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ASSESSMENT OF RURAL-URBAN E C<~~~§~6~ONOM r C L1 KAGE: n IE CASE OF HOSANNA TOWN :r ITS HINTERLANP~:;:~~ ____--..,. ADDIS AS .41l4. UNrVERS ITY! AI<AKI C !_ AMP US LIHllAay - ~ TAMlRAT'Sl:I===-_.--JTlAMO A THES IS SUB Mr- - -::= =rl 'TED TO URBAN DEVELOPMENT AND MAN-::-=-_ _ ~~A.. GEMENT DEPARTMENT PRESENTED IN PARTIAL FULFILLMENT OF HE REQUIREMENTS FOR THE DEGREE OF MASTERS OF ARTS (DRB~_-=--~""''''I.. N DEVELOPMENT AND MANAGEMEN r= ) ADDIS ABABA UNrVEFI ;;;;;;;;~~~~ SrTY I ADDIS ABABA, ETBIO-Ll== = = ===-- lA I JUNE 20 12 Addis Ababa University This is to certify that the thesis prepared by Tamirat Sulamo, entitled: Assessment of Rural-Urban Economic Linkage: The Case of Hosanna Town and its Hinterland and submitted in partial fulfillment of the requirements for the degree of Degree of Master of Art (Urban development and Management) complies with the regulation of the University and meets the accepted standard with respect to originality and quality. Signed by the Examining Committee: Examiner ~(. ~L ~~ , Signature_ -7"'--"'-"-F-_ _ Date~e U(l-b/V :;.t;~..!().fu~M~fl:::!.~tJ.J.l':0:US1gnature.~=l.!2::b.. .~Date 1fl10-6 b ..,1/ 1.. )P.(~~:&te....~~W._ .\LII4-,I~ Signatu'~..&Y.d:.6"q.__ Dat ~ (2cle Adivisor ___ _______--'--- __Signature ,_ __--/ '----_Date ____ Chair of Department or Graduate Program Coordinator 1 Abstract Assessment of rural -urban economic linkage: the case of Hosanna Town and its hinler/alUl Tamirat S ulamo A ddis Ababa University, June 2012 Rural and urban peoples are becoming increasingly multidimensional and mull i-local in present times and rural-urban linkages are receiving beller altention in the regional and local economic development discourse. However, Ethiopia is characterized with weak rural - urban linkage due to different factors. Moreover, there is research gap in thematic and spatial coverage. The main objective of this research is 10 assess the existing nature ofr ural - urban economic linkage in Hosanna town and ils hinlerland. To achieve the objectives, data were collected from rural and urban households, traders, and officers through questionnaires, interviews and observations. The gathered data were analyzed using descriptive statics frequencies, ranks and qualitative analysis. Findings of the study indica led difference between hinterland farmers and their urban counterparts to recognize and idenlify pertinent challenges that hamper to rural - urban linkage. The hinterland farmers indicated shorlage of land, subsistence agriculture, lack of market facilities and shortage offarm inputs as main challenges. Urban households on the other hand identified, price fluctuation, lack of market facilities, inflation, lack oj agro-processing industries and subsistence nature of agriculture as a main challenges. The study has identified weak and partial backward linkage while forward production marketing linkage is almost non-existent. The only linkage found relatively strong is consumption linkages. The hinterlands have shown limited marketing linkages in the sales ofrural products in the town. The main products brought to the town are wheat and teff. In addition, finical linkage is very weak and informal financing is the most important in the study area. Among ten variables, shortage of land is the first problem Ihal affecls agricultural production in the hinterland. Finally, it is recommended that a joint effort is needed from all concerned stakeholders to mitigate the challenges in order 10 promole mutual development in the sludy area. iii ACKNOWLEDGMENTS Above all, I thank Almighty God for always with me In all my endeavors and glvmg me endurance to complete my study. I am very glad to express my smcere gratitude and appreciation to my thesis advisor Dr. Berhane Mehary for his unreserved and valuable guidance; important comments; criticism and professional advice as well as well as the understanding and patience from beginning to the completion of this thesis that gave the work its fina l shape. Especial thanks also to my father Ato Sulamo Ergino, my mother Wor. Zenebach Anna, my sistar W/r!. Meratech Sul amo and my brother Ato Dawit Sulamo who were always by my side and who offered me financial, the material and moral support to complete thi s research work. Moreover, I would like to express my deepest gratitude to my best friend Ato Abinet Ergando, Ato Degele Desta, Ato Sisay Tiroro and Ato Solomon Ergando fo r their technical assistance and moral support in the due course my research works and studies. Finally, I also grateful to surveyed households, key informants, FGD participants, data enumerators and Officers in the study area are duly acknowledged for providing their willingness and valuable supports/cooperation. iv ADDIS AnA BA lr~!