Sugar Industry in the Lower Omo: Exploring Different Scenarios of Privatization

Abstract

The Ethiopian governmenthas pursued over the past decade a strategy of expanding sugar production to meet local demand and to generate foreign revenue. To date this has been mostly state-led, with core operations in the hands of parastatals, notably the Ethiopian Sugar Corporation. In the past six months, however, the Ethiopian government has offeredfour of its largest sugar estates for sale to private investors. This briefing note explores the impact of the privatization of the estates onlocal communities through a scenario analysis. The major factors determining the possible scenarios arethe investors’business modelsand the capacityof local communities to negotiate for their own interests. Thispolicy brief recommends that the governmentshouldsituate community interests among the top priorities in the auction and privatization of sugar estates, and that private investors (jointly with the government) should explore policy options and business models to mitigate undesired outcomesand toensure benefit sharing and participation by local communities.