Management project since 2011. It combines measures to conserve soil with an increase in agricultural production. In addition, water catchment areas are being restored to reduce the loss of fertile soil. KfW is also financing the expansion of municipal infrastructure that makes it easier to trade in agricultural products and provide supplies to people locally. The option of leasing agricultural machinery facilitates work and increases productivity in agriculture. This allows people to make a better living from their agricultural output, with the prospect of being able to sell their excess produce at markets and improve their living situation significantly.

The loss of livelihoods also affects the population of the arid and semi-arid areas of the lowlands, with their semi-nomadic pasture farming. The vast lowlands make a significant contribution to Ethiopia’s livestock production. Although the traditional farming system is well adapted to the harsh climate conditions, it is coming under increasing pressure due to more frequent droughts and the invasive shrub called prosopis juliflora. Furthermore, in the past, access to important water and land resources was made more difficult. As a result, the people’s capacity to withstand droughts has weakened considerably.

To counteract these trends, KfW is supporting projects to strengthen drought resilience. In consultation with the local population, measures are being developed, for example for water supply, rural infrastructure and cattle and pasture farming, as well as for alternative opportunities to generate income and basic services. This enables people to manage the natural basis for their livelihoods sustainably, even with changing climate conditions. It supports the traditional economic form of semi-nomadic pasture farming on the one hand, and taps into additional sources of income on the other.

Ethiopia’s topographical location and different climate zones make it home to a wide variety of unique flora and fauna. With this very high genetic diversity, Ethiopia is one of eight “gene centres” worldwide. However, this biodiversity is under threat. Poverty and high population growth mean that an increasing amount of land is used for arable farming, pasture farming or industrial agriculture, and the last remaining forests are cleared. Hardly any consideration is given to the natural resources, and biodiversity continues to decrease. At the start of the twentieth century, around 40% of the country was still covered in timber forest while today, only around 3% is left. Numerous plant and animal species are critically endangered, including the popular and particularly economically significant Arabica coffee, which grows as a wild plant in the mountain rainforests.

KfW is supporting its partners in Ethiopia in preserving important protected areas. This primarily involves professionalising park management, investing in the park infrastructure for the long term and securing local people’s acceptance of the protected areas. In addition, KfW finances afforestation measures on community land to contribute to biodiversity, more water availability and better income opportunities for families in the villages.

For many years, Ethiopia has been a destination for refugees from the surrounding countries. Most live in camps along the borders to Sudan and Somalia. The Ethiopian government delegates administration of the camps and the provision of basic supplies for refugees in the camps to the refugee charity UNHCR. But the provision of basic supplies, which is not integrated into the government systems, is not sustainable and is very expensive. Moreover, in the remote regions of the camps, resources are usually scarce. There are distribution conflicts with the local population.

The Global Compact on Refugees (GCR) has heralded a shift from isolating refugees to a policy of integration. It was adopted by the United Nations in 2018. In it, the signatory countries undertook, among other things, to accept refugees into their national systems for the provision of basic services.

Ethiopia is a pioneer in the implementation of the GCR and since 2018, it has adopted a liberal and integrated policy towards refugees. For example, with KfW’s support, an integrated, sustainable water supply system was introduced in a camp for mostly South Sudanese refugees in Gambella, which is operated by a public water supplier. This significantly reduced the costs of supply. Previously, the water had to be transported to the camp in lorries, which cost around EUR 6 per cubic metre. Now the water only costs around EUR 1 per cubic metre.