75,2/‘/ f3 \‘-O~o.- -_ u.- “"'Ov-~- - Inef...‘l. . t ~—~.‘ ,‘I. F C " v ~. ‘V‘. - .' p. 5‘. .- ‘|‘~ ~'_—. ’1‘- .-.V04_ .5— v 0.. \ b ”A. id‘s c 'v . \\_I‘I \ "~- ":s. “ a r ‘un ~ \ .. ‘.‘r‘. \q‘ “ ABSTRACT AGRICULTURAL MECHANIZATION IN ETHIOPIA: AN ECONOMIC ANALYSIS OF FOUR CASE STUDIES By David Alfred George Green Four dissimilar cases of agricultural mechanization in different regions of Ethiopia are described and analyzed for potential benefits, costs, and compatability with cer- tain objectives selected from the Ethiopian Third Five—Year plan The broad definition of mechanization is employed: any form of mechanical assistance used in agricultural technology facilitates consideration of any agricultural I system in Ethiopia as a potential site for mechanization. Objectives 0f the thesis are: to present pro- duction data over a period of ten years for which farm budgeting is employed; to analyze the financial datawith benefit—cost techniques to relate certain non-financial aSpects of these cases to objectives specified in EthiOpian development plans for which index trends were estimated; to demonstrate the types 0f data required for economic analy- see of agricultural mechanization; to demonstrate the applicability of the methodology to four different agri— cultural systems . c a- (I. p: O n: ~ v.... ._ _ . l ’7 A. A «an-scan..- . n u u ’11 "y- "II :~y~ A.. -.-._. . “n! ‘d.." ‘ l . . ‘ .: 7; -u...‘_.'“ .~ .- ‘ ..,.. -....¥A.. ‘ Q r"‘uu. .. t 4 ~nvl...‘. ‘ ... ‘ .' "v- .._ 4..- _ H...“ ., -Q 0‘“ ‘ a . u m... .‘ “~u-.-‘ ~ . .. "~v....,..‘- -.,_ . . I...“ F7 p'.F_“ -. ~ ‘. .~ O H-“ v i I ‘ \"‘ .l. .e. - "‘ 4"V v..- ‘4. n .- a :. -.~ _ ‘u. K... >_~‘ ~_. ~. ‘v. . - hi.- 5 g... ' David Alfred George Green Systems are classified as employing hand-, animal-, or engine—powered technology. The selected cases depict four alternative options Open to policy-makers interested in improving agricultural mechanized technology in Ethiopia. Mechanization is regarded as a process of improvement or transition . Potential commercial viability is the principal criterion employed for selection of cases. No value is placed in mechanization per se without economic justifi— cation for proposed changes. Hence, introduction of cash cr0ps into the agricultural systems are essential. The selected cases depict systems of hand—powered agriculture (a village subsistence economy in southwestern Ethiopia--72 hectares), animal-powered agriculture (a small family farm in the Central Ethiopian Highlands--8 hectares), and two cases of engine-powered agriculture (a large commercial farm in northwestern EthiOpia—-800 hectares and a plantation in eastern Ethiopia--10,ooo hectares) In each case, two yield levels (maximum and minimum) are investigated and two strategies for three of the cases. One strategy for the village economy provides for the introduction of improved hand tools and storage EQUipment; two strategies for the small farm provide for either improvement in oxen technology or the introduction of tractor hire services, two strategies for the large Commercial farm provide for intensive labor utilization . .- -‘A' D‘ ' O . 'F " n ;,.. _.,........ dflfi’ V’D... ..q .p....— a on ‘ ~uo-uu mo‘ ooucvot. ‘ . ‘ ’,,' FV.“. no. h.v»u . . n .Io ':s r. 5' s__ ~v ‘ 'ivu U- _ .‘ v~-. s.‘_"~ 'FII;-.~ '. Oaai_~_. '. :v- . ‘.._l ‘c.‘ g - .~_ ‘. N...,. .-\_" :V’ "" ‘.: David Alfred George Green or intensive mechanization; two strategies for the plan— tation provide for raw cotton or ginned cotton production each using engine—powered technology in early tillage operation and intensive hand labor subsequently. Benefit—cost analysis is used to establish seven indicators of primary net benefits from the financial accounts: net present value, payback period, internal rate of return, benefit-cost ratio, and average net present value for each of three arbitrarily designated scarce resources (investment capital, wage costs for technical personnel, wage and supporting costs for technical per- sonnel) . Cases are ranked according to each criterion. Sensitivity analyses consist of examining the effect of changing selected parameters in the system on the values for benefit—cost criteria and the total change in benefit- cost results caused by changes in prices for marketed outputs and wages. Objectives selected from the Ethiopian Third Five- Year Plan for additional investigation of non-monetary aspects of the cases are“ income generation, employment and wage distribution; productivity of factors; potentials fOr eXport and import substitution. Relative changes in these non-monetary aspects are measured by indices com- puted at selected points in time. Substantive conclusions are drawn from the results of case study analyses without attempting generalization David Alfred George Green either for EthiOpia or Equatorial Africa. Methodological generalizations are presented as the procedures employed have general application. Recommendations from the experience and work involved in the thesis are directed to policy—makers con- cerned with introduction of mechanized agricultural technology in EthiOpia. Attention is drawn to the importance of dialogue between policy-makers and research investigators in the design of both policy and research {upgranu3. Recommendations relate to the following: (1) questions about the role of agricultural mechanization; (2) specific questions of selection and implementation among alternative programs; (3) project appraisal; (4) project establishment; (5) research organization and priorities . an” 1 Q,. AGRICULTURAL MECHANIZATION IN ETHIOPIA: AN ECONOMIC ANALYSIS OF FOUR CASE STUDIES BY IDavid Alfred George Green A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Agricultural Economics 1971 Copyright by @DAVID ALFRED GEORGE GREEN 1971 , . . where shall I find help? Hwelp comes only from the Lord, maker of heaven and earth. (Psalm 121, N58) To those who also loved and waited-- Rodney, Leta, Frances, Margaret . . . and Sarah. ii .. "vv. 0.- . u a..‘_- 'v- .‘ " 09“ ..-.‘.u. ‘ Q. -. - . o. I h M.- .. .~ v. s--- ‘ _‘ “'r... ‘ v- -.‘..'.O-I§‘Q . . ..:.,..._.' ‘: : I: """“’H. “. . u v: ».A“_ A...‘ ‘s \u .s' "‘-.I A . ‘:‘.".‘I'U- no -u '-.§.'-. ' 5‘ h... I ‘ . :_ _-. ; 0.. I..~-“'n¢ as . '<. : . ..‘ I 3. n; ‘21,“? .su“ .ct.-. \ s ":. -N a.._ v~ a 2‘ o'.a~ ’- ‘L A‘ ‘ on.“ ‘ - Q“ :‘V$ 1‘.‘5‘ . - '1. . \u- ~ o. "-F osc‘ .‘.: .‘. .. ‘ .~ - I -.o~ “i‘ .h. . ~.. ‘ hI - 25. 'n‘ ‘. in c .. I.“ a. -I ‘ ‘- .' ~ ‘ N *“v. . ‘J .- . ~“ I c .. .- 3 ~;‘ "\A v‘... ~G‘ ' . “V ‘ \“‘_ I u‘ h \i“ :2. h. . ‘.‘V u'. ' Id A" n.’ u c. n I.» :‘upFfi- (‘4..- FOREWORD Tflue Mechanization Studyl which provided the means of obtajJang information and initial data employed in this .thesis extended over a period of 35 months, from 1 February 1967 to 31 December 1969. Primary attention was focused on agricultural mechanization in Ethiopia and Ghana; field observations also included extensive travel in The Gambia, The Ivory Coast, Kenya, Nigeria, Senegal, and Tanzania.2 The territory covered by the Study lies within the broad geographical area of Equatorial Africa, hence the title of the final report,3 to which this thesis is a sequel. The objectives of this thesis are more limited than those of the Mechanization Study. Certain economic 1Undertaken by Michigan State University in con- tract with the United States Agency for International Development (Contract AID/afr—-459). The author participated in field work from 1 July 1968 to 15 April 1969 as one member of the four—man team. This team was interdisciplinary within the agricultural disciplines; other members were two agricultural engineers and one agronomist. 3C. K. Kline, D. A. G. Green, Roy L. Donahue, B.Au Stout, Agricultural Mechanization in Equatorial Africa, Research Report No. 6 (East Lansing: Institute cm International Agriculture, Michigan State University, 1969). iii a O .0. A. .N. . .an, . D ..M . - .._ u. . _ . b-o ow... -... . . - . ....-.. _ ‘ I 'v'c ~. .-; 'H.‘a., .“- . ....._._,_ ._ .._ _ new“, -- mu... _. . - — um“-.. -.._ Ms‘. . ~“\. ‘~~~ 3.-” l.“ W—lwlv.\-“I '3 - .. '1 A, .s.b“ -~‘ .; ‘ " ‘|'A.‘ .._ .Qa“‘~- \- “’P‘ “ . . £‘VH“. f‘-._~ ‘ A 0“-." “by . ‘;P‘ h. .._ . i. . ‘ 1 \.~.‘~ ." §.. ,. “ "V- . .::. ‘ \- ~ C‘ v ~‘ “~‘.‘ A \s_ M.: ‘ D- ‘Q. ‘- ‘ .9" R“ : _ se‘ " ' 5..» V 3-, \. ‘b.- ‘ V":L' 6- ' . i‘ “ \“\ y. - *ch‘ .‘. .A ‘- ‘ V H \u ‘— .5. ~ 'v- H s x aspects of the problem of agricultural mechanization found in four Ethiopian case studies have been examined and analyzed. The entire inquiry of this thesis is circum- scribed by the delimitations of the Ethiopian economy. Through the objectives of the thesis a methodology is presented to demonstrate a suitable means to effect an economic analysis from a selection of available technical data. Research for this thesis was carried out in four methodological phases. The first two phases, consisting of field observations of the selected cases and preparation of production data to depict the initiating conditions of the productive processes observed in each agricultural system, were complete when the Mechanization Study termi- nated. These were conducted largely in Ethiopia. The second two phases, consisting of preparation of budget models and analyses of generated data, were conducted in East Lansing. Standard international units of measure have been employed in the thesis. Within the confines of Equatorial Africa, the scope of the Mechanization Study was inter- national; to coordinate the large number of data sources, units were converted into the metric system and monetary values to United States dollars. The problem of agri— cultural mechanization in Equatorial Africa is an inter- national problem, providing an area of inquiry for a iv my , . .g..' A. .- lll H1 .04-. to .‘-'~-- n a». an“... ‘. a... a " .“~.~~ s “- s __,r_ . "--n_._. . u "' . t“. ..‘ . .. 'u‘. “f -n.-. 'og. . \r _ ~ . n. .V .q“\ p. 0.- ~. *. or a o.~ I n _:b ‘ \ ~.~ I 4‘ D. u ¢.Hh ‘3 l . | U ‘y‘ 1" v“ ‘I .. u. number of Specific studies in several national economies. Economic generalizations about mechanization in Equatorial Africa are likely to become possible, and more likely to be given credence, as the results of similar inquiries from different countries become available. Thus, to facilitate such an approach to an international problem of considerable importance, the case studies used in this thesis are developed and analyzed in the international units in which they were originally prepared. In the benefit-cost analyses and trends expressed as indices, the final results are independent of the units of measure employed. For use within Ethiopia, the budget data can be multiplied by a factor of 2.5 to convert United States dollars into Ethiopian dollars.1 The Julian calendar is used in Ethiopia. However, in common with most scientific investigations, all dates other than those appearing in citations are expressed in terms of the Gregorian calendar. A further comment is necessary on standardization, with respect to the spelling of Ethiopian names and places. Ethiopian words are transliterated from Amharic into English and appear in a great variety of spellings. So far as has been possible, in this thesis, spellings of 1Units of measure and currency are contained in Appendix H. Ethiopian names and other Amharic words have followed those adopted by the Economic Commission for Africa at the First United Nations Conference for Africa, held in Nairobi, Kenya, in 1963. The author is indebted to a large number of indi- viduals for help and interest during the course of employ- ment with the Mechanization Study and, subsequently, in the preparation of this thesis. These studies have been aided by the United States Agency for International Development and the Department of Agricultural Engineering at Michigan State University under whose auspices field work in Africa was conducted, and the Department of Agri- cultural Economics at Michigan State University in which the author has been a graduate assistant. During the course of conducting field work, office accommodation and professional facilities were made avail— able at the Institute of Agricultural Research in Addis Abeba, Ethiopia, through the kindness of Ato Werqu Mekasha at that time Director of the Institute and Assistant Minister, and Dr. Ibrahim Abu Sharr, the concurrent FAO Project Manager of the Institute. Also on the staff of the Institute of Agricultural Research, a debt of grati- tude is due Ato Seyoum Solomon and Ato Solomon Bellete, Assistant Research Officers, who both assisted so admi— rably in many field trips; to Woizerit Maigenet Shifferraw vi for exemplary devotion to her secretarial duties and to Woizero Dalhia Mazengia for secretarial and administrative assistance. At the USAID Mission in Ethiopia, Dr. John L. Fischer, Chief, Food and Agricultural Division during the field work period of the Mechanization Study, gave con— stant help, interest, and logistic support. During the field work phase, Mr. Cernyw K. Kline, Department of Agricultural Engineering, Michigan State University, whose notable dexterity in combining duties of administration and engineering research relieved other Team members of many burdensome chores in the field, is to be thanked; Dr. Roy L. Donahue, Professor, Department of Crop and Soil Science, Michigan State University, proved a ready and constant help particularly in matters of agronomy. Mr. Charles F. Doane, Jr., Administrative Officer of the Mechanization Study, is to be thanked for effectively easing the burden of personal and project administration. Members of the Stanford Research Institute Team working in Ethiopia at the same time under the direction cf Dr. Clarence J. Miller provided congenial professional support. Special appreciation is due to Dr. Glenn L. Johnson for his continual guidance and persistent en— couragement over the past six years as the author's major vii ‘ to ....., .. _u .' - ... ..... - v .._ ~. . . ‘ - ' I: n I 3:. .. O .1 "- --. .. s“. - .. .. _.__ ~r- I .— h .... .___‘- _.‘ . .‘Il . - .. N ---~...._' - ~ c . _,‘ “‘—n...( .....,s . ”A M ~~ .. .._ A”- . . _ _ . - v- ' “u", v.0 . ‘.‘ . . -" -;.. R. """9... ~ . ._. . .‘ .V§.:—“ -. ~:“h.'... V I. n I ‘AR. .~ . .,. idUQV.".’ '- . - fins“ ~v ‘ .. - . . ‘uI§-“:‘ O. ~c ’c. U " '1' h... -. nvle. V“-‘ .l . \’ ..A L . . . *3 .2 . h“... o - u', ‘ v- . _ '5. ~...: t-A ‘ v- . .h.fl‘ ‘ . ". F. C.‘¥ '. ‘ I § professor. He has proved to be both a hard taskmaster and a wise and sincere counselor. Appreciation is also due to Dr. L. L. Boger, Dean of the College of Agriculture and Natural Resources, and to Dr. Dale E. Hathaway, Chair— man of the Department of Agricultural Economics, Michigan State University, for the position and financial support which made graduate studies in Agricultural Economics possible. Thanks must be expressed to members of the Guidance Committee who directed the program of studies: Dr. Carl K. Eicher, Dr. Robert D. Stevens, Dr. Lester V. Manderscheid, Department of Agricultural Economics; Dr. Victor E. Smith, Department of Economics; Dr. Harvey M. Choldin, Department of Sociology; and Dr. B. A. Stout, Chairman, Department of Agricultural Engineering, who also coordinated the activi— ties of the Mechanization Study. Gratitude is expressed to Mr. Robert F. Ranger for his help with the adaptation of his computer program for benefit—cost analysis which is employed in this thesis. Recognition is due for excellent facilities of the Michigan State University Computer Center; and gratitude is extended for the kind cooperation of Miss Laura J. Robinson, Pro— gramming Supervisor, Agricultural Economics Section; to Mr. Daniel C. Tsai for the preparation of the program for the CDC 3600 computer; to Mr. William R. Paley for viii . -«v"“' - ‘ ‘ “1“...-..- v .."v‘ ’- ‘ ~ ‘.I .. ...| "“- —' A ,.— ‘ 0 .,..a.-' .. ' ,- I .....I . 0. ~ «.2 'r" .. .. :L - . . h o H preparation of the program for the CDC 6500 computer; and to Mrs. Russell Tropp for her labor on the keypuncher. Thanks are due to Mrs. Dennis Campbell, Miss Kathryn Kohl, Mrs. Gaylord Walker who each helped in parts of first typings and to Mrs. Carolyn Piersma who handled the final preparation of this thesis. Finally sincere appreciation is due to Norma who has shared in this entire experience and whose constant help and presence were those which only a wife can give; and to Evelyn, the author's mother whose patience has prevented distance from meaning separation. ix .._ .~ ‘ - "Out ‘. .u. “a \ t . I... '. .;_.:‘r “‘II -“ U -. A.‘ I“ ! I... ‘s . N in “N U. ‘ N (I) f} TABLE OF CONTENTS Page FOREWORD O O O O O O O O O O O O O O O i i i LIST OF TABLES . . . . . . . . . . . . . xiv LIST OF FIGURES. . . . . . . . . . . . . xxii Chapter I 0 INTRODUCTION 0 O O O O O O O O O 0 Definition of Agricultural Mechanization . Categories and Processes of Mecha- nization . . . . . . . . . . . 2 Appropriateness of Mechanization . . 3 Scope and Purpose of the Thesis . . . . 6 Objectives of the Thesis. . . . . . . 10 The Agricultural Production Function. . . 11 Systems Approach to Productive Processes. 12 Mechanized Agricultural Technology in the Production Function . . . . . . 15 Selection of Cases. . . . . . . . . 19 Commercial Viability . . . . . . . 19 Effective Demand. . . . . . . . . 20 Research Techniques . . . . . . . . 24 Case Studies: Methodological Phases I and II 0 O O O O O O O O O I 2 5 Data Generation: Methodological Phase III . . . . . . . . . . . 26 Data Analyses: Methodological Phase IV . 28 II. THE ETHIOPIAN SITUATION: NATURAL RESOURCES, PEOPLES, NATIONAL ECONOMY . . . . . . . 30 Natural Resources . . . . . . . . . 30 Physical Environment . . . . . . . 30 Other Natural Resources . . . . . . 40 v. ‘Ccl \r: ._q '00 r 0'...- . a \‘V' ‘ are“. '- qfi' .. ’v .. ~-- I"" ,l U.-. . |~__ (I) - '1‘ It II! I Chapter Peoples of Ethiopia . . . Structure of the Ethiopian Economy General Status of the Economy Level of Contemporary Development. III. ECONOMIC GROWTH, DEVELOPMENT, AND DEVELOPMENT PLANS . . . . Growth and Development . . Ethiopian Development Plans IV. METHODOLOGY . . . . . . Selection of Cases . . . Basic Data . . . . . . Tools of Analysis. . . . Budget Models . . . . Benefit-cost Analysis. . Evaluation Criteria of Financial Performance . . . . Trend Analysis Employing Evaluation Criteria Selected from Ethiopian Development Plans . . . Summary . . . . . . . V. SELECTED CASES OF FOUR ETHIOPIAN AGRICULTURAL SYSTEMS . . . Agnale Village--Hand-powered Agriculture The System . . . . Basis for Technological Improvement and Mechanization . . . Basic Assumptions . . . Chilalo Awraja--Animal-powered Agri- culture . . . . . . . The System . . . . Basis for Technological Improvement and Mechanization . . . Basic Assumptions . . . Setit-Humera--Engine-powered Agriculture The System . . . Basis for Technological Improvement and Mechanization . . . Basic Assumptions . . . xi ETHIOPIAN Page 42 45 45 63 7O 71 75 82 82 85 87 87 98 108 114 119 122 122 123 124 124 125 126 127 128 129 129 130 131 ‘lA-‘l' - >v-o». -. 0..»a ‘ «7‘ n. (U h. “"'n.. . ,. _ .' A-‘_.- ‘v- ILA. - “5. “\- \ y n ‘n , v - h \_‘ Vu A K V V l A I \ h" \lv' ‘~ A \ V (W Chapter Tendaho P1antations-—Engine-powered Agriculture . . . . . . . . . . The System. . . . . Basis for Technological Improvements and Mechanization . . . . . . . Basic Assumptions . . . . . . VI. ANALYSES OF SELECTED CASES BY BENEFIT-COST AND TREND TECHNIQUES. . . . . . . . Benefit-cost Analyses. . . . . . . Net Present Values . . . . . . . Payback Periods . . . . . . . . Internal Rates of Return . . . . . Benefit-cost Ratios. . . . . Modified Benefit-cost Ratios. . . Analyses of Case Study Data . . . . Case Ranking According to Benefit-cost Criteria . . . . . . . . . . Analyses Based on Other Criteria Selected from Development Plans . . . . . . Generation of Income . . . Employment and Distribution of Income. Productivity of Factors . . . . Potentials for Export and Import Substitution . . . . . . . . . Sensitivity Analyses . . . . . . . Change in Total Product . . . . . Change in Labor Input . . . . . . Change in Discount Rate . . . . . Change in the Rate of Foreign Exchange Trend Effect in Total Product . . . Trend Effect in Labor Input . . . . Effect of Price Changes on the Analyses smary O O O O O O O O O O O VII. SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS. Summary . . . . . . . . . . . Thesis Development . . . . . . . Analyses . . . . . . . . . . Conclusions . . . . . . . . . . Scale of Operation . . . . . . . Alternative Forms of Mechanization for Small Farm Systems . . . . . . . xii Page 132 132 133 134 135 136 139 139 140 140 141 143 157 160 161 164 170 171 177 177 180 181 182 183 184 185 198 204 204 204 212 219 220 224 .u‘ .o.‘ n «o- .v. . Chapter Critical Yield Levels . . . . . Anticipated Net Average Returns to Selected Scarce Resources. . . . Indications of Sensitivity Analyses Field Observations and Data Trans- ference. . . . . . . . . . Agricultural Credit Facilities . . Sociological Implications of Budget Technique . . . . . . . . . Recommendations. . . . . . . . APPENDICES Appendix A. Agnale Village Case Study . . . . . B. Chilalo Awraja Case Study . . . . . C. Setit-Humera Case Study. . . . . . D. Tendaho Plantations Case Study . . . E. Interview Schedule . . . . . . . F. Selected Data from Benefit-cost G. Results from Sensitivity Analyses . . H. Units of Measure and Currency. . . . BIBLIOGMPHY C O O C O C O O C O O O xiii Analyses Page 226 227 229 230 233 233 234 242 272 310 338 360 362 364 365 366 I.- ‘« . o.‘ .. .n u n V?» . . LI ST OF TABLES Table Page 1. Classification of Climate According to Altitude and Temperature, Ethiopia . . . . . . . 35 2. Climatic Regions, Ethiopia: Altitude, Position, Mean Temperature Range, and Mean Annual Rainfall . . . . . . . . . . 38 3. Area, Estimated Population, and Population Density by Province, Ethiopia, 1967. . . . 43 4. Gross Domestic Product at Constant Factor Cost (1961 Prices) and Distribution of Gross Domestic Product by Industry of Origin, Ethiopia, 1961-67. . . . . . . . . . 47 5. Land Use, Ethiopia, 1967-68 . . . . . . . 48 6. Estimated Area and Production for Major Crops, Ethiopia, 1963/64-66/670 o o o o o o o 49 7. Annual Estimated Livestock Population and Production, Ethiopia, 1963/64—66/67. . . . 52 8. Distribution by Size and Tenure for Farmland (Holdings), Nine Provinces, Ethiopia, 1967-68 53 9. Employment and Gross Value Product by Groups of Manufacturing Industries, Ethiopia, 1964/65—66/67 o o o o o o o o o o o 56 10. Annual Value (f.o.b.) of Exports by Major Commodity Groups, Ethiopia, 1961-67. . . . 58 11. Annual Value (c.i.f.) of Imports by Major Commodity Group, Ethiopia, 1961-67 . . . . 60 12. Summary of Balance of Payments Accounts, Ethiopia, 1965-67. . . . . . . . . . 61 xiv v -~ . a 0'. ,_._,“. Oh]. it . .lo. a 'vp-.~ o . I.--;... .q. N y. N .\ d s. l.. L..- n T § h. P ‘1 It: [I] '1! Table 13. 14. 15. 16. 17. 18. 19. 20. 21. Page Annual Summary of National Accounts, Ethiopia, 1961-67 0 o o o o o o o o o o o o 62 Financial Performance Criteria from Benefit- cost Analyses of Budget Data (t=0,...,lO) and 20 Year Approximations (t=0,...,20) at High (H) and Low (L) Production Levels by Case Using Constant Prices and 10 Per Cent Dis- count Rate, Ethiopia. . . . . . . . . 137 Ranks According to Benefit-cost Criteria from Analyses of Budget Data (t=0,...,lO) and 20 Year Approximations (t=0,...,20) at High (H) and Low (L) Production Levels by Case, Ethiopia. . . . .- . . . . . . . . 158 Indices of Annual Gross Income and Annual Net Income at Three Points in Budget Period (t=l,5,lO), and Included Cash Percentage by Case, Ethiopia. . . . . . . . . . . 162 Indices of Annual Employment and Total Labor Earnings at Three Points in Budget Period (t=l,5,lO), and Cash Percentage Included in Total Labor Earnings by Case, Ethiopia. . . 165 Annual Labor Utilization Per Unit of Land and Per Unit of Accumulated Capital in Operation at Four Points in Budget Period (t=0,1,5,10) by Case, Ethiopia. . . . . . . . . . 169 Estimated Annual Gross Output Per Unit of Labor, Land, and Accumulated Operating Capital at Four Points in Budget Period (t=0,l,5,10) by Case, Ethiopia . . . . . l72 Estimated Percentages of Production Increases Absorbed in Domestic and Export Markets, Ethiopia. . . . . . . . . . . . . 174 Annual Foreign Exchange Earning Potential Indices, Annual Gross and Net Foreign Exchange Earning Potential Per Dollar Accumulated Operating Capital at Three Points in Budget Period (t=l,5,10) by Case, Ethiopia. . . . . . . . . . . . . 175 XV I. .' I Iv. IF 4 ou..---. . ,n ~.- V v— V...- - . . .g \p— >- a..-» ‘ _,~,. _ I! "'1._: 4 ‘_ A V», V‘ “ u t (7 (I) ('1 ()4 (‘5 ("'3 I. (D 3‘— Table 22L 23. 24. 25. Page Relative Changes in Financial Performance Criteria Due to Given Changes in Six Selected Parameters in Benefit-cost Analy- ses (High Production Level) by Case, Ethiopia . . . . . . . . . . . . 178 Crop and Labor Initiating Prices and Price Trends for Budget Computations (t=0,...,lO) Using Non—constant Prices by Case, Ethiopia 188 Selected Financial Performance Criteria from Benefit-cost Analyses of Budget Data (t=0,...,10) at High (H) and Low (L) Pro— duction Levels by Case Using Non—constant Prices, Ethiopia . . . . . . . . . 193 Ranks According to Selected Benefit-cost Criteria from Analyses of Budget Data (t=0,...,10) at High (H) and Low (L) Pro- duction Levels by Case Using Non-constant Prices, Ethiopia . . . . . . . . . 195 Agnale: Climatic Data and Distribution of Crop Operations by Calendar Months, Budget Model Initiating Year (t=0). . . . . . 244 Agnale: Basic Assumptions a. Population, Numbers of Workers, Sub- sistence Crop Requirements, Inventory of Equipment, and Total Annual Capital Expenditure, Budget Model (t=0,...,10) . 246 b. Determination of Maximum Attainable Yields for Subsistence and Cash Crops, Budget Model (t=0,...,10). . . . . . 253 c. Prices and Annual Yield Assumptions in Dry and Wet Seasons, Budget Model (t=0'000110) o o o o o 0 o o o o 254 d. Labor Operational Requirements for Cash CrOp Establishment and Cultivation by Calendar Months, Budget Model (t=l,...,10) . . . . . . . . . . 256 e. Cash Crop Establishment Costs, Budget MOdel (t=1I2'3) 0 o o o o o o o o 257 xvi u a” 1.- .v. - n 0.... u n ‘0 ‘0 '3! f- _ - u . ‘ AF a - C D nu‘nt--. ‘- ‘~ a.-. a (Y' Thable zx.3. ‘A.8. 21.9. Agnale: Annual Income Accounts, Budget Model (t=0,...,10)--High—level Yields, Years 4—10. Agnale: Annual Input Accounts, Budget Model (t=0,...,lO)--High-level Yields, Years 4—10. Agnale: Annual Crop Areas, Waste, and Sum- mary of Annual Total Production, Budget Model (t=0,...,10) . . . . . . . . . Agnale: Summary of Annual Gross Incomes, Budget Model (t=0,...,lO). . . . . . Agnale: Estimated Distribution of Labor Use and Availability by Calendar Months, Budget Model (t=0,...,lO). . . . . . . Agnale: Inputs of Seeds and Sprays, Budget MOdel (t=0'ooo'10) o o o o o o o o o Agnale: Summary of Annual Total Costs for Inputs (Excluding Financial Charges), Budget MOdel (t=0'000'10) o o o o o o o o o Agnale: Annual Financial Charges and Net Financial Costs, Budget Model (t=0,...,10) Agnale: Summary of Budget Model Accounts (t=0,...,lO) o o o o o o o o o o o Agnale: Estimated Annual Costs for Extension Agent, Equipment, and Supporting Costs, lO-lS Villages During Budget Period (t=0,...,10) . . . . . . . . . . . Chilalo: Climatic Data and Distribution of Crop Operations by Calendar Months, Budget Model Initiating Year (t=O) . . . . . . Chilalo: Basic Assumptions a. Subsistence Crop Requirements, Budget MOdel (t=0'ooo'10) I o o o o o o o b. Tools and Equipment for Initiating Year (t=0), Strategies I and II (t=l,...,10), Budget Model . . . . . . . . . . c. Prices and Annual Yield Assumptions, Budget Model (t=0,...,10) . . . . . . xvii Page 259 260 261 261 263 265 267 269 269 271 274 277 278 284 . I O I'— n... ‘ v a J. .- .— ‘. u . u a \I': " “L CD ~- .. ‘ " p. _ u“ V1.-.‘- \I- -. .‘b“ 'v‘ -. 7‘“ o.-. 1‘ ~-.Q - '1” ‘3....“ \'-~ ..__ n _ '7.- 5“ ._ A. . a. ‘. - u-I Va.‘.; 8" $1.... . .‘ — |- I P ‘0 . p‘ _ '| ul k'“..: u. q . s.“ . a . Al ‘ 1' . "‘ 5““ .O a. . I h.- flI—“ u. k ..“ I .t ‘i ‘ P -i . u.‘ (5!“ E..“ I» . u. 7‘" U< ‘ n n U ‘ § ‘ H". P”-\ U.“‘ t :" . Q IQ‘. fi" K...‘ I ‘ . i u I -I “I .CL; V.“ \. . ‘ C y I 3 i. I‘. CC. ‘ kl- Table Page d. Labor Operational Requirements for Strategies I and II, Budget Model (t=01000'10) o o o o o o o o o o 294 e. Machine Operational Requirements for Strategy II, Budget Model (t=l,...,10) . 294 B.3. Chilalo: Annual Income Accounts, Budget Model (t=0,...,lO)--Strategy I, High—level Yields, Years 1-10. . . . . . . . . 295 8.4. Chilalo: Annual Input Accounts, Budget Model (t=0,...,10)--Strategy I, High-level Yields, Years 1-10) . . . . . . . . 297 . Chilalo: Annual Crop Areas, and Summary of Annual Total Production, Budget Model (t=0,...,lO). o o o o o o o o o o 299 I3.6. Chilalo: Summary of Annual Gross Incomes, Budget Model (t=0,...,10) . . . . . . 300 I3-7. Chilalo: Annual Labor Use in Field Oper- ations, Budget Model (t=0,...,lO). . . . 300 . Chilalo: Inputs of Seed, Budget Model (t=0,...,lO). o o o o o o o o o o 301 E3-9- Chilalo: Summary of Annual Total Costs for Inputs (Excluding Financial Charges), Budget Model (t=0,...,10) . . . . . . 302 £3.10. Chilalo: Annual Financial Charges and Net Financial Costs, Budget Model (5=0,...,10). 304 I3'11. Chilalo: Summary of Budget Model Accounts (t=0,...,lO). O O I O O O O O O O 305 EB'LLZ. Chilalo: Estimated Annual Costs for Addi- tional Personnel, Equipment, and Support- ing Cost for Strategy I (150-200 Farmers) and Strategy II (50 Farmers) During Budget PeriOd (t=0' o O o ’10) o o o o o o 307 C2 "1-- Setit-Humera: Climatic Data and Distribution of Crop Operations by Calendar Months Budget Model Initiating Year (t=0) . . . 312 xviii F»... .--.- .IIC T: a. . a... .I v.. . . .1 I” .. NV;- s... U.v... "PM t... mu”. (m , o c I “T. A... U». 7‘ I! M.. col. -r« H... ‘s L.‘ . .nuc MW». \1. ! .vpu. am“ «my. AC. :0 n\u ~\u a\u «» a n P in 1 so : n - s. : ... .w ..,. .1... .2... .. ... .. . n . u .n . . . Table (2.2. (3.3. Setit-Humera: Basic Assumptions a. Total Annual Cost of Capital Inventory in Operation for Initiating Year (t=0), Strategies I and II (t=l,...,10), Budget Model . . . . . . . . . . b. Price and Annual Yield Assumptions, Budget Model (t=0,...,lO). . . . c. Cultivation Practices for Initiating Year (t=0), Strategies I and II (t=1,...,10), Budget Model . . . . . d. Estimated Costs for Manual and Machine Operations, Budget Model (t=0,...,lO). . Setit-Humera: Annual Income Accounts, Budget Model (t=0,...,lO)--Strategy I, High-level Yields, Years l-lO. . . . . . . . . Setit—Humera: Annual Input Accounts, Budget Model (t=0,...,10)-—Strategy I, High-level Yields, years 1.10. o o o o o o o o Setit—Humera: Annual Crop Areas, and Sum- mary of Total Production, Budget Model (t=0,...,lO). o o o o o o o o o o Setit-Humera: Summary of Annual Gross Incomes, Budget Model (t=0,...,10) . . . Setit-Humera: Annual Labor Use in Field Operations, Budget Model (t=0,...,10) . . Setit-Humera: Inputs of Seed, Spray, and Transportation Requirements, Budget Model (t=0,...,lO). o o o o o o o o o o Setit-Humera: Summary of Annual Total Costs for Inputs (Excluding Financial Charges), Budget Model (t=0,...,10) . . . . . . Setit-Humera: Annual Financial Charges and Net Financial Costs, Budget Model (t=o'ooo'10)o o o o o o o o o o o Setit-Humera: Summary of Budget Model Accounts (t=0,...,lO). . . . . . . . xix Page 315 316 317 317 325 326 327 328 329 330 331 333 334 .. . . - Io... .U \ .' Hub! v...‘ ‘. a tu‘ FA by . . . c - DJ 9 .. D ‘- u “H .-.. a .. n 01.. _' ‘V.. J H. p “b A '0 . Q I a Q'. .L' ‘0 § . i u! 7-,. L». I ‘ O . "u. r- ‘N K r r i 1.. '5. ‘x. ‘ . III, c ”'h "c \ . ‘IF '9 - . «t . . . 1 ‘dl \ Table c.12. Setit—Humera: Estimated Annual Costs for Additional Personnel, Equipment, and Sup- porting Costs for Strategies I and II (100 Farmers), Without and With Marketing Facilities During Budget Period (t=0,...,10) . . . . . . . . . . Tendaho: Climatic Data and Distribution of Crop Operations by Calendar Months. . Tendaho: Basic Assumptions a. Total Annual Cost of Capital Inventory in Operation for Initiating Year (t=0), Strategies I and II (t=l,...,10), Budget Model . . . . . . . . b. Price and Annual Yield Assumptions, Budget Model (t=0,...,10) . . . . . c. Estimated Annual Costs for Manual and Machine Operations, Budget Model (t=0,...,10) o o o o o o o o o Tendaho: Annual Income Accounts, Budget Model (t=0,...,lO)--High-1evel Yields, Years 1-100 0 o o o o o o I o Tendaho:i Annual Input Accounts, Budget Model (t=0,...,lO)--Strategy I, High- and Low-level Yields, Years 1-10 . Tendaho: Annual Crop Areas, and Total Annual Production, Budget Model (t=0'000'10) c o o o o o o o o o Tendaho: Summary of Annual Gross Incomes of Budget Model (t=0,...,lO). . . . . Tendaho: Annual Labor Use in Field Operations, Budget Model (t=0,...,lO). . Tendaho: Analysis of Annual Inputs, Budget Model (t=0,...,lO). . . . . . Tendaho: Summary of Annual Total Costs for Inputs (Excluding Financial Charges), Budget Model (t=0,...,lO). . . . . . XX Page 335 340 341 345 346 350 351 352 352 353 354 355 .- ‘- .. OHIO. .-.. . .~ - '. - "' u... ‘v n fl . n .1 L .. . I." K .n e... In ’1 ‘I' Table D. 10. Page Tendaho: Annual Financial Charges and Net Financial Costs, Budget Model (t=0,...,10) . 357 Tendaho: Summary of Budget Model Accounts (t=0'ooo'10) o o o o o o o o o o o 359 Data Required for Evaluation of Benefit-cost Criteria from Budget Data (t=0,...,10) High Production Level Using 10 Per Cent Discount Rate by Case, Ethiopia. . . . . . . . 362 Financial Performance Criteria Computed for Given Changes in Six Selected Parameters in Benefit-Cost Analyses by Case, Ethiopia (Parameter Changes--Increases in: Total Product, Labor Input, Discount Rate; In— creasing Trends in: Output, and Labor Input) . . . . . . . . . . . . . 364 xxi b .q— . . :w . o . . u a p . . . L. 4“. A v nun \uc .- I t I V I "I P.» a \U I P’- I t. . .axc: s. d axv LIST OF FIGURES Page Map of Ethiopia Showing Provinces and Locations of Case Studies . . . . . . 32 Climatic Regions of Ethiopia. . . . . . 37 Relationship Between Net Present Value and Discount Rate . . . . . . . . . . llO Agnale: Relationship Between NPV and IRR for High and Low Production Levels in Budget Data (t=0,...,10; run 2) . . . . 145 Chilalo: Relationship Between NPV and IRR for High Production Levels in Strategies I and II of Budget Data (t=0,...,10; run 2) . . . . . . . . 149 Setit-Humera: Relationship Between NPV and IRR for High and Low Production Levels in Strategies I and II of Budget Data (t=0,...,lO) o o o o o o o o o o 153 Tendaho: Relationship Between NPV and IRR for High and Low Production Levels in Strategies I and II of Budget Data (t=0,...,10) and for Low Production Level in Strategy I of 20 Year Approximations (t=0,...,20) o I o o o o o o o o 156 xxii ”- 5» ~ ‘ ~ '- n. .. - ‘-’ P... »'_‘ _. .vw-‘ ~ ~ _‘ v‘ T a. - n.‘ § ‘u . u :3 a.‘ ‘ . .“"n. ‘7 5“ y. y.‘ ,, . .- h \ A- ‘q‘ _8-' ‘~. ‘5 f. l‘ “I k... “| . n . ~‘~ . "'-.. ‘5“ ‘v‘ ... ‘u n '..-"s_ a -., L." 'V‘ _. . " .Cn ‘- ‘||\ .I .A‘ h \ .6: 'P\ ~ v a~~ . ‘ .- 9- ’- ‘s .. . . o. ‘p: ‘s a ‘\ V CHAPTER I INTRODUCTION Definition of Agricultural Mechanization A broad definition of agricultural mechanization is employed in this thesis: all forms of mechanical assistance used at any level of sophistication in agri- cultural technology are considered to be aspects of Thus, hand tools, animal- agricultural mechanization. POWered and engine-powered equipment are all included in thi S definition . Operating under this broad definition, the scope of a mechanization study may include any agricultural A classification of systems SYStem found in Ethiopia. 3 ele‘Zr’ced for study and a means of determining the form 0 f technology to be considered in the study are clearly de ~ S:Lrable in order to define the context and the nature 0f the investigation. Construed in recognizable \ 1 by de Wilde who uses the term, ". and more popular sense as referring only to motorized or c>3|:‘--drawn equipment, rather than to all machinery, John C. de Wilde, trac inn: . . . .. ing that employ1ng an1mal draft. E e - . A‘xJi-Li&uces with Agricultural Development in Trop1ca1 Johnsulture, Vol. I: The Synthesis (BalEfmore: The Op 1ns Press, 1967), p. 95. This definition contrasts sharply with that pre- in the narrow 1 “-n~.-, w. "vu‘... " u» .— ‘. V'- U I “ s. u...“ i“ .l--- A- 'w. . K... v: . ‘- -..-‘ . “u" ~ A“; ‘u _ .7” .‘ ‘4. If ‘A H ~‘v‘ .V categories, mechanization provides a means of classifi— cation for functional systems; construed in terms of processes, mechanization provides a means of identifying change taking place within each system. Appropriatehess of mechanization is taken into account in determining the form of technology to be introduced into a given system. Categories and Processes of Mechanization Mechanization can be construed in three distinct categories: hand-, animal-, and engine—powered technology. Within the limitations of appropriateness, discussed below, these categories represent alternative forms of mechani- zation, or options Open to decision-makers, to be intro— duced into agricultural systems selected for improvement. Agricultural systems can be similarly classified. However, the dynamic systems of the real world do not fall neatly into these precise categories since many systems can be observed simultaneously to be in a process of change, and in transition from one form of power to another. Thus, agricultural mechanization, when viewed in the dynamic context of economic development, is manifested in the real world in six different operational processes: 1. Processes of improvement (within categories), (a) in hand-powered technology, (b) in animal- powered technology, (c) in engine-powered technology. 2. Processes of transition (between categories), (a) from hand-powered to animal—powered technology, (b) from animal-powered to engine- powered technology, (c) from hand—powered directly to engine-powered technology. (Con- ceptually, these transitional processes can also be reversible.) Appropriateness of Mechanization Appropriateness of the form of mechanization employed in the agricultural system under investigation may be considered from a technical or an economic point of view, different connotations which tend to lead to misunderstandings among agricultural professionals. The technical interpretation implies Operational suitability of machines and equipment in contrast to the economic interpretation which implies efficiency in terms of net returns taking into account the socio-economic framework of institutions, infrastructure, and market structure required to support the particular form of mechanized technology under consideration. In the technical sense, appropriate mechanized improvement implies technical workability; in the economic sense, appropriate mechanized improvement is subsumed under the general condition of commercial viability which includes technical appropriate- ness. In this thesis a major criterion for selecting forms of mechanization is economic appropriateness; both (I) I ”own-- a 0 "-4- q--‘--- u a ‘ ...a- con“. un- ' ' s... v__ o _. O. M... ' u- _ - -‘_-b. .‘v'."-l . .. - :v.‘- ,. nu..‘_:- “V . b . -"v . \l n l.“ ' ‘.-. ‘- ‘I— ‘ 2'5. ‘.._": a ‘v. :. ~ — F "- "‘ ‘Ln b‘ , ‘5‘- h“ . .. h v- .Q 1 C - "r. H . "u - ~ ‘ A Q".' In. ‘H‘\ u .1“ $. ‘L. A ‘M Q Q 1 1 . f‘i; . "\"01 .1 v‘.g ‘8 . . ‘I ’v, ~,‘ h ‘P 1 .‘ \_'g i U A 13.. ‘ § interpretations, however, warrant consideration especially since discussion may serve to clarify misunderstanding where it exists. Appropriateness in the technical sense is generally related directly to increasing agricultural productivity. The potential for increasing productivity through the employment of a selected form of mechanized technology is found chiefly in two circumstances: (1) where it relieves pressure on labor at seasonal peaks, i.e., where labor is a limiting factor or "bottleneck"; (2) where increase in production depends upon the performance of tasks which manual labor cannot do without mechanical assistance.l Elimination of "bottlenecks" should permit more effective and fuller utilization of labor resources over the agricultural season although there is a danger of introducing machinery into an agricultural system which relieves one bottleneck and creates another.2 The benefits of mechanisation in developing countries are, of course, potentially the same as anywhere else, but Opportunities for realising them will differ with the existing economic and environ- mental circumstances.3 lHerman M. Southworth and Bruce F. Johnston, Agricultural Development and Economic Growth (Ithaca, N.Y.: Cornell UniverSIty Press, 1967), p. 216. 2De Wilde, 92, cit., pp. 97-103. 3Malcolm Hall, "Mechanisation in East African Agriculture," in Agricultural Planning in East Africa, ed. by G. K. Helleiner (NairObi: East African Publishing House, 1968), p. 82. ,. '..-. Pfl’ng“ p\. p >— ..u..' nag-s.-- - . V in: .‘an'a- . ’- H r. I‘-'-'-A\-\— ‘. . "v . ‘r "'"-I 61 8.. r... :r_' ‘ b. ‘ I. ." . w- . -u _‘.':‘ \ A ~ “V (- .3‘~:.'n ' ‘s ‘o-. 1‘- ya. 5 “:3: "Na 'A' ‘J ‘1 T! T‘ " h . ‘ l ”v. y “\4‘“ . I.‘ . I 4:]: ‘ZA 9 h— ‘ . x. h v“ § ~ 2 v. ‘- ?.£.~ fl . i -.