\'ER5l~\ "'~ll l~ L \BIlAl1.Y TABLE OF CONTET 'Jt1\ "I e-..... Page .. -.~ ~- Table of Content ________\ -~::::: :::::::_' __________ v List ofFigures_ _ _______________________ vll l List of Tables VIII List of Acronyms ______ __________________IX General Notes ____ _ _ ___________________ x CHAPTERONE _ _____________________________________ I, Introduction _ ____ _ ____________________ 1.1. Background of the Problem _ _ _________________ 12. Statement of the Problem _ ___ ___ _____________ 3 1.3 Research Questions ______________________ 6 1.4. Objective of the Study 7 1.4.1. General Objective 7 1.4.1.1. Specific Objectives of the Study 7 1.5. Scope of the Study 7 1.6. Significance of the Study 8 1.7. Limitations of the Study 8 1.8. Organization of the Thesis 8 CHAPTER TWO _______________________________________ 9 2. Literature Review _________ ______________ 9 2.1 . Definitions of Terms _____________________ 9 2.1.1. Urban and Rural Areas _ __________ _ _________ 9 2.1.2 Hinterland 10 2.2 Theoretical Framework _ _ _ __________________ 11 2.2.1 Concepts of Rural-Urban Linkage _ _ ______________ 11 2.2.2 The Evolution of Rural-Urban Linkage Concepts and Theory _______ 13 2.2.3 Debate on Rural- Urban Development Theory ________ ___ 14 2.2.4 Dimensions of Rural - Urban Linkage _ _ _______ ______ 16 2.2.5 Patterns of Rural - Urban Economic Linkage __________ _ _ 18 2.2.5.1 Marketing Linkage _ _ __________________ 18 2.2.5.2 Financial Linkage ____________________ _ 19 v 2.2.5.3 Inter - Sectoral Linkage _ __________________ 20 2.2.6 Factors Affecting Rural-Urban Linkages 21 2.3 Empirical Framework _____________---, _______ 23 2.3. 1 Rural-Urban Linkages in the World 23 2.3.2 Rural-Urban Linkages in Africa _________________ 24 2.3.3 Rural-Urban Linkages in Ethiopia 26 2.4 Conceptual Fran1ework of Rural-Urban Linkages 28 CHAPTER THREE 30 3. Background of the Study Area and Research Methodology 30 3.l. Background of the Study Area 30 3.1.1. Background Information of the Hadiya Zone/ Hinterland ________ 30 3. 1. 1.2 Location of Hadya Zone ___________________ 30 3. l.2. Background Information of the HosatU1a Town _____------- 31 3.l.2.2 Location of the Town 32 3.2. Research Methodo logy ____________________ 33 3.2. I Research Design ______________________ 33 3.2.2. Sampling Technique _____________________ 34 3.2.3 Population and Sampling 35 3.2.4. Data Type and Sources 37 3.2.5. Data Collection 37 3.2.6. Data Collection Instruments __________________ 39 3.2.7. Methods of Data Analysis 40 3.2.8. Analytical Framework For the Study 40 CHAPTERFOUR_____________________________________ 43 4. Results and Discussions 43 4.1 Demographic Characteristics of the Sample Households 43 4.1.1 Demographic Characteristics of the Sample Rural Households ______ 44 4.2 Economic Characteristics of the Sample Hinterland Households 49 4.2.1 Land Holding and Ownership System 49 4.2.2 Farming System and Problems of Agriculture 51 vi 4.2.4 Fruits and Vegetables Production _________________ 54 4.2.5 Livestock Ownership and Livestock Products _____________ 54 4.2.6 Occupational Diversification of the Sample Hinterland Family _______ 55 4.3 Economic Characteristics of the Sample Households in Hosanna Town 56 4.4 The Pattern of Rural-Urban Economic Linkages in Hosarma and Its Hinterland_ 60 4.4.1 Marketing Linkage _____________________ 60 4.4.1.1 Marketing of Agricultural Goods 6 1 4.4.1.2 Marketing ofIndustrial Goods 64 4.4.2. Inter-Sectoral Linkage Between Hosmma and Its Hinterland 66 4.4.2.1 Backward Production Linkages 66 4.4.2.2. Forward Production Linkage 70 4.4.2.3 Consumption And Linkages 72 4.4.3 Finar1Cial Linkage 76 4.6 Urban Traders and Their Role in Fostering Rural - Urbar1 Economic Linkage in the Study Area 79 4.7. The Nature of Market and Marketing Service in Hosanna Town and Its Hinterland 81 4.8. Challenges of Rural - Urban Economic Linkages in the Study Area 82 4.9. Prospects of Rural-Urban Economic Linkages in Hosanna Town and Its Hinterland 84 4.10 Roles of Local Government to Promote Rural-Urban Economic Linkages 86 CHAPTER FIVE 87 5. Summery, Conclusion, Recommendations and Policy Implications 87 5.1 Summery 87 5.2 Conclusion 91 5.2 Recommendations and Policy Implications 93 References 96 Appendices 106 vii LIST OF FIGURE Figure 2.1: Sketch for Conceptual Framework of Rural-Urban Linkages_____ 29 Figure 3.1: Administrative map ofHadiya Zone/ study area 31 Figure 3.2: Analytical Framework for developed Rural - urban economic linkage __ 32 Table 3. 1 : Di stribution of household sample in the study area 37 Table 4.1: Distribution of the Hinterland Respondents by Sex, Age and Marital Status_ 44 Table 4. 2: Distribution of the Hinterland Respondents by Educational Status 45 Table 4.3: Distribution of the Hinterland Respondents by Family Size 46 Table 4.4: Distribution