The objective of this case study was to describe and analyse cross-border livestock trade in the southern and southeastern Ethiopia borderlands with special reference to its implications on food security in the region. The livestock trade included cattle, small ruminants and camels.
The survey data was collected using questionnaire for livestock trader survey and interview with informants working for governmental and non-governmental organisations found in the research area. Livestock development experts and officers interviewed included border towns in the area both in Ethiopia and Kenya. In addition, data has also been obtained from secondary sources (from GTZ/BLPDP unpublished data).
The structure of the cross-border trade between Ethiopia and Kenya is characterised by sectoral specialisation and ethnic, geographical and product concentration. Ethiopia's unofficial exports through the borderlands are predominantly agricultural, live animals being the most important ones. From the Kenyan side goods sent to Ethiopia in return are manufactured consumer items dominated by foodstuff and clothing. While very few agricultural items are exported from Ethiopia, a wide range of manufactured goods are imported from Kenya.
Livestock is the most important item in Ethiopian exports. It is also the main source of livelihood in the area. Thus, the study emphasised on livestock cross-border trade from southern and southeastern rangelands of Ethiopia to Kenya. There are different estimates in different studies on the volume of livestock that crosses the border and sold in neighbouring countries specially Djibouti, Somalia and Kenya. However, there is no reliable data in this regard specifically on the distribution to each country. According to our estimate and GTZ/BLPDP market survey the volume of livestock smuggled to Kenya in 1998 was estimated at about 35,000-50,000 cattle; 100,000-110,000 sheep and goats; and 9,000-10,000 camels. Based on the GTZ/ BLPDP price records at Moyale- Kenya, during the same period the total value of livestock smuggled to Kenya is estimated at Birr37 million (see Annex 1 for monthly average prices of different types of livestock).
The social and economic characteristics of livestock traders revealed important implications on the performance of cross-border trade. Livestock traders are people living in the area and comprise primarily the Boran and the Somalis. This implies that several factors imposed entry barriers for other people to set up a livestock trade business in the area. There is also high scale of differentiation among livestock traders and most of these trader's annual volume of sales is below 200 cattle per annum. All traders were also found to engage in other activities including farming and small-scale business for retailing manufactured items.
Southern and southeastern rangelands provide three market sheds for livestock trade. The first is that of the southern rangelands that supply to cross-border markets in the borderlands of Kenya. The second is the southeastern rangelands, which is found near to the Ethiopia-Somalia border that supplies to markets found in Somalia such as Baidoa and Mogadishu. The third is the northern part of the area that supplies to the domestic markets in Ethiopia particularly to the coffee and other crops growing region of Gedeo, Sidama, Konso, Dorze/Ochollo and Wolaita areas.
The northern market shed boundary for the cross-border trade (export destined) is the line joining Hageremariam and Wadera (Map 3). Whereas, the market shed boundary for domestic markets is the line north of Yabello and Negelle (Map 3). The boundary between the sheds is found near to the domestic markets where the least price for livestock is found among all market options. The shed shrinks and expands depending on relative costs and prices in livestock trade.
The marketing channel for cross-border trade from Ethiopia to Kenya is simple in the sense that it involves few ownership changes before the border is crossed. Once the border is crossed, the involvement of Ethiopian traders drops substantially. Pastoralists found near the border area also supply markets in Kenya from own production. Thus the border markets in Kenya and Somalia are supplied by both traders and pastoralist. The simplicity of the channel suggests that other things being constant, price movements at border markets in Kenya will have strong impact on pastoral welfare in southern and southeastern rangelands.
In the cross-border trade between Ethiopia and Kenya, three currencies are used to effect transactions. These are the Kenyan Shillings, the Somali Shillings and the Ethiopian Birr. Livestock traders paid in Kenyan Shillings exchanged it for the Somali Shillings and the Ethiopian Birr. The use of the Somali Shillings in some parts of the Ethiopia-Somali region and the attractiveness of the Somali duty free markets for a range of manufactured products, Ethiopian traders paid in Kenyan Shillings in the northeastern part of Kenya preferably exchange it for the Somali Shillings.
Market information, transport, feed and water, veterinary services, herding, loading and unloading, searching lost animals, trade livestock attendants on livestock trucks and market fees are major transaction costs incurred by a livestock trader in the area. The importance of these costs increases at higher level of the marketing channel.
