Final project of the online course 'Unlocking Investment and Finance in Emerging Markets and Developing Economies (EMDEs)', offered by the World Bank Group

1. Final Deliverable
Coffee production in Ethiopia: Irrigation infrastructure
Unlocking Investment and Finance in Emerging Markets and Developing Economies (EMDEs)e – World Bank Group
Manuel Martinez de Ubago Alvarez de Sotomayor
3th July 2019

2. Disclaimer
The investment opinions herein expressed are from the personal research of the author.
Although best efforts are made to ensure that all information presented is accurate and
up to date, occasionally unintended errors or misinterpretations may occur.
Further study is highly advised.

3. Ethiopian’s flagship product in context
Coffee is Ethiopia’s single largest source of export revenue, representing more than 30% of
total exports of Ethiopia…
Source: Observatory of Economic Complexity
With developed countries as main destinations

4. Positive economic growth
The story of Ethiopia`s remarkable growth has been linked to the strong growth in the
agricultural sector, and agriculture will remain critical to engage a large part of the population into the
growth process. (Source: WBG Country Partnership Framework 2018-2022)
GDP growth of Ethiopia [$billion]. Source: WB Data

5. And encouraging investment environment ahead
Recent measures led by the new Prime Minister have given hope to the international community * :
Political: Release political prisoners, restore peace with Eritrea, ensure free elections
Economic: Reforms aimed at improving in the ‘Doing Business’ ranking (Source: africanews.com)v
*Full video of PM Abiy Ahmed at Davos: https://www.youtube.com/watch?v=x2l7KscqRro
expected improvement in the
investment environment in the
short term

6. Yet, environmental (and societal) problem ahead
Other Source: Climate Change and Coffee Forest Forum (ECCCFF)
Threatens a traditionally-based (and unproductive) sector, which employs about 20% of
the Ethiopian population
Rising temperatures and worsening drought linked to climate change are now hitting
coffee production in Ethiopia (Source: reuters.com)

7. World Bank Group needs help
Other Source: IFC’s Ethiopian Coffee Project
• The Government recommends farmers to move to the mountains, with milder
temperatures.
• The IFC (International Finance Corporation) has actively been working on addressing
productivity and climate mitigation issues.
• Yet, more investment is needed to address SDGs in the coffee sector in Ethiopia
• Given (upcoming) political and economic context, there are attractive investment
opportunities.

8. Investment opportunity: irrigation infrastructure
In PPP with IDA, ensures viability of increasing coffee exports
Also, higher employment in a crucial sector, and climate issues are mitigated (SEG goals)
Investors can receive a small percentage of revenues from exports

9. Bottom-up approach, following a lean strategy for quick
implementation
Phase I – Entering the market Phase II – Settling
2020
Location
Decision
and KPI’s
PPP
negotiations
2030
Pilot area
Select optimal area to
implement small pilot
test
Report
KPI’s
Report KPI’s
in pilot area
Scale up to other areas in the country
Funding strategy
with IDA
Adjust based on
feedback KPIs
KPIs Monitor
method
Hypothesis in pilot
Decision for Phase II
If Hypothesis
complies
If Hypothesis does not comply
Employment
[FTE/area]
Monitor WB Employment will increase in pilot
area
Scale Up
Pivot
Water Usage Monitor WB Better use of water resources Pivot
Productivity (kgs/hr) Monitor WB Productivity will increase Pivot
Farmer satisfaction Interview Farmers satisfaction will increase Pivot
Final decision for Phase II Try another pilot area
Decide on pilot area
and KPIs (to be
monitored by WBG
due to availability)
2022 2023 2028 2040

10. W
TO
• As with many African cases throughout history, political
and economic promises by new PM might in the end
become ‘paper tiger’
• Use of machinery might curve employment
• Large water resources underutilized
• Can open room for further investments in an
opening economy
SWOT ANALYSIS
S
• Lean approach allows for fast implementation while
avoiding redundant waste
• Backed my MIGA tools (Protection against losses)
• Product highly demanded globally, which ensures
future production
• Increasing areas used for coffee production, which will
increase demand
• How to really translate investment it into financial
returns to investors without taking revenues away from
farmers?

11. THANK YOU
Coffee production in Ethiopia: Irrigation infrastructure
Unlocking Investment and Finance in Emerging Markets and Developing Economies (EMDEs)e – World Bank Group
Manuel Martinez de Ubago Alvarez de Sotomayor
3th July 2019