“I “L, ié; ' . “~‘ _ . These benefits may be itemized as: (1) increased ability to cultivate land where there is an inadequate supply of labor; (2) increased ability to perform critical tasks where labor is generally adequate for the remainder of the season; (3) increased ability to cultivate intractable soils; (4) the possibility of higher yields (although this is frequently a case of interaction among mechanization and other factors such as improved seeds and fertilizers); (5) increased speed of work; (6) higher quality and im- proved timeliness Of agricultural operations.l No assumption is made in this thesis that a natural sequence exists in the context of economic develop- ment for agricultural systems to move to higher levels of mechanization (from hand-powered through animal-powered to engine-powered forms of technology).2 The grounds of justification for any process, either of improvement or transition, are economic; the basic underlying assumption in economic development is that the economy attempts to . . . . 3 real1ze opt1mal returns from 1ts ava1lab1e resources. lIbid., pp. 82-83. 2The so-called "farm-power ladder." Peter M. Weil, "The Introduction of the Ox Plow in Central Gambia" (Washington, D.C.: The National Science Foundation, 1968), p. 6. (Mimeographed.) 3Optimizing returns should not be confined to those objectives easily measurable in money terms. The Optimi- zation process depends on the totality of social Objectives which, of course, are different between different societies and nations of peOple. Glenn L. Johnson, "The Role of the raw :7 -_" In..- O -" . \' ‘I‘O«-.A ~, ' ' h— .. "‘----I_, ., :An. "’ u... ' ‘ .. . b . ‘ vva,’ b I F‘ U . ‘5. '- 3‘“. ~ ‘I .'I. V\ "“’:'-.-‘r. “ ‘H'C. L‘- A ‘ .“U I ’ "‘44."‘ “ \- ‘1 ,- .0 ‘b M: :Y'r. s ‘ v‘ Va. ““ ‘.F U The connotation Of appropriateness employed in this thesis is economic rather than technical. No par- ticular merit is presupposed by the introduction of mechanized technology into a given agricultural system. Selective mechanization must be justified by appropriate analytical procedures furnishing evidence which indicates a positive contribution to socio-economic improvement. Agricultural mechanization is dissociated from connotations of achievement level in economic develOpment. In the overall context of economic development, there is an apprOpriate form of mechanization for any given system. The perspicacity of both analyst and planner must be sufficiently sensitive to select a form of mechanization apprOpriate to the development of that system. Scope and Purpose of the Thesis The scope of this thesis is circumscribed by the economic framework of the EthiOpian Empire. The approach to the problem of agricultural mechanization adopted in this thesis is directed toward specific cases within the limits of a single national economy. Following this approach, and analyses, it appears reasonable to hypothe- size that principles can be elicited which have general validity to the problem of introducing mechanized University and Its Economists in Economic Development" (paper presented as the J. S. McLean Visiting Professor Lecture, Publication No. AE 70/2, Guelph, Department of Agricultural Economics, University of Guelph, 23 March 1970) I p. 3. . nuv‘I‘ ..." a I'oarla yo. - » ell-'A .u... - . 'i-ofifiOOU‘. . ""V y... g I. y - up ...'., . ' v- "’O (u -.. n... n.” . ‘ .. "" ”Oil. on..." .‘-¥ ‘I. ‘ D ~- ‘ ""H :V‘; ‘u .- 5 .I- ‘5 but . 2 ‘ul ‘O :.V~ ‘H‘ ‘ fies“ ‘ - _. u A -‘ nan,‘. u ”’u...‘ . s 2., ‘n i‘s "v~a y s ‘17 I ‘h v v . . 5‘»! F \- I". s ‘u 1%“ ‘s V. ‘s s." ‘ Q “ F ‘ 0‘: x \‘_ ‘ N‘s ‘ 5 a.“ - v.“ s '- \ V‘Nu 's‘ ‘5". '\ agricultural technology into African agriculture but such generalizations are beyond the scope of this thesis. How— ever, the methodology may provide a basis for further analytical studies of other cases of agricultural mechani— zation in similar economies. As more data from related case studies become available, the possibility of generali— zation increases. The approach to agricultural mechanization in EthiOpia is essentially directed toward analyses of pro— ductive processes of which mechanization is a part. This approach consists of microanalyses of agricultural systems which are themselves part of the macroeconomic framework of the national economy. Indeed, microanalyses of selected agricultural systems have little meaning for the designers of economic development unless relevant macroeconomic factors are also taken into account. Incorporated into the purpose of this thesis is a demonstration of a method of meeting the needs which policy decision-makers have for precise and detailed information about agricultural activities at production level. The gap which exists between research at pro- duction levels and planning economic development at national policy levels is given recognition. Until a substantial amount of "grass-roots" level research has been conducted and published, planners are unlikely to know with any degree of precision what can be achieved in the various sectors of the economy and the probable a...‘ — .-..,..., A: P _ . m- ...u' 4. p ’ O "" -- ' \ a” :F -\ o-«vvunu‘.. ‘ '~—. . v ' v :' c' '1 LI! (D Q. . v.. K . ‘M- K. '--r~... .. 1 "t. 3" K . “¥ t $.15“ :~~;~ n effect a policy decision is likely to have on the vast majority of people engaged at the production level in the agriculture of less developed economies.1 A study of mechanized agricultural technology and the processes of mechanization requires information about both mechanical components of agricultural activities and a whole range Of new or improved productive factors which together are recognizable components of a given agri- cultural system. Relevant information includes the results Of: biological inquiries into existing practices of plant and animal husbandry; research into new and/or improved varieties and breeds; fertilizer trials; techni- cal investigations into operational requirements for labor and machinery under existing and improved farming techniques; testing implements, machinery, and equipment under prevailing conditions. In addition extensive knowl— edge of the nation‘s markets, price movements, and infra- structure to support agricultural expansion is desirable. There is a wide range of agricultural systems in the Ethiopian economy for which precise information ob- served over suitable periods of time is unavailable. Data are available from the accounts of some of the few com- Inercial organizations. Such agricultural systems, however, Rainer Schickele, "Farm Management Research and LEccanomic Development: Suggestions for a Specific Research Pregram," Indian Journal of Agricultural Economics, XXI, PM)- 2 (April-June, 1966), 1-7. _ . . 'r' vzuv;;_,' - .vflbvv-u- . c S" u ,. .« ‘ ‘ ‘OF‘PF ou- WO“ ~boa-v& Q .4 t ) h- “I ’ V ,..‘.' "fl‘v-O V'- p I. u" 1..-... ... ‘ a .. FA c"~._- "' \ .. u ”" ”'V.»a. a . . ‘VAA . .- -.. . u' r ” u.u.‘ by ~ . - “~«‘ - .- -. A “A ..-.uqu. 5"“ I . x: _ -1”, A, .. 3“... ‘1‘- '¥-\. 1 ':‘ u #1:" nu... “*-3 u. . .“. A'- ‘s "‘“"v..s a ‘ o. O L. .1 v. a ‘ tn... “9.“ :‘y‘uc‘fi’: 4“»..‘ “I. W A‘ Iv ‘ ‘VU I . o ‘Vr ‘. ‘3 . D . n A ‘ -:~. A“ ~~ a. .5 V‘ C‘x‘ V». ( F b A. §~ - fi" s- :.._‘ v:— ~ ‘A .‘..‘ . C‘:~ ‘ Afiy‘cps t In _ . . ‘— ’R ‘9 $4.», “I‘O‘C‘Cr y‘l“ ‘L . W: at: bs‘ect n v 's A-“ ' '1 .He. are representative of an extremely small proportion of the total Ethiopian economy. Data relevant to mechanization studies are required firstly, to represent a selected agricultural system at a given point in time and secondly, to represent manipulation of the system through time as the form of technology is changed during the course of technological improvement. In order to effect economic analyses, new data typical of relevant technical and biological changes are required. Where such observations are unavailable or incomplete, the desired data can be generated on the basis of valid assumptions and/or data transferred from similar ecological situations. The usefulness of a study, in which agricul— tural systems are simulated, then becomes two-fold: first, to approximate the probable effect on a selected system of a set of assumptions with respect to mechanization and concomitant changes in other inputs; second, to indicate relevant areas for future research by the extent to which assumptions and data transference were necessary. In the use of case studies, the investigation may fall between two extreme analytical approaches: either the effect of introducing a range of different alter- natives of mechanized technology into one selected agri- cultural system; or the effect of introducing one form 0f mechanized technology into a range of different ..y~~ v y” 3...“..- — . .-, ... . -.- I n I F ,. . .. ._ __.. " >... nu. "' "NO~~.. . ....,. F. -. . “v ”v... 5“ I - .. A I--..._.“‘ :..,,'v_ “ a o.-_‘~.-_‘ " n. . . "’ :“Ar; vb. ‘H'-.. ‘ “F u..-._:-:‘ U“ 10 agricultural systems. A combination of these two extremes is employed in this thesis. The Mechanization Studyl afforded the Opportunity to collect appropriate data for several dissimilar cases in Ethiopia. Those cases selected for analysis in this thesis provide a means to demonstrate how data describing dissimilar functional systems can be employed, given apprOpriate assumptions, to generate new data for subse- quent economic analyses. The concept of appropriateness facilitates screening out certain alternative forms Of mechanization; a maximum of two different strategies were investigated in any one case. The purpose of examining selected case studies of agricultural mechanization in EthiOpia is to provide both data and analyses to guide planning and policy related to the adoption Of new agricultural technology, including new forms of mechanization. Such planning and policy-making is likely to include both planners and policy-makers of EthiOpia and donor countries willing to finance agri- cultural mechanization programs. Objectives of the Thesis The first objective is to present data of the productive processes of the cases selected to represent different agricultural systems in Ethiopia. These case _ lKline, _e_t_ 31., 92. cit. _ - '.v~ ~7- . :“--v‘.u II“ C (I! (D H ‘4. 11 studies have been prepared to represent functional agri- cultural systems into which improved forms of mechani- zation are introduced. The second objective is to analyze data on these particular cases so that designers of agricultural develOp- ment may have measures of the relative advantages of different selected forms of mechanization and measures of selected socio-economic changes important in development brought about by the mechanization process. Two additional and somewhat subsidiary objectives are also incorporated. The third objective is to demon- strate by the employed methodology the types of infor- mation, data, and procedures required to effect an economic analysis of changes in mechanized technology of selected agricultural systems. The fourth objective is to demon— strate how these methodological procedures can be applied to cases of quite dissimilar agricultural systems. The Agricultural Production Function Available data of agricultural production in .Ethiopia are insufficient, either in cross sectional or time series studies, to estimate production functions for Contemporary productive processes. However, conceptuali- zation of a function is useful in focusing attention on faCtors relevant to the mechanization of agricultural technology. 7Y4 "“ 2- ' 1 : Lu“... . . "'-»., I 5‘ '--~-..._.‘ I... F _v v “Ih. .v l .. a “‘ u... v. . ‘ ' .' ~an. ’ b - ~. ‘v-v.‘ ‘9. 5" a. . 5 “‘~ .l A V \- 12 Systems Approach to Productive Processes Allusions have already been made to agricultural mechanization conceived as part of a complete system of agricultural production. Mechanized technology is not confined entirely to productive processes although in order to circumscribe the scope of this thesis to manage- able proportions, the emphasis will be on mechanization in the context Of production. At Ethiopia's present level of develOpment, major attention is being focused on pro- duction along with necessary concomitant market changes. The technique of total farm budgeting is employed in the thesis for generating data required to analyze the effect Of improving mechanized technology in the pro— ductive processes of selected cases. In effect, this technique is a non-maximizing simulation of the total agricultural system. In the course of preparing the budget models, the entire socio-economic system comes under review because social processes frequently are Observed to be so closely related with productive pro- cesses, especially in cases of subsistence agriculture. In attempting a total simulation of productive processes, the observer is required to be acutely aware of social processes which have economic significance in the case under investigation.1 ¥ lAssumptions basic to contemporary economic analysis have been developed in the context of the a “‘5 13 The systems approach takes into account all variables relevant to the productive processes within a given socio-economic system. These variables are com— ponents of the system under consideration; some variables are factors involved in the system's production functions and others are variables in the system's environment. The environment, embodying both climatic and sociological variables, is largely independent of, although exerting a strong influence on, the productive processes. Input variables of the productive processes, while part of the production function, can be controlled from outside the system and are therefore regarded, along with the environ- mental variables, as exogenous factors of the system. On the other hand, there are internal characteristics of the system which relate inputs and environmental variables to outputs. Thus outputs, determined by these internal characteristics, are endogenous variables. Input and output variables of the productive processes are inter- related through the system's production functions; a given system may produce several different outputs, each socio-economic system of more highly developed western countries. Hence, it is important to bear in mind that in the context of the socio-economic system of less developed economies the assumptions of economic efficiency in terms of the market may be invalid. "The general appli- cability of the production function concept has represented both a major strength and a limitation on the contribution of production economics to the understanding of development processes." Vernon W. Ruttan, "Production Economics for Agricultural Development," Indian Journal of Agricultural Economics, XXIII, No. 2 (ApriI;June, 1965), 8. ’9‘! "O I n; u'I-v -. l \- . u h‘...‘ " .~w u. VII I a ""0' Av R ”mu-own: ~..a - s e I. "l' .n. o u ,v .O "' 7"" P» u ‘ ‘§~ —., ..~-'. ‘ g... > I "'r - ‘. g. ' n- ,. I‘..V.-I . I - vy a :p‘ *0; Av -. . ‘Iv.- \u‘n! ' it. ‘.I r :..'-'2‘\ a, §“ " I ‘ h"|.~‘ I V I".i" “ .Vfit ‘- u...‘ at- "I1 I" H . fir ' ~.. . v u. ‘s ‘4 ~ ‘ ' a u '.: :v- h |.‘ . .§ l 14 productive process being represented by a production function. A full understanding of the various production functions must also take into account exogenous variables of the system's environment. Production functions can be aggregated for differ— ent systems, different sectors, and for the total economy. A total systems approach would reduce all the relevant interrelationships between exogenous and endogenous vari- ables to a set of mathematical equations, of which the production functions, either aggregate or partial depend- ing on the level of aggregation of the system under con- sideration, would be a part. Changes in levels of mechanization are generally accompanied by concomitant changes in other factors of the production function and, perhaps, even in exogenous en— vironmental variables. Thus, the holistic systems approach views mechanized agricultural technology as a package of inputs and changes in mechanization as changes in the mix of input variables, usually accompanied by higher pro- duction costs to be offset, hopefully, by higher levels of agricultural productivity. Environmental variables must change concomitantly with changes in the production function in order to sustain new forms of mechanized technology. u...._'_ H‘ - “In-nu. V. .. . . ‘ .I‘ F -' ' sn- p s.., A. ham. _ nag... _'. .— D~D'.l‘.‘ . . 'x. ~§ . R H -. \- s .. ' .Q ‘: ~ u-V‘I s..‘ 15 Mechanized Agricultural Technology in the Production Function Mechanized agricultural technology embraces combi— nations of capital, technical knowledge, and individual competency which are introduced by new or modified vari- ables into the production function and which also cause the function itself to change. The introduction of new components into the production function requires increases in fixed and Operating capital, additional skills to be learned by labor and by those responsible for the manage— ment of the productive processes represented by the pro- duction function. This process, occurring through time, is referred to as technological improvement1 or more generally as technical progress. Technical progress together with capital formation are considered to be the I O 2 two important causes of econom1c develOpment. 1Evsey D. Domar, Essays in the Theory of Economic Growth (New York: Oxford University Press, 1957), pp. 59-65. 2"Technical progress, or advance in the state of technical knowledge, consists of the inventions of new nethods or new products, that is, the creation of new Rental constructs, and the introduction of these con- Structs into the processes of production in a society. The term 'innovation' is commonly used to refer to the Second step. ". . . Capital formation is the use of productive resources for the construction of added capital equipment. Capital formation without technical progress is the cre- ation of added capital embodying methods previously known. . "Innovation and capital formation overlap. Some :Lnnovation consists Of reorganization of the productive process without any change whatever in the capital .‘- 16 In terms of the three factor production function, capital and technical progress act in concert through time: the former either modifies existing inputs or introduces new inputs, the latter modifies the nature Of the function. On the one hand, this concerted action substitutes for or complements labor and land inputs; on the other hand the action can conceivably be neutral, neither substituting nor complementing but raising the productivity of all factors in equal proportion. Changes in levels of mechanization are appropri- ately accompanied by other changes in the input mix, and quality Of inputs. Thus, the form of production function which can be Operated in microanalyses is one in which the quality of inputs is being changed as increasing quantities of capital are added to the form of mechanized technology and accompanying improvements. The general form of function is required to be unique at a given time period (t): yt = ft (xl , x2 ,..., xn ). This function can be modi- t t t fied so that the improvements to each input are explicitly equipment used. And innovation often occurs without net capital formation, through replacing worn-out capital instruments with a more efficient one that constitutes no more capital than the old one. "On the other hand, capital formation may consist of the construction of added units of a type of equipment already known ('capital widening'). Almost no innovation is involved. One can also think of capital deepening without much innovation: the introduction of pieces of equipment already known but not previously used because not enough capital was available." Everett E. Hagen, The Economics of Development (Homewood, 111.: Richard Irwin, Inc., 1968), pp. 29-30. 17 introduced as a component of each exogenous variable, the change in quality being represented by the amount of added capital in place Of the time subscript: _ l yt _ ft,k[(xl + kl), (X2 + k2),..., (Xn + kn)]o In this form of function, new kinds Of capital carrying new technologies are represented by the kis. Improvements in technical competency of labor and management are re- flected in changing values for the function's parameters; these changes occur both through time and with respect to the new kinds of capital introduced into the function.2 Substitutability or complementarity between pro- ductive factors becomes an important consideration in the mechanization of Ethiopian agriculture because of general concern to expand labor employment. However, unless inputs are perfect complements, some degree of substitutability exists between all factors in the production function. The extent to which substitution takes place depends on technical conditions of the production function, changes in the relative prices of resources, and changes in pro- duct prices. ‘ lAn accounting problem will arise if this form of function is made Operational. As old equipment is replaced and other improved inputs are used, the distinction between the quantity xi and its corresponding ki will become in— creasingly difficult. . 2The kis may be considered as efficiency coefficients 1J1 which case the function would become: yt = ft,k[(xiki)' (x2k2)pooo'(xnkn)]o (ll 18 The mechanization process, viewed as a means of introducing amounts of capital into the production function, shifts the level of output to a higher isoquant. This shift is accompanied by changes in the relative pro- portions of component variables in the production function and, therefore, consists of a combination of two effects: output effect and substitution effect. Output effect shows the change in quantities of inputs employed when the level of output shifts, assuming relative input prices are un- changed; substitution effect shows the change in quantities of inputs employed when relative input prices change, assuming output is unchanged. These changes in the production function and in inputs take place over time. Therefore, analytical pro— cedures are required to facilitate quantitative measure— ment of these changes and assessment of their likely effect on national well-being. Both financial and non- financial data are required. Budget models provide a series Of financial accounts through time and correspond- ing non-financial data, both based on a given set of initiating assumptions. Certain non-financial data are expressed in monetary terms, e.g., revenue per unit of labor which is a measure of labor productivity, measured in dollars or in indices when change through time is measured; other non-financial data are expressed in non- monetary terms, e.g., level of labor requirements which 19 are measured in labor units or in indices through time. Research techniques, discussed below, provide procedures for collection, simulation, generation, and analyses of appropriate data. Evaluation criteria are used to measure both financial and non—financial data which constitute different parts of economic analysis. Selection of Cases Research conducted in the course of the Mechani- zation Study afforded detailed information from a number of Special study sites in Ethiopia. These cases were among the best available sources of data within their respective agricultural systems. Four of these cases were selected for economic analysis in this thesis: the overriding criterion of selection was commercial viability. Commercial Viability It has been established above that in this thesis apprOpriateness includes both economic and technical inter- pretations and that commercial viability subsumes appro- priateness in its broadest connotation. In the mechani- zation process, additional production costs have to be met by increasing agricultural productivity. The selected cases were judged to contain the potential productive capacity for cash cr0ps to meet added costs of appropriate mechanization and, given adequate extension and \ M~o.-¢ non-.4 ...., . 0- u..- -- -" '0- “ .,. Q on. .“ .._ L) 1). (3 20 institutional facilities, could be develOped into, or already are, commercially viable units. Careful consideration was given to effective demand for the crops which were proposed to be produced in each case. Effective demand is also subsumed under the criterion of commercial viability. During the process of planning agricultural mechanization there has been a general tendency to neglect the importance Of the available markets even though substantial increases in output are part Of the total plan. Effective Demand The major role of agriculture in the development of the EthiOpian economy has already been identified. The need for increased food supplies and increased exports tends to emphasize the key to economic development as lying within the area of agricultural production. Increas- ing production, however, is only a part of the agricultural development process. Effective demand must also be brought into consideration. Conceptually, effective demand for food is a function of per capita income, the income elasticity of demand for food, and the population.1 In an exchange —‘ lAnnual rate of increase in effective demand for food over time is: f=p+€Yr where f = (annual) rate of growth of aggregate food demand u A... , can. I “'R N . vu- ' ' r u w u u '...I ‘ a on ‘~- noun-"'.: a; . . A v :OhinOIU “v n-a._... '9'... u \ .4 Invwvuu n .“‘ - p-. " ‘ ”.2 ~.. .Ach a...~ ‘ a. Lav-5‘Cizl c. u.»....,.._ V! p I! V...- -»... 0V. ., . ‘ :90:A‘-!. ”Au-i "“‘~.I u» . ‘ . . N ~‘::P‘ ‘ ‘9‘. v 4 bnutl ‘.“'V. in .. C. a H“ sgvr “VA— d .V... . "~,.‘\ “A. ! ~ ‘ ""3 48‘s»: .. ~:""UCQ \‘v. ‘-<.‘ H I (V‘s u a H y“ “:‘haht' \ . u“ S Q, :‘Al‘a y. say‘:: 7’ ‘I R, ‘0‘ . V“§CQ 21 economy, production for exchange is equated with the effective demand of the market; non-cash demand for sub— sistence crops produced on small family farms is not included. The need for increased food production in Africa has been determined on the basis of accepted nutritional standards. Increasing food intake require- ments for individuals, however, are translated into effective demand for agricultural produce through increas- ing cash incomes. It is effective demand, not biological needs as determined by nutritional studies,1 which stimu- lates, and can absorb, marketable agricultural production. The food problem is a demand or income as well as a pro- duction problem.2 Increasing effective demand for staple foods depends on both growth in per capita income and the distribution of income. p = (annual) rate of growth of population a = per capita income elasticity Of demand for food = (annual) rate of growth in per capita income (GNP) President's Science Advisory Committee, The World Food Problem, Vol. II (Washington, D.C.: Government Printing Office, 1967), p. 648. 1Glenn L. Johnson, "Food Supply, Agricultural and Economic Development," Proceedings, Western Hemisphere Nutrition Congress II, San Juan, Puerto Rico, August 26-29, 1968_(Chicago: American Medical Association, 1969), pp. 51-52 0 2The problem of "too low income and not of too low production, two different things." Lauchlin Currie, Sflgtacles to Development (East Lansing: Michigan State University, 1967), p. 40. .. 0....V “ ’ . 'to-.'. ' ... -~ u». U 300‘ I-. . ‘ _'A, he...» I'- '6 P: A. x S'. 22 Expansion in agricultural exports as a means of earning foreign exchange, and increasing the production of import substitutes as a means of saving foreign exchange are essential to the development of the Ethiopian economy. These are also components in the concept of effective demand. Thus, the demand to which the productive capacity of the economy must direct its supply is a function of the effective demand of the indigenous population which in— cludes both subsistence and market demand, world demand for Ethiopian products, domestic demand for imports which the Ethiopian economy could produce. The significance of effective demand in the macro- framework of agricultural develOpment must not be neg- lected. Changes of certain technical inputs in the pro— ductive processes are only part of the overall economic considerations. Planning the mechanization of productive processes without also giving consideration to resultant increases in production and demand which exist for the product becomes a self-defeating exercise. In the process of national develOpment, commercialization of the agri- cultural sector and widening the distribution of income among potential consumers must be concomitant processes. Mechanization of the productive processes involves the farmer in higher production costs which have to be met (Mm.of increases in income; raising agricultural pro- ductivity through apprOpriate mechanized technology :hmxeases production and the need for adequate markets . .- uv . I. no. . . l sum... . h . . u... . ' . 01-. . c . "" 'I v u u I H ‘ — sun‘uh . “ “"r. ..“I‘ . ' ‘2»... ' ..\"§l .‘p-“hp \4‘... 4 .. F "\ .“'. ‘ ~' I ‘ FV _ "~~ ‘ ‘s . -._ H . c. i a. "k ‘. ‘b. ‘- ~ 5‘ 23 for the disposal of these surpluses. If effective demand is neglected, a proposed program of mechanization may very quickly encounter problems of surplus production. The out- come will be to declare the scheme a failure when, in fact, the scheme itself may have been technically sound whereas planning may have been too limited in perception. Economic policies both domestic and international1 may be introduced to influence the level and rate of in- crease of effective demand. The importance of effective demand in agricultural development suggests that priorities' to product develOpment must be placed on an individual commodity basis. Commodities with low or slowly growing effective demand, or for which the demand is not expressed through cash exchange in the market, receive low priori- ties. Thus, staple food commodities and nutritionally superior foods used in local diets are given low priority until increasing farm incomes in turn can generate in- creased effective demand for staples. In the light of 1"Steps [domestic policies] which can be taken by some less developed countries to expand effective per capita demand include: increasing per capita farm incomes by creating more favourable farm policies and investment Opportunities in export and import substitution crOps; redistributing income to the poor; nutrition education and lowering the cost of producing food and feed grains. ”External approaches to increasing effective demand for a country's agricultural products include: reducing tariffs, duties, etc., to increase trade among less developed countries; reducing tariffs and duties in developed countries on imports from less developed coun- tries, especially on the partially and fully processed commodities and aggressively searching for new markets . . . " Carl K. Eicher, "Production is not Sacred," Cemes--The FAO Review, II, No. 3 (May-June, 1969), p. 39. 24 effective demand high priority is given to develOping production of export and domestic cash crOps.l The importance Of effective demand also bears on the selection of cases for a study of agricultural mechani- zation. Ideally, economic research studies on selected commodities should be conducted to determine the nature of effective demand and the potential future demand in domestic and foreign markets. In this thesis, crOps for possible mechanization or improved mechanization of the productive processes were selected with due consideration for expansion in production and related effective demand. In both cases, Agnale Village and Chilalo Awraja, where substantial proportions of resources are devoted to pro- ducing subsistence crOps, a major objective of the budget models is to improve efficiency of production for required quantities of subsistence crOps; following these budget adjustments, increasing amounts of resources remaining unused in producing staples are employed to produce increasing amounts of cash crops. Research Techniques The first two phases of research were field obser- vations of selected cases and the preparation of pro- duction data from the initial Observations. The two following phases were data generation (preparation of' lIbid., p. 38. 25 budget models) for each case and analyses of generated data. Research techniques and their employment in this thesis are discussed in greater detail in Chapter IV. Case Studies: Methodological Phases I and II Four case studies depict typical agricultural systems in Ethiopia which neither represent all the agri- cultural systems nor completely represent the single category to which each belongs. Rather, the selected case is typical of the agricultural system in its own particular area of Ethiopia. The four cases depict: hand-powered agriculture (Angale Village), in which all tools are operated by human power; transitional animal-powered agriculture (Chilalo Awraja), in which principal imple- ments are operated by oxen although hand-tools are also used and there are Opportunities in the area for utilizing tractor power; engine-powered commercial agriculture (Setit-Humera), in which individual farmers are engaged in relatively large-scale cash crop agriculture using tractors along with manual labor; engine-powered plan- tation agriculture (Tendaho Plantations), in which a large-scale plantation produces a single cash crop using many tractors and large amounts of manual labor. Field observations provided initial situations for each case study from which budget models have been developed by selecting an apprOpriate form of mechanized ... W. Wc i.- vv -..'QOI . 26 technology. This is the point of discernment at which the criterion of apprOpriateness must be exercised with careful judgment. Data Generation: Methodological Phase III Without actual observations through time, a synthetic technique is required to generate data. Two alternatives are available: budgeting and linear program- ming (along with variants of integer and recursive pro— gramming). The number of alternative production processes are relatively restricted; production possibilities for a maximum of two strategies (alternative forms or intensity Of mechanization) have been investigated in selected case. Also, the agricultural systems under investigation tend to be restricted in the number of crOp possibilities either to crOps required for subsistence and a limited number of cash crops or, in the commercial Operations, to a few relatively profitable crops. Hence, with limited alternatives linear programming tends to be a relatively inefficient technique.1 In the maximization (or minimization) procedure employed in the linear programming technique, an Objective function is necessary to determine an Optimum solution. Determination of an objective function at the current 1Earl O. Heady and Wilfred Candler, Linger Program- ndng Methods (Ames: The Iowa State University Press, 1958), pp. 3-4. 27 state of knowledge of productive systems in Ethiopia is likely to be as elusive as determination of a production function. Furthermore, maximization procedures may intro- duce additional unrealities into the sets of assumptions for the cases. At present levels of development, commercially-minded farmers employ simple rules of thumb for increasing net returns based on profitability of the immediate previous year's cropping. These procedures can be incorporated into budget models without elaborate requirements for maximization. Currently, both commercial and subsistence farmers are more likely to follow extension advisors' guidance, as relevant technical information becomes available, without following an intensive procedure of manipulating resources in order to realize optimal returns from a wide range of alternative crops and pro- cesses. Thus, the full farm budgeting technique was selected as the appropriate means for data generation. Having selected an appropriate form of mechanized technology, budget models for each system were prepared on the basis of available technical and agronomic infor- mation. In the first instance a planning horizon of 10 years was selected, later 20 year approximations were also investigated. The basic data which describe these four agricultural systems in the initiating year (t=0) in which the field observations were conducted and the data generated by the budgeting procedure are recorded in four appendices, A to D. 28 Data Analyses: Methodological Phase IV Analyses in phases I, II, and III are technical and financial. In phase IV, the data generated by these procedures are to be examined from the broader vieWpoint of development in the context of the Ethiopian economy. Two considerations are important in selection of appro- priate analytical criteria. The first consideration is the necessity to appraise the feasibility of mechanizing the agricultural processes by analyzing the generated financial data. Benefit-cost analyses have been employed for this consideration. These analyses determine net present values, payback period, internal rates of return, benefit-cost ratios, and modified benefit-cost ratios. The second consideration is the necessity to appraise the synthesized agricultural systems represented by the budget models in relation to those Objectives for economic development adOpted by the policy-makers in the five-year development plans. In the Third Five-Year Develgpment Plan "agricultural policy is designed pri- marily to deal with two great problems which beset EthiOpia--the problem of production and the problem of the peasantry."1 Certain specified objectives, discussed in detail in Chapter IV, are employed as evaluation 1Imperial Ethiopian Government, Third Five—Year Development Plan, 1961-1965 E.C. (1968-1973) (Addis Abeba: Haile Selassie I Printing Press, 1968), pp. 189—90. 29 criteria for non-financial aspects of the case studies. Trends in these aspects are examined by computing index numbers at selected points in time over the period of the budget model. CHAPTER II THE ETHIOPIAN SITUATION: NATURAL RESOURCES, PEOPLES, NATIONAL ECONOMY The previous chapter served to introduce the subject of agricultural mechanization and its place both operationally and conceptually in the development of a specific economy. The purpose of this chapter is to provide the context for the ensuing discussion and analy- ses. Obviously, the Ethiopian situation embraces a great diversity of factual materials and interpretations of Ethiopian socio-economic life: past, present, and antici- pations for the future. The principal sections of the chapter are focused, howbeit summarily, on Ethiopia's natural resources, her peOples, and the structure of her economy. Natural Resources Physical Environment Geography Ethiopia occupies the eastern area of the African continent known as the Horn of Africa; the Empire stretches 3O 31 from latitude 3 degrees to 18 degrees North and lies between longitudes 33 and 48 degrees East. The total area of 1,221,900 square kilometers is shown in Figure 1 to be roughly triangular with Kenya, Somalia, the Terri— tory of Afars and Issas, and the Sudan being contiguous countries.1 The physiography Of Ethiopia is characterized by the massive highland complex of mountains and plateaux transversed from the northeast to southwest extremities by the deep Rift Valley, most of the lowlands lie around the Empire's periphery. The highest point of the high- land massif is Ras Dashen of the Simien Range in the pro- vince of Begemdir and Simen,2 rising to 4,543 meters; there are 24 other major peaks of over 3,500 meters throughout EthiOpia.3 The massif is formed out of crystalline rocks covered with thick sedimentations of limestone, sandstone, and volcanic lava. The Rift Valley (floor elevation about 1,600 meters) forms a natural channel between the Red Sea and the system Of East African 1Kifle-Mariam Zerom, The Resources and Economy_of Ethio ia, Report No. 13, SRI Project 6350, prepared fOr the Technical Agency of the Imperial Ethiopian Government (Menlo Park, Calif.: Stanford Research Institute, February, 1969), p. 9. 2Hereafter referred to as Begemdir. 3Imperial Ethiopian Government, Statistical Abstract, 1967 and 1968 (Addis Abeba: Central Sta- tistical Office, 1969), p. 12. E 32 FIGURE 1 Map of Ethiopia showing national boundaries, provinces, and locations of selected cases .a.-~l 5...“- "a ,.-.,... g r .- J CID. fiwfifivfib Q -...~' g," A a Quay- ’ 9 ~--.. . ‘ .-...- 3. H .g...":. I‘. ......~-‘.. g... . ' Q . _ .v. P “---. A..._ - I "j FDNQF t. “.._._‘-‘. . .AN 1"” .‘\ ‘ N a , Q‘.‘ .n“ \ '3‘ q t ‘V' AH“ ‘ sv1 ’v I.“ 1V. . 7" ‘~ :‘V' 7:93 ) “~10“; - ‘ Egg-57631 Ss ‘\y’ r 5 ‘ e 33 lakes. Small volcanoes, hot springs, and deep gorges in the region are contemporary evidences of former volcanic action and current geological instability. There are nine major river systems with a total length of 5,785 kilometers within the territory of the Ethiopian Empire, and 11 major lakes totalling 7,023 square kilometers.1 These geographical features depict an exceedingly rugged terrain in which human geographical mobility is severely restricted by physical Obstacles.2 Ethiopian soils are considered to be only of moderate fertility although there is much regional vari- ation. Two main soil types are distinguished: red to reddish-brown clayey loams which have good fertility usually, excellent permeability and air-water ratio although there is some phOSphorous deficiency;3 black soils, found generally at lower elevations, which have 1Ibid., p. 11. 2Ethiopia is described by Huffnagel as the "water tower of northeastern Africa." A description of the river and lake systems of Ethiopia is contained in chapter VIII, "Hydrography." H. P. Huffnagel, Agriculture in Ethiopia (Rome: Food and Agriculture Organization of the United Nations, 1961), pp. 51-56. 