Market information is private. Lack of standardisation makes the market search by both the buyer and the seller more complex. Almost all traders used brokers to facilitate transaction both in cross-border and domestic markets. Broker's service becomes more important at larger markets. The most often used mode of payment for brokerage fee is fixed payment irrespective of the quality of animal. The payment is related to the type of livestock traded and location of the market.
All traders trek their animals from border markets of Ethiopia to border markets in the neighbouring counters (Kenya and Somalia). The border is exclusively crossed on hoof. A livestock trader hires drovers and fixed payment per trip or per animal is made based on the distance between the origin and destination. To minimise risk of loss, two or more drovers are hired by one or more traders. Motorised transport is limited in the domestic channel. In trekking of animals to neighbouring countries, the main livestock routes are done away with. Instead, traders use several other routes to avoid government detection. This contributed to loss due to theft and disappearance in the bush.
Other costs incurred by the trader are feed and water, veterinary services and market fees. Feed and water costs are not substantial due to the availability of communal pasture and deep water wells along the external livestock routes. However, this is a constraint along domestic routes due to increased cultivation and shortage of grazing land. Veterinary services are not provided in an organised manner in the area. This is due to the unofficial nature of the trade and hence is beyond the reach of government institutions available in the area to provide such services. Therefore, trader's expenditures for veterinary diseases captured in this study are those paid for the purchase of drugs. Market fees are paid to municipalities in every market centre.
Formal trader finance is virtually non-existent. Informal finance partly substituted capital market access. Trust relationships among the livestock traders at different market chain facilitated access to credit. The common form of credit available to livestock traders in the area is commodity credit with implicit interest. In this case, traders buy animals on credit from the client and pay after the animals are sold. In this arrangement, opportunity cost of money is considered and hence traders repay their suppliers with some provision in return for the facility. Other forms of credit are interest free cash loans from relatives and friends. These loans provide more options to the trader but they are rarely available.
Seasonal characteristics of production and consumption and different marketing inputs determine livestock prices. Supply fluctuations are caused by availability of feed and water. On the other hand pastoralists tend to sell more during the dry season mostly to buy grain whose demand increases during the same period due to additional quantity required to compensate the decline in milk production.
The producers and traders buy food items such as maize, sorghum, rice, etc. and other essential goods and also invest in livestock. The terms of trade between grain and livestock deteriorates in the dry season and drought periods and that is the period when pastoralists sell livestock. The yield from livestock dwindles and the pastoralists have to relay on purchased grain.
Prices are also affected by different marketing inputs including transport, information and market fees, fees to feed and water and veterinary expenses. After considering different inputs used by Ethiopian traders who sold at Moyale and Kenyan traders who sold at Nairobi, it is found that there is high disparity between Ethiopian and Kenyan traders in profit sharing.
Livestock prices in different markets are found variable explained by high standard deviation and coefficient of variation. The correlation result between two border markets of Ethiopia (Dubluk and Negelle) and between markets in Ethiopia (Dubluk and Negelle) and Kenya (Moyale) revealed that there was no relationship.
Regarding food security, the borderlands are food insecure in the dry seasons for seven months- September to March and seriously insecure between January and March. The bulk of the food input into the area comes from the highlands in Borana zone and the Southern Nations, Nationalities and Peoples Region. The peripheries in Kenya such as Marsabit, Moyale and Mandera districts are in the same ecological area as southern and southeastern Ethiopia and are grain deficient.
Although cross-border trade in the south and southeastern part of the Ethiopian border is unofficial and contraband, this study has shown that livestock trade is one of the major activities for the pastoralists and agro-pastoralists. It helps for the sustenance of life for the poor households and in the generation and accumulation of capital for the rich. Following are issues that favour and challenge cross-border trading in the southern and southeastern rangelands of Ethiopia.
1. At the point of origin of livestock markets (e.g. Dubluk and Negelle in Ethiopia), pastoralists earn higher prices with cross-border trading since larger and competitive markets tend to benefit producers. Thus, food security is enhanced through income from higher livestock prices.
2. At the point of destination markets, (e.g. Nairobi, Kenya and Mogadishu, Somalia) consumers of livestock also benefit from cross-border trading, as larger competitive markets tend to depress marketing margins.
3. Cross-border trading also creates opportunities for diversification by pastoralists. For instance, pastoralists may engage in some small -scale activities such as vegetables and grain trading.
4. Regional integration is strengthened that could help for the creation of common market for a wider range of goods and services.
5. Recent developments in Ethiopia in legalising cross-border trade between Ethiopia and Djibouti as well as between Ethiopia and Northern Somalia could provide relevant experience to the cross-border trade that can be legally undertaken between Kenya and Ethiopia.
