Value Chain Analysis of Vegetables: the Case of Ejere District, West Shoa Zone, Oromia National Regional State of Ethiopia
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VALUE CHAIN ANALYSIS OF VEGETABLES: THE CASE OF EJERE DISTRICT, WEST SHOA ZONE, OROMIA NATIONAL REGIONAL STATE OF ETHIOPIA MSc THESIS ADDISU HAILU May 2016 HARAMAYA UNIVERSITY, HARAMAYA Value Chain Analysis of Vegetables: The Case of Ejere District, West Shoa Zone, Oromia National Regional State of Ethiopia. A Thesis Submitted to School of Agricultural Economics and Agribusiness, Postgraduate Program Directorate HARAMAYA UNIVERSITY In Partial Fulfillment of the Requirements for the Degree of MASTER OF SCIENCE IN AGRICULTURAL ECONOMICS Addisu Hailu May 2016 Haramaya University, Haramaya ii APPROVAL SHEET POSTGRADUATE PROGRAM DIRECTORATE HARAMAYA UNIVERSITY We hereby certify that we have read and evaluated this Thesis prepared, under our guidance, by Addisu Hailu entitled “Value Chain Analysis of Vegetables: The Case of Ejere District, West Shoa Zone, Oromia National Regional state of Ethiopia”. We recommend that it be submitted as fulfilling the Thesis requirement for the Degree of Master of Science in Agriculture (Agricultural Economics). Lemma Zemedu (PhD) __________ _________ Major Advisor Signature Date Kindie Getnet (PhD) __________ _________ Co-Advisor Signature Date As a member of the Board of Examiners of the MSc Thesis Open Defense Examination, we certify that we have read and evaluated the Thesis prepared by Addisu Hailu and examined the candidate. We recommend that the Thesis be accepted as fulfilling the Thesis requirements for the Degree of Master of Science in Agriculture (Agricultural Economics). Fekadu Beyene __________ __________ Chairperson Signature Date Jemma Haji ___________ __________ Internal Examiner Signature Date Adam Bekele ___________ __________ External Examiner Signature Date iii DEDICATION I dedicated the manuscript of this Thesis to my Mother KURI ABDO, and my Father HAILU ZAWUDE for their encouragement, support and partnership in the success of my academic career. iv STATEMENT OF THE AUTHOR By my signature below, I declare and affirm that this Thesis is my own work. I have followed all ethical and technical principles of scholarship in the preparation, data collection, data analysis and completion of this Thesis. Any scholarly matter that is included in the Thesis has been given recognition through citation. This Thesis is submitted in partial fulfillments for MSc degree at Haramaya University. The Thesis is deposited in Haramaya University Library and is made available to borrowers under the rule of the library. I solemnly declare that this Thesis has not been submitted to any other institution anywhere for the award of any academic degree, Diploma or certificate. Brief quotations from this Thesis may be made without special permission provided that accurate and complete acknowledgement of the source is made. Requests for permission for extended quotations from or reproduction of this Thesis in whole or in part may be granted by the Head of the school if in his or her judgment the proposed use of the material is in the interest of scholarship. In all other instances, however, permission must be obtained from the author of the Thesis. Name: Addisu Hailu Signature__________ Date: May /2016. School/Department: Agricultural Economics and Agribusiness v BIOGRAPHICAL SKETCH The author was born in May 1987 in Lume, East Shoa Zone. He attended his primary education (1-6 grade) in Balli Rukketi Elementary School and (7-8 grade) in Liben Dingil Bishoftu Elementary School and completed his junior secondary education (9-10 grade) in Ada‟a Model Senior Secondary School. The author attended preparatory education (11-12 grades) in Bishoftu Higher Education Preparatory School. The author joined Haramaya University, College of Agriculture and Environmental Sciences, in 2007 and graduated in July 2010 with a BSc degree in Agricultural Economics. Soon after his graduation, he was employed by Oromia Agricultural Research Institute of Haro Sebu Agricultural Research Center and served as junior socio-economics researcher until he rejoined Haramaya University in October 2014 for his MSc in Agricultural Economics program. vi ACKNOWLEDGEMENTS First my praises to the God who created this world of knowledge for us: Thank you for your giving me health, strength, patience and support for completion of the study. Primarily, I would like to express my deepest thanks to my major advisor Dr. Lemma Zemedu for his unreserved effort, sociable encouragement, academic stimulation as well as productive and helpful comments on the entire document. I also extend my thanks to Dr. Kindie Getnet my co-advisor for his constructive comments and suggestions in the formulation of the research proposal and during the write-up of the thesis. They edited the whole document timely and made very productive comments right from the start. They guided me with patience to enable me accomplish my study. I owe thanks to ILRI/LIVES Project for financing the