3Further discussions on soils are included in the Appendices A to D. Also Donahue's soil analyses for each Ethiopian study site are included in the Mechanization Study report. Kline, gt’al., _p. 315., Pt. II, pp. 38-46. 34 poorer fertility, tending to dry out quickly and crack badly.l Soil fertility of Ethiopia has been grouped into three categories based on a map prepared by the Committee on Regional ASpects of National Planning in Ethiopia: useless to poor; average to partly good; good to excellent. Useless to poor soils are found in the northeastern, east- ern, southern, and southeastern regions of Ethiopia; aver- age to partly good soils occur in northern crystalline highlands, the central and southern highland regions; good to excellent soils are located in the central, eastern, and southeastern regions.2 It must be noted that Ethiopia's major soil problems, especially in the highlands, are erosion on the lepes and drainage in collecting areas. Large areas of fertile land are lost annually. Climate Although Ethiopia lies within the Tropics of Cancer and Capricorn the prevailing climate cannot be described as tropical: altitude is an important factor 1Huffnagel, 92. cit., p. 37. Huffnagel gives a detailed description of €53 nature and behavior of Ethiopian soils under the following geological areas: Central Highlands, Northern Crystalline Highlands, Rift Valley, Eastern Highlands, East and Southeast Ethiopia. Ibid., pp. 38-50. zzerom’ EEO Cit. ' pp. 12-130 35 in determining the temperature.1 Thus, the Ethiopian climate may be classified into climatic zones according to elevation as shown in Table 1. TABLE 1 Classification of climate according to altitude and temperature, Ethiopia Average annual Climatic zone : Altitude : : : temperature meters degrees centigrade Alpine Above 3,500 14 Temperate 2,400-3,500 16 Subtropical 1,800-2,400 22 Tropical Below 1,800a 26 Desert Below 1,800 30 a . Desert zones are really a subgroup of the trop1- cal zones in which environmental conditions cause a higher average annual temperature. Source: Zerom, 9p, cit., p. 15. Marked variations in temperature occur at ele— vations above 2,000 meters and frosts also occur in most years. Day length (average 12 1/2 hours) varies little between seasons. These factors tend to have affected 1"Although there is no common agreement among scientists regarding the elevation ranges within the Equatorial Belt that are considered 'Tropical' several criteria have been advanced. These include: 1. Areas free of frost. 2. Areas with climates favorable to the pro- duction of cold-sensitive perennial crops such as sugar- cane, banana, and coconut. 3. Areas too low in elevation for production of wheat." Kline, SE 31., pp, gi£,, p. xvii. .....v — uu-v. 1 .— - .u u. Th2? E cu cu, -‘ 'v- , . _ “ 0:5“ “5 a...‘ -._ _ . ‘ '-=::: Iv'."~'\— < 95.. ‘ ~4- :~V’ a..-) -5- ‘ ..A ' . . _ >.~ “O. .‘ ‘ “"-¢ , d - ’ ‘ l'1':- ' a In..-‘ ‘3 (I) h J 36 adversely the introduction of improved varieties from the temperate zones of the world. Less variation is Observed in daily temperatures at lower elevations and frosts seldom occur. Lower areas are often excellent for agricultural production, growing crops throughout the year. However, rainfall tends to decrease at lower altitudes, thus in many of the lower areas agriculture is less well developed in contrast to the highlands where annual precipitation is satisfactory. In general there are two rainy seasons, although there is considerable regional variation from the general pattern. The rainy seasons are: kiremt occurring July through September, the time of the "big rain" (tili'k ggpgp); 221g occurring February through April, the time Of the "small rain" (tini'sh 3323p). In addition to this seasonal pattern, much moisture, evaporated from the Red Sea during the dry season, October through February, is precipitated on the face of the Eastern Escarpment, giving this area a completely different rainfall pattern. The rugged physiography of Ethiopia greatly affects the distribution of rainfall and accounts for a wide variety of micro-climatic conditions. The climatic characteristics of the country can be classified into 10 regions as shown in Figure 2. Only those regions in which the selected case studies are found are considered in any detail here. The data recorded in Table 2 sum- marize the climatic conditions for all 10 regions. 37 34° 36° 45° ‘30 ‘ l’ l6“:- l4. : 4 FIGURE 2 Climatic regions of Ethiopia. Source: Huffnagel, pp. cit., p. 60. ~NQ. ‘FOQI..‘ hath-Ccftl: .23‘ uawlxc; \...::_a .~ d ~u... u....~.~.u.-~-u....~ \sza.» .~.?..-~ UN§~£Efi~nv M1 n4.~.r.~<~ 5.2;: .12. .r.~.:-.- ...:-....;_:L~ :...:: 38 .mNIvo .Om ..uflo «mm .HmmMwaDm "wousom .ucmEQumowm gnu Ou quEonum mmoHo Op mac coflmwu mo Hmufidwu muflsq uozO .mmmum Hmummoo as waco musooo cuflnz EdEwaE Hanucflmu umbEmomO on map Havam>um xaunmflam HHchflmmu .mabmaflm>m uozb .mflmmcu was» usonmsoucu Omm: ma umpcwamo cmfluommuom H.0Hm N.nmnv.ma m.mmuv.mm .m.c .mmomm .omoma m hmnmvma m3HmuH2 x 0.0mm H.NHne.m w.mm|m.am .m.c .mmomm .naoma mmm.m hmlmvma mumEmd O m.mmm m.mmnm.va m.mmno.mm .m.c .mmonm .MMOmH mmw nmlmvma uncuomd m do.~mm v.ma|m.v o.omnm.vm m.ma|m.ea .waomm .vVONH oom.m nmummma 3mnoflmz o .o.mmma m.mHnm.m m.wmum.am m.Hmnm.mH .mmomm .omoma HNH.N nmlmmma umccoo m m.mnam n.maua.ma o.omnm.om o.om|o.na .MMOmm .oaomo moo.~ mmummma muoo m Ov.ow m.omsa.mm o.mmum.>m .m.c .mvomv .Hooma Ha nmnmvma nwmd O m.mmma m.oanm.o m.mmum.om H.waum.ma .mvomm .NOOmo mov.m nmumqma samba mficpm O v.voo .w.: .m.c .m.c .OOoov .oaono nmn.m nmnmmma mnou m m.Hm¢ .m.c .m.c n.m.c .OVOmm .oaomo omw.a hmlmmma oflaaonmwz a mumumEHHHHE llllll mcmumflucwo mmmummc nnnnn mumume omummm Hamwcflmu “ EOEHCHZ EOEmez >chcoz "ummm nuuozu " u u . . OOHHOQ Hmsccm . . "OOOuHuHDuring the big rains there is seldom a dry period and precipitation is intense. Humidity is high during both rainy seasons. Toward the end of the dry period humidity is low and frosts occur at night. This is also a period of daytime winds. Region G (Setit-Humera: Appendix C) includes most Of Tigre and northern Begemdir provinces. Rainfall is light and confined to the period July to September. The period from October to February is almost completely dry with high evaporation. This region is similar to Region 40 D but, because it lies on higher ground, temperatures are lower. 4. Region D (Tendaho Plantations: Appendix D) includes the low-lying land of Welo, Tigre, and Eritrea provinces east of the Eastern Escarpment. Some desert zone is included; the only extensive rains occur during July to September. The period between October and March is one of low humidity and strong winds. Other Natural Resources Fuel and Power Wood from cedar and later eucalytus forests, has been the main fuel until recently; now the consumption of petroleum fuels and gas is increasing. Success in oil exploration will increase Ethiopia's economic self- sufficiency and export potential. EthiOpia's coastal area has yielded large petroleum and gas reserves. The hydro-electrical potential of Ethiopia's major river systems is considerable. Theoretically, the annual available potential of eight major river basins is 143,481 millions of kilowatt hours.1 1Zerom, pp, cit., pp. 66-69. 41 Mineral Ores Ethiopia has a number of deposits Of precious metals, iron ore, ores of non-ferrous metals, and non- metals. Exploitation of these resources so far has been at a very low level. At present only manganese ore, marine salt, and feldspar are exported. Fertilizers, glass, pottery, iron, lead, c0pper, and other metals are being imported.1 Agriculture, Fisheries, and Forestry The use of agricultural resources forms the largest contribution to the Empire's gross domestic product. Agri- culture is the main occupation of the Ethiopian peOple and the principal source of foreign exchange resources. There is also an abundance of fish. In addition to the Red Sea, the lakes and rivers of Ethiopia are abun— dant in commercially useful fish. However, no commercial exploitation of this resource has taken place yet, nor does fish make much contribution to the Ethiopian diet.2 A considerable amount of deforestation has occurred during Ethiopia's history. Indigenous forests of olive, cedar, juniper, and various pines have been "ruthlessly" burned leading to an acute shortage of fuel and building timber during the nineteenth century. The eucalyptus forests, established toward the turn of the last century 1 2 Ibido' pp. 74'77. Ibid., p. 480 42 on the initiative of Emperor Menelik II now meet major fuel demands.l Today there remain some five million hec- tares of forest. Necessary legal measures to prohibit further destruction and to foster reforestation have been initiated but the potential of a forestry industry has not yet been exploited commercially.2 Peoples of Ethiopia No complete population census has yet been con— ducted in Ethiopia. Data recorded in Table 3 are estimates for 1967-68 obtained from the National Sample Surveys. The estimated pOpulation of EthiOpia is 24 millions of which 8.1 per cent live in urban communities. Population distribution throughout the provinces is uneven due to the prevalence of malaria in the lowlands causing heavy concentrations Of populatiOn in the highlands. A high prOportion of the total population consists of chil- dren and adolescents. One—third of the population is under 10 years Of age, 45 per cent is under 15 and only 5 per cent is Older than 60.3 L 1Richard Pankhurst, Economic History of Ethiopia, 1800-1935 (Addis Abeba: Haile Selassie I University Press, 21bid., pp. 51-52. 3Eli Ginzberg and Herbert A. Smith, Manpower Strata for Developing Countrips: Lessons from Ethiopia (New York: Columbia University Press, 1967) , pp. 21-23. 43 .mm .O .mmma cam noma .uomuumna HMOHumHDMpm .ucmesnm>oo cmHmOqum HMHHmOEH "mousom .Aumumaoawx mumswm Hmm mGOmHmm Hmm.mv mmumuomn mo mcoflHHHE mo. CH manomm Ocmmsonu m.vvm “sauna mappd mmpzaoch as H.m s.smm.mm ma.mma Hmuoa mm ~.m k.mHH4m sm.n cams om m.m m.mmv.a NH.» «spams mm m.s m.som.m mm.m whose ma o.m m.amm.a mb.HH msmphm mm m.am mm.osm.m ~m.m msmsm ma s.s «.mmm ms.m Mums 4H m.m «.mmw «5.4 HogansHH ma v.4 s.avm.m sm.mm umumm pm s.s H.mkm.a ma.p Epsom Hm m.~ m.ovm mm.m mmoo 5866 4H p.0a v.mmm.a mn.HH mmuuhum ma ~.m s.msm.fl ~¢.s uhpsmmmm H m.ma m.mma ms.~H mamm ks k.m m.oaa.a mm.~ Hmsua HwamEOHHx mumsqm umm mQOmumm ucmo Hmm mooo.H OH mumnasa mmumuomn mo mOOHHHAE auamcmp u aspou mo u u coflumasmom m coflwmmmw m coflumHsmom H mmu< moafl>oum hood .MHOOHnum .mocfl>oum an wuflmcmc coHumaamom can .coaumasmom pwumEflumm .mmud m mamme 44 Foremost among the peoples of Ethiopia are the Amhara and the Tigreans. Since the formation of the EthiOpian state they have been the kernel of Ethiopia; they made its history and determined its Christian character. Together, they are more numerous than any other single group within the Empire. Both these groups of peOple live in settled agricultural communities. The Galla (Omoro) people, only slightly less numerous than the other two groups together, were origi- nally pastoralists, now many are agriculturalists. Moving into EthiOpia probably from the corner of the Horn by con- quest during the sixteenth century,2 the Galla of Shewa have embraced Christianity; those settling in parts of Arusi and Kefa embraced Islam, others remained pagan. Amhara, Tigreans, and Galla account for the majority of EthiOpian people. In addition there are the Afar (Danakils), Moslem pastoralists who inhabit the hot desert plains. These four Ethiopian groups are Cushitic people, descendants of a union of Hamitic and Semitic races. Small groups of Nilotic peoples inhabit the west- ern extremities of the Empire. They form no integral part of the life and civilization of Ethiopia. The Nuer and Anuaks live in the southwest; the Barea and Kunama along the western border of Eritrea.3 1Huffnagel, pp, cit., p. 15. 2Edward Ullendorff, The EthiOpians: An Intro- gpption to Country and PeOple (London: Oxford University Press, 1960), p. 41. 31bid., pp. 44-46. 45 Illiteracy is a continuing problem among the people of Ethiopia; less than 10 per cent of eligible children are in grades one to six, less than 2 per cent attend higher grades. Proportions are lower in rural areas. Employment in manufacturing has grown at an annual rate of 15 per cent indicating that about 100,000 people will be employed in this sector by the early 19705. How- ever, by the end of the century, three-quarters Of the labor force will still be engaged in agriculture.1 Structure Of the Ethiopian Economy General Status of the Economy Ethiopia has a mixed economy. Government effort is not restricted to social development. Indeed, it is anticipated that the private sector is likely to expand only "at a very modest rate."2 The single most important determinant of the future demand for trained manpower will be the rate of growth in government expenditures; efficiency in both government and quasi-government corporations "holds 1Clarence J. Miller, William L. K. Schwartz, Willis W. Shaner, Kifle-Mariam Zerom, Development Of Agri- culture and Agro-Industry in Ethio ia: A Prpposed’Program of Research and Planning Studies, Phase I Report, SRI PrOject- IU- 6350, prepared for the Technical Agency of the Imperial Ethiopian Government (Menlo Park, Calif.: Stan- ford Research Institute, October, 1967), p. 10. 2Ginzberg and Smith, pp, cit., p. 86. ‘ . o-..-.... . - F p».--d '- . ‘~v~ an ‘ . .. ‘-v—-_ ‘ . ‘."""~‘ V Ifiifi‘ib“ . a -‘ ,. ‘c- -- v..._ ‘- '0 ‘F'-“‘r~.‘ - on“ . . 5“: s : V;n“‘ ‘ ‘:‘Q&,‘L» . I ‘h S‘“‘IC Fan ‘1‘; ‘u 1.1Cr W “p .s ..= Q ’ .10 :1 1 I kL. 7‘: 1'15.- F‘Nu‘ ' ‘4: fl . ‘Hytl. A p ‘u' “A“ ‘ l “Jk A q A. ~ J‘ ‘ N anCc. 5‘. ~19 h \ p Pre,l t ~3Qt‘ s~°e f \. | in 1'! . m (D H 46 the key to progress of the economy and the society."1 However, agriculture is the mainstay of the population, thus much of the government's endeavors must be directed toward the agricultural sector. Agriculture The data recorded in Table 4 show that agricultural production exceeded 55 per cent of GDP (at constant factor cost) from 1961 to 1967. However, agriculture's relative contribution to GDP declined steadily from 64.8 per cent at the beginning Of this period. Per capita GDP from agriculture is reported to . . . have increased only fractionally. In fact, since 80 percent of all agricultural output is for farm family subsistence, the accuracy of even this increase in per capita output is questionable. It is possible that Ethiopia's agricultural sector has no more than kept pace with population growth.2 1) Land Use Data presented in Table 5 are rough estimates of the major land uses. There are large areas of apparently productive land which are used either for nomadic grazing or not at all. The use of some areas is limited because of inaccessibility, lack of accessible water supply, or the prevalence of disease vectors, mainly mosquito and tsetse fly. lIbido ' pp. 35-360 2Miller, p£_pl., Development of Agriculture . . ., Phase I Report, p. 15. 235 A n a. u . . . u u . .1 , . I x I; . .2... . 3;..— . Q..3~ . ~ :.~ . .. :3~ . ~G?~ .. ACOUUE 3:1. Emwgfi 5.»- ~53d \q..;:..£...~ ~:.,.~‘_.--~: C \A- I . . .. s.» zap. d3.-— - «5.4-. -.:-.~ «In-nu. H.~ .~ 5.... u v ask...- xuav uterus 9:9. ecu—~AUMV UH. .h¥.,:.~vnv~~n_w~ muahhsfltmwnhdhwyuan-Nunvhyl ,‘ . Y . mna vyuuv V .41qu (NIH. ,.- OEDII-bnunq ll... a: .000 .0 .0000 000 0000 .00000000 00000000000 .0000000000 000000000 00000000 “000000 .mumHHOp .m.: O0 cwudQEOO O00 mHmmnu m000 00 mwm>amcm 000 OOC0m Omam mumaaoc .m.D :0 cm>0m mum monam>n .00.0 0.0.: n 00.0 000 47 0.000 0.000 0.000 0.000 0.000 0.000 0.000 00000 0.00 0.00 0.00 0.00 0.00 0.00 0.00 00000000 00000 0.00 0.00 0.00 0.00 0.00 0.0 0.0 000m00000 000 00000000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00003 000 00000000000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 000000000000 000 00000000 0.0 0.0 0.0 m.0 0.0 N.v ~.v >0umspc0 mamom HHmEm cam ammuo0pcm: 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0000000000002 0.0 0.0 0.0 0.0 0.0 0.0 0.0 000000000 000 000002 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0000000000000 000 000002 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0000000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0000000 0.0 0.0 0.0 0.0 0.0 0.0 0.0 00000000 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0000000 0.00 0.00 0.00 0.00 0.00 0.00 0.00 00000000000 nnnnnnnnnnnnnnnnnnnnnnnnnnnnn usmo uwdllnullununlunnnnlulunuuuulntslnu 0.000.0 0.000.0 0.00040 0.000.~ 0.000.0 0.000.N 0.000.N 0.000.0 0.000.N 0000 000000 00000000 um unaccum 0000080O mmouo 00.0.0 0.0 0.0.0 IIIIIIIII mCOHHHflEIIIIIIII IIIIIIIIIIIIMmHMHHOU CMflQOHnum MO mCOHHHHEIIIIIIIIII 0000 0 0000 0 0000 0 0000 0 0000 0 0000 0 0000 0 000000 000 0000 000 0010000 .00QO0num .cwm0uo mo wuumsch an uoscoum 000mmfioc 00000 «0 c0005n0uum0p can AmmOHHm 0000. 0000 Houomw assumcoo um pospoum uaummfiop mmouo v mamme Q a. l C 1: .w 0. .0; .00 C ~.. 0.00 .0 C. . 0n“ u» 0|. I \Lh .«b 3» e hlu +0 n D; 0“.; 0.. V0.3 I 31.11; v0.1.0 u 0» S a .0 30 O 0.. e b H. O m .3 a. C e a a . -. .. V e 3 L 0.0. g :0 ”a 5 I +0 at. a a. e r r :0 C. a hu 0, . .3 A 0 0 . u ,0 «A nu. 0 .0 :0 A: r; 0 . a» Pu a 0U. C 0 Arv CL -70 0a. . 0 0 0 :0 00 0 0 a: A: v... C» 50 V0 0 0 . 0 _, . 0 0 .: 2~ #0 v. '0. . . 0‘0 00 v . 10 v.0 0 0 2. .D 0.0 0. v .0. .0.‘ 0 0 u .0. 0.. 0 0 00. .00 . . 0.. .09 ,..fi ~\u RD .0. A ESt 48 TABLE 5 Land use, Ethiopia, 1967—68 Use : Area : Distribution millions of ------ per cent ------- hectares Crops 9.99 78.7 Fallow 2.00 15.8 Fruits and stimulants .70 5.5 Total cultivated 12.69 100.0 15.1 Pasture 66.24 78.7 Swamp 5.18 6.2 Total agricultural 83.11 100.0 68.8 Forest 8.78 7.2 Barren or built-up 17.21 14.1 Water and water courses 12.09 9.9 Total 122.19 100.0 Source: Imperial Ethiopian Government, Statistical Abstract, 1967 and 1968, p. 11. Nevertheless, there are thousands of hectares which are accessible to markets and not subject to health problems that are used at only very low levels of farming intensity. Thus, there are substantial opportunities both for increasing the intensity of farming on presently cultivated lands and for open- ing up new lands to specialized cropping activities and to systems of mixed farming incorporating both crops and livestock.1 2) Cropping Patterns Estimated cropping patterns are given in Table 6 for the seasons 1963/64-66/67. By far the largest pro- portion of land is devoted to the production of cereals. 1Ibid., p. 16. 49 N I 1 . L YVLL.» ...-. bwi» m.” mi... N . A. C a w C x . ._ .. 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"" ‘ionb . ' n “A", ‘.'."H a A ""“bcvat ' I ‘ . 8"A9. A t is e . :--~: a 'a*‘ ”W“; m h . ‘e n A“ V .5“ ‘. 0.5:“ res u‘ . . 'f‘6~, ~ 4...: “g “7‘5 fin c.. “ Gv.‘; u\- 33‘;- b.1 s‘- 51 3) Livestock Ethiopia's livestock population is claimed to be the largest in Africa, but statistical accuracy is un— certain. The data in Table 7 show estimates of livestock population and production. At present livestock pro— duction is extremely low, calf losses are great, and animals mature slowly. The practice of accumulating live- stock, particularly cattle, as a means of storing wealth often results in animals being kept past their optimal marketing age. Livestock production may become an im— portant foreign exchange earner in the future.1 4) Agrarian Structure and Lane Tenure The information on land tenure and agrarian structure is inadequate at present. The Ministry of Land Reform and Administration has conducted surveys of land registration, and classification according to systems of ownership. The source of data recorded in Table 8 is a small sample survey conducted by the Central Statistical Office in which the term "holding" rather than farm was used: a holding was defined "as all land used wholly or 1United Nations, Report of the Exploratory Mission to Ethiopia in Connection With a Possible Agricultural Economic Survey (Rome: Food and Agriculture Organization, 1965), cited in Miller, et al., Development of Agriculture . . ., Phase I Report, pT_l8T N GUSNJO-HAW MUCH.» \..u\.CCT~HCC\:C:~“A.C\TCCH.~\C\MSCH o \-C\C§:F. V..~\.. ~Cr. l\\ ~ ~(t- . I O I O O O O . I u o. .LCw «USECLQ HEUCCzN u CCderuHJQOQ HQDCCC‘ .. 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Ir 9H’lhlhni QOIRDQH \ muHQOHCuQ mvNflm \AQ CCHU3Q~U~U¢HQ mw umeNmN <.H 53 .mm .m ..uHo .mm .EOHmN ca Umuosv .Ammlhmma .moflwmo Hmowumflumum Hmuucmu “mambfl mflop¢v mhm>u5m HMflocH>oum .ucmecnm>ow amamofinum HMHHmQEH "mousom N pm He mm.o H H m m mH ms mamem HH mH H» ov.H m m m mH om ow anammmm v ms mm vm.o . N N v mH ma mmoo 9866 m am He hm.H v s OH «H mm mm ommHmz mm RH ow em.o N v m HH mm mm onz mH 5 ms -.H m o m 8H mm ms mumHa SH Hm mm Rm.H mH MH HH mH mm mm «swam a mH om mH.H S OH NH mH hm hm awnoo a ma ms um.H om on «H mH mm m Hmsua nnnnnnnnnn ucmo umalulnllnllu mmumaomz Illllnullllllucmo ummnllnllllllln omucmu puma " Umucmm u UmGBO H Show " +m u o.m u o.m u m.a u o.H u m.o « \omcso uumm u u u mom mono u "no.~ ”Im.a “Io.H "Im.o u Io u mosa>oum u Umum>fluaso u u . muscme u momum>< " mmnmuomc CH mnam msouw u mounmmH .mHmoHnum .mmocfl>onm mafia .Ammcfinaozv CQMHEHMM How muscmu paw muflm >3 GOHuanHumwo m mqmda ‘ I Y N, t .1" ' Lib .C. 33. 0 6 . . ' I. r, A. ApA "A" V ‘ ‘ ‘ 1.. v. in: Atu as v: E22101) of re ‘:.;A k A; vu.‘: 50 M‘sc ”2...: Since a ‘:-:..H_ maul ‘JwNEI. .-V '5’ ‘. WC? "n o WEI, ls hel ‘o. , . “an .1 ‘ ‘1 ‘ w fuse-“1L t9 invest . Under t1:- 36mm}. develxz SE'Ster.§ Clearly the malq advarc; ‘ x—A prod“4(th The abi: ate m0: SEQrd 1')“ J 53%.” C N"~ ‘ «a A» . n. ‘ ‘U F :\:". ‘ 64. i‘ueQ 54 partly for agricultural production and operated by members of one household."l These data show a high proportion of farms too small to be considered adequate for economic develOpment. Similarly, in southern parts of the Empire a high pro- portion of rented land (usually share-crOpping agreements) tends to discourage the adOption of agricultural improve- ments since additional returns must be shared with the land-owner. In the northern part of the Empire, a higher proportion of farms are owner-operated. Most land, how- ever, is held under family ownership systems and subject to periodic redistribution, thus limiting the incentive to invest. Under the existing agrarian structure then, the majority of small farms could not qualify for further development. Because of out-of-date land ownership systems (which in many areas of Ethiopia are not clearly defined) and the lack of security of tenure, the majority of farmers could not qualify for the advancement of credit, even though they possessed the productive capacity to employ such credit efficiently. The ability of the majority of small farmers to accumu- late money is negligeable, therefore, they cannot afford to purchase improved seed or other adjuncts to improve production. The reform of the existing agrarian structure--the system of land ownership and the tenancy system--is a prereguisite for the develOp- ment of EthiOpian agriculture. 1Zerom, op. cit., p. 24. 2John L. Fischer, "Agriculture in Ethiopia" (Addis Abeba: USAID/Ethiopia, May, 1967), p. 15. (Mimeo- graphed.) 55 Other Industry The major components of Ethiopia's manufacturing sector of the economy are depicted in Table 9. These data are based on reports from 272 establishments made in 1964/ 65, 273 in 1965/66, and 395 in 1966/67.1 Thus, while there is no guarantee that all existing industrial establishments have been included, the data illustrate the relative small- ness of the manufacturing sector. It is not always easy to distinguish between agri- culture and agricultural industry. The agricultural sector may be defined "as encompassing the direct product of the farm prior to any off-farm processing,"2 and the agricul- tural industry sector as . . . (l) the production of goods and services that go into farming and (2) the off the farm processing, handling, or other commercial treatment of agricul- tural products.3 The nature of the Ethiopian economy is such that the defi— nition of the agricultural industry (agro-industry)4 sector lImperial Ethiopian Government, Statistical Abstract, 1967 and 1968, p. 57. 2Miller, e£_gl., Development of Agriculture . . ., Phase I Report, p. 20. 3Ibid. 4In the Final Report a further explication of the definition is added: "Agro-industry is defined to mean any step in processing, manufacturing, and distribution that has linkages to agricultural production or agricul— tural products. While backward or forward integration into farming or industry is accepted by this definition, 56 .mmunm .aa .mwma cam nomH .uomnumbd HmoHumHumum .ucmE:uo>oo cmHQOHnum HMMHOQEH "mousom . mHMHAOU .m.: CH pmusmaoo mum mHmmLu menu CH mmmmecm Ham mocflm Oman mumHHOU .m.: CH cw>Hw mum mosam>m m.~vH H.~mm www.mm m.n0H m.mo~ oom.sm n.mH~ nmo.>s Hmuoe m.m ~.- mmo.H m.v ~.NH 0mm m.m omm HmoHuuomHm .Hmuoe .Hmmum o.m «.mH nmm.~ n.m m.m mHm.H m.m ooe.H mHmoHEmno N.m o.m mm4.H w.~ v.0 mov.H m.m HvH.H mcHanHnsm 6cm mCHucHua m.a H.mH omm.v H.m >.mH vmo.m m.oH NOH.m HHmumEucocv mHMHHOUME Ucm OCHQHHDm m.m m.m omo.m m.~ m.o an.m ~.m Hm~.~ umnEsH 0.5 v.nH OOH.~ m.m o.MH mam.~ H.m ~mm.H mmocm 6cm umcummq ~.Hv H.mOH Hn~.mH o.Hm H.mn oso.nH w.~o mom.mH mmHHuxme m.m H.» awe m.~ m.n moo.H v.m qu ooomnoe m.mH m.mv mvm.~ m.oH o.~q mnv.~ n.0m SMH.~ mommum>mm m.mv N.MHH OFH.NN m.~m 0.0m NHH.NN m.mh wmm.mH Boom Mm.m.D Mmm mw.m.D wwm mm . mdonu . msonu muwflfidc . mDOLu . mfionu mhmflfidfl . mdonu mhmflfiflc uospoum " mwmonmfim uosooum " momonQEm uUDpOHQ u mommonEm wfldwxw mmOHU u wddm> mmOHU n wddm> mmOHU u ho\mmma mm\moma mw\¢wma msouw amauumsocH ho\mwumm\vmma .mHaoHnum .mmfluumSch mcflusu00mscme mo masouo an uosp0um 09Hm> mmoum 0cm ucm8>onEm m mqm<9 n R‘ ...u-" .‘P‘H : l v. .1 a» L. .H. .1. .. v. I :. :. —.. h. as -~A,q. .- ‘DUUO u p- ‘. r. I. E . . . C “I“ —~\v .u 41 r .. . I ,...t ~14 ! u u -~ A..- ‘ b... - a; s. i s - c .c. nu. Q» 4» we :5‘ A» an ~fi‘ Va“ sd‘ a. :. C a. Z . _ .. . 5... : . l .151 H: 57 includes approximately 85 per cent of all manufacturing when measured by employment or by the gross value of the product.1 External Trade and Balance of Payments Details of exports, by major commodity, for the period 1961-67 are given in Table 10. Since the closure of the Suez Canal, an anticipated decline in exports has become apparent in 1967 data. Over five-year periods be- ginning in 19452 increases in the value of exports were: 1945-50, 44 per cent; 1950-55, 78 per cent; 1955-60, 19 per cent; 1960-65, 50 per cent.3 The basic weakness in Ethiopia's eXport position shows in heavy dependence on coffee, constituting 50-65 per cent of the total value over the period 1961-66. Details of imports are given in no particular level or form of integration is assumed necessary.‘ Clarence J. Miller, Willis W. Shaner, Ray- mond E. Borton, Development of Agriculture and Agro- Industry: Strategy and Programs, Final Report, SRI Project 6350, prepared for the Technical Agency of the Imperial EthiOpian Government (Menlo Park, Calif.: Stanford Re- search Institute, December, 1969), p. 4. lIbid., p. 23. 2The exchange rate was fixed at U.S. $0.40 = E$ 1.00 in 1945 and has not changed since. 3William L. K. Schwartz, Ethiopia' 3 Export Trade in FMajor _Agricultural Commodities, Report No. 6, SRI Project IU- 6350, prepared for the Technical Agency of the Imperial Ethiopian Government (Menlo Park, Calif.: Stan- ford Research Institute, January, l969), p. 11. oMH ohm ..uHo .mm .Nunm3com CH bwuoso .ucmEcno>oo cmHQochm HmHuanH wcu wo coHumuuchHEpd mEoumzu on» wo mausumm womue .58 .momH Ucm noma .uomnumb4 HmoHannmum HmHHwQEH paw .QSHM> mo mcoHDMOQOuQ m.~unoxcom .mucwE>6Q wo oucmHmn m.EouoN mo mflmmn mnu c0 pmumEHummm "moonsOm .ucmficuw>oo cdeoHnum manomxm mo ms~m> Hmscc< honaoma .mflQoHnum .mmsouv >uHUOEEoo uoflme wn monomxw wo H.n.o.wv msHm> Hmscc< ooo.HOH oom.~m~ moo.HHH Hmm.>- mmm.mm~ omm.~o~ oHv.m- omm.mmH mmo.mmH Honoe coo.H swarm nom.m mHv.m mmn.o amm.m Hoo.m mmm.m mNH.m manomxm-mm «Hm.oH mmm.nm Nmm.n mmm.mH mnH.nH www.mm mmm.mm Hom.H~ omv.mm uwzuo NHH.H om~.m mom mn~.~ OHH.m aqm.m oHH.H mov mmv mcmquzo new mHmeHcm m>HH Hme.m som.o mmm.m mmm.n mov.n ovm.m mom.~ awv.H MH~.m 1cm~onu new nmccmuo mummz oHH.HH mn>.nm amm.VH nvo.mm www.mm mvm.H~ www.mm so».¢~ va.m~ mwan new mcme omo.m oo~.om mom.m qu.Hm RHH.mH mmm.mH mmm.GH mqm.GH amo.mH mmmHsa 62m mHmwumo OOH.OH om~.mm VVG.OH HHo.wm Hmm.m~ OHH.om Hom.Hm www.mm vnm.nH mmxmo 6cm mummmHHo mno.mm NmH.mMH RHV.NG qvo.mmH nvm.mmH ~mm.mmH mmm.OHH maH.nOH qnm.mm mwuuoo m.m.: w.m m.m.s nnnnnnnnn monumsonunnunnuuun uuuuunnununnumanHoo cmeoHnum uo mocmmzozununululunnunua anomH ome m momH m qomH m mwaH m momH w HoaH m msouo qupOEEOO 0H mAmCB 59 Table 11. Over the same five-year periods increases in value of imports were: 1945-50, 58 per cent; 1950-55, 58 per cent; 1955-60, 30 per cent; 1960—65, 71 per cent.1 From 1955/56 to 1965/66 the total value of imports increased 140 per cent compared with a corresponding in— crease of 80 per cent for exports. Since 1945 Ethiopia's visible annual trade balance has only been positive in 1951, 1953, and 1957. These trade imbalances have been counteracted by capital inflows and, as a result, external reserves have maintained an upward trend although holdings of foreign exchange have declined.2 Table 12 shows balance of payments details for 1965-67. Increased exports will be needed to provide the bulk of foreign exchange. Also, increased production of import substitutes will be needed to ease the foreign ex— change position. These demands will have to be met by increasing agricultural productivity in the current stage of Ethiopia's develOpment. Size of the Economy The relative size of the Ethiopian economy can be assessed from the data in Table 13. In addition to a summary of national accounts, estimates of per capita GNP and the rate of growth of the economy are included. 11bid., p. 17. 2Zerom, 92. cit., p. 102. 6() .FHH .Q ..uHo rum .Nuumznum CH pmuosv .moma can nomH .uomuumbd HmoflumHumum .ucmEcum>oo cmHmochm HmHuwmeH "monsom .00H .m ..uHo .mm .EonmN .mumc mucwE>mm mo wocmHmn mo coHumEHumm m.EoumN co comma mumEHummm moH.mvH ~n~.>mm GNR.HGH mHm.vov Hno.mam mmo.aom www.mnm moo.hmm omo.mm~ Hobos cam mooo.~ om~.H mmm.v no~.~ omm.~ oov . mam uwnuo ~H~.o¢ omn.oHH vom.mm mmN.QVH NHm.OVH omo.mm ucmEmHsvm . HHm.¢mN ORH.OH~ mom.mmH uuoamcmuu new sumcHnomz avm.Hm mam.mmH mHm.vm Hmo.RMH mm~.smH omm.mNH 1 H H mausuommscoz Hom.MH mom.qm man.~H Hmm.Hm BHH.R~ omo.mm mHmoHEmco nHo.~H vqm.Hm nmm.OH «VH.NN mHa.m~ Hum.mm . H . . . mucmoHunsH 6cm Hwam mam.w Gen.mH omm.m mmw.om HHH.mH m»o.nH nHo ow , omm am 1 mam Hm H mHmHumwme 3mm moo.~ moo.m mmo.~ omo.m OHm.v mm~.m . . . ooomnou new mm muw>wm mmm.m www.mm Hms.~H mam.Hm Hmm_om me.VH amm «H 1 NHm SH 1 new «H H mHmeHcm m>HH new Boom m.m.: m.m m.m.a IIIIIIIIII mUCMwSOSUIIIIIIII IIIIIIIIIIIIImHMHHOU CMHQOHEum m0 mflcmmsonulllllillllllll nme oomH H momH m «omH m mwaH m momH m HomH muuanH wo 09Hm> Hmsccd msoum xufiooaeoo houaoma .mHmoHnum .m50uw quUOEEOU uoflme >2 muuanH wo A.w.H.uv wsHm> HMDGC4 Ha mqmdfi 503a m. ,3 a fl 3 U :puzuxh nuaaw MN 9. V ... oflu P~ r. .N IHQIN 25....“ N. «k C \nnfl 5.22:: .flu NV N. .alN .INfiV (r V. \ . .‘l. u C C? N. ni‘,v~.\1ridavfiav‘- U...‘ x 3 r. C: «a... 7i. p4 61 .00H .m ..uHo .mm .Eoumm "condom comm O OKOKD I H H.mvHI o.HOH E m.m.o mcoHHHHe m.mh I h.mH N.hH I m.mm m.mOHI m.hmml m.NmN m.Hm I h.mN h.NH I H.mm m.mmHI v.QOVI m.nnm IumanHon amHmoanm mo mcoHHHHEII ucsooom HmuHmmo Hmuoe mm>umwmu mmcmnoxm cmHmHOM SH mmcmno mGOmeHEo can muounm mamuH mCHUGMHmm son HmuHmmo Apmcv HmuHmmo oHHgsm Aumcv HmuHmmo mum>Hna .m .N .H unsound HmuHmmO .HH ucsooom ucmnuso so mocMHmm Humcv mummmcmua mEoocH usmfiumm>cH Aumcv pasooom m0H>Hmm mocmHmn momma A m.H.ov muHOQEH A.n.o.m~ manomxm .N .H undooofl unmuudu .H hmoa mwma mmmH souH nmummmH .MHmoHnum .mucsooom mucmahmm mo OOCMHMQ no mumsfidm NH mqmfih €52 .mNH .a .meH can no ijuomunmn< HmoHumHumum .ucmecum>oo cmHmochm HmHumaeH "mousom .OOHHHIquU .Auv umm> comm :H “Halumoouv How» msoH>mum mo moo um>o Humoouvmoo ucmuuso mo mmmwuocHw G.m H.m o.m m.v ¢.m m.« I mHmmoHumIHooH nae moo Hmmu cH £u30um mo mumu Hudcc4 G.HHH m.wHH G.mHH m.GOH H.00H ~.ma o.OOH AOOHIHGmHC xmncHImoHua uHuHHaeH m.~o m.mmH ~.~o v.mmH ~.qu m.~mH ~.o~H ~.HHH H.4HH AmmoHua umxume umv mzu «uHamu umm .m o.mo~ m.H~m v.mmH G.mm¢ o.HHv H.mom H.o~m m.on H.mm~ 1n+ov coHuaEuou HmuHmmo UHumeOU mmouo .m o.v H.0H m.v a.OH H.OH m.m m.m H.m a.OH AxUOumm>HHo mxooum cH mmmmuocH .n m.am m.mVH m.nm ~.mvH m.o~H H.00H m.mm m.om m.m~ acmEEHsvm was sumcHnomz m.HVH o.HGm m.H~H m.vom w.mH~ H.mm~ v.o- v.H- m.mo~ mxuoz can mmcHoHHsn .vcmq o.vo~ v.HHm H.mHH H.HH¢ m.oov ~.Hmm o.HHm ~.m0m ~.vm~ :oHumEHOL HmuHmmo omxHH mmouo .o n.mnv.H m.mmo.m v.mmv.H H.8om.m m.mwm.m a.omm.~ m.mmo.~ H.4Nm.~ o.oH¢.~ lq+mv mmoHum umxums um uUSUOuQ HmcoHum: mmouo .m H.Hm H.>- m.mm m.o- H.~o~ m.vnH H.HMH o.-H H.HHH .memensm wo umcv mwxmu uuoqucH .v G.mmm.H G.HHv.m H.omH.H m.m>m.m m.mmH.m m.om>.~ e.gmv.~ H.Hmm.~ a.vom.~ 1~+Hc umoo uouomu um DUDUOum HmcoHuwc mmouu .m o.o- m.GH- H.m- H.~HI m.m- «.mH- m.mH- m.m- «.mH- vacuum eouu meoocH umz .~ ~.mmm.H H.mmv.m «.mmm.H o.mmm.m m.maH.m G.Hom.~ m.on.~ a.mo«.~ m.m~m.~ umou nouuow ucwuuso um yonpoum UHumeoc mmouu .H ”.m.: m.m m.m.: m.m IIIIIIIIIIIIIII mcoHHHHEIIIIIIIIIIIIII IIIIIIIIwumHHOU cdeoHnum mo mcoHHHHEIIIIIIIIII HomH m momH m meH m vomH m moaH m meaH m HomH now» pmumoHch um muadouom choHum: mo aumEEdm .0 I. O. .. BfluH noIHomH .mHmoHnum .mucsouom HmcoHumc mo xumsfism Hmsccd MH mqml), the latter includes growth and other concomitant changes in economic and social structure. Essentially the concept of growth is a sta- tistic; the concept of development subsumes the gradual introduction of economic linkages, changes in economic and social institutions necessary for overall increasing economic prosperity.1 Development subsumes general in- creasing prosperity. Thus, income distribution is also an important component of development but is not included in the concept of growth. The importance of income distri- bution is elucidated as follows: . . . our subject matter is growth, and not distri- bution. It is possible that output may be growing, and yet the mass of peOple may be coming poorer. We have to consider the relationship between growth and distribution of output. . . .2 1Social welfare is a more appropriate term since it includes the intangibles of the good life. Its use is eschewed in this discussion, however, in order to avoid considerations of the components of the good life for the EthiOpian nation. This would lead into difficult anthro- pological considerations which are beyond the scope of this thesis. 2W. Arthur Lewis, The Theory of Economic Growth (London: George Allen and Unwin, Limited, 1955), p. 9. lvA' ‘Ofi «.90 u... 4 “"cr 1" . at... b. .F “a .“.“.. q, ’A a “e ‘c .L. "Iw- . A v..‘..‘: ’5. vL 5.... .. ‘ u n“,- s -‘H ‘ u f 1 I(’ ’— 72 The Liberian case exemplifies the situation of growth without develOpment. The annual rate of growth over the period 1954-60 averaged about 15 per cent1 but in 1960 as a rough estimate "fewer than 5 percent of the total number of income receiving units in the economy received more than 90 percent of total domestic income in money and in kind."2 New institutional arrangements are required to improve development. Institutional changes cannot be imported they must be created domesti- cally.3 Development is a broad concept which includes growth. Policy-makers in less developed economies seek to promote both growth and development; the ramifications of the development process have an important bearing on planning any particular mechanization program. Hence, some further discussion on development will provide essential points of reference in the formulation of evaluation criteria. In less developed economies the various sectors tend, in a dynamic sense, to be unrelated: the most typical characteristic of less developed countries. 1Robert W. Clower, George Dalton, Mitchell Har- witz, A. A. Walters, Growth Without Development: An Economic Survey of Liberia (Evanston, Ill.: Northwestern University Press, 1966), p. 23. 2 Ibid., p. 65. 3 Ibid., p. 91. 4Albert 0. Hirschman, The Strategy of Economic Development (New Haven: Yale University Press, 1958), pp. 106-080 ‘ .m4..- o 1.1..“ .u-v- .. _§A‘.- fl [II (I) (J) V“C III .I b. (n 73 Backward and forward linkage of the economy can be ob- served in the way developing industries demand increasing quantities of inputs provided from either indigenous resources or imports until such time as the appropriate intermediate industries become established. Derived demand for inputs gradually extends further into the economy's productive capacity as the economy becomes more developed (and more commercialized). Backward linkage gradually harnesses available resources of the economy through economic linkages from consumer demand back to the inputs of primary production. Forward linkage in- volves establishing a level of demand which equates with industrial productive capacity. "Investment decisions that are taken as a result of both backward and forward linkage must be prized highly since they are sure to be particularly easy-to-take ones."l Economic develOpment appears generally to proceed as a sequence of imbalances as investments in social overhead capital stimulate the investment in directly productive activities.2 Distortions occur as the eco— nomic linkages increasingly integrate the sectors of the economy. The fully integrated economy is self-coordinating and self-adjusting through the price mechanism. Use of lIbid., p. 17. 21bid., pp. 98-119. QA’PQY “grip Nut! 51va ‘ ‘flqnhfl-v' av :uunovtvl ‘ cf ud‘ob' p D.‘ R ' ‘ 7‘ -..-.: “uye flexfcle a 3"" “Ky-J 'v'“‘"‘---C SI -. " ._~ I .' . a"; , “ In w: . I :CSCCQLC Y’v . .'( ”PO: “, “Ratio . C {iv} le \ts (En " l“Ms 74 money becomes widespread, ways of manipulating the money economy are learned, and the market becomes an important source of information in the process of making economic decisions. Mobility of productive factors becomes a necessary condition and economic institutions, hitherto inflexible in traditional societies, become increasingly flexible and adaptive to change.1 As modernization proceeds, gradual integration facilitates the increasing articulation of the socio- economic system: the market processes provide neutral media in which individuals can express their own socio- economic values and attitudes, in contrast to traditional societies in which expressed values and attitudes are generally established by an elite. The articulated society is identified with the economy in which the character, education, and ethical persuasions of individual members have made important contributions. Individual achievement is an important motivation. Institutions facilitating the operation and manipulation of the market economy, i.e., the manifestations of commercialization: banking, credit, accounting, storage, transport, schools, research uni- versities, hold a prominent place in socio-economic life. The modern economy maintains its progressiveness by a continuous process of increasing specialization which 1Cyril Belshaw, Traditiongl Exchange and Modern Markets (Englewood Cliffs, N.J.: Prentice-Hall, 1965), pp. 168-45. 'e~-:: ‘0 fl c::i~‘ b :4 Hi~6~oupc I“ § oucu.u‘u-v . . . Alb :flflq I v‘. uvv- - ’Y) In . .-.IA. ‘ .- , u-szu ‘ . ‘I- .. ”I .:|"+“ -"‘I0i-‘v 5‘ .~A ‘m- I 7" .’..r‘ c “'V anviy v .~,, , “' but SLI- ‘A o' 7: ‘ ' Yv "‘ .. .‘O‘n ‘ QS . I.“ QM)?“ rl ~ V‘QiLS 0c :ECM ‘ " ) ducary 1‘. 75 leads to greater diversity in characteristics of its institutions and its people and an increasing complexity of social organization.1 Part of the process of develOpment and moderni— zation is a sectoral shift of resource employment from primary (agriculture, forestry, fishing) to secondary (manufacturing, mining, construction) and tertiary (ser- vice industries) production.2 The changes taking place in the structure of production are not random, but appear to follow a universal law. As per capita income increases, secondary industry increases in size relative to primary industry, and as per capita income increases further, tertiary industry increases in size relative to both. Ethiopian DevelOpment Plans The First Five-Year Plan was introduced in 1957; prior to this date some individual departments such as education, agriculture, highways, and telecommunications had independently formulated plans, but there was no lIbid., pp. 130-40. 2Hagen, op, cit., pp. 41-51. This phenomenon is a manifestation of FIEHer's thesis which states that as incomes rise, primary sector products have increasing amounts of value added to them by processing in the secondary sector and by services in the tertiary sector. A. G. B. Fisher, The Clash of Progress and Securipy» (London: Macmillan and Company, Ltd., 1935), subsequently verified and extended by Colin Clark, Conditions of Eco- nomic Progress (London: Macmillan and Company, Ltd., 1957). 0.- bid ,.an"- 4 --~ A? H- a V .alc- ub‘ . mxv v. V... I. r. .3 .3 ”a 2. S. ,: 6~u 322: --.L . " w..