Small and Medium Forest Enterprises in Ethiopia

Little is known about the small and medium enterprises that produce, collect, process, transport, market and sell forest products in Ethiopia. Their role in supporting livelihoods is not fully understood and is probably greatly underestimated. As a result, the future of forest resources in Ethiopia remains uncertain. This report attempts to consolidate existing knowledge on small and medium forest enterprises (SMFEs) and provides an overview of the sector based on fieldwork surveys. SMFEs are overwhelmingly informal and remain largely unregulated by any government authority. Many operate illegally by using prohibited resources or failing to pay taxes. SMFEs are largely undocumented, with no reliable figures that estimate their scale and extent. Our research indicates that certain subsectors beyond round wood are commercially important, notably fuel wood entrepreneurs (USD 420 million per year), herbalists (USD 216 million per year), wild coffee producers (USD 130 million per year), honey and beeswax producers (USD 86 million per year) and furniture makers (no estimates available). Yet despite their commercial significance, SMFEs produce a limited range of low quality products. While there are some important exceptions that need to be built upon, in general they have limited investment, access to credit, training opportunities, business management and knowledge of the natural resource base. The timber subsector sources the vast majority of its raw materials from natural forests that are undergoing rapid deforestation. While the formal timber trade is dominated by government enterprises, they have been unable to meet demand and this has led to the growth of illegal loggers and traders. Timber is purchased by furniture makers and the construction industry. Timber products that reach the market are generally extremely low quality with limited added value. Likewise, the full potential of the gum resin subsector remains unrealised. Production is constrained by low yields and there is little investment along the supply chain. Nonetheless, it represents a valuable export market that employs large numbers of collectors and processors. Greater integration has occurred within the honey subsector with the emergence of entrepreneurs who have invested in improved production, processing and marketing techniques. However, the vast majority of honey continues to be produced using traditional hives and consumed locally in the form of mead. Only recently has Ethiopian honey begun to register as a significant export, although its value continues to be much lower than that of beeswax. Finally, despite vast stands of bamboo, the trade in this most versatile resource is confined to the production of basic household implements and furniture. Innovation is almost nonexistent and only recently have entrepreneurs begun to explore the potential of using bamboo pulp for paper production. Despite their shortcomings, SMFEs appear to offer significant social and economic benefits. The Government of Ethiopia recognises this and supports SMFEs, particularly through the Micro and Small Enterprises (MSE) framework. The recent establishment of the Oromia State Forest Enterprises Supervising Agency (OSFESA) and the community’s stated role in forest management are also clear indications of the current interest in forest resources and the roles they play in rural livelihoods. Non-governmental organisations (NGOs) have also been experimenting with Participatory Forest Management (PFM) and offer training to SMFEs, particularly those dealing with non-timber forest products (NTFPs). SMFEs have limited capacity and are unable to add significant value to the natural resources they use. They are not organised into associations that could tap the more lucrative national and international markets; these are currently dominated by large enterprises. SMFEs have great potential to reduce poverty in Ethiopia, but in their present unregulated state they also represent a threat to the country’s declining forest resources.