Rural Urban Transformation and Agglomeration linkages in Ethiopia
1. Rural Urban Transformation and
Agglomeration linkages in Ethiopia
Emily Schmidt
Seminar: DFID – Ethiopia
October 23, 2012
2. Presentation outline
1. Ethiopia’s Changing Economic Landscape
– Structural shift of the economy (declining share of
agriculture)
– Spatial (urbanization)
– Infrastructure (expanding road networks)
– Electricity generation and use
– Telecommunications (mobile phones and internet)
2. Key policies
– Land policies
– Industrial growth and constraints
3. Concluding Observations
3. Ethiopia Economic Structure: 1999/00 – 2008/09
140 52
120 50
billion (1999/2000) Birr
Agric Share of GDP (%)
100 48
80 46
60 44
40 42
20 40
0 38
(2008/09)
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
Agriculture Industry Electricity and Water
Construction Other Private Services Public Administration
Agric Share of GDP
Source: Calculated from World Bank, World Development Indicators data.
• Ethiopia’s share of agriculture in GDP in 2006 was highest in the world (48%)
• More than double the average for low income countries (20%)
• Ag share of GDP decreasing, but real ag GDP growth averaged 6.2%
4. Agricultural Share in GDP in East African Countries, 1980-2008
80
70
60
Share of GDP (%)
Ethiopia
50
Kenya
40
Uganda
30 Expon. (Ethiopia)
20 Expon. (Kenya)
10 Expon. (Uganda)
0
1980
1982
1988
1990
1992
1994
1996
1998
2000
2002
2008
1984
1986
2004
2006
Source: Calculated from World Bank, World Development Indicators data.
• Striking difference between Ethiopia’s overwhelmingly agriculture-dominant
economy and the economies of most other developing countries.
5. Urban Economic Theory
• As economy grows, structure and location of economic
activity tends to move more towards diversified economy
with larger urban industrial and services sectors
(Kuznets, 1950’s)
• New innovations in urban sector, increases in urban labor
productivity and wages, make secondary cities make an
attractive supplement (substitute to onfarm generation)
• Ethiopia launched ADLI (1994/94): focused on increasing
productivity of smallholder farmers through use of
fertilizer and improved seeds, infrastructure, public
services.
– Agricultural growth induced by ADLI interventions would
spur industrialization (agricultural input and processing
industries, and consumer goods to higher household
incomes and increased spending)
6. Ethiopia: comparatively slow transition
• Unique Biophysical Landscape
– Agricultural production is characterized by fragmented
and dispersed land holdings average plot size is 0.8
hectares)
• Limited Transportation Infrastructure
• Level of development as function of urbanization
• Political landscape and evolution of agricultural policies
(Monarchic, Derg, Present Government)
7. Ethiopia: Urbanization
Official Agglomeration
Estimate Index
(percent) (percent)
1984 11.4% 3.7%
1994 13.7% 7.1%
2007 15.9% 14.2%
(mns people) (mns people)
1984 4.55 1.48
1994 7.33 3.80
2007 11.72 10.50
(growth rate) (growth rate)
1984-1994 4.9% 9.9%
1994-2007 3.7% 8.1%
1984-2007 4.2% 8.9%
Ethiopia remains one of least urbanized countries in SSA, but
Ethiopia is urbanizing faster than people think!!!
12. Percentage of Population by Travel Time to
Agglomerations of 50,000 or more People
<1 1-3 3-5 5-10 > 10
Hour Hours Hours Hours Hours
Ethiopia
1984 6.74 1.96 9.22 41.77 40.31
1994 8.38 6.44 18.19 35.96 31.03
2007 12.48 23.56 25.73 26.03 12.20
13. Agglomeration Index 1984
In 1984, Addis Ababa and
other larger cities were
primarily confined to its city
administrative boundaries.
There were only a few cities
with greater than 50,000
people
Limited road networks and
more dispersed population
characterized the
demographic landscape.
14. Agglomeration Index 1994
By 1994, Ethiopia’s cities grew,
and the country’s
transportation network
expanded
Urban corridors were formed
from Addis to the Southeast
Population growth and
improved transportation
infrastructure facilitated
linkages to form an urban
network between Oromiya
and SNNP regions.
15. By 2007, urban linkages were Agglomeration Index 2007
clearly visible throughout Oromia,
SNNP, and Amhara regions.
Addis Ababa expanded to connect
Sebeta and Bishoftu, and Asela in
the South.
Addis Ababa also connected to
Ambo in the west, and Debre
Berhan in the east
Linkages between Arba Minch and
Sodo were also forming
Jimma had grown into a
southwestern hub with
opportunities to link with Nekemte
to the north.
16. Ethiopia: Percent Population connected to
Urban Agglomeration
45 60%
40
50%
35
30 40%
Millions of People
25
30%
20
15 20%
10
10%
5
- 0%
1984 1997 2007
Under 1 hour 1- 3 hours Share of Total Population
Source: Schmidt and Kedir (2009)
17. Ethiopia: Electricity Generation Capacity
1958 to 2011*
2000 25
1800
1600 20
megawatts (mn watts)
1400
watts/person
1200 15
1000
800 10
600
400 5
200
0 0
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
Total Installed Capacity Non-Hydro Capacity Capacity/capita
Source: Calculated using CSA Survey of Manufacturing (various years) and Ethiopian Electric Power Corporation data.