6. The same Oromo groups and Somali clans inhabit both sides of the border. Therefore, because of the trust that originate from ethnic relationships, missing markets (e.g. credit access) can partly be substituted to facilitate trade.
7. Attempts to prevent or control cross-border trade have proved to be ineffective. According to the customs records at Moyale-Ethiopia, animals captured by the Customs Authority border patrols while crossing the border are very few when compared to the total volume traded (See Annex-3).
8. In cross-border trading there is no requirement for official paper work, letter of credit to be established and export/import clearances to be obtained.
9. Less or no patrol control by Kenya for livestock and grain and other commodities originating from Ethiopia.
10. In situations where official livestock export trade does not exist, cross-border trade would provide an outlet.
1. The border is near northern Somalia through which duty free goods can be smuggled to Ethiopia. This would frustrate domestic trade and industrial policies in Ethiopia.
2. The border is frequently closed due to insecurity in the area.
3. There are no quarantine, bank services and market information that are required to facilitate the cross-border trade.
4. The lack of and or limitations of standardization in the goods traded in the borderlands, under invoicing or over invoicing by the traders is likely to be higher depending on the magnitude of taxes and duties.
5. Ethiopia is likely to loose in the border trade since some of its goods can be re-exported to generate foreign exchange through other ports.
6. The cross-border trading is a two- way exchange for specific products. For instance, agricultural products (crop and livestock) originate from Ethiopia whereas manufactured goods originate from Kenya. This situation puts Ethiopia into a disadvantage because of the terms of trade between these two groups of products.
Although the Ethiopia-Kenya cross-border trade is considered as contraband and there are restrictions and controls by governments, it is facilitated through social ties among the ethnic groups living in the borderlands of both countries. This relationship partly substituted missing markets. Thus, livestock traders benefited from ethnic and trust relationships to get market information and credit.
The structure of the cross-border trade suggests some important policy implications. One aspect is that the situation favours the Ethiopian government to develop infrastructure to redirect the unofficial channel to official ones and to promote the availability of manufactured substitutes in the area. Lack of intervention by the Ethiopian Government would continue to encourage uncontrolled flows of goods across the border and it would also affect the effectiveness of domestic trade and industrial policies.
Most pastoralists in the rangelands finance food purchases through the sale of livestock and, thus, any change in cross-border commerce and prices will have a negative effect on pastoral food security.
Cross-border trade from southern and southeastern rangelands of Ethiopia to Kenya is constrained by several interrelated factors. First and foremost, it is currently regarded as illegal for most of the goods traded particularly live animals. In addition, formal capital markets are missing; and informal substitutes are imperfect; market search is complex; access to large markets in Kenya by Ethiopian traders is limited; and livestock stock routes are not developed. Thus, improving pastoral welfare through increased incomes and the environment through increased offtake in southern and southeastern rangelands require several policy and development interventions.
Much of the demand for livestock comes from outside. Export markets are the most important marketing options for livestock traders and pastoralists living in the southern and southeastern rangelands despite inadequate price transmissions. Domestic markets for these products are limited. Only few traders responded that they moved their animals to domestic markets. Thus, government controls and bans of the cross-border trade will not be without adverse implications on food security in the area due to suppressed prices owing to a forced downward demand shift. Markets in the area were found non-integrated based on simple correlation results. Given the importance of livestock to the livelihoods of pastoralists and agro-pastoralists in the area, the performance of livestock markets would substantially affect welfare.
Ethiopia and Kenya have a permanent committee that meets every year to look into issues that concern their border areas. Because of the benefit that cross-border trade gives to pastoralists, agro-pastoralists and others on both sides of the border, it is high time that the two Governments discuss the issue with the view to design a system to lift the border control in such a way that is beneficial both to the Governments and the people.
Policy decisions of this nature would generate official cross-border trade and create more employment in a more secure environment. In this way, cross-border traders will not run away from the state but would rather work with the state. Pastoralists and traders will also perform their livestock trading in an open and free environment. This not only brings additional revenue to the Regional, Federal and Central Governments Treasury but also helps in a reduced policing of the borderlands and in the harmonisation of clan and ethnic conflicts. This is good for the peoples and the countries in the border areas and good for the region as a whole. Finally, it is our hope that this study could help set the grounds for further understanding of the cross-border trade and for food security in the Horn of Africa region in general and the southern and southeastern Ethiopian rangelands in particular.