research project and for providing me other required facilities. It is a great pleasure to extend my appreciation to staff members of LIVES project for their facilitation of the study process and encouragement. My thanks also go to Oromia Agricultural Research Institute (OARI) head office staff members for their encouragement and gracious support. I am grateful to the Haro Sebu Agricultural Research Center staff members for helping me during my research work. I am also very much indebted to Mr. Ayelew Moges, Mr. Ayelew Sida, Mr. Bodena Guddisa, Mr. Fikadu Kitaba, Mr. Tariku Firdisa, and all enumerators who assisted me during my data collection. I also would like to extend my thanks to all staff members of Ejere District Irrigation and Development Authority office that helped me at various levels during my research work. Last but not least, I would like to express my heart-felt gratitude to my parents and my beloved for their encouragement and love since my academic career. vii ACRONYMS AND ABBREVIATIONS AIV African Indigenous Vegetables BDS Business Development Services BLUE Best Linear Unbiased Estimator BoA Bureau of Agriculture CIAT International Center for Tropical Agriculture CLR Classical Linear Regression DWH Durbin-Wu-Hausman EAP Ethiopia Agricultural Portal EHDA Ethiopian Horticulture Development Agency EHPEA Ethiopian Horticulture Producers and Exporters Association EIA Ethiopia Investment Agency EWAO Ejere Woreda Agriculture Office GMMCR Gross Marketing Margin of Central Retailers GMMP Gross Market Margin of Producers GMMRC Gross Marketing Margin of Rural Collectors GMMW Gross Marketing Margin of Wholesalers GoE Government of Ethiopia GTZ German Technical Cooperation GVC Global Value Chain HARC Holeta Agricultural Research Center ILRI International Livestock Research Institute LIVES Livestock and Irrigation Value Chains for Ethiopian Smallholders M4P Making Markets Work for the Poor MVN Multivariate Normal Distribution MVP Multivariate Probit Model NMM Net Marketing Margin OARI Oromia Agricultural Research Institute OLS Ordinary Least squares RMA Rapid Market Appraisal viii ACRONYMS AND ABBREVIATIONS (CONTINUED) SNNPRS Southern Nations Nationalities and Peoples Regional State SCP Structure Conduct Performance SUR Seemingly Unrelated Regression 2SLS Two Stages Least Squares UNCTAD United Nations Conference on Trade and Development UNIDO United Nations Industrial Development Organization USAID United States of America Agency for International Development VC Value Chain VIF Variance Inflation Factor WOTMD Woreda Office Trade and Market Development ix TABLE OF CONTENTS DEDICATION iv STATEMENT OF THE AUTHOR v BIOGRAPHICAL SKETCH vi ACKNOWLEDGEMENTS vii ACRONYMS AND ABBREVIATIONS viii LIST OF TABLES xiv LIST OF FIGURES AND MAPS xvi LIST OF TABLES IN THE APPENDIX xvii ABSTRACT xviii 1. INTRODUCTION 1 1.1. Background of the Study 1 1.2. Statement of the Problem 3 1.3. Objectives of the Study 6 1.4. Significance of the Study 6 1.5. Scope and Limitations of the Study 7 1.6. Organization of the Thesis 7 2. LITERATURE REVIEW 8 2.1. Definitions of Terms and Concepts of Value Chain Analysis 8 2.2. Agricultural Value Chain 11 2.3. Purpose of Value Chain Analysis 12 x TABLE OF CONTENTS (CONTINUED) 2.4. Dimensions in Value Chain 13 2.4.1. Network structure 13 2.4.2. Value addition 14 2.4.3. Governance structure 15 2.5. Methodology for Value Chain Analysis 15 2.6. Mapping a Value Chain 17 2.7. Upgrading in Value Chains 18 2.8. Framework for Evaluation of Marketing System 19 2.8.1. Market structure 20 2.8.2. Market conduct 20 2.8.3. Market performance 21 2.8.3.1. Marketing cost 21 2.8.3.2. Marketing margin 22 2.9. Status of Vegetables Production and Marketing in Ethiopia 22 2.10. Review of Empirical Studies 24 2.11. Conceptual Framework 28 3. METHDOLOGY 30 3.1. Description of Ejere District 30 3.2. Sources of Data and Method of Collection 33 3.3. Sampling Procedure and Sample Size 33 3.4. Methods of Data Analysis 35 3.4.1. Descriptive analysis 35 3.4.2. Value chain analysis 35 3.4.3. Marketing margin 36 3.4.4. Econometric analysis 37 3.4.4.1. Determinants of market supply 37 xi TABLE OF CONTENTS (CONTINUED) 3.4.4.2. Determinants of market outlet choice 40 3.5. Definition of Variables and Working Hypothesis 42 3.5.1. Dependent variables 42 3.5.2. Independent Variables 42 4. RESULTS AND DISCUSSION 48 4.1. Socio-Demographic Characteristics of Respondents 48 4.1.1. Socio-economic characteristics of sampled farm households 48 4.1.2. Access to institutional service of farm households 51 4.1.3. Demographic characteristics of sampled traders 54 4.1.4. Socio-economic characteristics of sampled traders 56 4.1.5. Demographic characteristics of sampled consumers 57 4.2. Vegetable Production 59 4.2.1. Types of vegetables produced by sampled households in Ejere district 59 4.2.2. Profitability of vegetables production in Ejere district 60 4.3. Value Chain Analysis 61 4.3.1. Vegetables value chain actors and major functions 61 4.3.2. Enablers and facilitators 68 4.3.3. Value chain map of potato and onion in the study area 69 4.3.4.