‘ H 4" 5‘ 'CD'T. ‘ v- ‘46 r». \v .I‘ 76 integrated plan of action. In the First Five—Year Plan major goals were oriented toward: (1) development of infrastructure essential for economic growth; (2) raising levels of education and technical skills; (3) accelerating agricultural development; (4) establishing processing in- dustries; (5) directing economic policy, particularly financial policy, toward mobilizing financial and human resources for economic development. Emphasis was given to infrastructure by the allo- cation of total investment $269.4 million (E$ 673.6 m.): 35.6 per cent to transport and communications; 20.5 per cent to industry; 27.0 per cent to agriculture and forestry; 8.5 per cent to education, health, and community development. During this period, annual growth of national income was estimated as being at a rate of 3.2 per cent, some 0.5 per cent below the planned rate. This was a significant improvement over 2.0-2.5 per cent for several years previous to the Plan, but since population increase during this period was at an annual rate of 1.6 per cent the annual increase in per capita income only amounted to 1.6 per cent.1 The Second Five-Year Plan (1963-67) had similar broad objectives to those laid down in the First Plan. However, emphasis was shifted in favor of directly pro- ductive activities to increase the output of consumer lMiller, op 21., Development of Agriculture . . ., Phase I Report, pp. 23—24. 77 goods and to create new employment Opportunities for the growing population. The Second Plan stressed the following specific objectives in production: (1) extension of cultivable areas; (2) improvement in cattle raising; (3) introduction of modern large—scale industrial undertakings; (4) establishment of processing industries based on agri- cultural raw materials. Investments for the Second Plan were considerably larger, estimated at $678.4 million (E$ 1.696 m.) allo- cated as follows: 20.9 per cent to agriculture; 18.8 per cent to manufacturing; 16.8 per cent to tranSport; 14.7 per cent to housing; the remaining categories of mining, power, forestry, communications and others, less than 5 per cent to each.1 The major goals of the Third Five-Year Plan2 have been established as follows: 1. The fastest possible growth and development of the economy as a whole—~the plan growth rate is 6% per year--and a steady if gradual improvement of the social and cultural welfare of the people of Ethiopia. 2. A steady and perceptible rise in the real standard of living for the population in terms of higher per capita incomes which would expand on average by over 3% annually. In plain terms lIbid.I pp. 24-26. 2Imperial Ethiopian Government, Third Five-Year Development Plan, pp. 35-36. g. . II I «‘C . 41C 1 OO n... “U; HIV 1. a 55 ‘1. IBM a #5 III. Lde es 78 this means better dietary levels, better clothing and better housing conditions, better health standards and educational Opportunities, as de- tailed in the sectoral chapters of the plan. 3. The building of far stronger foundations for sustained and rapid growth and development of the economy in the fourth plan period and beyond. This will particularly require the enlarging of the educational base of the population, with Special attention to the provision of the skills required by the various sectors, the acquiring of a more accurate knowledge of the country's natural resources, and the improvement of the adminis- trative capacity of the government. 4. Without sacrificing foregoing objectives, a gradual improvement in the distribution of real incomes, and increased Opportunities among the different sections of the population and the various regions of the Empire. In the agricultural sector, two main lines of policy have been adOpted by Ethiopian planners: one is directed toward commercial farming which is viewed as the vehicle for rapid expansion, to provide the dynamism to the sector;1 the other is directed toward "peasant, sub- sistence agriculture" to raise standards of the mass of the people.2 The planners intend to encourage private national and foreign entrepreneurs with the expectation that rapid commercial develOpment may have a substantial impact on the economy, generating income, facilitating the establishment of infrastructure and having a local lIbid., p. 37. 2". . . Out of four million peasant households 90 per cent cultivate less than five hectares each, two- thirds of them less than one and a half hectares." Ibid., p. 190. 9.9-LR? ‘- " bL—nua.u v c):’=’=. v Unfit-v- . H‘V Rhy- " I H two vya. :v-n‘....p 00-9 8 an. t, 79 demonstration effect.1 The rate of expansion for com- mercial farming is anticipated to be at least 5.7 per cent annually2 in order to compensate for the slow annual expansion in the subsistence sector, estimated at 1.9 per cent. Policy for developing the subsistence sector includes increasing the availability of improved tech- nology through expanding extension services, increasing credit facilities, improving access to available markets, establishment of "package programs," and land reform.3 In order to expand exports a number of crop expansion policies have been adOpted. Total agricultural export is planned to expand 72 per cent over the planning period: coffee exports to increase 27 per cent; oilseeds 214 per cent; fruits 72 per cent; pulses 60 per cent.4 The total Plan involves investments to the esti- mated sum of $1,246 million (E$ 3,115 m.), at current prices, of which 77 per cent is to be obtained from gross domestic saving. The balance plus net payments abroad will be made up by private and public borrowing from foreign sources.5 General development strategy for Ethiopia appears to follow four principal lines of policy: (1) meeting lIbid., pp. 191—92. 21bid., p. 37. 3 4 Ibid., pp. 193-94. Ibid., pp. 69-720 5Ibid., p. 57. P“ Sflgv v.‘ Vu‘ . DNQP “Fl-v 5)....3‘.“ - ‘ v . ! A5,. A . é. ‘ EVoU‘- ’b‘ “I C‘;;v,‘ »~\'“\r ‘.v 1 W «1C1 "7“ g... ‘l “t'. . *5.» I. s“ fICluc& i'v? 80 food demands for a growing population; (2) generating domestic surplus; (3) increasing foreign exchange sup- plies; (4) expanding industrial (agriculture, agro-industry and manufacturing) activity. Specific attention is to be given to: (1) early generation of cash income; (2) demands on scarce resources; (3) increasing the supply of foreign exchange; (4) difficulties in land tenure and health conditions; (5) government priorities for implementing research studies. Development of the agricultural sector is expected to include: (1) encouraging private foreign investment; (2) developing and improving institutional arrangements for agriculture; (3) increasing irrigation; (4) expanding production of crOps and livestock; (5) eXpanding agro- industries; (6) increasing mechanization and improving agricultural technology; (7) encouraging better land use practices; (8) increasing bi-lateral and multi-lateral . l aid programs. Evaluation criteria discussed in the following chapter are consistent with general develOpment conditions and objectives of EthiOpian development plans. These criteria can be classified into two groups: (1) those used to evaluate financial potentials of investment 1Miller, gp_gl., Development of Agriculture . . ., Phase I Report, p. 5. . urflnfifi‘] I - s . thuvdaas I b 9.3.; c. ,; ( ~~vv¢~g u o .M I I .b'w an: Invuavr- I 81 proposals; (2) those used to evaluate projects in terms specified objectives in the Third Five-Year Plan of Ethiopia. a ”q 1‘ " sues C91; U‘WQ ' CHAPTER IV METHODOLOGY Research techniques which constitute the method- ology of this thesis were discussed briefly in Chapter I. The methodology falls into four distinct phases: field work, preparation Of basic production data, data gener- ation (preparation of budget models), and data analyses. The research techniques employed in each methodological phase serve to appraise, synthesize, and analyze the data from selected cases of Ethiopian agricultural systems in which different forms of mechanized technology are employed. Selection of Cases In terms of agricultural systems, nature estab- lishes certain exogenous variables; man with his knowl- edge, skills, social values, attitudes, and customs establishes other exogenous variables and manipulates the inputs of resources available to the system.1 The 1R. F. Lord, Economic Aspects of Mechanised Farm- ing at Nachingwea: In {he Southern Province of Tanga- nyika (London: Her Majesty's StatiOnery Office, 1963), pp. 12-22. 82 83 endogenous characteristics of the production function establish the interrelationships between exogenous factors of production and endogenous products each of which has an economic value in monetary or non-monetary terms de- pending on the method of obtaining resources and diSposing of products. Dynamic situations in which these basic determinants are observed are depicted by the case studies which afford different forms of mechanization opportuni- ties in the agricultural economy of Ethiopia. A review of mechanization opportunities reveals a wide variety of possible situations for different forms of mechanized technology. Each situation is somewhat unique with respect to ecology and crops, seasonal availa— bility of manpower, and markets. Consequently, the possi- bility of a "best" mechanization policy is excluded. Rather, designing a mechanization policy is a pragmatic exercise to be initiated after careful analyses of rele— vant production and demand Opportunities have been sur- veyed. The diversity of agricultural systems and mechanization opportunities suggests a pragmatic policy will promote the efficient combination of the three forms of mechanization simultaneously. Within the Ethiopian economy a wide range of agri- cultural systems can be found. This range is the array of potential alternatives, from systems of unSOphisticated hand-powered technology to sophisticated engine-powered «I ufi‘fl’flf‘ , f‘l: -:L¢canv-\d ‘ ‘I'fil up; ~~-'ui .I.‘ H I." r; at v... vaQ- d I 1 ‘-v-.—~-. 5. :1.‘-'“- a ' Q ‘9‘”.“P C “" vuvb A. a ~--. 1*: V . ‘;v-~~+ *- ‘b~-»- ~ 1‘ _ If.:3:.v~,.. “""“. 84 technology, among which policy—makers may select for the introduction of different forms of technological improvement. Four cases have been selected from differ- ent regions of EthiOpia. These four cases of dissimilar agricultural systems were selected to demonstrate the method of treating available information to Obtain data suitable for the proposed economic analysis. The cases depict the following systems: (1) hand—powered agri- culture, Agnale Village (Appendix A); (2) transitional animal-powered agriculture, a family farm in Chilalo Awraja (Appendix B); (3) engine-powered commercial farm- ing, a large private farm in the Setit-Humera region (Appendix C); (4) engine-powered plantation farming, Tendaho Plantations (Appendix D). In selecting these cases, the objective of developing the system into a com- mercially viable unit was maintained as a principal cri— terion; thus, mechanized settlement schemes which have Special sociological objectives were not included. Com- mercial viability requires the technical skills of the Operator, under skilled supervision if necessary, to be adequate to handle the proposed form of technology. It also requires additional Operating and investment expenses to be met out of the proceeds from increasing the system's productivity level. Achievable production levels are demonstrated by assuming the introduction of appropriate new technological 85 forms, along with other associated improved inputs, and favorable economic conditions for disposal of surplus (marketable) production. The data presented in the tables of the budget models establish the system for the initiat- ing year (t=0) of each case, prepared by approximating the system observed in the field, and a synthesis for each system over an Operational period of ten successive years (t=l,...,10) prepared by using the budget technique. The uniqueness of each region precludes the possibility of assuming that each case is representative of its own particular system for the entire economy. However, each case study has been prepared to typify a particular agricultural system in a region; dynamic . . . . . . . 1 deV1ations from the average Situation have been minimized. Basic Data Sources of basic data were field observations2 and other studies believed applicable to the selected cases because of similar ecological and socio-economic 1It has been observed that case studies do not give averages but emphasize the dynamic nature of agri- culture; averages tend to neglect differences of oper- ational efficiency of systems which case studies can embody. Henry C. and Anne Dewees Taylor, The Stor of Agricultural Economics in the United States, I840-i932 (Ames: iIOwa State University Press, 1952), p. 358. 2Field work was conducted over the period of 19 months, October 1967-April 1969, during which members of the Mechanization Study Team traveled in Ethiopia and throughout eight selected countries of Equatorial Africa. 86 conditions. The objectives of personal visits to the location of each case were, firstly, to Observe the local ecology, the agricultural system, and assess potential for change and development; secondly, to meet and interview local persons who know the area well. Such persons repre- sented a variety of occupations: farmers, agricultural- ists, civil servants, teachers, missionaries, medical doctors; both Ethiopians and other nationals.l In order to facilitate the collection of specific information about production, processing, and diSposal of agricultural outputs from the local system, a schedule was drafted which provided a guide to the course of interviews. The schedule was designed to serve as a checklist for specific questions rather than as a questionnaire; the areas of inquiry have been listed in Appendix E. A number of inquiries are included in the schedule about which an average local inhabitant is unlikely to have precise infor- mation. Such information was subsequently obtained from members of the Mechanization Study Team and other relevant sources . lMost educated persons in Ethiopia are competent in English. However, many interviews in the field were conducted in Amharic; the author is indebted to Ato Seyoum Solomon and Ato Solomon Bellete both for their company on these field trips and their frequent assistance afforded as interpreters. t—‘l ".ases ar Lie stru 2x152. E . .. .fi a‘.ra "' Db“bb ‘ ‘ F 5J3. ..a‘ ‘ r- vy . .- c:'e‘s 0‘ "Econd V Usu balneC 87 Tools of Analysis The objectives of the first two methodological phases are to obtain sufficient information to describe the structures of the agricultural systems as they actually exist. Budgeting is used in the third methodological phase to estimate the probable outcomes which can be expected for the productive processes based on a set of stated assumptions. Two analytical approaches are employed in the fourth methodological phase. Firstly, the benefit- cost analysis technique is used to assess the relative levels of financial returns to be expected from investment in the mechanization of different agricultural systems. Secondly, other criteria selected from stated objectives contained in the Five-Year Plans have been employed to assess the relative values of new levels of mechanized technology. Budget Models Budget Technique The budget technique is essentially a synthesis used to combine data from various sources to generate new data for subsequent analysis. Data synthesis may be used to determine which set among several sets of assumptions appears the most economic as a basis for planning improve- ment for a single system, or which among several systems (each synthesized on a different set of assumptions) :u .3 .c. p I 2. 2. .: L~ 3‘ “,...‘r .C- v. y n :_ 4‘ CM C. a T: C. C. .+ :- 0.x. .3 ‘or ‘c- ‘c.‘ 88 appears to promise the best level of expected returns as a basis for selecting a system having economic merit for further improvement. For each individual agricultural system, budget analyses . . . should undertake to determine in advance how profit or loss differs if each of several different systems of operation is followed. It should carry such analysis to the point that the farmer is satis- fied in his own mind as to which of the alternative systems of operation will prove most useful . . . it should also indicate in advance what can be expected over the next 5-10 years. The budget technique has been known for over three hundred years.2 The procedure calls for: (1) information and description of the agricultural system; (2) determination of the future plan for the system; (3) determination of gross returns; (4) determination of Operating costs; (5) computation of net returns and other economic features of the system.3 1John D. Black, Marion Clawson, Charles R. Sayre, and Walter W. Wilcox, Farm Management (New York: The Macmillan Company, 1947), p. 146. 2"Writings on budgeting or 'advanced estimating' as it was then called appeared in German literature through the years since 1663 in connection with valuation, appraisal, sale, leasing and kindred subjects." Merle Eugene Quenemoen, "A Study of Costs and Returns for Dry— Land Farms in the Triangle Area of Montana with Emphasis on Operator's Labor, Machinery and Land" (unpublished Ph.D. dissertation, Michigan State University, 1966), p. 12. 3Walter J. Roth, "Farm Budgeting in Germany," Journal of Farm Economics, XI (October, 1929), 624. 9 ‘t A. the 5!! ‘y- ya» ' A g :" Affirm loll \vu'sibe- E'EILGlt‘l ( J 89 The first two requirements are met in the synthesis of the system for the initiating year and the basic assumptions of the budget. Returns and costs are deter- mined through operating budget procedures. The accuracy and consequent usefulness of budget models depends on the validity of the assumptions and the closeness of approxi- mation to reality. Scope and Application The SCOpe for making assumptions about prices in both product and factor markets is limited because compre- hensive future price forecasts are unavailable for the Ethiopian economy. Thus, two sets of budget models have been computed. In the first set, constant accounting prices, based on the actual observations of the systems, are employed to generate data for the first analyses dis- cussed at the beginning of Chapter VI. In the second set, accounting prices for major outputs and inputs, reflecting anticipated price trends to general data, are employed for a reappraisal of the analyses discussed at the end of Chapter VI. In order to synthesize an agricultural production system, basic assumptions derived from agronomic, engineer- ing, and socio-economic observations must be related to parameters established by the climatic features of the environment and the crOpping patterns established in the . F“,- :ECIORO 4”: 1 fi' ‘ 2a! fa‘ x nvv‘ .19. I 1‘ h. 7.. “yr-R. a... s‘ -3- CtCthIl, tc .‘VIAQY :v‘v‘Er'nprlt ‘hub‘ 90 region. These data are contained in Table 1 of each appendix, A to D. Basic Assumptions The set of basic assumptions specific to each budget model are contained in Table 2 of each appendix, A to D. The areas in which basic assumptions were made are: subsistence crop requirements and cash crop pro— duction, tools and equipment, crop prices and yields, operational rates for labor and machinery, and establish- ment costs. In addition, the conditions for obtaining loans, and certain other requirements to be provided government funds must be established. 1) Subsistence Crop Requirements and Cash CrOp Production A particularly difficult problem encountered in economic analyses of subsistence agricultural systems lies in the fact that few outputs or inputs are involved in cash transactions of a local market. Assigned cash values are arbitrary but in accord with the small proportion of transactions taking place in local markets which provide some guide for accounting prices. In the process of budgeting, outputs and inputs are valued in cash, yet to Consider final annual net output as a single cash figure diStorts the analysis of the system. Therefore, in I\‘Qnale, Chilalo, and Setit-Humera cases, which contain SlQ‘nificant amounts of "non—cash" production, "non-cash" 91 returns, and "non-cash" input costs, valuations are established in accord with local prices and the accounts of productive processes in the budget models are organized in separate non-cash and cash categories. Agnale and Chilalo are subsistence agricultural systems; in computing production possibilities first priority is given to meeting domestic food requirements. These requirements are based on the number of people to be fed per producing unit and established levels of food intake. As the productive capacity of the system in- creases, due to improved crOp yields and improved oper- ational efficiency, increasing capacity to produce cash crops is assumed. 2) Tools and Equipment In the initiating year (t=0), there is an inven- tory of tools and equipment for the case as it was ob- served as an operational system. Improved tools and equipment are introduced during this year in order that the level of mechanized technology considered appropriate for each system is in operation at the beginning of the operational years (t=l,...,10). In this way a difficult problem of incomparability between inventories is avoided. This problem arises due to the fact that the improved levels of technology of Agnale and Chilalo require the introduction of new tools and equipment in the first operational year of the budget (t=l), in contrast to ’- .‘o‘- r n “‘03- “‘ ya .0. ¥ ya. u in ‘ ‘no .. r‘ —v\v.o¢0\— . .Aa'“ ..-+ .3 .3 1 11.. .‘L t .l r t T. . . v . «a by L O . a. w‘ “c. v" we. .11 nu. at H - a . .U D. 3 c. I. . .. .l .1 a. .u I: p, ., H. .ql‘ .‘nv -r I. a: .Nh A,» .l ..v «n 92 Setit-Humera and Tendaho in which the actual form of technology is already established. If it were assumed that new capital equipment be introduced in the first Operational year of the budget model (t=l), then another inventory would have been necessary for the initiating year (t=0). In the first two cases, old tools and equip- ment gradually would depreciate and disappear from the system as improved equipment were put into use, beginning in the first operation year (t=l). In the second two cases, however, improved equipment would be already in Operation in the initiating year: replacement equipment would not be necessary until the end of respective depreciation periods for each category of equipment, i.e., toward the end of the budget period (t=5,...,10). Shift- ing large capital injections away from the initiating year which would occur only in the second two cases would cause significant changes in the benefit-cost analyses results due to the discounting procedures. Thus, to make the case studies comparable, depreciation is charged in the initiating year on the inventory of equipment actually observed to be in use, whether old or improved equipment, and the new inventory is introduced in the initiating year to form the basis of the production system for the operational years (t=l,...,10) and the basis of depreci— ation charges during these years. De; "Ml oerc Icahn». . ;: secure : IS. ,..‘ ._ Y‘. 1 ."P‘Oht wash/I‘M" d Were Obtai input Pric Pricing) t E? 1 I *piO-jed S ‘0 ‘ r Ontput 1 ‘5 «1e Year j 93 Depreciation is charged on the basis of fixed annual percentage of the original acquisition cost. This procedure is consistent with the situation pertaining throughout Equatorial Africa of no salvage market exist- ing for used equipment.1 3) Prices and Yields Prices and yields are major determinants of gross value of the total product; a percentage waste estimate is also incorporated into this computation. The first set of computations for the budget models incorporates constant prices for all outputs and inputs. These data were obtained from field observations and related studies. Trends in product market prices, sensitivity to changing input prices, and modified accounting prices (crude shadow pricing) to reflect changing economic circumstances are employed subsequently. Thus, in the first instance prices for outputs, inputs, and capital reflect the 1968 markets, the year in which field observations were conducted. Yield data are drawn from field trials and other related agronomic studies. Two production levels have 1This fact is most important in explaining the difficulty experienced in attempting to introduce new forms of agricultural technology into areas where agri- cultural productivity is generally low and the salvage value for any equipment is low. New equipment will have an economic cost greater than zero, probably even greater than expected new levels of output, and there is no eco- nomic compensation for abandoning the use of old equip- ment which is still productive although at a low level of efficiency. :‘een comp: law-level j reflect CO‘ superior IT. yields rea BEN”. hlgf“ *9- 4. ‘g' e C.) *1 *1 he *6 4) Re field are ObSEIVEd rates are made of 1 animal- 0 experimEn actual 31‘ similar t 94 been computed for each budget model based on high- and low-level yields. The high-level yield assumptions reflect commercial yield attainable under conditions of superior management although somewhat less than maximum yields realized by experiment stations; low-level yield assumptions reflect average to poor management conditions. Both high- and low-level yield assumptions represent improvements over current production levels. 4) Operational Rates: Labor and Machine Rates for labor and machine operations in the field are based on information for the current technology observed during the course of field observations. These rates are employed in the initiating years. Assumptions made of improving efficiency and shifts from hand- to animal- or to engine-powered operations are based on experimental work and observations made either in the actual area or in areas where conditions are sufficiently similar to warrant the transference of relevant data. 5) Establishment Costs Only in the Agnale case are establishment costs necessaryfor the develOpment of the budget model. In the other three cases improvements in the level of mechani- zation are facilitated by production of annual crOps which yields returns in the year of planting. Tree crOps in Agnale do not begin to bear fruit until four years after planting (i.e., planting, t=l; begin fruiting, t=4). cover shor amal sea I ANN 1 “”13“ u . , ¥‘u.v...\,¢. I d 's heany capi‘ of interes N ~33? loans in qual i 3:63.: depre reFi‘.~’ffierxt; negathe C 15 accomc 95 6) Credit and Loans Three types of loans are assumed: crop loans to cover short-term operations less than the duration of the annual season; medium-term loans to cover the purchase of equipment, implements, and tools; long-term loans to cover heavy capital establishment costs. Assumed annual rates of interest 8 per cent computed on a monthly basis for crop loans; and 7 per cent for the medium- and long-term loans. The medium-term loans are assumed to be repayable in equal installments over seven years, except for equip— ment depreciating in less than this period in which case repayment is computed over the depreciation period. Any negative cash margin at the close of any year's operation is accommodated on overdraft terms (short-term loan of one year) at 7 per cent per annum interest. 7) Additional Requirements Certain additional requirements are assumed in Agnale, Chilalo, and Setit-Humera. These are outside the assumptions necessary for the budget models but should bementioned at this juncture since they are included in each case study. Additional requirements, introduced during the first operational year of the budget, consist 0E7 capital and operating expenses necessary to introduce thfii proposed changes in mechanization, i.e., expenditures iJNJurred by the government in order to operate the program. Tl'lese expenses are in addition to farm operation costs but I ='esart o- “erefore, 96 are part of the exogenous components of the system and, therefore, are included in the benefit-cost analysis, being part of the total cost structure of the project. No additional requirements are included for Tendaho. In large-scale plantation farming the management is assumed to be technically competent to control and finance the introduction of its own technical requirements. The Models Budget model data are tabulated in a comparable form for each case study. The first two tables of each appendix, A to D, contain the ecological data, established cropping operations of the initiating year, and basic assumptions. Data are generated from these initiating situations and assumptions. The complete budget model includes the following generated data for each case study: annual income accounts (Table 3); annual input accounts (Table 4); annual crOp areas and summary of annual total Fufloduction (Table 5); summary of annual incomes (Table 6); OEKarational use of labor (Table 7); other inputs (Table 8); Sunnnary of annual total costs for inputs--excluding financial costs (Table 9); annual financial costs (Table 10); summary of annual budget model accounts (Table 11) . Budget model computations were based on esti— matlions of high- and low-level yields to establish maxima 5““3 minima production possibilities. Additionally, in 122 cases 0’. Strategies '. approaches Ir. Chilalo ether imp: P‘E'w’er) or t Zetrategy 1 szrategies Primary ti: labor inter Extens ive l: the two 5: cotton (st 0330;} SEE ( 97 the cases of Chilalo, Setit-Humera, and Tendaho, two strategies were assumed to exemplify two alternative approaches to improving mechanization in the systems. In Chilalo the strategies are designed to introduce either improved oxen and equipment (strategy I: oxen power) or the facilities of a tractor hire service (strategy II: tractor power). In Setit-Humera the strategies are designed either to mechanize only the primary tillage operations by tractor power (strategy I: labor intensive) or to use tractor power and combines extensively (strategy II: machine intensive). In Tendaho the two strategies are designed either to produce raw cotton (strategy I: raw cotton) or ginned cotton lint and cotton seed (strategy II: ginned cotton). In the systems depicted by Chilalo and Setit—Humera a substantial degree of integration into the market system has already taken place: surplus cash crops are produced. Thus, a simple decision-making algorithm which shifts sequential annual areas of cash crOps according to the level of gross operating profit on cash crOps grown in the previous year has been built into the budget models of these two cases. These are recursive algorithms1 based on the established practice of local farmers to determine the area of crops sown in each succeeding year. 1See Appendix B, pp. 286-90 and Appendix C, According per unit a gsduct le ia:.estic c :3, '95 are are decree: L. -. 5::uI1010 C 19.101318 5 1:1 ln‘lest £35.th i: be ClaSSj 98 According to ruling market prices, gross Operating margin per unit area is determined on the basis of gross value product less total costs of direct inputs. Allowing for domestic crop requirements, the areas of more profitable crops are increased and the areas of less profitable crops are decreased in each succeeding year. Benefit-cost Analysis Benefit-cost Technique The process of introducing improved mechanized technology into already established agricultural systems involves the local community, or the government, or both, in investments in implements, machinery, equipment, and modern inputs. Benefits derived from such investment may be classified into three groups: (1) primary benefits which are the financial rewards to resulting higher levels of agricultural productivity; (2) secondary benefits which are those objectives of economic development concomitant to achieved higher levels of productivity (e.g., gener- ation of income, cash, and non-cash; employment and distribution of income; export and import substitution potentials); and (3) intangible benefits which are im- portant in the overall develOpment process but are realized without being specifically engineered in any particular single project (institutional changes which emerge gradually in the process of development; training mdividuals I p ' 1:3: 0: 1nd. aarket and Cf market Ir function;- Cementior (mimize E"‘7‘rginal 1 viduals aw iearning 31",; . h”: ard l Vanni“? :l 99 individuals in new technological skills; growing familiar- ity of individuals with the developing institutions of the market and the price mechanism).l Primary benefits are relatively easy to evaluate because of their financial nature. However, in many cases the outputs and inputs of the systems under analysis are assigned accounting prices although the actual goods and services do not pass through a market. Thus, the financial nature of the primary benefits frequently re— flects an accounting convenience rather than an account of market transactions. In developed market economies the efficient functioning of the market system depends on a set of conventional assumptions: (1) consumers are rational (maximize total utility), they experience diminishing marginal utility, and utility functions between indi- viduals are independent; (2) producers are rational 1These are the "side-effects" of large infra- structural projects which Hirschman emphasizes are of great importance in the develOpment process: ". . . projects have a variety of more subtle, yet perhaps highly important and powerful effects, from the acquisition of new skills to the greater readiness, on the part of the consumers of the project's outputs, to produce for the market; from the stimulation of entrepreneurship to the learning of c00peration and discipline, from backward and forward linkages to greater prOpensity to engage in family planning; from increased literacy to greater confidence in the ability of one's own country to achieve progress——not to forget the negative effects such as new or heightened social and ethnic tensions, fresh opportunities for spread- ing corruption, etc." Albert 0. Hirschman, DevelOpment Projects Observed (Washington, D.C.: The Brookings Insti— tution, 1967), p. 161. izax‘mize ; graduction are indeper. 535 (4) asg 1.. the marl- Cf income, of target : itctiv fa 100 (maximize profit), they experience decreasing returns, production functions between individual producing units are independent; (3) goods and services are marketable; and (4) assumptions which affect the degree of perfection in the market, (a) degree of optimality in distribution of income, (b) degree of factor mobility, (c) availability of market information, (d) level of employment of pro- ductive factors.1 In considering alternative prOposals to invest in mechanization programs in Ethiopia the com— mercial market's level of development is clearly an in- adequate guide for optimal allocation of new investment funds becoming available for development projects. In the first place, in common with large government-sponsored investment proposals in any economy, the size of the in- vestment is likely to distort market prices in the region of investment; secondly, alternative proposals usually 1In equilibrium the operation of the capital market of the market economy is able to produce a future flow of goods just sufficient to compensate for consumers' sacrifices of present consumption. "Profit maximizing producers will make their investment plans in such a way that the present value of their future profits is at a maximum. This requires that they invest up to that point at which the present value of the net revenue stream made possible by the marginal dollar of investment is just equal to the dollar of cost, where net revenue of a period is defined as the difference between gross revenue and current costs. This principle can also be expressed on an annual basis: the firm invests up to that point at which the annual rate of return on the marginal dollar of investment (the marginal efficiency of investment) is just equal to the interest rate." Otto Eckstein, Water-Resource Development: The Economics of Project Evaluatibn (Cam- bridge, Mass.: Harvard University Press, 1965), pp. 43-44. entail a c] 1:.1'clve so A: ‘ I a: ;... a son: Ebtr‘eh benefits 1' 101 entail a choice between different regions and therefore involve social criteria for which the market tends to be ineffectual; thirdly, the commercial market mechanism in Ethiopia is of little consequence beyond the few metro- politan areas of the Empire. Another decision-making device is therefore necessary to indicate the relative returns to alternative investment proposals. Benefit- cost analysis offers an appropriate alternative. Benefit-cost analysis is a technique which takes into account streams of benefits, generated over time, and the concomitant incurred costs, from the initiating year of the proposed investment. Thus, by discounting all benefits and costs to the "present" (t=0) each alternative investment proposal may be viewed as a single sum of net benefits. The proposals may each have the same or differ— ing planning horizons but all can be put on a comparative basis viewed from the commencement of the project. The discounted flow of benefits less discounted Operating costs is the "present value" of the project and when the total discounted quantity of capital required to generate this present value is also deducted the "net present value" is derived. Viewed from a single point in time, interest charges and depreciation cost are excluded from the computations since these are costs incurred by using capital through time. G r1. 0 I , . a“ C ‘ .VOU" up .lfi. 0 A u r: ‘ . .‘ a V\‘ 1.. . u . . C. a O t O O 3 n .1 .I nu e .1 3 e 5 n w. an. I a w . C 4; E E e » Md 1. C n» A .5» I I .Mr . Wu. hwy. . Mu. «ad» a u .u t a flu ~“ .1 ‘ E 1' g o 102 The benefit-cost analysis procedure affords decision-making rules which are used either to accept or reject a proposal. PrOposals may be ranked according to one or a combination of selected criteria. Values for these criteria were determined in the case studies with the aid of the computer program which has already been developed and tested.1 Scope and Application Benefit-cost analyses may be formulated to reduce decision-making to a single exercise of rejecting or accepting alternative proposals according to predeter- mined values for a selected criterion. In this thesis the forms of mechanization represented in four case studies are not considered as alternatives to be either accepted or rejected. Rather, the problem is to determine rela— tive anticipated levels of returns to prOposed investments and concomitant anticipated secondary benefits. Intangi- ble benefits are not included in the quantitative analyses; they are nonetheless important, however, and should receive proper qualitative consideration before final decisions 2 . . are made. Benefit-cost analyses were carried out on 1Robert F. Ranger, Benefit Cost Methods for Project Appraisal: A ComputerProgram, Agricultural Economics Report No. 149 (East Lansing: Department of Agricultural Economics, Michigan State University, November, 1969). 2One way to treat intangibles is to ignore them. However, their importance in the overall development b . . M S 1* 6 an..- - ‘ . '(1 (D H ’- .21 J: m L J :1 r?" p; f 1 [.14 C7 103 primary benefits represented by the financial data gener— ated in the budget models and concomitant secondary bene- fits were analyzed separately. By treating primary and secondary benefits separately in analyses and intangibles qualitatively, tenuous discussions involved in deciding which secondary (and intangible) benefits should be in— cluded, and their valuation, are avoided although the problem of selecting satisfactory accounting prices remains.1 The benefit-cost criteria, discussed below, are employed as measures of financial performance. In iso- lation from other analyses, the benefit-cost analysis technique cannot be considered complete since other im— portant criteria, essential parts of the overall approach to develOpment planning, remain outside its scope. Each criterion is defined to measure a single aspect of process should not be neglected and even if, by definition, intangibles are not commensurable with other benefits and costs, clues to their impact on development can often be given in the process of systems analyses. Roland N. McKean, Efficiency in Government Through Systems Analysis: fiith Emphasis on Water Resource DevelopmenthNew York: John Wiley and Sons, Inc., April, 1958), pp. 60-63. 1"The real art of cost-benefit analysis is to assign prices to goods and services which do reflect their real costs to society (when they are inputs, i.e. used up) and their real benefits (when they are outputs, i.e. produced)." Ian M. D. Little and James A. Mirrlees, Manual of Industrial Project Analysis in Develo ing Countries, Vol. II: Social Cost Benefit Analysis (garis: Develop- ment Centre of the Organisation for Economic Co-operation and Development, 1969), p. 86. 