• Large investments in hydroelectric power: increased electricity
generating capacity 29-fold between 1960’s and 2011, increase of 8.9
times on a per capita basis.
18. Electricity use
• Survey evidence suggests that productivity effects of
electrification could be very large (output per worker)
• Small-scale handlooms in SNNPR: productivity per
worker is about 40 percent higher for electrified versus
non-electrified (Ayele et al., 2009)
• In electrified villages, producers work longer hours, firms
share workspaces with electric lights and lower cost
19. Ethiopia: Fixed Line and Cellular Telephones - 2003 to 2010
10
9
8
7
6
(millions)
5
4
3
2
1
0
2003 2008 2009 (plan) 2010 (plan)
Cellular Phones Fixed Lines
• Fixed telephone line infrastructure more than doubled from 2003 – 2008
• Cell phone subscription increased from 50,000 in 2003 to 3.16 million
subscribers in 2008
20. Ethiopia: Fixed Line and Cellular Telephones
2003 to 2010
2009 2010
2003 2008 (plan) (plan)
Main (fixed) telephone lines
Ethiopia 405 909 3,000 4,400
Africa 9,553 10,617 --- ---
Mobile cellular subscriptions ('000s)
Ethiopia 51 3,168 7,500 9,900
Africa 35,251 245,608 --- ---
Mobile cellular subscriptions (per 100 people)
Ethiopia (share of total population) 0.1 3.9 9.0 11.5
Ethiopia (share in connected area) 0.1 5.3 --- ---
Africa (share in connected area) 3.7 32.5 --- ---
• Infrastructure plans report that cell phone subscriptions more than doubled
from 2008 to 2009, and estimates of users continue to increase in future
years.
• Compared to SSA, Ethiopia falls behind: Share of population in connected area
is 5.3 percent in Ethiopia compared to 32.5 percent of the population in SSA
22. Ethiopia Food Security Index
90.0
80.0
70.0
60.0
Large
50.0
Urban
40.0
Small
30.0 Urban
20.0 Rural
10.0
0.0
2000 2005 2000 2005 2000 2005 2000 2005
Prevalence of Calorie Prevalence of Under 5 mortality rateEthiopia Food Security
Undernourishment underweight among Index
children < 5 years
Source: Household Income Consumption Expenditure Survey, and the Demographic and Health Survey from
1999/2000 and 2004/05
*The calculated calorie-based undernutrition for Ethiopia is based on the undernourishment cutoff of 1,990
kilocalories per day
**Proportion of underweight children less than five years of age is calculated as a weight-for-age was less than two
standard deviations
23. Ethiopia’s Industrial Sector: Growth and
Constraints
• Industrial growth has occurred primarily from trading companies
converting to manufacturing, rather than from small and medium
firms converting to large enterprises.
• Credit constraints
– In 2007 the government imposed tight lending controls on private
banks in an effort to curb speculative investments and inflation. In
general, only large firms were able to access bank capital.
• Uncertainty
– There are almost no secondhand markets in machinery and
equipment in Ethiopia, which contributes to irreversibility of decision
making.
– Possible disruption in electricity also raises risks, as productivity per
work is strongly linked to electricity (Ayele et al. 2009).
– Both electricity supply and the proxy measure of irreversibility have a
statistically significant negative effect of on investment decisions in
Ethiopian manufacturing (Shiferaw, 2009).
24. Land Policies and Migration
• Regional governments' proclamations restrict access to
rural land by prescribing the need to be a rural resident in
that particular region as a condition for acquiring rural land
free of charge.
• No right to transfer land right on sale or in exchange with
another property
• No easy transferability of land rights: transfer of use right in
the form of inheritance and donation is allowed only to the
right holder's family members who are residing in the rural
kebele and are engaged or wish to engage in agriculture.
• These policies inhibit migration from rural areas – hinder
labor mobility.
25. Concluding observations
• Rural – Urban connectivity has increased dramatically over
the last several decades
– Upgraded and maintained transportation corridors and
increased density on these corridors
– New cities were created and economically viable cities
have experienced large growth (count and density)
– Dramatic increase in electricity production and cell phone
subscription
• Ethiopia’s level of development affects urban transition
– Lack sufficiently large non-farm population to generate
enough demand for its own agricultural products
– Unless farmers can respond to demand from urban
consumers, through access to credit, labor and inputs,
local markets are limited to low-level transactions
26. Concluding Observations
• Population in large cities: ample space to expand and grow its
primary and secondary cities
– 4 percent of the total population lives in the three largest cities
– 5.4 percent live in towns greater than 20,000 people
• Migration/agglomeration are potential sources of growth
• But without supporting investments, there is an “urbanization
of poverty” and rising urban inequality
• Land and Migration Regulations:
– Easing of regulations?
• Prohibition of sale of land, loss of land rights for those
who leave rural areas
• Registration requirements for new migrants
27. Concluding Observations
• Urbanization and industrialization are a crucial part of
development and accelerating growth.
– Urbanization reduces the rural-urban divide
– Facilitate increases in economic density to create small town networks for
rural service provision (healthcare, education, etc.)
• However, given:
– Low levels of GDP/capita in Ethiopia
– A high concentration of poverty in rural areas
– Realistic prospects for increasing agricultural productivity and
production
• Ethiopia should NOT neglect agriculture, if these countries are to
rapidly increase food security and reduce poverty