104 financial performance, thus, taken alone, no single benefit-cost criterion can be considered an adequate measure of financial performance. The Planning Horizon In each case a time period of 10 years is employed as the planning horizon. However, since mechanization programs are envisaged as a continuing phenomenon of economic change, reinvestment in equipment to replace that fully depreciated was maintained throughout the period in all the cases. Fixing a single time period for the planning hori- zon raises a problem of comparability between the cases. Capital investment in tree crops incurs relatively heavy initial investments which have greater longevity than investments in perennial crOps, implements, and equipment. In Chilalo, Setit-Humera, and Tendaho perennial crOps are the basis of cash incomes but in Agnale, the main cash crops are citrus fruits. A maximum limit in estimating output and input prices is around 10 years but yield computations show tree-crop output to be increasing annually for at least 16-18 years (t=20-22) after the orchards begin fruiting. In the other cases, some nega- tive net present values were decreasing; suggesting that over a longer period positive net returns may be antici- pated. Approximations of the budget models for 20 years, therefore, were computed for all cases. In cases of 105 Chilalo, Setit-Humera, and Tendaho, these computations consisted Of reiterations Of year 10 (t=10) 10 times; in the case Of Agnale, increasing annual citrus yields were incorporated to approximate budgets for years t=ll-20. In the 20 year approximations some negative net present values become positive. The Discount Rate Clearly, evaluation of investment alternatives by the benefit-cost analysis technique is significantly in- fluenced by the selected discount rate. Two extreme cases are posited: (1) investment Opportunities with no capital rationing, and (2) investment Opportunities with capital rationing.l The first case assumes that investment capital can be readily borrowed in the capital market and can be liquidated completely in the event that the investment project ceases to be profitable. In this case, investment should proceed in any given project as long as the internal rate Of return (i0) from marginal investment is higher than the market rate Of interest (im), i.e., iO Z.im° The second case assumes that the investor seeks to maximize the present value of net returns to a fixed investment 1The intermediate case, partial capital rationing, embraces a continuum of situations in which investment units (i.e., firms or governments) can borrow in the capi- tal market and can liquidate some, but not all, invest— ments in the event of the capital assets proving un- profitable. McKean, 223 232., pp. 76-87. ‘YN VVAQ: 5‘ a ~~vz1 V“ ‘.cé.‘- ~ . 106 budget when faced with a set of investment proposals from which the invested capital, once committed, cannot be liquidated for future re-investment. In this case the market rate of interest becomes irrelevant: the present value Of net returns is maximized when the sum of dis- counted streams Of net benefits just equals the budget constraint using the internal rate of return of the mar— ginal project. Thus, the marginal internal rate Of return (MIRR) becomes the appropriate discount rate in the case of capital rationing. If investment continues until there are no additional projects which yield more than the market rate of interest, then MIRR equals im. The first case is an extreme situation which has little bearing on investment in productive assets. The situation for individual firms Operating in a well- develOped market economy appears to be that of the inter- mediate case (partial capital rationing) in which some investment is capable Of liquidation. The extent to which the intermediate stage approaches either end of the continuum represented by the two posited cases de- pends on the extent to which the initial investment can be liquidated.1 In the case of loans to governments for develOp- ment projects in less develOped economies, the market system is seldom well-developed. Moreover, budget lIbid., p. 85. «F' F‘- ‘vb"v v v:"‘ w - .l ‘I- i. cor d .st;m Chosen h C A31 and n ‘U s 107 constraints are fixed by votes in the donors' and recipients' respective governments and, once committed, even partial liquidation Of investments is unlikely. Thus, the situation depicted by the case Of capital rationing appears to give the appropriate context in which to select the discount rate.1 The discount rate employed for a given set Of investment prOposals will depend on the size of the budget constraint, since the budget determines the number of prOposals which can be considered. The selected MIRR will be higher, the smaller the given budget constraint. In considering the entire range Of investment Opportuni— ties in an economy the expected MIRR will be at least the estimated Opportunity cost of capital. A discount rate Of at least 5—6 per cent must be chosen because governments can earn this rate of return by investing funds abroad. Most less develOped economies can expect to achieve a social return to investment Of 10 per cent and it may not be unreasonable to anticipate 15 per cent.2 These are high interest rates but the con- tention is that developing countries are concerned to expand surplus social value as rapidly as possible; one way to achieve this Objective is to invest only in projects affording high rates of return.3 1Ibid. 2Little and Mirrlees, g2. cit., p. 96. 31bid. 108 The Development Bank Of Ethiopia charges 7 per cent interest on agricultural and fishery loans and 8 per cent on other loans.1 Thus earnings on direct in— vestments should be anticipated as greater than these interest charges. One estimate Of the Opportunity cost Of capital in Ethiopia has been estimated at 10 per cent per annum;2 this figure has been used for the discount rate in the benefit-cost analyses, since it is above the current interest charges for development loans and approaches estimates of social returns tO investment. Evaluation Criteria Of Financial Performance This first group of evaluation criteria consists Of seven benefit-cost criteria used to evaluate the finan- cial potential Of prOposals to invest in different forms of mechanization: net present value (NPV); payback period (PB), i.e., break-even over time; internal rate Of return (IRR); benefit-cost ratio (B/C); and three modified benefit-cost ratios, NPV in relation to capital costs 1Harry J. Robinson and Ato Mammo Bahto, An Agri- cultural Credit Program for Ethiopia, Report NO. 9, SRI Project IU-63§0} prepared for the Technical Agency of the Imperial Ethiopian Government (Menlo Park, Calif.: Stan- ford Research Institute, January, 1969), p. 187. 2U.S., Agency for International Development, "Application to the U.S. Agency for International Develop- ment: Shashemene Agricultural Development Project" (Addis Abeba: USAID/EthiOpia, 1970), p. 32. (Mimeo- graphed.) :EYSOYLrfi a - n ‘- 1:1; LOSE! criteria Were tO' em yea; Costs (1" Matted 109 (NPV/K), NPV in relation to salary costs for technical personnel (NPV/Tw), NPV in relation to salary and support- ing costs for technical personnel (NPV/T These WS) ° criteria are defined at this juncture; computed evalu- ations are tabulated in Chapter VI. Net Present Value NPV, which is in dollars, is defined as follows: T TR T O T K NPV = z -——5;—-— z ———E—— + 2 ———£L—-, t=0 (1+1)t t=0 (1+1)t t=0 (1+1)t where total revenue for each year (TRt) is the total annual benefit expected from the project, total costs for each year consist Of Operating costs (0t) and capital costs (Kt), all discounted to the initiating year at a selected interest rate (i). NPV decreases with increasing discount rates as illustrated in Figure 3. A decision-making rule can be formulated on the basis Of the NPV: the investment project is acceptable if NPV Z 0 when discounted at an appropriate rate. Thus, at the discount rate employed, an NPV 3_0 indicates an investment Opportunity, when viewed from the initiating year (t=0), which yields higher income streams than can be Obtained by investing in stocks or bonds at the same market interest rate. V-L J23- press: 0 1" £3.49 (VP?) $133.2“ 5 Svilrce - panb n‘ < r 110 Net present value (NPV) 1,000 800 600 400 200 3 - 0 .01 .03 .05 .07 .09 .11 Discount rate i i =IRR (l) m 0 FIGURE 3 Relationship between net present value and dis- count rate Source: William J. Baumol, Economic Theory and Operations Analysis (2nd ed.; Englewood Cliffs, N.J.: Prentice-Hall, Inc., 1965), p. 441. Payback Period PE is the number Of years Of Operation required before the net discounted benefits are equal to the dis- counted cost of capital investments. The year in which' net present value changes from negative to positive is the payback period.1 1Demonstrated in the following definition of NPV: T (B -O ) T K NPV = 2 ——£——%— - Z t t , where B = benefits (out- t=0 (l+i) t=0 (l+i) puts) O = Operating costs Let NPV 5.0 for t = 0,...,p-l (inputs) and NPV > 0 for t = p,...,T K = capital costs Then p is the payback period. t = year Of Oper— ation T = planning horizon ‘1 hm .Lf I: \ i: 9” .‘ tske 111 A decision-making rule can be formulated from the payback period (break-even criterion): Choose the project with the shortest payback period. This criterion ignores benefits that may accrue after the payback period. Never- theless, it is a useful guide when risk is high, or a considerable degree Of uncertainty exists and there is concern to recover investment quickly. Internal Rate of Return IRR is defined as that discount rate which reduces NPV to zero. The decision rule is to accept the project if IRR is greater than the market rate Of interest. Thus, if the IRR (io) is greater than the market rate Of inter- est (im), then the project can exactly repay the capital investment costs and pay a return to investors above the 1 market rate (i.e., i - i > 0). O m Benefit-cost Ratio The B/C, which is a monetary ratio, is defined as follows: 1If the economy were in competitive equilibrium then one value for IRR would result in an NPV of zero for all investment Opportunities. The value for IRR would be the marginal efficiency of capital defined as follows: ". . . that rate of discount which would make the present value of the series Of annuities given by the returns ex- pected from the capital-asset during its life to its supply price." John Maynard Keynes, The General Theory Of Employment Interest and Money (London: Macmillan and Company, Ltd., 1960), p. 135. 112 T TR T O T K -1 B/C = z ———E—— z ———E—— + z ———E—— t=0 (1+1)t t=0 (1+1)t t=0 (1+1)t The decision—making rule is to accept the project if B/C Z l for all i < iO(IRR). Thus, when viewed from the initiating year (t=0), benefit streams are worth more than associated costs in acceptable projects until that inter- est rate is charged which brings NPV to zero. Modified Benefit-cost Ratios The conventional benefit-cost ratio, just defined, assumes that the sum of inputs represents the total Of scarce resources. In development planning it is Often most economic to maximize the use Of one scarce resource. Generally, the scarce resource is considered to be capital but in less developed economies this frequently is not the case since aid funds are Often more readily available than the supply of technically skilled personnel or some other specifically scarce input. Modified benefit-cost ratios employed in these analyses express NPV as a fraction of an arbitrarily selected resource designated as the scarce resource for decision-making in the context Of economic develOpment in Ethiopia. Each fraction expresses anticipated net aver— age returns tO all employed resources per unit of the one selected resource. The following three modified benefit— cost ratios have been employed: ratio inves t diEfEI! follow Little 113 l. NPV in relation to capital costs g TRt T Ot T Kt ___—_E ' E '_____E + 2 '——_—E NPV = t=0 (l+i) t=0 (l+i) t=0 (l+i) l K T Kt z t t=0 (l+i) 2. NPV in relation to salary costs for technical personnel EEK : the numerator Of the fraction is the 2W NPV as defined above; the denominator consists Of the sum of discounted salary expenses paid to professional technical personnel. 3. NPV in relation to salary and supporting costs for technical personnel ¥E!-: in this criterion the denominator WS includes both salary expenses paid to l EBKis a similar concept to the profitability ratio in that both are measures of the returns to invested capital. The two concepts, however, are defined differently. The profitability ratio is defined as follows: T TR T O t t 2 ——E'- X ———E‘ PR = t=0 (l+i) t=0 (1+1) T K ' z t t t=0 (l+i) Little and Mirrlees, op, cit., p. 20. 114 professional technical personnel and costs for supporting facilities to maintain these personnel in the field. Trend Analysis Employing Evaluation Criteria Selected from Ethiopian Development Plans The second group of evaluation criteria consists of four criteria developed from four Objectives Specified in the EthiOpian Five-Year Plans: generation Of income, cash and non-cash; employment and distribution Of income; productivity Of productive factors; and potential for export and import substitution. These criteria are defined at this juncture. Substantial financial returns from investment Opportunities are clearly accorded high priority in the Five-Year Plans. Other non-financial criteria have also been cited for high priority in the Empire's development. Certain Of these criteria have been employed as analytical concepts. These criteria relate closely to the secondary benefits Of development projects discussed in the scope and application Of benefit-cost analyses. The budget models were designed in such a way that these criteria may be measured. The analytical technique employed for these criteria is the determination Of trends over the budget period. Tabulated indices at selected points in time 115 indicate changes relevant to these criteria which are occurring in the budget models. Generation Of Income In the budget models, both gross and net income data have been generated. Net income is a useful measure of economic surplus by which, according to conventional micro-economic theory, the farm Operator receives rewards for his management function, returns to invested capital, and any fortuitous economic gains accuring to the system.1 Gross income, however, is a preferable measure Of the income generating capacity Of the system because gross income is the total value Of the system's product to be shared among all the productive factors of the system. Not only is income generation important but also, in relation to development policy Objectives, income gener— ation should increasingly be in the form Of cash. The relative shift from non-cash to cash income generation is indicated by percentage cash data. 1Management and returns to investment are legiti- mate charges tO be included in total costs. Thus, in the strict sense, economic surplus or "rent" only accrues to "scarce" or unique qualities of management capacity which are not price-determined. Milton Friedman, Price Theory: A Provisional Text (Chicago: Aldine Publishing Company, 1962), pp. 115-18. 116 Employment and Distribution of Income In the Third Five-Year Plan recognition is given to the necessity Of variable targets of expansion among different sectors of the economic activity. "The foun— dation for the Ethiopian economy is and must long remain agriculture."l With only 8.1 per cent Of the Empire's population resident in urban areas and approximately one— quarter of l per cent of the population employed as wage earners in manufacturing industries, the Opportunities for wage-earning employment outside the agricultural sector are extremely limited. Policies for economic development in EthiOpia have clearly shifted emphasis during the course of three Five- Year Plans to the current position of attempting to plan in accordance with the factor endowment and product prices Of the economy. The shift has brought the agricultural sector into the position of first priority. The gener- ation Of new employment Opportunities is an Obvious Ob- jective to be incorporated into planning development in the agricultural sector. This shift Of emphasis in Ethiopian planning from urban to rural industry represents a movement away from the classical model which takes the position that the "capitalist" sector of the economy is capable Of continuous 1Imperial Ethiopian Government, Third Five-Year Plan . . ., p. 36. 117 expansion, employing the unlimited supplies Of labor which emerge from the "subsistence" sector at a wage slightly above subsistence earnings.1 The interpretation Of this model appears to have led to an overemphasis on developing urban industry leading to increasing rural-urban income differentials; excessive stimulation Of migration from rural-urban income differentials; excessive stimulation Of migration from rural to urban areas; and converting "dis- guised underemployment to Open unemployment."2 Analysis indicates the agricultural sector rather than urban areas as the key tO expanding employment Opportunities in econo- mies preponderantly endowed with agricultural resources. 1W. Arthur Lewis, "Economic Development with Un— limited Supplies Of Labour," The Manchester School, XXII (May, 1954), 139-91. 2Carl Eicher, Thomas Zalla, James Kocher, and Fred Winch, Employment Generation in African Agriculture, Research Report NO. 9 (East Lansing: Institute of Inter- national Agriculture, Michigan State University, 1970), p. 9. , 3Ibid., pp. 3-17. (However, this argument should be regarded as more relevant to short- than to long-run analyses in order to avoid excessive rural to urban mi- gration and resulting chronic urban unemployment. Ethi- Opia, like other developing economies, continuously experiences acute shortages Of foreign exchange, a situ- ation which can be alleviated by both earning foreign ex- change and substituting domestic manufactures for imported ones. Thus, some urban manufacturing development is also desirable. TO argue that Ethiopia is entirely agricultural and must give attention only to developing her natural agricultural resources overlooks the fact that England of the 18005, Germany Of the 18508 and the United States of the 19005 were primarily agricultural economies.) See W- Arthur Lewis, "Employment Policy in an UnderdevelOped 118 In order to evaluate the employment potential of each system, indices (to=100) were computed for the number Of work units required and an estimate Of the number of workers was made on the basis Of the average work day for the region. Labor earnings over the Operational period were estimated by the use Of indices and the relative cash content of wage earnings was computed. Productivity of Factors In the process of reappraising the analyses and deciding on changes in accounting prices to reflect antici- pated trends, indications of changes in factor productivity are necessary. Crude estimates Of changing productivity were computed in the form Of gross product per unit Of input (labor, land, capital). Potentials for Export and Import Substitution . . . The primary rationale for placing foreign ex- change impact in a pivotal position is that the immediate bottleneck handicapping industrial1 develOp— ment in the typical underdeveloped country is found in foreign exchange stringency, and that, therefore, the effect of any new industrial enterprise upon total foreign-exchange supplies logically represents a core of consideration. The contention is that an enter- prise has special merit if it helps ease the Area," Social and Economic Studies (September, 1958), re- printed in Gerald M. Meier, ed., Leading Issues in Develpph ment Economics (New York: Oxford University Press, 1964), pp. 378-79. 1This term would also include the agricultural industry as distinct from subsistence agriculture. 119 foreign—exchange situation, since added development then becomes easier, not harder; on the other hand, an enterprise looses in merit if its presence serves to impair the foreign exchange situation further and automatically precludes additional development.1 The foreign exchange impact Of any development program is determined by its capacity to either earn or to save foreign exchange. In the analyses, two aSpects Of foreign exchange impact are considered: first, the cost, in terms of foreign exchange, Of the capital investments of the program and imported inputs; second, the degree to which the program can anticipate either earning foreign exchange (i.e., producing exports) or saving foreign exchange (i.e., producing import substitutes). Summary The methodology employed in this thesis consists Of four methodological phases: (1) field Observations, and (2) preparation of basic production data; (3) data generation (using budget techniques), and (4) data analy— ses (using benefit-cost analysis techniques and other criteria selected from certain specified Objectives Of EthiOpian development plans). Four case studies, prepared from field Obser- vations and other relevant data, are presented in budget 1Walter Krause, Economic Development: The Under- develpped World and the American Interest (Belmont, Calif.: Wadsworth Publishing Company, Inc., 1961), p. 134. 120 models (Appendices A to D), non-maximized simulations Of relevant data, dynamic agricultural systems. Each case is unique, depicting a particular form of mechanized technology: hand-, animal-, or engine-powered agriculture. Basic assumptions were made with respect to sub- sistence crop requirements and cash crop production, tools and equipment, crop prices and yields, Operational rates (and costs) for labor and machinery, establishment costs, loan and credit conditions, and additional requirements to be supplied by government financial and personnel support. Having established the basic data and assumptions for each selected case (the situation in the initiating year: t=0), budget models were employed to generate data for 10 Oper- ational years (t=l,...,10). These data, constituting the budget models, consist Of: annual income accounts; annual input accounts; annual crop areas and production; summary of annual incomes; use Of labor; other inputs; summary of annual total costs; financial costs; and summary of annual budget model accounts. Generated data in each case study are presented for high- and low-levels Of production. Only one strategy is developed for Agnale, but in the other cases two possible strategies are developed as alternative ways Of improving or changing the form of mechanization in the system. 121 The benefit-cost analysis technique provides a means Of evaluating a set Of investment proposals for situations in which either the market mechanism is inade- quate to guide the flow of investment funds (the EthiOpian case), or the nature of investment will change the ceteris paribus assumptions Of the market (the general case). Benefits (primary) and costs (Operating and capital) are discounted to the present (t=0) to evaluate a given in— vestment proposal; the technique affords a set Of decision- making rules either to accept or reject a proposal, or to rank a set Of proposals according to computed financial returns. The criteria forming the bases for these decision-making rules are: net present value, payback period, internal rate of return, benefit-cost ratio, and appropriately modified benefit-cost ratios. In these analyses, the benefit-cost technique is used on the financial data generated in the budget models. In this way, only primary financial returns are evaluated; the difficulties Of deciding which secondary benefits (some non-monetary) might also be quantifiable for inclusion in the benefit-cost analyses are avoided. Certain Objectives drawn from the Five-Year Plans are included as criteria to evaluate important non-financial benefits. These are: generation of income; employment and distribution Of in— come; productivity Of factors; potentials for export and import substitution. CHAPTER V SELECTED CASES OF FOUR ETHIOPIAN AGRICULTURAL SYSTEMS The four cases depict different systems Of Ethiopian agriculture into which mechanized technology may be introduced. In this chapter distinguishing fea- tures Of each selected case are given brief consideration: the system, the basis for mechanization and technological improvement, and the basic assumptions for budgeting. This chapter is a summary of the budget model data de- scribed and tabulated in Appendices A tO D. Agnale Village--Hand:powered Agriculturel Agnale Village, approximately 1,083 kilometers from Addis Abeba, is located in the southwestern extremi— ties Of the Empire on the rich alluvial soils Of the north bank Of the Baro River; the area lies at an elevation Of 450 meters with a natural vegetation of wooded savannah and a hot and fairly moist climate. The village consists Of a large enclosed compound containing small houses 1Appendix A. 122 123 (about 15) to accommodate 190 people (20 families); the surrounding land is cultivated. This case was selected as an unSOphisticated agri- cultural system in which the available supply of labor is fully occupied, at certain periods Of the year, in pro— ducing subsistence crops. Only hand tools are employed. The System The climate affords two annual cropping seasons. The dry season extends from October to March: maize, sorghum, and beans are planted in November for harvest during February—April. The wet season extends from April to September: maize and beans are planted in April for harvest August-September. The system is balanced in such a way that there is an adequate food supply produced by a total labor force Of about 48 men and boys (over l2 years Old). Maximum labor demands occur during January-March, weeding and culti- vating three principal crops. Each worker cultivates a single "field" of 1.3-1.5 hectares: 72 hectares being cultivated in the dry season and 38.4 hectares (a little over half Of the same area) in the wet. Two unsophisti- cated hand tools are used: a short shafted hoe and a wooden hook. 124 Basis for Technological Improvement and Mechanization The area is ideally suited for producing citrus fruits which may become the basis Of cash cropping. Sesame is produced already and can be developed as a cash crop. Although the area is remote, there are plans to improve the highways to provide routes for marketing cash produce. The system must continue to produce adequate sub— sistence crOps, at least over the chosen planning horizon for the budget models. Thus, technological improvements are based on more efficient uses Of resources in sub- sistence production and employing labor and other re- sources, as they become available, in cash crop production. In this context, mechanization consists of intrO~ ducing a form Of improved hoe and a hand planter already approved by workers who have used them. During the budget model planning period, the people's diet has been improved by increasing bean production, and some increase in citrus consumption. Annual rates Of crop attrition in storage are currently high (40-50 per cent); the introduction of improved storage cribs can reduce annual losses to l0 per cent. Basic Assumptions Assumptions are related to: attainable yields for subsistence and cash crOps; crop prices; new required 125 production levels for subsistence crops taking into account the annual rate of population increase and improved stor- age facilities; and improvements in labor efficiencies as the result Of improved hand tools. Attainable crop yields are based on relevant experimental data from similar ecological zones; price assumptions are based on the local market and held constant for the budget model; sesame is introduced in the first Operational year of the budget model (t=l); citrus orchards planted in this first oper- ational year begin to yield in the fourth (t=4); improved varieties Of subsistence crOps are introduced in the sixth year (t=6). In the initiating year, the case is a non-cash system. It is assumed that cash will be paid for work on cash crops, as they become established, the cash content Of labor earnings increases over the budget period. TO facilitate these improvements short-term loan facilities (i.e., crOp loans and over-drafts), medium—, and long-term loan facilities are assumed, and general supervision Of the system by a well qualified extension agent who can be responsible for 10-15 such villages. Chilalo Awraja--Animal—powered Agriculturel Chilalo Awraja (subprovince) is an area of small scattered family farms some 150 kilometers south of Addis 1Appendix B. 126 Abeba on fairly fertile brown clay soil; the area lies between the elevation of 2,000-2,500 meters with a tem— perate climate. The case study establishes a typical family farm system which supports an average Of 6.3 persons, producing a wide variety Of crops and some live— stock for subsistence and market exchange. This case was selected as a system depicting an animal-powered agriculture, well established in Chilalo Awraja. Also, the area is in a state Of economic tran- sition. The Swedish International Development Agency has been Operating a package development program (Chilalo Agricultural Development Unit) in the Awraja since 1967. Attitudes toward the modernization process are generally favorable. The use Of engine-powered equipment is expand- ing through the development of a local tractor hire ser— vice. The area has a well established commercial economy although a substantial proportion Of agricultural output is for family subsistence. The System There is one crOpping season annually. Principal crOps are wheat, barley, maize, flax, and beans which are both subsistence and cash crOps; pgip and peas are more generally grown for family consumption. Oxen plowing begins with the "small rains" in February and continues until the planting season, June-July. Hand weeding extends through the period August-November (the "big 127 rains" begin in June). The harvest is gathered and stored during December and January. A variety Of animals is also raised: cattle, oxen, sheep, goats, horses, mules, donkeys, and poultry. A typical farm budget was prepared for 8.1 hectares Of which 5.1 hectares is crOpped in the initiating year. The average farm has 2.4 fragments. Hiring workers for cash wages is a well established practice in the area. The typical family employs one resident laborer who receives wages in kind and cash. Some additional labor is hired as required at planting, weeding, and harvesting times. Population is quite concentrated in the area and cash wages tend to be low, about $0.05 (E$0.20) per man-hour. Basis for Technological Improvement and Mechanization Two alternative strategies are prOposed to raise productivity and cash income. Strategy I is designed to introduce improved oxen, oxen equipment, and hand tools in order to improve efficiency in labor utilization and the quality Of cultivations. At the same time recom- mended improvements in crop varieties and cultivation techniques are introduced. Strategy II is designed to introduce new crop varieties along with the facilities Of a tractor hire service to improve quality and timeliness Of cultivation techniques. 128 A substantial amount Of farm output is required tO satisfy domestic needs which have first priority in the farmer's planning. Surplus production is marketed. Economy in domestic requirements is effected by improved storage cribs on the farm. Basic Assumptions Assumptions are related to: attainable yields; crOp prices; domestic crop requirements taking into account improved storage facilities; improvements in labor and animal efficiencies. Attainable yields are based on local research data on both variety trials and cultivation practices; price assumptions are based on the local market and held constant. In the initiating year, the case is comprised Of both cash and non-cash enterprises. The cash content in- creases over the planning period. TO facilitate improve- ments short-term loans (crop loans and overdrafts), medium-, and long-term credit facilities are assumed. General supervisory services and storage facilities are assumed to be established for strategy I; additional capital requirements and personnel are assumed to Oper- ate a tractor hire service in strategy II. 129 Setit—Humera--Enginejpowered Agriculturel Setit-Humera is a remote area in the northwestern extremities Of the Empire close to the Sudanese border approximately 750 kilometers from Addis Abeba. Soils are fertile vertisols. Water tends to be a limiting factor; the area receives annual mean precipitation Of 615.4 mm. during the wet season, July-November. Elevation is around 600 meters, the climate is generally hot and fairly dry. Conditions are excellent for growing rainfed crops. This case depicts engine-powered private commercial agriculture. The area has experienced rapid economic expansion during the past 10 years. Private entrepreneurs Operate tractors and tractor equipment on large farms. Some 60,000 workers migrate into the area annually as farmers hire labor for planting, weeding, and harvesting. This recent rapid economic expansion has occurred without planning; current development Of socio-economic infra- structure is totally inadequate. The System There is one annual cropping season. Principal crops are sesame, cotton, and grain sorghum (also a subsistence crop). Crops are planted at the beginning Of the wet season, June, July, and August, after the land 1Appendix C. 130 has been disced two or three times by wide-level disc harrow and tractor. The average farm of 800 hectares is divided approximately into 45 per cent sorghum, 30 per cent sesame, and 25 per cent cotton in the initiating year. Approxi- mately, 50-70 workers are hired on a farm Of this size, depending on the crop distribution and seasonal require- ments. Crop production is quite sensitive to market price fluctuations. Following a substantial decline in 1967/68 sorghum prices there has been a significant swing to sesame and cotton as major cash crOps. A good market exists for haricot beans which are introduced as another cash crop at the beginning of the budget period (t=l). Crops are sold in Asmera, a haul Of 430 kilometers east, or to local merchants. The absence Of a bridge over the Tekeze River and extremely rough feeder roads neces- sitate double handling Of much produce and consequent high transport and handling costs. Basis for Technological Improvement and Mechanization The level Of mechanization is already established in this case but at recent levels of crOp yields, general agricultural productivity has been very discouraging to further development. Two alternative strategies are employed in the budget models. Both incorporate improved 131 cultivation practices and improved crop varieties in order to raise crop yields. The first strategy is designed to maintain the employment of manual labor at approximately the same or a slightly increasing level in view Of the general economic Objective of expanding employment Oppor- tunities. The second strategy is designed to make greater use Of mechanization and consequently displaces relatively more labor. Basic Assumptions Assumptions are related to: attainable yields; crOp prices; domestic requirements for sorghum and improved storage facilities; improved cultivation practices; labor and machine Operating rates; the effect Of constructing a bridge over the river. Little agronomic experimentation has been conducted in the area, assumptions for crOp yields are based on relevant work from other similar sources. Crop prices are based on current Observations and held constant for the budget model. Domestic requirements for grain sorghum are based on the man-days Of work required; improved storage facilities are assumed to reduce waste from 15 to 3 per cent per annum. Improved cultivation practices, labor and machinery Operational rates are based on data available from Observations in the area. Similar credit facilities are assumed. Supervisory and extension services are also assumed along with storage 132 and marketing services. Plans for the construction Of a bridge have been drawn up, therefore, transport and hand- ling charges are reduced in the third Operational year (t=3), by which time the bridge should be in use. Tendaho Plantations--Engine-powered Agriculturel Tendaho Plantations Share Company is a joint com— mercial venture between the agencies Of the Imperial Ethiopain Government, private Ethiopain shareholders, and Mitchell Cotts and Company (Ethiopia) Limited. Total accumulated investment in 1967/68 amounted to $5,840,000 (E$l4,600,000). This case depicts large-scale plantation farming using sophisticated engine-powered technology. The plantations are located in the lower Awash Valley in the Danakil Desert about 580 kilometers north- east Of Addis Abeba. The area lies at an elevation of 370 meters. The soil is extremely fertile when irrigated. Rainfall amounts to 100 mm. annually; under natural conditions the area is a flat, semi-hot desert. The System The climate affords a single annual crop of irri- gated cotton which is Of excellent quality. Cotton is planted in May, following three months of land preparation 1Appendix D. 133 by tractor equipment. Weeding, irrigating, and culti- vating take place during July—October, and picking (three times) lasts from December until February. The early tillage and cultivation Operations are performed by tractor equipment, much hand labor is employed during the irri- gation and weeding Operations. There is a tremendous build-up of employed labor during picking, during the 1967/68 season approximately 5,600 people were employed in the fields. In 1967/68 management consisted Of seven expatri- ates and 30 Ethiopians. The expatriate staff is generally responsible for policy and administration assisted by Ethiopians who are also substantially responsible for general management duties. The market for Tendaho cotton is adequate to absorb all its production. The quality of the fiber is excellent. It is anticipated that much cotton will be exported in the future but at present a substantial amount is sold in Addis Abeba, substituting for imported cotton. Basis for Technological Improvements and Mechanization The level of mechanization is already established. The basis for improvement and further mechanization lies in improvements in yield, improvements in Operational efficiency, and enlarging the size of the Operation. 134 Two strategies have been proposed. Strategy I is based on production and sale Of raw cotton; strategy II is based on ginning raw cotton to sell cotton lint and seed. The second strategy involves the addition Of a ginnery, which requires larger amounts Of labor and capital. NO attempt is made to increase the level Of mechanization. Plantation farming appears to have a unique Opportunity to create employment which would be neutralized if all Operations were fully mechanized. Basic Assumptions Assumptions are related to: inventory Of capital equipment; prices and yields; costs for manual and machine Operations. Assumptions for cotton yield possibilities are based on achievable results in other similar areas. Experience at Tendaho has shown that annual increases in cotton yields can be anticipated. Some fertilizer and insecticide spray programs are incorporated into the assumptions. There is clear evidence in the plantation's records of improvements in Operational efficiency. These data are used in the development Of labor and machine Operational rates. CHAPTER VI ANALYSES OF SELECTED CASES BY BENEFIT-COST AND TREND TECHNIQUES The details Of the analyses are presented in this chapter under three main sections: benefit—cost analyses; analyses based on other criteria selected from develop- ment plans; and sensitivity analyses. The technique Of benefit-cost analysis employs the financial data generated by the budget models, hence the criteria Of this technique of analysis are measures Of financial performance. Many important economic criteria Of performance defy quantifi- cation in monetary units; consequently, those selected from EthiOpian development plans are treated separately rather than being assigned notional monetary values in order to incorporate them arbitrarily into the benefit-cost analy- ses. The sensitivity analyses employ the facilities Of the benefit-cost analysis program to make crude estimates of the degree to which changes in levels of selected parameters cause changes in the magnitude of benefit- cost criteria. Such crude estimates, based on the gross adjustment of total outputs and total inputs, can be 135 136 refined by making changes in assumptions Specific to each crop included in the system, then recomputing the accounts for each particular budget model. Following the crude sensitivity analysis, the effect Of price changes are evaluated by means of the last procedure. Benefit—cost Analyses Data from the benefit—cost analyses are contained in Table 14 which contains two major divisions: analyses Of data generated directly from the budget models (t=0, ...,10) and analyses Of 20 year approximations (t=0,...,20). Within each division the seven criteria of financial per- formance are presented by case for high and low production levels. For Agnale and Chilalo two separate runs1 are employed. Both these cases were Observed to devote a considerable proportion Of available resources to sub- sistence production. Without any change in the level Of agricultural technology, it is reasonable to assume that 1The term run is employed to designate a computer run in which the second run (run 2) is used to analyze data in some way modified from the data used in the original analysis (run 1). The data included in run 1 incorporate all the data generated by the budget models while the input and output data for the subsistence production of the initiating year (t=0) are excluded from run 2. Thus, the analyses employing run 2 data exclude production resulting from investment which took place before the budget period. Essentially this form of analysis takes into account the effects on the agricultural system of changes in level Of technology and avoids the problem Of including production due to investment not taken into account which inflates the results. This separation constitutes the process Of analysis "with and without" the project. 137 .mumfifloc .m.D Has cud memxawcc omen» uou monac> Lamuoap .mu:d:~ can uuamuso uncoumamndm ancaoauo mama Tun mono ~ :3: .cunn LLo no nonaflocc uo muwamcou H cam .mcsu ozu Dan >ooucuum oco xaco mp Ones» wauco< Lo amuo och ca nxoououum OCHJOHHOV mawwcucwuua c“ gonad: admv .nunou “duck O3Hc> uconvum n .LcoquSUOLQ fio>m~ 30H 0 a “cozuunpOua aw>0a swan n xv wscw>om amuOH 03Hm> ucwmuuma mq.m- Hm.m sm.v- No.5 v~.~- ”a.” “m.o OA.L o . H.om ON. A omn.m.~.m- me.sam.na one. son. couuou noccam--HH s~.o- ow.» am.o- s..o o~.o- «c.~ 13.0 mm.s ~.m m.m~ on. m oao.hao- «pm.acm.ofl mmm. 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Nam. .H. was: Louueuuunuu ~.o- ~o.~ zm.o- m“.v mn.o- km.d mm.o c~.L 0.9 h.mm 0L. 4 ~04- Hum.“ ova. ooo. .Hs coxo:-H osaauzo Hm.m mm.o oa.o v~.hn On.~ 50.x oo.~ as.» o.ms L.Lo a m «ma.va osm.vm coo. mam. A~. - so.c .m.- La.~L rm.- L~.. am.a om.~ om.~ oov. oov. L . L. www.mm Amm.ov cam. man. In. . uscco< Leas»...ouu. uuuv uMMV3n mo vaNch< nnnnnnnnn cvuu-aauuoancnlumo~ueu andHopn-nuuuu-nunnnu;-uu-n-nuu -Tuuucwu Luann- auunuom>1uv aa-nuunJHMLc-ouuuuncunn nusllunm0aucu nuaaovcsucn . I u I u n « n J u n u n n u u n J n u u n u n I u u q u 1 u u z u q n z u A n z n J u x n . u z u zuh>m Esm u =me>d 85m u u " m3 .. . u 34 . n x. . N Cay...» " Cujuvu “O n u .. u . u . u Oar—dug n " b.>&7 u & >A7 u x.mMfi u um001um~occm ” ouch Hmcuouca " Juanamm " 03Aq> ucmwwua uu- " J u u A q u >oouuhum u ouoU u 5.5:. 55m u a «Van Ham “ “ caucuauu umcuuuauvcoa no“ mvn~n> poundfiou n eaaoanuu .Ouuu ucsouman acmu nun 0A was movaua uniumcou czams undo >n n~0>oa ceauunpoum “4. 30a pan 1:. non: no Ao~.....ouuv chuucELxOLQac Lm0> ow can .oa.....onuv sump uoovzn uo mammaccc unconuuuocon EOuu sauuuuuu OUGQELOuuva AuduCQCLE va mqm 0 then the project can be ex— pected to repay capital investment costs and pay a return to investors above the market rate Of interest. The benefit-cost program is limited to a maximum IRR Of 400 per cent which was encountered only in run 1 data for Agnale. When these data are re-analyzed on the basis of "with and without" the project, a more plausible IRR is obtained. The IRR ceases to be a useful criterion when its value becomes negative since then the project must also receive, rather than pay, an interest rate. Such a situation is implausible so the result has been recorded as IRR < 0. Benefit-cost Ratios The computation Of the conventional B/C employs the same elements as those used in the computation Of the NPV. Thus, when NPV : 0, B/C Z l and when NPV < 0, B/C < l. The data in Table 14 are consistent with these conditions. 141 Modified Benefit—cost Ratios Three other ratios were computed: NPV in relation to capital investment costs (NPV/K); NPV in relation to the salary costs for professional technical personnel (NPV/Tw); and NPV in relation to salaries and costs Of supporting services for professional technical personnel (NPV/Tws). The use of these three ratios carries the implication of the relative scarcity Of these three selected resources: capital (K), salaries to technical personnel (TW), supporting facilities to technical per- ). sonnel (TWS NPV in Relation to Capital Costs NPV/K estimates anticipated average net returns per unit Of investment capital when the entire antici- pated net operating surplus is allocated to the one arbitrarily selected scarce resource Of capital. The data in Table 14 indicate possibilities Of NPV/K > B/C and NPV/K < B/C. The relationships between NPV/K and B/C can be understood from the following argument: m_(B—(0+K) 1. K _ K ' where B = discounted total benefits, 0 = discounted total Operating costs, K = discounted total capital costs. 142 = -1 NPV _B—01 _E_ + 1 _ . B 2. B/C — O + K (I! I O [I] 011 if, and only if +1< 0+K B'O< B 'f d l‘f B <1- K 0+1<1'am onyl0+K ' 3.0— B 'f d l'f B —1 K —O+Kl,an ony10+K—. Therefore, if B/C > 1 then NPV/K + l > B/C and if B/C < 1 then NPV/K + l < B/C. These conditions are satis- fied by all the computed values for B/C and NPV/K con- tained in Table 14. NPV in Relation to Salapy Costs for Technical Personnel NPV/Tw estimates the anticipated average returns for the one arbitrarily selected scarce resource Of pro— fessional technical personnel when only salary costs (TW) are taken into accOunt. The data in Table 14 indicate pOSSibilities Of NPV/Tw > NPV/Tws and NPV/Tw < NPV/Tws, l B 0 is the concept Of profitability ratio used by Little and Mirrlees with the exception that taxation (T) on inputs is also accounted for, thus: B - 0 - T PR = K . Little and Mirrlees, pp. cit., p. 96. 143 NPV in Relation to Salary and Supporting Costs for Technical Personnel Since professional technical personnel are unable to Operate in the field without certain facilities in addition to their salaries, these additional costs have been included in the cost (T ) Of employing technical WS personnel. NPV/T estimates the anticipated average WS returns for this one composite Of arbitrarily selected scarce resources. The computed values for these two ratios satisfy the following conditions: TWS > TW' therefore when NPV > 0, NPV/Tw > NPV/T however, when ws’ NPV < 0, NPV/Tw < NPV/TWS. Analyses Of Case Study Data The benefit-cost analysis technique affords a means Of Obtaining quantified measures Of the financial potential for selected cases. The discussion in this section attempts to interpret the analyses for each case and the underlying suitability Of the selected agricul- tural systems to accommodate the proposed changes. Thus, the results of the benefit-cost analyses are used in this thesis primarily tO show qualitative differences between selected cases rather than to effect a selection process by which projects are either accepted or rejected. 144 Agnale Clearly, the financial potential Of introducing appropriate technological improvements into the productive system Of Agnale Village is high. This is demonstrated by relatively high computed values for NPV (at 10 per cent discount rate), high B/Cs, and high modified benefit-cost ratios. Analysis Of run 1 data indicates IRR > 400. The analyses Of the 20 year approximations make the investment potential for Agnale appear even more favorable because citrus yields are continuing tO increase beyond the tenth Operational year Of the budget. Over the 20 year period NPVs are approximately three times greater than over the budget period, B/Cs and modified B/Cs are approximately two to three times as great. The computed values for IRRs suggest that the rate of return to investment in Agnale can be anticipated to be higher than in all other cases at high production levels, higher than all other cases except Setit-Humera, strategy II (machine intensive) at low production levels where the difference is small. IRRs are also high and positive for the low production level assumptions. The relationships between NPVs and IRRs for high and low production levels using run 2 data are illustrated in Figure 4. The figure demonstrates that expectations of relatively high net returns are legitimate for appropriate investments in the Agnale system using any reasonable discount rate whether high or low level yields are anticipated. 145 High production level (H) Low production level (L) J .4 1 1 L NPV (U.S. dollars) 40.000 30,000 20,000 _ 10,000 7 1 0 10 FIGURE 4 Agnale: 20 30 40 50 60 70 80 IRR (per cent) O H (I) H M \D II II ._'I O 0 .,.g .,..' Relationship between net present value (NPV) and internal rate Of return (IRR) for high and low production levels in budget data (t=0,...,10; run 2) 146 At high production levels for run 2 data, antici- pated net returns to total investment approach six times the costs Of investment over the budget period and about 14 times over the 20 year approximation. Net returns for technical personnel approach 17 times the cost Of salaries over the budget period; 31 times over the 20 year approxi- mation. When supporting costs are included, these antici- pated net returns for costs Of technical personnel de- crease to about 9 for the budget period and tO about 17 for the 20 year approximation. Improvements in the level Of mechanization and concomitant technological improvements are suggested as appropriate to the Agnale system are quite unsophisticated. Due to the level of understanding Of the people, the level Of essential technical skills was assumed to be that which a single extension agent can provide. Thus, initiating the system from relatively low levels Of productivity and introducing new capital equipment which is relatively in- expensive, the potential for improving total benefits by moving the system toward cash crop production appears to be high. Chilalo The financial potential Of the productive system represented by the budget model from the Chilalo case presentes less attractive investment prospects than either 147 the Agnale or Setit-Humera case. This situation is demon- strated by relatively low NPVs, B/Cs, and modified B/Cs several Of which have negative values. The analyses of the 20 year approximations suggest a somewhat more favorable situation for the longer planning horizon. During this period two NPVs become positive along with their six associated B/Cs. Furthermore, the longer planning horizon is useful since PBs Of less than 20 years for two out Of the four which are greater than 10 years. Two strategies are incorporated into the budget model. Strategy I provides for the utilization Of improved oxen and oxen equipment in contrast to strategy II in which a tractor hire service is employed. The analyses Of run 2 data in both the budget period and the 20 year approxi- mation indicate strategy II tO be a less attractive invest- ment proposal than strategy I. These results suggest that the Chilalo case is unlikely to appear favorable in comparison with other cases. Within the Chilalo case study, in both strategies, there appears to be a critical level Of yield assumptions below which net negative returns can be anticipated. This critical level is indicated by the point at which B/C becomes less than unity.1 1The sensitivity analyses have been employed to determine this critical level. Data are tabulated in Appendix G. 148 The computed values for IRRs indicate high rates Of return relative to market interest rates for investments provided that high level yields are realized. However, IRRs of Agnale and Setit-Humera cases are considerably higher than IRRs for Chilalo. Furthermore, under assump- tions of low-level production, IRRs are negative although the IRR for strategy I, low level, is positive in the 20 year approximation. The relationships between NPVs and IRRs using run 2 data, are illustrated in Figure 5. The figure demonstrates that expectations Of only modest anticipated net returns are legitimate in this case using reasonable discount rates. Anticipated net returns tO total investments are small, NPV/K > 1 only in strategy I, high production level (run 2 data) which suggest some considerable uncertainty about expectation Of adequate returns from investments. Average net returns for costs Of technical personnel appear to be adequate in strategy I but not in strategy II (where NPV/TW < l and NPV/TWS < l) in the budget analyses although NPV/TW > 1 (1.07) in the 20 year approximation. The potential for mechanization and technological improvement does not appear to be high in the Chilalo case. Two important observations emerge from these analyses: firstly, that production levels are critical in determining whether positive or negative net returns 149 NPV 2,000 (U.S. dollars) 1,500 Strategy I, high production level (IH) 1,000 Strategy II, high production level (IIH) 500)- L l 0 10 20 30 40 50 IRR (per cent) 8 =35.3 -— H ll 3: :I‘. H H H O O -:-i w-l FIGURE 5 Chilalo: Relationship between net present value (NPV) and internal rate Of return (IRR) for high production levels in strategies I and II Of budget data (t=0,...,10; run 2) 150 can be expected; secondly, that strategy I appears much more promising than strategy II. Assumptions for strategy I (oxen) enable extension facilities (the costs and services for technical personnel) to be more extensively employed than assumptions for strategy II (tractor hire): in strategy I the unit1 Of extension facilities were assumed to be Spread over 150— 200 farmers in contrast to the extension and tractor hire service Of strategy II, Spread only over 50 farmers. These assumptions illustrate the importance Of Spreading facili— ties Of capital intensive services over a large number Of farm units. This appears to be particularly important in areas where farm structure and/or current farming practices have not yet reached the level Of development compatible with the utilization Of sophisticated engine-powered equip- ment. Setit-Humera Benefit-cost analyses demonstrate a high finan- cial potential for all aspects of the Setit-Humera case study. NPVs are high and positive using the 10 per cent discount rate; B/CS and modified B/Cs are all greater than unity. When the costs Of technical personnel are con— sidered as the scarce factor, reference to Table 14 reveals 1These are the annual costs for additional per— sonnel, equipment, and supporting costs shown in Table B.12. 151 that the computed values for NPV/Tw and NPV/TWS are extra- ordinarily high. These high values for NPV/Tw and NPV/Tws relative to the values for NPV/K are because expenditures for technical personnel are modest in relation to total capital investment costs which are relatively high. Furthermore, the employment Of technical personnel was assumed to be spread over 100 farmers. Thus, a modest expenditure on salaries and supporting services is spread over the expected net returns of some 80,000 hectares. This situation contrasts to that Of Tendaho Plantations in which both capital investments and the costs Of techni- cally qualified professional personnel are extremely heavy; these costs are spread over the expected net returns from a maximum of 10,000 hectares. Consequently, for Tendaho B/Cs and modified B/CS are relatively much smaller at the same discount rates. Differences between the values Of IRR computed from the budget data and 20 year approximations are small. Since PBS are the same in both analyses, these results suggest that when the introduction of appropriate techno- logical improvements into the Setit-Humera case causes net returns (i.e., NPV : 0) to reach the break-even point, relatively high rates of return can be expected. Replace- ment Of depreciated capital perpetuates the continuing high rate of return for investment rather than causing any material change tO anticipated returns over the longer period Of the analysis. The relationships between NPVS and IRRs are illustrated in Figure 6. This figure demon- strates extremely high NPVS associated with low discount rates. Farm structure Of the Setit-Humera case is appro- priate to make economical use Of expensive equipment; economies Of scale are demonstrated in the high rates Of expected net returns to investment. Under these con- ditions it appears that technical personnel can also be employed extensively with consequent high anticipated net average returns for this scarce resource. The profitability Of Operations from the indi— vidual farmer's vieWpoint is clearly influenced by the level Of attainable yields. From the aspect of long-term investment decisions, however, even the low level yield assumptions employed in these analyses lead neither to negative IRRs nor negative NPVS. Furthermore, neither B/Cs nor modified B/Cs are below unity. These are im- portant considerations which favor decisions to make long— term investments in such an area Of enterprise. Tendaho The analyses demonstrate high positive NPVs for high production levels in both strategies. However, NPVS are high and negative for low production levels in both strategies. These results suggest that yield attainments 153 NPV (U.S. dollars) 160,000- Strategy II, high production 120:000" level (IIH) Strategy I, high production level (I ) H Strategy II, low production 80,000- level (IIL) Strategy I, low production level (I ) L 40,000 b \\ l l . 0 10 20 30 40 50 60 IRR (per cent) N 0‘ o; m .4 g m w Ln 1n n u u u A A m m H H H H o H 0 P4 -H 0 W4 O -:-l .,.g FIGURE 6 Setit-Humera: Relationship between net present value (NPV) and internal rate of return (IRR) for high and low production levels in strategies I and II Of budget data (t=0,...,10) 154 are critical in establishing the plantations and caution should be exercised in making decisions to proceed with an investment prOposal of this nature and magnitude if adequate yield achievements are uncertain. From the analysis of strategy I (raw cotton) low level production, a break-even point at which NPV will become positive is clearly indicated by the shift in value Of NPV as the period Of analysis is extended from 10 to 20 years, how— ever, the PB period is greater than 20. Expected average net returns to investment costs and professionally trained personnel are moderately high for high production levels but are negative for low levels due to NPV < 0. The computed value for these criteria Of returns to selected scarce resource (NPV/K, NPV/T and W’ NPV/TWS) are not particularly high, probably because Of the extremely large amount Of capital investment involved, especially in the early stages when establishment costs are high and the productive area is only a fraction Of the whole concession. Improvements in the financial potential Of the plantations are reflected in the substantial in- crease in the values Of NPV/K, NPV/T and NPV/TWS for w! the analyses Of 20 year approximations in contrast tO their values in analyses of budget data. Nevertheless, heavy capital expenditures, a relatively large number of technically trained personnel, and relatively high costs for supporting services to these personnel result in 155 adequate but not high returns to these scarce resources when yields are satisfactory. Computed values for IRR for high production levels are considerably higher than the selected discount rate so that an adequate rate Of return for investment can be anticipated. IRRS are negative, however, for low levels although in the analyses Of the 20 year approximation, the low level strategy I IRR becomes positive, but small. This shift in sign for IRR suggests that, over the longer period, strategy I can be expected to break even on net returns only if the market rate Of interest were lower (i.e., 8.2 per cent) than the discount rate assumed for these analyses (i.e., 0.10). The relationships between NPVs and IRRS are illustrated in Figure 7. This figure also demonstrates the relationships among high and low levels Of production for each strategy and the way in which the curve for strategy I (raw cotton) low level, shifts to the right (the dashed line) in the analyses Of 20 year approximations resulting in IRR > 0. Tendaho Plantations case study depicts a large- scale engine-powered Operation in which capital investment costs and the costs Of technically trained professional personnel, both to employ and to maintain in the field, are high. Thus, rates of return for capital and antici— pated average net returns to scarce resources are not NPV (U.S. dollars) 5,000,000 r 4,000,000 _ Strategy I. 3'000'000 production 18V€1 Strategy II, production level 2,000,000 b 1,000,000 _ V -2 -l,000,000 _ [x a; H I ll 0.] H O '04 FIGURE 7 Tendaho: 1156 Strategy II, high production level (11“) Strategy 1, high production level (IH) Strategy I, low production level (20 year approximation) (IL ) (20) 1 \ \ \ \ \ \ \ \ | \ \ \ \ \ ‘11 L 10 20 30 IRR (per cent) N h l‘ a; on; .36 u H N »~ in u o m m N H H V O H A --1 o H 0 Relationships between net present value (NPV) and internal rate Of return (IRR) for high and low pro- duction levels in strategies I and II of budget data (t=0'ooo'10) and for low production level in strategy I of 20 year approximations (t-O, .,20) 157 particularly high even though the total size of Operation and anticipated net returns are large under assumptions Of high level production. Under low level production assump— tions these anticipated net returns are large and negative. Case Ranking According tO Benefit- cost Criteria The criteria of benefit—cost analysis have been used to demonstrate the relative effects on selected pro- ductive systems when apprOpriate improvements in tech- nology are introduced. However, Since one of the main uses of the benefit-cost analysis technique is to rank projects according to one of the criteria, the ranking Of the four cases can be considered at this juncture. The data contained in Table 15 places each production level of the case studies in order Of rank according to each criterion on a scale Of 7.1 Using NPV as the criterion it is clear from these data that relative size of Operation has an important bearing on rank. Tendaho ranks first and second (strate- gies II and I), Setit-Humera third and fourth (strategies II and I) in both sets Of analyses for high levels Of production. At low levels Of production Setit-Humera moves into first and second position and Tendaho into 1Two strategies in Chilalo, Setit-Humera, and Tendaho cases, one strategy in Agnale case. Wherever two cases are equal for a position Of rank, they are assigned the same number and the following position Of rank is omitted. 1£38 .mmmmo nonuo muOE HO one squ mcchmu Hangs mmumOHch uoxomum .o.H v oHumm p .coHumuHuo mcchmu new msHm> O>Hummoc mmumOHch mHmwnucmummo .xmmumuum mcHBOHH0u mHmmcDSOHMQ CH uwnadc camm n inc v Inc v HHS v as N Lev m Hm m HAS H couuoo soccHouuHH Hmv m Amy m Hmv m cm m m o Hm N Hwy N cobweb zwunnm 0:80:09 H H H H N m N v H N H H H m m>HmcmucH wcHnumEnuHH muses: N N N N m N m Hm m m N N N e O>HmcmucH noannuH uuHuwm Lee as Lee 5 Hey we co S Lee A Hm 8 Amy N Hwy 00H; uouomuuuuHH v m pa 9 v o v Hm v v v Hm v o HNV coxOInH onHHnu m m m m H H H H N H m Hm m m HNV u mHmco< mcoHumEonmem. cox ON mo mmeHmcd Hes m rev m Ame v mm m HHHV m is m Lee H couuoo omcch--HH Hey w Hue O Hov pm On o Hva o He n Hhv N :0uuoo 3muuuH ocmpcwe H H H H N m N m N N H H H m m>HmcwucH OCHcOMEIIHH muses: N N N N m N m m m m N N N v m>HmcquH MondHiuH IuHuwm Amy Us Amy pp Any Oh no n Hva n He 0 Am. 5 HNV wuHc HouocuunuHH va v Ave v va m pv v Hva v He Hm ova m HNV :mxouuH oHcHHcO m m m m H H H H H H m nHm m m Ame u meco< sump uomssn mo mmmNHmc< uuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuu xcmununnnunnlununuuunnunulunununulunnnlusnu gm:m.”SWAM.1M.M=H.”=MSM..MSM=M m m3 u 3 u u n u n " chsuv “ S\>mz " e\>mz " x\>mz " O\m " mmH " mm " >mz “ Homumuum " 0mmo pmumoHch coHumuHuo uo mch> Ou mchuooom xcmu ammo m m cHdonum .mmco >3 me>OH coHuospoum HHH 30H can Amy 20H: um HON.....ouuV mcoHusEHxOHQQM use» cm was HOH.....ouuv cusp poopsn wo mmmchcm Eouw cHumuHuo umoo:Uwacmn ou mchuooom mxccm mH mqm<9 159 sixth and seventh because Of large negative NPVS for low yield assumptions in the Tendaho case. The PB used as a ranking criterion indicates that break-even point on investments may be anticipated first in the Setit-Humera case: 4—6 years in strategy I for high and low production levels, 3-4 years in strategy II. Agnale follows showing 5-7 years for high and low pro- duction levels. The relative positions in rank Shift in using cri- teria based on rates Of return and average net returns to scarce resources. Using IRR as the criterion, Agnale moves into the high position, Tendaho moves tO a relatively low position, and Setit-Humera takes second and third positions. The relative high order Of rank is maintained for Setit- Humera and Agnale throughout the use Of these criteria for ranking. The benefit-cost ratios indicate Agnale to be con— sistently high, ranking in the first position. Tendaho (strategy II: ginned cotton) is higher than Setit-Humera (strategy II: machine intensive) for high production levels but for low production levels, Setit-Humera occupies second and third positions. There is a considerable degree Of consistency be- tween the orders Of rank when modified B/Cs are used as ranking criteria. Using NPV/K, average net returns to invested capital can be anticipated as highest in Agnale, 160 second and third in Setit-Humera for both high and low levels Of production, and for both the analyses Of budget data and the 20 year approximations. These orders are reversed using NPV/Tw and NPV/Tws as ranking criteria: Setit-Humera occupying first and second position and Agnale third. It should be noted that using these last two criteria, the cases occupying positions 1-3 remain unchanged with either a change in criterion or a change in production level. For the other cases, change in criterion has no effect on ordering but there is a re- arrangement between high and low levels Of production. The results of benefit-cost analyses are useful in assessing the potential financial performance of the case studies. Previous discussion has illustrated that using financial criteria is only one aspect in judging the potential value of an investment proposal. The next section Of this chapter takes these other economic aspects into account. Analyses Based on Other Criteria Selected from Development Plans The data contained in the ensuing four tables, are the results of measuring other economic quantities Of importance in the overall development of national eco- nomic plans. These quantities were not incorporated into the benefit-cost analyses because each one is a specific 161 criterion for which Specific quantified information tends to be more useful than the single number measure for values or ratios which the benefit-cost technique affords. Generation Of Income The data presented in Table 16 show the relative increases in gross and net incomes for each case; these data are not expressed relative to each other, however, Since a common base is not used to compute these indices.1 The percentage cash relates to the cash component in each Of the incomes. The data for Agnale indicate that gross incomes increase some 5-6 times (high production level) over the budget period and net incomes approximately 14 times. The greater increase in net incomes is due to relatively low input costs which do not increase as rapidly as output revenues. Over the budget period cash content of incomes increases from zero to almost 80 per cent. The increase in gross incomes for Chilalo is similar to that for Agnale although the relative size is much smaller in Chilalo. Net incomes for Chilalo also increase in similar proportions in high production levels 1For relative sizes Of incomes between cases the employed index bases (t=0) are as follows: gross income, (1) Agnale, $4,497, (2) Chilalo, $330, (3) Setit-Humera, $69,197, (4) Tendaho, $141,680; net income, (1) Agnale, $1,567, (2) Chilalo, $37, (3) Setit-Humera, -$6,352, (4) Tendaho, -$440,872. 162 .monHm> O>Hummoc muocmp mommcucoummo .mcoHuquHno cmso woos Ou nmxoucon mac Leapcu moucOHch womucwoumd cmmu m>Hnmomc ”mmszv 0>Huomwc ouocop momonucmummn .onHch new coHumxnu mLOmwn pmuzdeoo coon o>mc mmoHch HHHmcvuca N.noH H.OoH )Hm.n¢i 5.3m N.Hmm o.mmm uHm.mov m.va m.mm m.Nm n.mm m.NON o.mmH n.oHH : wcqumEuuHH m.mHH nio.mmc m H.:». 9.9m m.p.q 01H.HHL 0T4.mmHv ~.Ha H.Ho q.om k.Hm H.HSH H.4HH H.kHH 4 0>HmcoucH 80025: m.ooH m.ooH nAc.maV o.wm n.me ”.mmw OHO.HNHV n.mm m.Nm m.oo n.mm m.ooH m.OmH o.mHH : noanuuH nuHumm nio.moHv nim.moHv oA~.ooHv k.mn 01H.oac.He 0.~.Ho~. V oHo.mo~s m.om o.nm m.mn m.vo m.HoH o.vq~ m.m~H H man N.Vm m.mm JHv.Hnmv “.mr o.-pc.H w.wmo.H 0.5N o.vm H.mm v.Nm m.vo H.50m n.wvv o.wnH : uOuUGHDITHH H.wn nie.nHHl n c.3muv “.mn a.umm on.NH L OHo.NoI N.Hm n.op «.mm m.no H.mou m.nHN m.HNH H c.mm . m.mm nflv.momv “.mb o.mmH.H c.mvo n.Hn m.am m.om m.mw m.ve N.mav N.mmm «.moH : coxOTIH MOHMHHLU N.mo n.mH m.o u H.uvm m.va m.HNH o.mo N.Nv m.H I m.mnm H.NmH v.NoH H n.mn m.oo m.o 1 v.4tv.H n.Hmm m.HNH b.0n N.Hw m.H n ”.mwm H.v>N v.NOH : t mHmco< uuuuuuuuuuuuuuuu ucwu Hodn1-|nanunnn unnnu--uuu-|a|uooH“Ouuunnnounnuac nun::--uu|ucou nomuu:nnpuou unuaunlnnuOOHuouulunnnn OH m H H H o M OH M m H H oH H m H H H o H 0H H m H H H H I I 0 o o H n o ~w>mfiu H cmmu mmsucwoumm H waCH cmcu oomucmuumd H xmch coHuospH momusuum H Undo . Iona“ H use» pwusoHch um OEOOCH up: Hmsccd use» poucoHch um waoucH mmoum Hmscc4 H H nHQOHnum .wmau >9 omaucouuwd cmuu pupsHucH ppm .AoH.m.Huu. poHumd woopsn cH mucHom manna us oEoocH no: Hunccs can OEOOSH mmoum Hmzccm mo mmqucH oH mqmde 163 Of both strategies. In the low production levels, however, negative net returns are anticipated until the eighth year in strategy I (oxen) and over the entire budget period in strategy II (tractor hire). The cash content Of incomes shows only modest increases Since the system is already integrated into a market economy. In the case Of Setit-Humera, increases in gross incomes are modest although the increase in net incomes is greater than eight times over the budget period. Furthermore, over this time period net incomes in strategy I (labor intensive) shift from a negative value in the initiating year to positive values after the fourth year for high production levels and after the sixth year for low levels. Increases in cash contents are small Since the system is already Operating as a cash economy in the initiating year. The data for Tendaho indicate substantial increases in gross but only modest increases in net incomes. It should be borne in mind that part Of these increases is due to substantial increases in area under cultivation over the budget period. Net incomes for low production levels remain negative throughout the budget period. The plantations are organized completely as a cash economy, therefore, there is no change in cash content Of the accounts. Since the data contained in Table 16 are derived from the budget models, an analytical view Of each case is 164 presented in terms of gross and net annual incomes from the point Of View of the individual Operator within the farm system. This point Of view is important because the Operator must view any proposals for improvement favorably before being convinced to begin effective Operation. Thus, even though Chilalo does not present a very attractive case for investment under benefit-cost analysis techniques, the anticipated increase in net returns from the farmer's view- point, at least at high production levels, appears to be quite substantial. This Observation suggests that the prOposals may find enthusiastic support from local farmers. Employment and Distribution Of Income The data compiled to Show the extent of increase in labor unit requirements were computed from total labor requirements in each case.1 Since constant wage rates are assumed in the budget models, the index Of employment is also an index of total labor earnings in each case. However, the cash content of these earnings appears to increase substantially in Agnale and Chilalo as indicated by the data on annual cash earnings in Table 17. In con- trast, Since Setit-Humera and Tendaho are well established 1To estimate relative sizes Of annual labor em- ployment between cases the index bases (t=0) are necessary, they are as follows: (1) Agnale, 44,328 man-hours; (2) Chilalo, 2,036 man-hours; (3) Setit-Humera, 62,256 man- days; (4) Tendaho, 60,056 man-days. 1.655 .ucwEwuqumu Hoan xwmd mH :OHLI umm>umz vcHusp mucmeuHsku co comma mumEHumw “muwuoan pwuHc mo uwnfidc omumH U .uoan OEHunuucd ocHuHc >3 use mucoEouHsvou noan ucosqwmndm .uHfis HonsH mN.uwuH3 m.HOEme .uHc: HonsH Hnuwuoan ucmpHme .uHc: Hoan HuHoEucw Hwo mumHmcoo wquw noan umm> ocHumHuHcHu .Huu us mH Oman xoch ououwumnu .OHON mus ouu CH mHmcm< uOu mmchumo zmmun .pmsdmmc mH much mos: accumcoo wmzsuon seam and mmchumo noan Hmuou wo xoccH can ucmE>oHan Haney uo xocho o.ooH o.OOH o.OOH o.ooH H.voo.H m.mov m.vHN oom.NH oco.m mvn.~ pHmN.H H.voo.H m.mov m.VHN H couuou o.ooH o.ooH 0.00H o.OOH m.Hoo.H o.Hmo m.mNN HmN1HN Nmo.m th.N OHmN.H m.ooo.H 0.0mw m.mNN z pwccHo-nHH o.OOH o.ooH o.ooH o.ooH H.oom H.Hmv w.mON Hmo.HH mmm.m mmm.N chN.H H.moa m.mmv m.mON H c0uuoo 0.00H c.00H o.OOH o.ooH m.va.H v.nnm N.mHN www.mH coo.» mmn.~ pHmN.H m.va.H v.hnm N.mHN : Immunn ochcop o.mm o.mm w.mm m.Nm H.HOH v.ooH n.vm Hm Hm um poo m.noH m.nOH m.mm H O>HmcmucH w.mm o.mm o.mm H.Nm m.oHH m.moH a.vm HoH Hm n pom m.HHH «.mOH 0.0m : mcHzOmEuuHH o.mm o.mm o.nm H.Nm o.mmH m.NmH o.oNH NNH ONH VHH com m.mMH N.MMH m.ONH H 0>HmcwucH shoes: o.mm o.mm o.mm H.Nm o.oHH m.va m.eNH wNH NNH oHH pom v.owH m.mmH m.mNH : HoanuuH :uHumm m.nm N.om o.mm o.Nv a.SVH N.NmH N.Hm Nw.N Nv.N Nv.N OmN.N a.oHH o.moH m.mm H wqu v.vo m.mm v.ov o.Nv N.NHN v.HmH N.nm NV.N Nv.N Nv.N OmN.N n.HmH m.OMH n.0m : uOuomuuanH N.vv m.om H.mH o.Nq m.mom N.omH n.mv No.N No.N No.N UmN.N w.maH N.HNH m.NNH H N.No o.vm m.vn o.Nv m.MNv v.00m H.mm Nn.N N¢.N Nm.N OmN.N m.omN N.mmm m.MVH : coxOn:H OHcHHnU «.mv N.vm H.H o n.vvm.Nv m.mom.w o.ooH Hm Hm ow mv N.mn h.nn m.mHH H m.mo o.mm H.H I H.oNv.No m.mNo.m no.ooH Hm Hm mv mv m.»h o.Hm m.mHH : I chcm< O O . uuuuuuu ntnooHn un-nunun-u: --unuunuuuni:u-TsmuOHEdcnunu:nn»unussnn nonunnvuTOOHu unnauuu 0H m m m H H o M 0H m M H m 0H m m H w o OH m H H m . . H . . Hm>mHH H chchsm HcDOD No wosucouumm H xOOCH H muoxucz mmecH coHuospH mowucuum H muco . H -ouan H Hcm> pousqucH um mmchHmw HonoH chou Hcscc< H use» pmudOHch um ucoEonwEw Hmsccd H H cHdOHnum .wmcu >2 mochuco HoncH HouOu cH pocsHocH wmmucwoucm cmco pas .HoH.m.Huuv poHde ummpsn cH mucHOd mwuzu um mmcHuumm Hoan HauOu can ucwE>OHdEo Hmsccc uo mmOHOcH NH MHmde 166 cash economies, the cash content of workers' earnings shows little change over the budget period.1 These data indicate a falling trend in annual employment for Agnale; rising trends for the other three cases. The increase in Chilalo approaches two to three times in strategy I (oxen) and 16-52 per cent in strategy II (tractor hire) the labor input in the initiating year supplied by increasing the employment Of part time workers at peak seasons Of the year. In Setit-Humera annual em- ployment and the number Of workers increase by about 35-40 per cent in strategy I (labor intensive) and 7—12 per cent in strategy II (machine intensive). In Tendaho, since the area under cultivation increases substantially, the in- crease in annual employment in the final budget year ranges from 9-14 times in strategy I, 10—16 times in strategy II the employment level Of the initiating year. The falling trend in employment in Agnale is largely due to two technological changes: the substantial improvements in labor productivity effected by the intro- duction Of improved tools and improved storage which re- duces the input Of labor requirements for subsistence food although cash wages increase in total. These data illus- trate an important aspect Of planning strategy. If local 1To estimate the relative size of annual labor cash earnings in each case the index bases (t=0) are neces- sary, they are as follows: (1) Agnale, $28; (2) Chilalo $43; (3) Setit-Humera, $31,728; (4) Tendaho, $36,761. 167 labor is to lend enthusiastic support to programs Of im— provement, it may be unwise to permit total returns to labor to fall because labor productivity is substantially improved by maintaining constant wages. Hence, wage in— creases should be included in such plans in order to com- pensate for reductions in labor requirements. The overall impression given by the data in Table 17 is that the Tendaho Plantations case can provide very substantial employment Opportunities for local economic development and generate substantial cash wage earnings each year. The case of Setit-Humera is less pretentious but nevertheless effective as an employment generator Since this case can be multiplied many times: it is one case in an area which may contain many large farms of this nature. Chilalo data show increased labor requirements which will have to be met by attracting new labor into the area and also by increased man-hours from existing labor. The employment level in Agnale is a reflection of increases in the local populations; no influx Of wage earners into the area is envisioned. Field labor from the farming community Of the sur- rounding highlands is employed On Tendaho Plantations. SO long as the labor demands keep within the bounds of local Supply, which necessitates a peak level Of demand occurring when local farm labor demands are low, constant or slightly riSing wage rate may be anticipated. In the Setit—Humera reqicnh.ndgrant workers arrive in large numbers for 168 cultivation and harvest employment. These workers have shown a propensity to organize themselves into working groups which are in a strong bargaining position. Moder- ate wage increases are likely to occur in this area. In Chilalo Awraja, labor is relatively scarce although work— ing for wages is a well-established practice. Moderate increases in the wage level can be anticipated as compe- tition for labor increases and new labor may possibly be attracted into the area. Relative intensities Of labor utilization to land and invested capital are shown by the data in Table 18. In the initiating yearl labor utilization per unit Of land is least intensive becoming rapidly more labor intensive as oxen technology (strategy I) is improved. In Agnale, labor intensity, already high, increases substantially over the 1Distribution of land in each case at years 0,1,5 and 10 is as follows: Setit- Year Agnale Chilalo Humera Tendaho ------------------ hectares-—--------------——-—- 0 73.97 5.1 800 1,100 l 66.35 a 5.1 b 800 2,165 5 c 54.42 d (I) 6.6 (II) 7.1 800 5,030 10 (H) 30.32 (L) 46.06 (I) 6.6 (II) 7.1 802 10,000 aI--strategy I. bII--strategy II. CH--high level yields. dL---low level yields. 169 v.0 v.qu n.vev N.mne m.mmv H covuoo e.o m.eme m.moe m.eom m.eme m emceHm--HH v.0 m.mmv m.mHv e.mm¢ m.mmv H couuoo o.o N.NHN o.Hmm m.mmv m.mmv m BMHIIH onmpcoa N.NN o.nmo N.mmw m.mmm m.NNm H m>HmcmucH N.NN m.Nmm H.Hmo m.>mm o.NNm m OGHHOMEIIHH n.NN N.Nvm m.mNm v.nmn m.NNm H O>HmcmucH mnoanm N.NN N.Hnm m.mvw o.mmh o.NNm m HOQMHIIH IpHuom m.mH N.mmm e.va H.mmm N.mmm H OHHH m.mH m.emv N.Nnm N.Nmm N.mmm m HouomuullHH m.mH m.nmm N.mNm N.mom N.mmm H m.mH N.mmm >.vm5 m.vnm N.mmm m coxOIIH OHMHHHU o.v m.v m m m.HoH H.th o.mmm m.omn N.mmm H m.e H.m m mH m.HmH o.mmH.H m.VHm m.onm N.mmm m u mHmcma InnuHMHHOp mom masocncmE|nuu naunmumuomn Mom musoclcmEIII OH H m u H u o H OH H m u H u o u Hm>mHu u coHumuomO SH HmpHmmO H MMOMJHCOHHOSOH ammumuum u mmmu poumHSEdoom mo umHHop mom u pOHMOHOcH um oumuomn mom u loud" “ SOHumNHHHus HOHMH Hmscc< SOHHMNHHMMS HOQMH Hmsccd MHQOHHHM .mmmo NH AOH.m.H.ouuv OOHHOQ ummpsn cH mucHom HSOM um coHumummo CH HmuHmmo OOHOHSESOOM mo uHcs Mom can pcmH mo uHcs Mom COHumNHHHu: HOQOH Hmsccm mH MHmHB 170 budget period as does the intensity of capital employed relative to labor. From these data Agnale is clearly indicated to be the most labor intensive case; labor utilization per dollar of capital is relatively very low in the case of Tendaho. Productivity of Factors Gross output per unit of productive factor is a crude estimate of factor productivity. There is no way of refining this form of estimate without more precise data about the nature of the production function. Furthermore, while indications of increasing productivity may be assumed from rising values for gross output per unit of productive factor,l nothing precise can be determined about the 1The number of units of productive factors are the units of land, labor, and capital employed in each year. Units of capital (dollars of investment) raise the problem of how to treat investments occurring in previous years and continuing in use during the year in question. One alternative is to depreciate the capital and accumulate depreciated capital to the particular year. This method has the disadvantage of a tendency to underestimate the capital value in terms of alternative resources foregone in order to invest: in any given year a piece of equip- ment purchased in the past (providing the purchase date is relatively recent and not in antiquity) represents the cost of acquisition to the Operator rather than its depreciated value (which is really a reflection of its salvage value.) A second alternative is to depreciate the investment over the period of medium-term loans. This method has the dis- advantage of tending to overestimate the capital value by overlapping in the accumulation: some equipment depreci- ates more rapidly than others but treating all investments in the same way results in the introduction of some re- placements before the original item is fully depreciated; the accumulation to a given year then includes some double counting. A third alternative, the one used, is to 171 relative level of returns to each factor and, hence, the distribution of the total product. However, the data in Table 19 indicate that gross output per unit of each factor increases after initial investments have taken place, for each productive factor. This suggests that, while nothing can be deduced about the relative distribution of the total product, there is evidence that the production function in each system is rising and, hence, returns to productive factors can be expected to increase over the budget period. Potentials for Export and Import Substitution The potential for the agricultural systems either to earn foreign exchange or substitute for imports, and thereby save foreign exchange, was estimated both on the basis of potential to earn or save foreign exchange and the expression of this potential per unit of invested and operating capital. The second expression was determined accumulate the original acquisition price of capital over the lifetime of each piece of equipment and to eliminate it at the end of the depreciation period. Thus gross out- put is expressed as a fraction of accumulated capital in operation. Accumulated capital in operation in each case at years 0,1,5, and 10 is as follows: Year Agnale Chilalo Setit-Humera Tendaho ------------------ U.S. dollars--------------—-------- 0 274 112 21,898 843,384 Strategy 1 ll .1. a .I. .1; 1 3,041 593 803 22,123 37,572 1,014,483 1,284,161 5 6,994 616 902 22,206 38,515 2,835,212 3,105,890 10 7,556 630 1,050 22,298 38,607 4,784,017 5,054,695 172 .ucmEumo>:H nmmu >3 Huu :H pwomHmmu mH can :mmoucoc >HCHME ma ouu CH ucmEumm>cH HmuHmmo U .mmsHm> Hmqumo CH pwUDHocH mum mucmEUmm>cH ammo Una nmmolcoc nuon ucsooom oucH Emumxm wuwucm @cmeBu .mmSHm> pouSQEH um Hmufldmo ammuncoc mH ouu um mamcmd aw ucmEumm>CH HHdn .mumHHov .m.D mum mmm>Hmcm mmmsu cw mmsHm> umHHoom Hmqumo mcHumquo pmumH:E:uom mo umHHOU you usauso mmOuo Hmzcc< umw> pmumqucH um mumuown you usmuso mmouo Hmsccd pmumoach um uson-:mfi Had usmuso mmOuo Hmscc< mm.o vm.o cm.o 5H.o ma.nmv oo.omm om.mmH om.m~H mo.H w~.o -.o m~.o a couuoo mm.H oa.o Hv.o 5H.o mm.mma ah.mmm mm.Hq~ om.m~H pH.H No.0 mq.o a~.o m nmccHo--HH 55.0 ve.o mm.o 5H.o oo.mom oq.mv~ om.HmH om.m~H vm.o om.o mm.o m~.o H couuoo ev.H mn.o am.o 5H.o oo.omo ov.mov oo.omH om.m~H hm.o vs.o mm.o m~.o z sou--H ocmncme Hm.~ Hm.~ oH.~ mh.m mm.OVH Nm.o~H om.HOH om.om H~.o mH.o pH.o «H.o H m>HmcmucH mo.m mm.~ o~.~ mh.m H~.v~H vm.an mm.HOH om.om m~.o o~.o pH.o 4H.o m mcHnomet-HH oo.m m~.v oo.m ma.m 4H.amH mo.mHH m~.HOH om.om pH.o QH.o mH.o «H.o H m>HmcmucH mumss: o~.m am.v va.m ma.m mm.-H em.mmH me.m0H om.wm o~.o wH.o MH.o vH.o : nonaHu-H -uHuwm mm.o mm.o ~m.o umm.~ «N.OVH ao.mHH ov.Hm aa.vm ~v.o em.o v~.o oH.o H mqu ms.H mo.H Np.o 6mm.~ em.~a~ mo.ho~ mm.~HH »~.vo oo.o mm.o Hm.o 0H.o x uouumuu--HH Hv.H 0H.H mm.o 6mm.~ No.VMH Nn.mOH mm.ms h>.vo -.o H~.o mH.o oH.o q mm.~ wo.~ om.o 6mm.~ vo.~v~ om.~0H 5H.mOH an.vo m~.o m~.o mH.o 6H.o : cmxosuH onHHno m~.~ HH.H Hm.H nHv.mH mm.wom Hm.OVH mv.mw mm.Ho av.o v~.o NH.o oH.o H . mm.m on.H Hm.H nHv.oH m~.mvm ha.oH~ ~v.mw ~8.Ho mn.o um.o NH.o OH.o = - mHmcu< IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII MWHMHHOUIIII|IIIIIIIIIIIIIlillliillllll|llllIII' oH m m m H m o m OH H m M H M o H OH H m m H o m m M u m u u ” Hm>wH " H mm pmumoHpCH um " " “00> "coauospoum" hwmumuum ” mmmu ummpsn :H mucHom u30u um HMuHmmo ocHumuwmo pmumHsfiduum paw .UGMH «HaoHnum .ommu an 10H.m.H.ouuc voHuma .uoan no uacn Hum udauso mmoum Hmsccm oquEHumm ma mHmmmu0uumnl.mum85:uuHumm “hm.~ .HH %mwumuumsu 17S HwHucquQ ochumo mocmco uxm conHOW um: Hmsccd HmHucmuOQ mchumm wmcmno wa conu00 mwOum Hmacc< wvcmcoxm cmequ Hmsccm mo xwch .H0.00 .H >mwumuumnu.onHHno “00.~vu .mech ”m3oHHOm mm wum musch pmquQEH 00 um: omcmzoxm :unu0w Hmsccm new wmmmn .mumHHOp .m.D HHm mum mmmmecm mmwcu uow mwnHm> umHHoom 00.0 vm.0 00.0 v0.0 Hv.0 mm.0 0.Hmm H.m~m m.~0 nH0~.~mm H couuoo 0~.H 00.0 00.0 00.H 00.0 Hm.0 0.000.H 0.Nmm 0.00H nH0~.~00 : 0mcchunHH mv.0 mm.0 MH.0 00.0 00.0 vm.0 0.m~0 H.000 0.~0 £000.00m H coupon m0.o 00.0 0H.0 00.H v0.0 00.0 H.~m0.H 0.0Hm 0.00H £000.00m : 3muunH ocmpcmh 0>.H 00.H 00.H 0~.m 00.H H0.H v.0vH 0.0mH 0.00 nHHm.hm H m>HmcwucH mm.m 00.H HH.H H0.~ 0H.~ 00.H 0.00H H.m¢H 0.00H nHHm.nm : mcHzomEnuHH 0m.m v0.m 0H.~ 00.m VH.m mm.~ v.MVH v.H~H 0.00 qum.0m H m>HmcmucH amass: mH.v 0H.m -.~ 00.0 00.0 00.~ v.00H 0.0MH 0.00H nHv0.>m x noannIH nuHumm m~.0 NH.0 00.0: mm.0 0~.0 00.0 n.0vm 0.HOH 0.00 00.0MH H mqu 00.0 0v.0 H0.0 00.0 00.0 0H.0 >.HHm m.m0m 0.00H n00.0mH : nouomuuulHH mm.0 0~.0 00.0 0v.0 0m.0 00.0 0.~0m 0.00m 0.vv bH0.00 H 00.0 m0.0 vH.0 00.0 00.0 mH.0 v.vm0 0.000 0.00H bH0.~.0 : cmeInH onHHLO mv.H vv.0 H0.0u 0v.H 0v.0 No.0 0.000.0H 0.00H.m 0.00H n0m.00 H 00.~ 00.0 H0.0- Hm.~ H0.H No.0 m.Hk0.0m 0.vmm.HH 0.00H n00.00 : u uHuco< uuuuuuuuuuuuuuuuuuuuuuuu «mumHHounnnnuuunuuuusnuununnnn mmumHHop " n u u u u u n " AOOHHHDVH u u 0H ” m u H " 0H " m n H " 0H u 0 u H u wmmmu " u now» pwumoHch m umw> pmumuHUcH " m m m um coHumuwdo cH Hmqumu H um coHumquo cH Hmqumo new» H Hm>wH H xmmumuum H mmmu pmumHSEduom 00 uwHHOp uwd “pwumHzEdoom 00 umHHop umm pwuonch um HmHucwuom ochumm “coHuospoumn H mHmoHnum .mmmo >2 A0H.0.Huu. poHumm ummpnn :H mucHoa owns» um HauHQmo mcHuoummo omumHsadooo HMHHoo you HmHucwuom vchumw wocmzoxm cmeuOu uwc can mmoum Hosccm .mooHch HmHucmuoa mchumw mwcmzoxo :meu0u Hmsccd Hm mHmda 176 the relative size of the project is quite small (shown by the index base). The reason for this rapid increase is found in the excellent export potential for citrus crops and the fact that Agnale is operating on a very small base in the early years of the budget. The indices for Tendaho also increase rapidly. The size of this Operation in- creases substantially over the budget period contributing, thereby, a substantial increase in production. The rela- tive size of the operation appears to be very large as indicated by the index bases. Chilalo indices increase more rapidly than those of Setit-Humera. A probable explanation is the extremely small foreign exchange poten- tial in the early years in contrast to Setit-Humera where substantial export crOps are produced from the initiating year. Expressing these foreign exchange potentials per unit of capital in operation, at a given time, gives a similar measure to a benefit-cost criterion of NPV/K for foreign exchange except that in the benefit-cost analysis technique this fraction affords a single number for com— parison where individual yearly calculations afford an indication of trends over time. Having common denomi- nators, these values permit comparison. Agnale and Setit- Humera cases stand out clearly as having the highest foreign exchange potential. Modifications to these values when the foreign exchange expenses are taken into account do not change the order of the potentials. The reduction 177 in potentials is most marked in those systems in which capital commitments to machinery are heaviest, i.e., Setit—Humera and Tendaho. Sensitivity Analyses The detailed results of the sensitivity analyses are contained in Appendix G. The data given in Table 22 present a selection of these analyses in terms of relative changes in benefit-cost criteria due to relative changes in the selected parameter. Thus, from these data elastici- ties of changes can be determined although, with a con- stant rate of change for each parameter, the rates of each set of changes in the benefit-cost criteria are already based on a common denominator. Except in the case of changes in discount rates, the relationships of these changes are linear. Hence, given one set of changes other levels of relative change may be determined on a pro— portional basis. Only data for the high production levels are analyzed; in the cases of Agnale and Chilalo the analyses are only applied to run 2 data. Change in Total Product Data in Table 22 give relative changes in benefit- cost criteria for a 40 per cent increase in total product. Such an increase can occur as a result of some conbination of increased crop yields and rising market prices for products. 178 TABLE 22 Relative changes in f1nanc1a1 performance criteria due to given changes in six selected parameters in benefit—cost analyses (high production level) by case, Ethiopia : gNFV CIFR fiB/C ISPV/K :SNPV/Tw :LNPV/qu Case f Strategy 5 NPV f IRR B/C NPV/K :W7T—w 3W -------------------------- ratio--------------------------- . . 0 Total promuct a 1. Increase in total product. Total product +0.40 Agnale - +0.52 +0.24 +0.40 +0.52 +0.52 +0.52 Chilalo I--oxen +2.41 +1.49 +0.40 +2.42 +2.41 +2.42 II--tractor hire +6.77 +3.64 +0.41 +6.72 +6.71 +6.77 Setit-Humera I--1abor intensive +2.61 *+6.84 +0.40 +2.61 +2.61 +2.61 II--machine inten51ve +1.80 *+5.92 +0.40 +1.80 +1.80 +1.80 Tendaho I--raw cotton +3.23 +1.18 +0.40 +3.22 +3.22 +3.24 II--ginned cotton +1.67 +0.84 +0.40 +1.68 +1.88 +1.67 2. Increase in labor input: £_La§9£ = +0 40 Labor ' Agnale - -0.18 -0.31 —0.37 -O.17 —0.18 -0.18 Chilalo I--oxen -0.56 -O.4O -0.10 ~L.57 —0.56 -0.56 II-—tractor hire —0.81 -O.38 -0.05 -O.81 —0.82 -0.80 Setit-Humera I-—1abor intensive -0.73 —0.96 -O.19 —1,30 -1.27 -1.26 II--machine intensive -0.70 -O.63 -O.17 —0.70 -0.70 ~0.70 Tendaho I--raw cotton -O.38 -O.18 -0.05 -O.39 -0.38 -0.38 II--ginned cotton -O.15 -0.09 -0.04 -O.15 -0.15 —0.15 3. Increase in discount rate: a; - +0.50 Agnale - -O.32 - -0.14 -0.24 -0.16 -0.16 Chilalo I--oxen -0.34 — -0.03 -0.28 -0.19 -0.19 II--tractor hire -0.67 - -0.03 -O.64 ~0.60 +0.60 Setit-Humera I--labor intensive -O.30 - —0.03 —0.22 -d -U II--machine intensive -0.26 - -o.04 -0.48 -b -b Tendaho I--raw cotton -0.66 - -0.07 -0.61 -O.59 -0.58 II--ginned cotton -0.43 - -0.07 -O.33 —0.28 -O.29 4. Increase in foreign exchange rate: L 5xcnan9€ rate - +0.20 Exchange rate Agnale - -0.03 -0.01 -0.01 -0.02 -0.02 -0.02 Chilalo I--oxen -o.02 -o.01 —b -0.02 -o.01 -0.01 II--tractor hire -O.51 ~0.22 —0.03 -0.53 -0.44 -0.60 Setit-Humera I--1abor intensive -0.16 -0.09 -0.01 -O.16 -0.12 —O.12 II--machine intensive -0.14 -0.09 -0.02 -0.15 ~O.11 ~0.11 Tendaho I--raw cotton -0.23 -0.09 —0.03 -O.24 -O.13 -O.14 II--ginned cotton . -0.15 -0.07 —0.02 -0.15 -0.11 -O.1 . , . 5 Total product s c 5. Increasing trend in output. Totaliproduct p.a. +.015 Agnale - +0.15 +0.06 +0.11 +0.15 +0.15 +0.15 Chilalo I--oxen +0.50 +0.20 +0.08 +0.50 +0.30 +0.50 II--tractor hire +1.40 +0.50 +0.08 +1.39 +1.38 +1.40 Setit-Humera I--labor intensive +0.46 +0.22 +0.07 +0.45 +0.47 +0.46 II--machine intensive +0.32 +0.13 +0.07 +0.31 +0.32 +0.32 Tendaho I-—raw cotton +0.82 +0.24 +0.20 +0.90 +0.79 +0.85 II--ginned cotton +0.43 +0.18 +0.11 +0.43 +0.43 +0.43 . A Labor c 6. : . . a . Increasing trend in labor input Labor p a 015 Agnale - -b -b -b _b _b _b Chilalo I--oxen -o.01 -b -b -o.01 -o.01 -o.01 II--tractor hire -0.01 -0.01 -0.01 -0.01 -0.01 -0.01 Setit-Humers I--labor intensive -0.20 -0.l2 -0.04 -0.19 -0.20 -0.20 II--machine intensive -0.11 -0.06 -0.03 -O.11 -0.11 -O.ll Tendaho I--raw cotton -0.09 -0.04 -0.01 -0.10 -0.10 -0.10 II--ginned cotton -0.03 -0.02 -0.01 -0.03 -0.03 -0.03 “A scale factor is incorporated into the program in order to increase or decrease selected inputs and outputs by a given amount. The scale factor for a 40 per cent increase is 1.40. bComputations have been rounded to two decimal places; these values are less than .005, therefore round to 0. CA price function (P - A + B(t)) is also incorporated into the program in order to introduce trends in the price of selected inputs and outputs. If A - 1.0, then a trend of +1.58 per annum is effected when 8 - +.015. 179 The effect on Agnale criteria is to increase NPV and related criteria (modified benefit-cost ratios: NPV/K, NPV/T NPV/TWS) by about 50 per cent, IRR by 24 w: per cent, and B/C by 39 per cent. These changes are sub- stantial when viewed in absolute values (NPV increases by $18,165)1 but cash crop values from the system are rela- tively high, therefore relative changes to a 40 per cent increase in total product do not tend to be large. Chilalo data present a contrasting case in which the increase in NPV for strategy I (oxen) is 2.41 times greater than the original NPV and for strategy II (tractor hire) is 6.77 times greater. Increases in IRRs and B/Cs are smaller but nevertheless substantial. The costs of inputs are much smaller in strategy I (oxen) than in strategy II with a consequent higher NPV for strategy I than for strategy II. Hence, relative increases in NPVs for a 40 per cent increase in total product show a greater increase in the NPV for strategy II. These results sug- gest that yield achievements and/or market price for products are extremely important to the success of intro- ducing improved mechanized agricultural technology into a small-scale farming system, especially when engine-powered technology is involved. IRR increases are also large. 1Absolute values can be obtained from data tabu- lated in Appendix G; e.g., $53,005 - $34,840 = $18,165. 180 The results for Setit—Humera suggest that net gains result from increases in total product although relative to the original NPVs, which are high, the relative increases are less than in either Chilalo (strategy II: tractor hire) or Tendaho. IRR increases are also large. The data for Tendaho also suggest that substantial net gains result from increases in total product, especially in strategy I (raw cotton) in which the value of the product is considerably smaller than that of strategy II (ginned cotton). Hence, the relative increase in net gains is much greater due to a 40 per cent increase in total product in strategy I over strategy II. Change in Labor Input Benefit-cost criteria are negatively correlated to changes in labor input. The data in Table 22 indicate highest relative changes to a 40 per cent increase in labor inputs are observed for Chilalo (strategy II: tractor hire) and Agnale. Sensitivity to change in labor inputs tends to be high in systems in which net gains are small and in which the labor content of the input-mix is high. Hence, changes tend to be relatively large. The fact that con- siderable quantities of labor are employed in Setit-Humera is demonstrated in the relatively high values for changes in NPVs and modified B/Cs. In Tendaho these relative changes are somewhat less and the changes in modified B/Cs are smaller. In Setit-Humera strategy II (machine 181 intensive) much less labor is employed than in strategy I although the nature of total products is similar. Hence, the change in labor inputs in strategy II has much less relative effect than in strategy I. In Tendaho the quality of the total products is different; in the two strategies, that of strategy II (ginned cotton) has considerably more value than that of strategy I (raw cotton). Hence, al- though more labor is employed in strategy II, the relative effect of a 40 per cent change in labor input is less marked in strategy II than in strategy I. Change in Discount Rate Relationships between benefit—cost criteria and discount rates are curvilinear.l The correlation between the criteria and the discount rate is negative. From the data of the analyses, it appears that benefits are reduced most rapidly in Agnale when the dis- count rate is increased by 50 per cent (from .10 to .15). The cost of inputs over the budget period, in the Agnale case are relatively small and increase only moderately in contrast to the output which increases substantially in the early years and continues to expand beyond the budget period. Increasing the discount rate tends to have great- est effect on those projects in which initial input costs 1See Figure 3. 182 are relatively high and yield increases delayed to some time after initial investments. Increasing the discount rate above that selected on the basis Of the opportunity cost of capital has legitimacy in a sensitivity analysis. It can be argued that, in fact, the social returns to capital investments are greater than the opportunity cost of capital (assumed in these analyses to be 10 per cent per annum) since pru- dent investment Over the long run will foster secondary and tertiary benefits of development neglected in the Opportunity cost concept. Such benefits as linkage and economic integration, engendered by the most desirable investment projects, defy quantification and tend to be neglected in the selection of appropriate discount rates. Change in the Rate of Foreign Exchange In each case different quantities of imported capital equipment are incorporated into the productive system during improvement and mechanization processes. The data in Table 22 show the effect of a 20 per cent 1Foreign exchange requirements for imported capital will consist of the portion of capital equipment which is actually paid for during the period under consideration. Estimates of imported capital paid for during the budget period expressed as percentages Of the value of total capi- tal in Operation are as follows: Agnale, 10.93 per cent; Chilalo--strategy I, 5.12 per cent,--strategy II, 67.85 per cent: Setit-Humera--strategy I, 59.35 per cent,-- strategy II, 52.97 per cent; TendahO,-—strategy I, 39.62 per cent,--strategy II, 40.77 per cent. 183 increase in the current cost of imported capital equipment. The effect is small in cases employing relatively little imported equipment, i.e., Agnale and Chilalo, strategy I (oxen). There is an increased effect in those cases for which output is high in relation to the quantity of im- ported capital, i.e., Setit-Humera and Tendaho, strategy I. The greatest effect is observed where output is relatively low in relation to imported equipment, i.e., Chilalo, strategy II (tractor hire) and Tendaho, strategy I (raw cotton). Foreign exchange rate is an important consideration since an over valuation of domestic currency undervalues the cost of imported capital equipment in terms of alter- native uses for resources devoted to the purchase of im- ported equipment. Evidence for the over or under valuation of Ethiopian currency is virtually unavailable.l Hence, this sensitivity analysis merely suggests the possible effect of over valuation. Trend Effect in Total Product An overall increase in total product of 40 per cent is useful to determine the effect of having originally underestimated output by this amount. To investigate the 1Black market trade in United States currency sug- gests an exchange rate of E$2.60 = U.S.Sl.00 instead of the fixed rate. This figure gives an over valuation of 8.3 per cent for Ethiopian currency at the fixed exchange rate. 184 effect of a general rise in product prices and/or yields, it is more usual to assume a percentage increase each year. The data presented in Table 22 demonstrate the effect of an annual increase in total product of 1.5 per cent of the level assumed in the initiating year. The data show relatively similar effects on the results of an overall increase in total product of 40 per cent although less dramatic because of the lower percentage increase. Net gains accrue most rapidly to those cases in which the original NPV is low relative to capital investments, i.e., Chilalo, strategy II (tractor hire) and Tendaho, strategy I (raw cotton). The trend effect tends to emphasize B/Cs in those cases in which a substantial annual increase in output occurs: Agnale where citrus yields increase sub- stantially over the budget period and beyond, and Tendaho where the area under cultivation is increased almost 10 times over the budget period with gradually improving yields. Trend Effect in Labor Input The trend effect Of a 1.5 per cent annual increase in wages is Observed to be most marked in those cases employing high quantities Of manual labor relative to the product value, i.e., Setit-Humera and Tendaho, strategy I (raw cotton). In the case of Setit-Humera, changes are relatively high which suggest that moderate annual 185 increases in the wage level are likely to have a marked effect on entrepreneurs' expected net gains. Through the sensitivity analyses the relative effect of single changes can be observed. Highest rela- tive changes occur with increasing total output values. The most pronounced effect is Observed in Chilalo, strategy II (tractor hire) where the value Of the total product to investment cost is relatively low. Increased labor costs are Observed to have the greatest effect in cases of low output relative to the quantity of labor employed. Two aspects of the systems are neglected in this form of analysis. Firstly, the fact that within the system isolated changes in parameters usually cause other adjust- ments: secondly, within the system several parameter changes may occur simultaneously. Thus, the sensitivity analyses tend to be a measure of gross effect and not the net effect of given changes. Net effects of single changes or a set of changes can be ascertained by generating new data in the budget models so far as these cases are repre- sentative of the real world situation. Effect Of Price Changes on the Analyses The budget models were each computed in the first instance using constant prices (those observed in the initiating year). Such assumptions are sufficient to 186 permit the comparison of different agricultural systems from the standpoint of technological conditions of pro- duction. However, when decisions are to be made concern- ing the relative returns to investment proposals, it is important to take into account the influence that market conditions are likely to have on effective demand over the planning horizon of the proposal. The selection of the various products of each system was made in the light of anticipated future demand. However, as already discussed above, the level of demand for a given product is affected by both the domestic and international levels of demand, depending on the relative quantities of domestic product exported or the extent to which domestically produced commodities must compete with imports. Within the context of economic development a large number of combinations of price changes may be envisioned for outputs and inputs. The most important questions re— garding price changes faced by decision-makers, whether farmers or government planners, generally appear to be with regard to shifts in market prices for cash crop and shifts in wage levels. Therefore, the budget models were recomputed using assumed price trends in place of constant prices for marketed products and for wages. 187 Anticipated Trends in CrOp Prices Data on total crop production and demand pro- jections are unavailable in sufficient detail to predict future prices with accuracy. The Food and Agriculture Organization's projections1 and Eichberger's estimates of domestic food crop production and utilization2 were used as the best available information on which to approximate possible shifts in supply and demand. World price trends for imports and exports used in these second computations are approximations from data published by the United Nations.3 Price trends are shown in Table 23 and the evi- dence for these assumptions is discussed below. Wheat is a cash crop only in the Chilalo case study. The annual decrease in wheat price of 0.73 per cent was assumed as a rough approximation based on: modestly declining world wheat prices (around 0.5 per cent per annum over the period 1960-66); assumed local prices for 1968 of 1United Nations, Agricultural Commodities: Pro- jections for 1975 and 1985 (Rome: Food and Agriculture Organization, 1965), pp. 88-99. 2Wheat production is required to increase by 3.6 per cent annually to maintain self- -sufficiency, when aver- age annual food crop increases are around 2. 7 per cent. Eichberger, "Food Production and Utilization . . . , p. 43. 3United Nations, Trade Year Book (Rome: Food and Agriculture Organization), Vol. XX (1966), Vol. XXI (1967), passim. 1138 ucmumCOOIcoc 0chs mcoHumusmEoo u0mvsn 0:0000 000 0000 .mHMHHOU .m.0 HHm 0H0 m0m>H0c0 00020 new m0sH0> uwHHOOO .HHuvm+Hv< u m "coHumsv0 00Hum 0zu 000 Amy uc0HOH000OO 0H.....Huu 0:0 H000» 0CHumHuHcH 0500 0"» 0cm 0mm 000:3 .HHuvm+Hv¢ .000Hud a .Hu0mpsn 0c» 00 0000» HscOHumu0dO u a “coHumsv0 0OHMQ 0gp mchoHQE0 >n mCOHuquQEOU u00©sn HmHuHcH CH ucmumcoo 0053000 H000Huv um0> mcHumHuHcH mcHusv mcoHum>H0mno moHumm 00H0.+ 00.0 H0£uo 00m0.+ 00.0 u0£uo 00H0.+ 00.0 mcquHa 0000.+ 00.0 ocHucmHa 00003 noan 00H0.+ 00.0 uonmq 0000.+ 00.0 noan o.ur\0 o.ur\0 o.uz\0 - o.un\0 mmH0.+ 00.0 mc00m I No.0 000m NOH0.+ No.0 mem H000.+ 0N.0 msuuHU 0m00.+ 00.0 mammm I mv.0H 000B «N00.+ 0N.0H 060000 mmoo.+ 00.0 0000 0000.+ vm.v Ednmuom 0H00.+ mm.m 0NH02 I 0v.0 mc00m 0000.+ 00.00 ucHH 0000.I 00.m~ copuou vH00.+ mm.0 >0Humm I 00.v Escmuom mmoo.+ 00.0N COquU 0H00.+ mH.0m wfidmmm mnoo.l Nh.m 00053 I 00.0 0NH02 u.0\m o.0\0 o.0\0 o.o\0 100 . lac muHua M 500H m 100 m 100 «UHHQ m 500H m .00 m 140 moHua m 500H m 0100 m 0.00 moHua m 200H oc0u9 mcHumHuHcH . H pc0ue H mcHusHuHcH H H pc0ue H mcHumHuHcH H H pc0ua ” oCHumHuHsH H onmpc09 m mu0fidquHu0m m onHHnu m 0H0c04 MHQOHnum .0000 an m0OHum ucmumCOOIcoc mch: H0H.....0uuv mCOHumuSQEOO 000052 ~00 mvc0uu 00Hua 0cm m0OHuQ mcHumHUHcH Hoan 0:0 mono mm mHmee 189 approximately 21 per cent higher than world import prices; the policy objective to remain self-sufficient in food production; and a possible wheat deficit increasing by 1.9 per cent per annum. Barley is a cash crop only in the Chilalo case. The annual increase of 0.14 per cent was assumed as a cautious approximation based on: substantially declining world prices (around 5 per cent per annum); assumed local prices for 1968 of approximately 13 per cent below world import prices; and a maximum annual importation of 5 per cent of total requirements, since barley requirements are not expanding as rapidly as those for wheat. Maize is a cash crop in the Chilalo case with good potential for export into the world market. In Agnale, maize is grown for subsistence only and, therefore, in this case the price was assumed to be constant. The annual increase of 0.18 per cent in maize prices for Chilalo is based on: indications of increasing world price for maize exports (approximately 3 per cent per annum); and the possibility of exporting maize up to a maximum of 15 per cent of total national production. The local price for 1968 was assumed to be approximately that of the world export price. Flax is grown only in the Chilalo case. Demand is anticipated to increase in the domestic market which domestic production is likely to meet with a surplus pro— duction of up to 15 per cent available for export. The 190 annual increase of 1.02 per cent was assumed based on: the assumed local price for 1968, approximately 15 per cent below world export prices; world export prices de- clining at an approximate annual rate of 2 per cent. Beans appear to have a promising future as an export crop. An annual rate of increase of 0.2 per cent was assumed for Setit-Humera and 1.59 per cent for Chilalo based on: the assumed Chilalo price for 1968 being 50 per cent below the world export price (declining at about 1.3 per cent per annum); the Setit-Humera price for 1968 being 25 per cent below world export prices for 1968; declining world export prices being likely to have a more marked impact on Setit-Humera production than on Chilalo because of the commercial nature of production in Setit-Humera. Sesame provides another promising export crop for which prices have been increasing substantially (at approxi- mately 2.1 per cent per annum). Some overproduction is anticipated in which case modest price declines may occur. In Setit-Humera a small increase of 0.19 per cent per annum was assumed based on the Setit—Humera price for 1968 being the same as the world eXport price. In Agnale a larger increase of 0.24 per cent was assumed based on the Agnale price being 20 per cent below the current export price. Future cotton production in Ethiopia will be essentially for import substitution. A small decreasing trend of 0.096 per cent per annum was assumed in the case of Setit-Humera and a similar annual increase in the A _ 191 Tendaho case based on: imported lint prices declining by about 0.8 per cent annually: assumed 1968 prices for Setit- Humera being above the trend of prices; assumed 1968 prices for Tendaho cotton being below the trends. Moreover, Tendaho cotton is of superior quality and may become an important export. Sorghum export prices were assumed to be increasing according to the general impression of rising world prices for coarse grains. In the case of Setit—Humera, sorghum is an important export crop for which local prices have slumped rapidly due to overproduction. In View of the export potential of the crop, however, a modest increasing annual trend of 0.57 per cent was assumed for Setit-Humera. In the Agnale case, however, sorghum is a subsistence crop and, therefore, a constant price was assumed. Citrus world eXport prices are expected to decline slightly in order to clear small surpluses in production. However, the assumed prices for 1968 were some 25 per cent below world export prices, so that a small increase in price of 0.31 per cent per annum was assumed for Agnale. Assumed labor prices were increased for each case. The assumed increasing trends Of 1.5 per cent per annum in Chilalo and Tendaho cases were based on the assumption that the substantial increases in work requirements are likely to lead to small wage increases. This assumption is more readily substantiated in the case of Chilalo where there appears to be less temporary labor available 192 than in the Tendaho case. In Setit—Humera, migrant workers are well organized into bargaining groups, consequently, wages may rise more rapidly than in the first two cases, thus, an annual increase of 2.0 per cent was assumed. In the case of Agnale, despite the increasing cash wage re- ceived by labor, the total value of returns to labor (valued at the constant wage rate of $0.06 per man-hour) declined substantially due to improved labor productivity. The annual rate of increase Of 2.9 per cent for wages was assumed to compensate the worker for the total loss due to reduction in total hours of work required. By employing such a high rate of annual increase, cash wages will tend to rise quite rapidly.1 Changes in Benefit-cost Analyses Caused by Assumed Trends in Prices The data contained in Table 24 show evaluated cri- teria of the benefit—cost analyses. Only NPV, PB, IRR, and B/C are tabulated since these criteria are sufficient lIf cash wages are to be permitted to rise fairly quickly the economy must provide adequate and desirable consumer goods for disbursement of this new income. It may be argued that wages should not be permitted to in- crease rapidly but, rather, increasing surplus should be used to provide new tax revenues. An important economic consideration, beyond the scope Of these analyses, is the extent to which increasing factor productivity can pro- vide tax revenue and the extent to which taxation may act as a disincentive to the productive capabilities of the factors. l£93 .mumHHoc .m.0 HH0 0u0 m0m>H0c0 000:» 000 003H0> umHHoom H0.0 00.H 0.m 0.00 0HA 0 0H0.~H~.HI 00v.H~m.m 000. 000. couuoo nmcchIIHH H0.0 HN.H 00 H.N~ 0HA 0 00H.0mm.mI 0mm.m00.m H00. 000. COuuoo 30uIIH 0:00:09 0H.H v~.H m.0m m.Hm v 0 000.00 000.00H 000. 000. 0>Hmc0uCH 0CH200EIIHH 00.H VH.H 0.0m v.0v 0 v NMH.00 mvv.00 000. 000. 0>Hmc0ucH 000E5: HoanIIH IuHu0m N0.0 v0.H 0V 0.0H 0H.H 0 0Hm.HI 00m 000. mvm. 0HH: uOuumquIHH Hm.0 0H.H 00 0.00 0H; m H00I 000 0N0. ~00. :0onIH OHmHHLO HH.N 00.0 0.00 0.00 0 m voH.0H 00m.vm H00. 000. I 0H0c0¢ moHumu uwHHou quc0o uwduII IIIIum0>IIII IIIIIIII mmumHHon IIIIIII H n z u H u z u H u z u H u I " mue>m E50 " zme>m E50 u u u n u u . u u ACDHV u U\m " mmH " mm ” >02 u H I u H a " >m0umuum " 0000 0Hu0uHuo umOOIuH00c0n p0uo0H0m H00 m0sHm> U0usdEOO m ue>m E50 m mB>m E50 m m 0HQ0H£um .m0oHuQ unaumcooIcoc mchs 0000 an 0H0>0H :OHuuspouQ HHV 30H 0:0 A20 20H: 00 HOH.....0uuV 0000 H0005b 00 m0m>H0c0 umOOIuH00c0n E000 0Hu0uHuU 00:0Eu0000m HmHocmcHw p0uo0H0m vm mHmde 194 to judge the extent to which shifts have occurred in financial returns to each budget model. The changes in analytical results brought about by these changes in product and labor prices can be visualized most easily by examining the change which occurs in the order of rank. The new order of rank is shown in Table 25. There is no change in rank according to NPVS, PB (low-level), and IRR (high-level). Ranking according to PE (high-level), an exchange of 6th and 7th rank takes place between Chilalo (II) and Tendaho (I); ranking according to IRR (high—level) the changes are slight, and there are small reshuffles in the ranking according to B/C. within these categories of readjustment the follow- ing selective observations can be made: 1. Agnale. The small reduction in high-level NPV (1.6 per cent) is the result of moderate in- crease in cash crop prices being slightly more offset by increasing wages. These changes lead to a decline in IRR of 3.5 per cent and B/C of 12.1 per cent. The reduction in low— level NPV is much greater (7.4 per cent), in— creases in cash crop prices having been offset by both increasing wages and lower yields. The effect is to double the reduction of IRR (6.6 per cent). Anticipated net returns and rates of return remain high in this case, the 195 o.H v 0H00m0 .coH000H00 mCch00 000 09H0> 0>H00m0c 00000H00H 0H00n0c000mh .00000 00000 000E 00 000 n0H3 mcch00 H0000 00000H0GH 00x000m0 000 N v m Hv m Amv H c00000 00cchIIHH on v HAmv 0 Av o Anv m 000000 300||H 0000009 m m H m H H H m 0>H0000QH . 0cHno0EuuHH m m m m m m m w 0>H0000GH 000Edm H000H|IH 100000 00 n mev n 00 0 Amy n 00H0 0000000||HH 000 m Hflmv v 00 Hm nAvv o c0xounH oH0HHnu H H m H m mHm m m - mHmcaa nnnnnnnnn 1I||||nnunnnnlulnlunmxc0ullnlnnuuunnlIIIIIIIIIIIIIIIII qmmmqmmmgmmmgmmw m o\m M 00H m 00 m >mz M 00000000 m 0000 0000000QH 000000H00 mo 05H0> o0 mcH000000 0000 0000 u " 0HQOH£0m .000H00 0c0000001000 mchs 0000 >0 0H0>0H coH0050oum AHV 30H 000 Amy anz 00 AOH.....ou0V 0000 000050 00 000%H0c0 E000 0HH00H00 0000:0Hm0c00 00000H00 00 mcH0uo000 0x000 mm mHmde 196 price changes serve to illustrate the importance of taking into account the way in which price changes, especially when coupled with changes in yield levels compensate or counteract each other. Chilalo. Crop price changes are quite small, coupled with the annual wage increase of 1.5 per cent, heading to an overall decline of NPV in strategy I (oxen) of 18.0 per cent (high— level) and 43.2 per cent (low-level). The corresponding declines of NPV in strategy II (tractor hire) amount to 35.6 per cent (high- level) and 5 per cent (low-level). The rela- tive size of decline is observed to be much larger in those strategies in which anticipated net returns (NPV) and rates of returns are al— ready small, i.e., strategy II. Thus, these results suggest that where increasing input prices are likely to be substantially greater than a combination of output prices, in pro- posals for investment in projects which reveal low anticipated net returns, there is insuf- ficient "cushion" in the financial returns to accommodate modest price changes. B/Cs are reduced to be very close to unity at high—level yields and are already less than unity at low levels. 197 Setit-Humera. Increasing labor costs are sufficient to more than offset increasing pro- duct prices in both strategies at both levels. In this system, however, there is sufficient "cushion" to accommodate the reductions in anticipated net returns without substantially reducing B/Cs, and IRRS are still very high. It is important to note that in strategy II (machine intensive) the relative decrease in NPVs is less than in strategy I (labor inten- sive) in contrast to the Chilalo case. Both strategies II are more highly mechanized (engine-power) than strategies I, but in Setit- Humera the higher degree of mechanization is accompanied by higher levels of returns. Tendaho. High- and low-level yields move in opposite directions in strategy I (raw cotton) and in the same direction in strategy II (ginned cotton). These different movements can be explained by the fact that in strategy I increasing prices coupled with high yields for the low valued product (raw cotton) are sufficient to compensate for increase in wages and anticipated net returns increase; with low yields the compensation is inadequate and net returns increase in the negative direction. 198 In strategy II increases in the price for the high-valued product of cotton lint is sufficient to compensate for increases in wages at both high- and low-level yields. Summary Budget models employed to generate data for benefit-cost analyses were prepared in two different strategies for each of the Chilalo, Setit-Humera, and Tendaho cases. For Agnale only one form of hand-powered technology was deemed appropriate. For Chilalo, strategy I, the case under assumptions to improve the form of oxen- powered technology already established in the area is analyzed, strategy II, the case under assumptions to intro- duce a tractor hire service for tillage operations and harvesting cash crops is analyzed. For Setit—Humera engine-powered technology is employed in both strategies. In strategy I, the use of tractor power only in early tillage operations is assumed; in strategy II, more inten- sive use of tractor power in tillage, cultivation, and the harvesting of certain cash crops is assumed. Labor requirements in both strategies are provided by migrant workers. Tendaho, strategy I, the case for the production of raw cotton using engine-power for early tillage and cultivation operations, hand labor for weeding and picking is analyzed; in strategy II the same basic production techniques are employed with the additional ginning 199 process to produce cotton lint and seed. Labor requirements are met from the many small farms in the surrounding high- lands. Benefit-cost analyses of Agnale data indicate very high rates of return (IRR), for both high and low pro- duction levels, and high anticipated average net returns for the selected scarce resources of capital, costs of professionals' salaries, and costs of professionals' wages and salaries (K, T and T ). The implications of these W' WS analyses are that high potentials for increasing antici- pated net returns (NPV) exist by introducing unsophisticated improvements into hand—powered systems, provided adequate supervision is available along with cooperation from the people in introducing new cash crops into the system. Benefit-cost analyses of two strategies contained in Chilalo data indicate the anticipation of modest net returns (NPV) for high production levels and negative re- turns for low levels. The analyses suggest that in this system, where farms are small and fragmented with much effort devoted to producing for subsistence, that; firstly, high yields must be attained through relatively efficient management in order to avoid negative returns; secondly, improving established animal-powered technology leads to higher returns than introducing tractor hire services. This second conclusion appears to be derived from the fact that the tractor hire service requires much higher government investment than improving animal-powered 200 technology and the necessity to concentrate unit extension facilities on fewer farmers. Benefit—cost analyses of two strategies contained in Setit-Humera data indicate high rates of return (IRR) for both assumed production levels, and high average and T ). net returns for selected scarce resources (K, Tw, WS The implications are that, due to the large—scale oper— ations in this system and the fact that individual pri- vate entrepreneurs are able to manage engine-powered tech— nology for early tillage, investment in extension facili- ties can be spread over an extremely large area of pro- ductive land. Also, returns to strategy I tend to be lower than those to strategy II due to additional economies facilitated by the higher level of mechanization, but achieved at the expense of a lower level of employment. Benefit-cost analyses of Tendaho data indicate high anticipated net returns (NPV) and moderately high rates of return (IRR) for high production levels but nega- tive returns for low levels. These analyses suggest that the extremely heavy investment commitments implied in this system should be undertaken with caution if there is un- certainty about yield attainments. Average net returns for selected scarce resources tend to be lower than in Setit—Humera; investment in administrative facilities and costs of supporting technically trained professionals are very high in the Tendaho system. In this case, returns to strategy II (ginned cotton) are also higher than those 201 to strategy I (raw cotton) but, since additional operations of the ginning process are incorporated, more labor is employed in strategy II. In estimating the income generating capacities in each case, Agnale data demonstrate the most dramatic in- creases both in gross and net incomes, and the cash con— tents. In this case the computations of the system were initiated at a low productivity level on a completely non- cash basis, thus demonstrating these dramatic increases due to technological improvements. Important implications of these analyses lie in the fact that a substantial pro- portion of Ethiopia's population makes its livelihood in unsophisticated hand-powered systems. Improvements to low levels of productivity can have substantial effects in economic development. Analyses of employment requirements indicate decreasing trends in Agnale in which substantial improve— ments to labor efficiency were assumed. Increasing labor requirements are demonstrated in all other cases; in both Chilalo and Setit-Humera higher levels of mechanization are employed in strategy II and, consequently, increases in labor requirements are smaller than labor increases in strategy I; in Tendaho, higher levels of mechanization in strategy II are accompanied by additional operations and consequently, increases in labor requirements are higher in strategy II than in strategy I. Absolute levels of employment are largest in the Tendaho case which involves 202 highest levels of investment but, in the process of plan- ning development, potentials for generating high levels of employment must be set in juxtaposition to the total investment requirements and the relative levels of antici- pated net returns, rates of return, and anticipated average net returns to selected scarce resources. Average gross product per unit of factors suggests a rising level of productivity for each factor. However, changes in the relative distribution of total product can only be estimated with more precise information on the production function than revealed by the investigations of this thesis. In the analyses of potentials to earn or save foreign exchange, relative potentials for export or import substitution are high for Agnale and Setit-Humera although in absolute values Tendaho and Setit-Humera rank highest. When imported inputs are taken into account, greatest re- ductions occur in Tendaho in which imported equipment is relatively highest, next highest in the Setit-Humera case. In Tendaho, this net effect appears greatest in strategy I in which the value of the product (raw cotton) is con- siderably lower than in strategy II (ginned cotton), despite the total investment costs in imported equipment being greater in strategy II. Analyses suggest greatest sensitivity to increas- ing total output values in cases of high investment rela- tive to value of total product, i.e., the most pronounced 203 effect is in Chilalo, strategy II (tractor hire). The effect of increasing labor costs are observed to be great- est in cases of low output relative to the quantity of labor employed, i.e., Chilalo, strategy II (tractor hire); Setit-Humera, strategy I (labor intensive); Tendaho, strategy I (raw cotton). Increasing discount rates appears to have greatest effect on those cases in which initial investment costs are relatively high and returns are initially low or delayed, i.e., in Agnale, where fruit bearing does not begin until several years after initial investment. The greatest effect of raising foreign exchange rates appears to be in Chilalo, strategy II (tractor hire). In this instance returns to investments, a substantial amount being imported, are relatively quite small. Data available to estimate anticipated price changes are scanty. Thus, at best, price changes employed to re- compute the budget models can only be estimates of slightly increasing or slightly decreasing trends. In each case, modest increases in labor costs were assumed. The changes in values of benefit-cost criteria suggest that there is likely to be sufficient margin in the system to absorb labor cost increases in Agnale, Setit-Humera, and Tendaho. However, in Chilalo, strategy II, the higher level of mechanization leaves insufficient margin even at high levels of production to absorb significantly increasing trends in labor input costs. CHAPTER VII SUMMARY, CONCLUSIONS, AND RECOMMENDATIONS Summary Thesis Development The first three chapters are largely introductory discussion designed firstly, to lay out the plan of the thesis and the role of mechanization in agricultural pro— ductive processes; secondly, to present a selection of socio-economic and environmental information about Ethiopia and her people in order to establish the macro—situation; and thirdly, to bring into focus those aspects of economic development which provide a context to relate micro-analyses of selected case studies to the macro-economic framework of the Empire. The fourth chapter presents the methodology employed in collection and analyses of data, concluding with the establishment of two sets of evaluation criteria: those to appraise the financial performance of proposals to invest in mechanization projects and those to be conso- nant with specified objectives of Ethiopian development planning. The fifth chapter contains brief descriptions of the four case studies (elaborated in Appendices A to D), 204 205 and the sixth contains the analyses of data. The salient points of discussion, methodology, description, and analy- ses are presented in this summary. Agricultural mechanization is defined as all forms of mechanical assistance used at any level of technological SOphistication. This definition enables the technology ob- served in any given agricultural system to be categorized as: hand-, animal—, or engine—powered, each of which represents a different technological option open to eco- nomic planners. The concept of mechanization in the dynamic context of economic development is manifested in six different operational processes: 1. Processes of improvement (within categories), (a) in hand-powered technology, (b) in animal- powered technology, (c) in engine—powered technology. 2. Process of transition (between categories), (a) from hand- to animal—powered technology, (b) from animal- to engine-powered technology, (0) from hand- to engine-powered technology. (Conceptually, transitional processes are reversible.) The scope of the thesis is limited to analyses of four selected cases in which forms of mechanized technology may be introduced. Four dissimilar cases were selected, 206 each having potential commercial viability, to demonstrate the procedure of economic analysis in dissimilar agricul— tural systems and the types of data required for these analyses. No generalized statements on agricultural mecha— nization in Equatorial Africa are attempted although the methodological approach has general application. Thesis objectives are: (1) to present data rele- vant to mechanization from four cases of agricultural systems in Ethiopia; (2) to analyze these data to measure benefits, costs, and selected socio-economic changes which occur when mechanized technology is introduced into the selected systems; (3) to demonstrate by the methodology the types of information and data required to effect economic analysis; and (4) to demonstrate the application of the methodology to four dissimilar cases. Relevant to Ethiopia's present level of develop- ment”, and in order to maintain the scope of the thesis WithiJi manageable bounds, only mechanization possibilities Of Funoductive processes are examined. Agricultural mecha— niZiiltion is conceived as part of a complete system of agricultural production. Such an approach permits the ana10N3es to take into account many of the variables rele— Vanti‘to the productive processes within a given socio- economic system. The Ethiopian situation, providing the macro-context Of tine case studies, presents an extremely rugged and varied 207 physiography over which a wide variation in climatic con- ditions obtains. The cases are selected from widely differ- ing regions: Agnale Village, in the southwest some 1,000 kilometers from Addis Abeba, is located in hot, humid wooded savannah country; Chilalo Awraja, 150 kilometers south of the capital, is located in the temperate climate of the Central Ethiopian Highlands; Setit-Humera, 750 kilometers northwest of the capital, is located in a hot region where precipitation is relatively low; Tendaho Plantations are located some 580 kilometers northeast of Addis Abeba in the semi-hot desert of the Lower Awash Valley. Agriculture contributes the largest single pro- POrtion to the Ethiopian gross domestic product and 85 per Cent;¢3f all manufacturing is classified as agro-industrial. Trains imbalances, the needs to increase national levels of :fixxi production and foreign exchange are additional factors IXHJTting to the importance of developing Ethiopia's agri- Culture. The Third Five-Year Plan emphasizes agricultural develllpment and gives high priorities to: early generation Of CaSh incomes; economies in demands on scarce resources; correuztion of difficulties in land tenure arrangements; implfinrlentation of research; encouragement of private sector enterprises; improvement of agricultural insti- tutlcnis; extension of irrigation enterprises; expansion 208 of production; expansion of agricultural mechanization and improved technology; expansion of bilateral and multi- lateral aid. Agricultural develOpment is envisioned in two major strategies: (1) rapid development of modern commercial enterprises at an estimated annual rate of 5.7 per cent, and (2) eXpansion of the subsistence sector at an estimated annual rate of 1.9 per cent. The commercial sector of agriculture is expected to generate high income volumes, facilitate the establishment of new infrastructure, and provide local demonstration effects. It is anticipated that provisions will be made in the subsistence sector for extension and credit facilities, increased accessibility to markets, establishment of "package" input programs, and introduction of land reforms. Methodology falls into four phases: field work, Prepniration of basic production data, data generation (Prfnparation of budget models), and data analyses. Field WOIWE consisted of selection and observation of cases. Basil: data were prepared from these observations to estab- list; the initiating year for budget models employed to generate additional data for the analytical phases. Selected cases depict agricultural systems employ- ing tractor hire and extension services. The Setit-Humera case depicts a typical 800 hECtRIre farm operated by a private entrepreneur operating three; tractors and growing sesame, cotton, grain sorghum, and 1I><.=:ans on a commercial basis. In order to effect im- prOVEHnents, it was assumed that a small team of trained profs”Ssionals (extension agent, research officer, finance officxar-—half-time), can provide extension facilities for 100 farmers (80,000 hectares). Two strategies were assufimui; strategy I, only early tillage operations meChEuiized to maintain high levels of employment (migrant labor); and strategy II, operations subsequent to early 211 tillage mechanized to employ engine—powered technology more intensively as a substitute for labor. The Tendaho Plantations are being developed from a large land concession of 10,000 hectares devoted to cotton under a combined management of Ethiopian and expatriate technical personnel. In the initiating year, cotton is grown on 1,100 hectares; the area is expanded annually to take up the full concession. Technical ser- vices were assumed to be provided fully by the Plantation's professional staff. Two strategies were assumed: strat— egy I, early tillage operations mechanized to employ the minimum requirements of engine-powered technology to grow cotton in a plantation system; and strategy II, in addi- tion to mechanized early tillage operations, establishment of a ginnery to increase the number of mechanized oper- ations. Both strategies employ high levels of hand labor in weeding, thinning, and picking. Following preparation of basic production data to establish the initiating year of the budget model for each case, a number of basic assumptions were made in order to prepare budgets over a 10 year period and later approxi- mations over a 20 year period. Basic assumptions cover the following areas: subsistence requirements, yields for subsistence and cash crops, crop prices, levels of crop attrition during storage, tools and equipment, operational rates for labor and equipment, and establishment costs. 212 In order to introduce improvements to each system in the form of appropriate new levels of mechanization, additional assumptions were made with respect to extension and credit facilities based on annual interest rates of 8 per cent for cr0p loans, 7 per cent for overdrafts and medium- (7 years) and long—term (20 years) loans. In each case the financial accounts of the budget model presented in the Appendices are based on high and low production levels corresponding to high- and low-level yield possibilities. Both high- and low-level yields represent improvements on achievements observed in the field (1968). High-level yields were assumed achievable with efficient management, low-level yields for less than adequate management skills. In the initial budget computations, constant product and input prices were employed; in second computations price trends were assumed for cash crops and labor inputs. Also, in computing budget model data for the Agnale, Chilalo, and Setit-Humera cases, in which substantial proportions of outputs and inputs were observed to fall within the non-cash fraction of the system, the presented accounts maintain non-cash and cash flows separately. The budget models provide data for benefit-cost and subsequent analyses. Analyses The benefit-cost analysis technique facilitates the evaluation of anticipated financial returns and 213 costs to investment proposals in situations where the market mechanism does not guide the flow of investment funds. This technique provides computed values for a number of selected criteria which form the basis for alternative decision-making rules: net present value (NPV), payback period (PB), internal rate of return (IRR), benefit- cost ratio (B/C), NPV per unit invested capital (NPV/K), NPV per unit salary cost for technical professional per- sonnel (NPV/Tw), and NPV per unit salary and supporting costs for technical professional personnel (NPV/Tws). The IRR is a measure of the anticipated rate of return for capital invested in the project when capital investment costs are exactly repaid to investors. IRR enables comparisons to be made between projects in terms of rates of return to capital invested in each project. The NPV for a mechanization proposal is the present value of anticipated stream of net returns after meeting all operating and capital costs incurred through the project period. Streams of benefits and costs are discounted to the initiating year (t=0). In the analyses of this thesis, the budget period employed was 10 years; the employed discount rate was 0.10, based on an esti- mation of the opportunity cost for capital in Ethiopia. The actual size of NPV is a result of the com- bined effect of accounting prices employed for all outputs and inputs. Thus, NPV/K, NPV/T and NPV/TWS are each w! measures of anticipated net average returns when this net 214 return is allocated for one arbitrarily selected resource (K, or T or T ). These measures are devices for indi- W' WS cating those project proposals in which the selected re- source is employed extensively. Usually investment capital (K) is designated as the limiting resource. Any single resource can be selected arbitrarily as a limiting factor and, given an array of alternative investment proposals, selection would require a high value for NPV/K. In the Ethiopian situ- ation NPV/Tw and NPV/TWS were also computed because skilled technical personnel (wage costs: T wage and supporting w, costs: TWS) are probably scarcer than direct investment capital (K). Computed values are tabulated for these cri- teria obtained from the budget model data and 20 year approximations. Four other criteria derived from specified non- monetary objectives in the development plans are employed in subsequent analyses. They are employed independently because they cannot be realistically conceptualized in monetary terms for incorporation into the benefit-cost analyses. These criteria are: generation of income, employment and distribution of income, productivity of factors, potential for export and import substitution. Changes in the values of these criteria were measured by index numbers at selected points in time over the budget period. 215 Benefit-cost analyses of data generated in the Agnale Village case study indicate very high internal rates of return (IRR), for both high and low production levels, and high anticipated average net returns to each of the arbitrarily selected scarce resources of capital (NPV/K), costs of salaries for technical personnel (NPV/ Tw), and costs of salaries and support for technical per- sonnel (NPV/T These analyses suggest that high WS)' potentials exist for increasing net benefit streams by introducing unsophisticated improvements into economies based on hand-powered technology, provided adequate super- vision is available along with cooperation from the village elders and people in introducing new cash crops into the system. Data from two strategies in the Chilalo case study suggest that only modest net returns (NPV) can be antici— pated from high production levels, and low production levels lead to negative net returns. Benefit-cost analyses of Chilalo data suggest that: (1) high yields must be attained through relatively efficient management in order to avoid negative net returns; (2) improving established animal-powered technology leads to relatively higher net returns than introducing tractor hire facilities. The second conclusion appears to be derived from the much higher capital investment required in establishing tractor hire services and the concentration of unit extension 216 services on fewer farmers. Also, the farm is small and fragmented with much effort devoted to the production of subsistence crops. Therefore, machine operational per- formances tend to be inefficient. Benefit-cost analyses of data from two strategies in the Setit—Humera case study indicate high rates of re— turn at both production levels, and high anticipated aver- age net returns for each of the selected scarce resources and T ). These results appear to be derived (K' TW' WS from a combination of features: the large-scale nature of this system; the ability of the entrepreneur to manage engine-powered technology; the spread of investment in extension facilities over an extremely large area of pro— ductive land. Anticipated net returns to strategy I (labor intensive) tend to be lower than those to strategy II (machine intensive) since additional economies are facili- tated by the higher level of mechanization, achieved at the expense of lower rates of increase in employment. Benefit-cost analyses of Tendaho data suggest high anticipated net returns and moderately high rates of re- turns for high production levels but negative net returns for low levels. This system requires heavy investment commitments which should be undertaken with caution if any uncertainty exists about yield attainments. Average net returns for each of the selected scarce resources (K, TW’ and T tend to be relatively low: administrative WS) I facilities and costs of supporting technically trained 217 professionals are relatively much higher than in the other cases. Net returns to strategy II (ginned cotton) are higher than to strategy I (raw cotton) due to the higher value of the product. Higher employment levels are indi— cated in strategy II because of the additional operations of the ginning process. Analyses of Agnale data demonstrate the most dramatic increases in gross and net incomes, and increases in cash percentage. This system is initiated from a low productivity level on a wholly non-cash basis; thus, dra- matic increases due to technological improvements are demonstrated. Analyses of employment requirements indicate a decline in the Agnale case, in which substantial improve— ments to labor efficiency were assumed. Increasing labor requirements are demonstrated in all other cases; in both Chilalo and Setit—Humera higher levels of mechanization are employed in strategy II and, consequently, rates of increase in labor requirements are lower than in strategy I; in Tendaho, higher levels of mechanization are accompa- nied by an additional operation (ginning) and consequently, increases in labor requirements are higher in strategy II. Absolute levels of employment are largest in the Tendaho case which also involves highest levels of investment. Average gross product for factors of land, labor, and accumulated capital in operation suggests a rising level over the budget period for each factor. However, 218 changes in the relative distribution of total product can only be estimated when more precise information is known about the relevant production functions. Analyses of potentials to earn or save foreign exchange, relative potentials for export or import substi- tution are high for Agnale and Setit-Humera although in absolute values Tendaho and Setit-Humera rank highest. Taking necessary imports into account, greatest reductions occur in Tendaho, Setit-Humera is next; these two cases have relatively highest quantities of imported capital equipment. Sensitivity analyses indicate highest relative changes toward increasing total output values (positive correlation with benefit-cost criteria) in cases of rela- tively low value of total product to total investment costs, the most pronounced effect is observed in Chilalo, strategy II (tractor hire). The effect of increasing labor costs (negative correlation with benefit-cost criteria) are observed to be greatest in cases of low output rela- tive to the quantity of labor employed. Increasing dis- count rates (negative correlation with criteria) appeared to have greatest effect on those cases in which initial investment costs are relatively high and returns initially low or delayed. Thus, the effect appears greatest in Agnale where fruit bearing commences several years after the initial investments. 219 Raising the foreign exchange rate (negative corre- lation with criteria) has greatest effect in cases of small output relative to imported investments. Chilalo, strategy II (tractor hire) was affected to the greatest extent. Estimates of anticipated price changes are not readily available. At best, price changes employed to recompute the budget models can only be estimates of slightly increasing or decreasing trends. In each case, modest increases in labor costs were assumed. Resultant changes in computed benefit-cost criteria suggest that increasing labor costs can be absorbed without difficulty in Agnale, Setit—Humera, and Tendaho. Chilalo, strategy II, data suggest that at the higher level of mechanization there is insufficient margin, even at high yields, to absorb increasing trends in labor input costs. Conclusions The intention to avoid substantive in contrast to methodological generalization was asserted in Chapter I. One case from each of four different agricultural systems is an inadequate basis from which to draw generalized con- clusions for the technological improvement of similar systems or to designate the role that such improvement may take in the context of total Ethiopian development. However, methodological generalizations are admissible because they provide general guidelines for analytical procedures without anticipating any particular results. 220 Conclusions drawn from the analyses of each of the four case studies are presented first. They serve to point to the possibility of other useful specific, perhaps similar, conclusions being drawn from similar analyses of other cases. Specific conclusions from this thesis will serve as guidelines to what might be expected, and there- fore what should be sought, in similar analyses. Method- ological conclusions serve to suggest appropriate analyti— cal procedures and the data required to perform the analyses. Scale of Operation Clearly, no common basis of comparison exists for the four selected cases in the basis of absolute quantities. In terms of the level of total income generated, total export earning potential, and the level of total employ- ment, Tendaho Plantations rank highest. In terms of anticipated average net returns for investment (NPV/K), for wage costs of technical personnel (NPV/TW), and for wage and supporting costs of technical personnel (NPV/TWS), Tendaho does not rank high; in terms of average gross out— put, returns are relatively high to labor and land but relatively low to capital; in terms of employment of labor relative to land area the Tendaho case is relatively in— tensive but in terms of employment relative to capital investment Tendaho is extremely capital intensive--labor utilization per dollar of accumulated capital in operation 221 is low. Average gross returns for land and labor in Tendaho Plantations are relatively high but those resources arbitrarily designated as scarce in the Ethiopian economy, and T i.e., K, T display much higher average net re- W' WS' turns in the Agnale and Setit-Humera cases. Neither case depicts an operation of comparable size to Tendaho but in its respective location each can be multiplied many times according to the extent to which that option is given necessary investment and technical support. The impli- cation of these observations suggests that in the event of comparable scales of investment among these three cases, much higher average net returns for selected scarce re- sources can be anticipated in Agnale and Setit-Humera than in Tendaho. Tendaho and Setit—Humera depict two forms of com— mercial agriculture employing sophisticated engine-powered technology. According to Ethiopian development plans, commercial agriculture is to be encouraged as the principal vehicle for rapid economic expansion and for achieving specified objectives of generating employment Opportunities, facilitating the establishment of infrastructure, and creating opportunities for local demonstration effects. Tendaho depicts a case in which the realization of these specified objectives can be reasonably assured. On the other hand, the Setit-Humera case can facilitate the objectives of rapid commercial development only if the government is prepared to promote the development of 222 appropriate infrastructure. Thus, a conflict of policy may arise between allocating investment funds to the Tendaho case, and allocating funds to provide the neces- sary infrastructure in the Setit-Humera region. The former option offers the opportunity to achieve most of the specified developmental objectives at the expense of relatively low average net returns for the arbitrarily selected scarce resources; the latter offers the oppor- tunity for rapid commercial expansion and relatively high average net returns for these resources, given adequate investment in infrastructure by the government. Such con- flicts in objectives must be carefully examined in the course of economic analyses. Agnale depicts an unsophisticated hand—powered system containing potential for substantial increases in both non-cash and cash forms of incomes and in exportable production. The system is initiated at a low level of productivity and the improvements are relatively unsophis- ticated. Such improvements can have a substantial impact on total development of the economy when the single case is multiplied many times according to the total investment level for the region. Relatively low investment require- ments for each case enable development funds to be spread over a large sector of the economy in which relatively high levels of net return can be anticipated. In the course of planning development, the prag- matic approach to agricultural mechanization is likely to 223 include some combination of available forms of mechanized technology. Before new proposals are effected their evaluation from two different aspects is important. Firstly, the potentials of large-scale operations are to be set in juxtaposition to total investment requirements, the relative levels of anticipated net benefits and rates of return. Secondly, since a substantial proportion of Ethiopia's population makes its livelihood in unsophisti— cated hand—powered systems, an appropriate weight must be assigned to a mechanization proposal according to the size of the sector for which the improvement is proposed. Sophisticated mechanized agricultural technology in com- mercial operations facilitates the development of large- scale enterprises. Increases in scale, however, increase investment costs, management costs, and costs of additional technical facilities which may tend to depress returns to certain scarce resources. In contrast, modest investments in improved forms of unsophisticated mechanized technology in those systems where the majority of Ethiopians makes its livelihood may be substantial. Knowledge of such differ- ences among proposals can only be determined accurately through the employment of appropriate analytical procedures prior to policy decision—making. 224 Alternative Forms of Mechanization for Small Farm Systems The term "small farm" has been used throughout this thesis to refer to small—scale agriculture employing any of the three forms of mechanized technology. Two strategies employed in the Chilalo case depict the improve- ment of extant animal-powered technology (strategy I) or the provision of a tractor hire service (strategy II). These two strategies represent alternative forms of mecha- nization for the Chilalo farm system. At the farm level, and at high yields, the budget analyses suggest that the tractor hire service alternative proves somewhat more profitable than the improvement of oxen technology. At low yields, however, negative net returns for the tractor hire service alternative are anticipated to be substantial while net returns for oxen— powered agriculture are anticipated to remain positive although substantially reduced from high yield returns. At the government level, benefit-cost analyses which include costs incurred by government support to the pro- posal in addition to farm level costs, suggest that antici- pated net returns and internal rates of return for im- proved oxen technology are considerably higher than the tractor hire alternative. Two major conclusions emerge from the analyses of the Chilalo case: 225 1. Although at the level of accounting employed for the farm (budget analyses) the tractor hire service appears profitable to the farmer who can anticipate high yields, at the level of accounting employed by the sponsoring insti- tution, usually government (benefit—cost analyses), the tractor hire service promises lower returns to this small farm system than the proposal to improve extant animal-powered technology. 2. Yield levels are critical to these analyses and may have a predominating effect over the successful introduction of new forms of tech- nology. This conclusion is discussed in the following section. Given analyses indicating this situation, a decision to introduce a tractor hire service into Chilalo under the conditions represented by the analyses can only be made as a positive decision if policy-makers intend to adopt this form of technology as a means of introducing a subsidy to the area, a form which tends to use available resources uneconomically. Such a decision is frequently made in this sort of situation with the objective of increasing the power available for the cultivation of small farms. The Chilalo case study appears to offer no economic grounds to support such a program. 226 The following reasons may be posited from this case study to serve as guidelines for the analyses of similar cases. The farm in this case study is small and frag- mented; thus, tractor and machine operating efficiencies are low. In this region, farmers' skills are generally inadequate to manage the problems of engine-powered tech- nology without substantial supervision; therefore, the services of technically trained professionals are employed much more intensively than in the strategy improving oxen technology. Capital investment requirements per operating unit (50 farms) is considerably more intensive than that required to improve oxen power (150-200 farms). Critical Yield Levels The analyses of Chilalo and Tendaho cases suggest anticipated negative net returns for low production levels in contrast to positive returns for the same situations at high production levels. Low production levels are based on low yield assumptions due to less than adequate manage- ment and/or inferior agronomic conditions. Thus, yield attainments in these cases become critical in determining whether anticipated net returns are positive or negative. Anticipated net returns for investment in the Chilalo case are only modest under the most favorable assumptions. Thus, it appears prudent to implement im- provements which are not heavy in capital investment and in which scarce resources can be employed extensively in 227 order to avoid risk of inadequate yields to realize sufficient net returns to meet relatively heavy investment costs. Tendaho analyses anticipate substantial net returns to high production levels in both strategies and substantial negative net returns to low production levels in both strategies. The Tendaho case involves very heavy invest- ments for which returns are inadequate if low yields are realized. Whenever yield attainments are low, or there is doubt about the adequacy of yields to anticipate adequate net returns for the investment proposal, the adoption of the proposal, especially when investments are very heavy, should be considered imprudent. The same resources can be made available for employment in programs which promise more favorable net returns. Proposals should be carefully analyzed to determine the extent to which yield levels are critical and, if sufficient data are available, the ex- pected distribution of crop yields around averages. Anticipated Net Average Returns to Selected Scarce Resources Three resources have been selected for special consideration throughout these analyses: capital, costs of salaries for technical personnel, and costs of salaries and supporting services for technical personnel. This selection is somewhat arbitrary for the purposes of the 228 benefit-cost analyses since any resource is relatively scarce, unless it is a free commodity. These three re- sources were selected as scarce in the Ethiopian develop- ment situation. The benefit-cost analysis technique measures discounted average net returns to each selected scarce resource. The technique enables crude comparisons to be made among different investment proposals in terms of anticipated average net returns to each selected resource. Investment capital is considered a scarce resource insofar as, in the development of the economy through special projects, capital has to be raised on local capital markets or negotiated through bilateral or multilateral aid arrangements. However, the potential for capital accumulation which exists in the economies of millions of small farmers through the creation of unsophisticated work- ing equipment should not be overlooked. Such capital accumulation can be encouraged by policy decisions which favor cash crop production and enable small farmers to accumulate economic surpluses. Costs of employing technical personnel, and the supporting costs necessary to maintain these personnel in the field are essential to the management of new agricul- tural projects. In the Ethiopian situation, the resources represented as investment in technical personnel to super- vise projects are probably scarcer than direct investment capital. 229 With respect to invested capital, higher average net returns are anticipated in the analyses of data from Agnale since capital requirements are relatively low. With respect to costs for technical professionals, high- est average net returns are anticipated in the analyses of data from the higher level of mechanization alternative (strategy II) of Setit-Humera, followed by the lower level of mechanization (strategy I) since these service facilities are spread over production from an extremely large agricul- tural area. This device of the benefit-cost analysis technique serves to indicate the projects in which designated scarce resources are employed extensively. The results are useful insofar as the criteria encourage the selection of invest- ment proposals to which average net returns to these re- sources are anticipated to be highest. Indications of Sensitivity Analyses Greatest changes occur with respect to changes in total product. The observations suggest that a combi- nation of changes in crop yields and product prices is likely to have the most significant effect on results of this form of economic analysis and, therefore, the accuracy of these data is most important in the preparation of budget models. In cases for which computed anticipated net returns are initially low, the relative change in 230 computed values of benefit-cost criteria are much greater than in cases of relatively high values in initial compu— tations. Increasing the labor input has the most marked effect in two groups of situations: (1) cases in which labor input is relatively high, i.e., Setit-Humera (both strategies) and Chilalo (strategy I); (2) cases in which returns are relatively small (any change in input costs appears relatively large), i.e., Chilalo (strategy II). In such cases careful inquiries must be conducted into labor Operational requirements and scope for increasing economies in labor utilization in the event of wage increases. Field Observations and Data Transference The preparation of budget models used in this thesis necessitated the use of a large amount of technical and economic data relating to each case. Field observations were conducted and the systems were simulated for the initiating year on the basis of these observations. How— ever, little accurate data were available for average agricultural practice in any of the regions in which the cases are located. The best available data were provided in the Chilalo Awraja where the Chilalo Agricultural Development Unit of the Swedish International Development Agency has conducted numerous agricultural surveys. In 231 this region the results of some variety and fertilizer trials were available and were employed in preparing the budget models. Little information was available, however, on local labor and machine operational rates, or on the use of improved agricultural equipment. Many of the assumptions for yield data, seed rate requirements, culti- vation requirements, labor and machine operational require- ments used in Setit-Humera and Agnale were based on esti- mates available in publications of the Stanford Research Institute in which data transferred from similar ecological conditions found in the United States have been employed. Wherever possible such estimates were modified according to observed eXperience in Ethiopia. In the case of Tendaho, the budget model presented in this thesis is the result of data and financial information being made avail— able from the working accounts of the company. There is no substitution for actual field obser- vations of agricultural research conducted in the country, and in the particular region, for which developmental changes are proposed. Estimation of total output, demon- strated by the sensitivity analyses to be the most signifi- cant single item affecting the value of the benefit-cost criteria, is determined by crop yields, product prices, and quantity of marketed production. Of these components, yields in many instances were estimated using formulae which adjust actual experience for changes in environmental 232 conditions; prices employed were those obtained from interviewed farmers or Stanford Research Institute esti— mates, market records being unavailable; rates of product attrition were estimated rather than the experience of controlled observations. Data on currently practiced cultivation techniques were only available to a limited extent from experimental stations. These had to be adapted to local conditions. Data on new or improved practices were virtually unavail— able and had to be approximated. In the study of mechanization, testing a range of available equipment to determine most suitable equipment and its operational capacities under prevailing conditions is essential to achieve accurate economic investigations of farming systems. These data only become available systematically as suitable agricultural equipment is tested under appropriate conditions. Thus, the data and procedures employed in this thesis serve a three-fold function. First, to give approximate answers to questions about the relative bene- fits and costs from changing forms of mechanization in the selected cases; second, to demonstrate the analytical procedures and the data required in the process of these analyses; third, to provide approximations of technical data, used as assumptions in this thesis, which can be tested and adjusted as future research provides more accurate estimates for local production conditions. 233 Agricultural Credit Facilities In the preparation of budget models credit facili- ties were assumed for medium— and long-term loans at annual interest rates of 7 per cent and crop loans at annual interest rates of 8 per cent, charged monthly. Net nega- tive balances were accommodated as overdrafts at an annual interest rate of 7 per cent. Clearly, the workability of the budget models is dependent on adequate credit accommodation. There is little realism in any proposal to improve small farm systems unless adequate credit facilities are available. In certain cases, large-scale commercial undertakings are able to finance themselves. However, in the Ethiopian experience the large-scale undertakings have been able to obtain bank accommodation more readily than small farmers, a situation which tends to mitigate against widespread rural development. Sociological Implications of Budget Technique In the justification of the budget technique com- mercial viability of each selected case was assumed. How— ever, the sociological implications of increasing cash incomes cannot be overlooked in the development of a system into a commercially viable unit. Commercial viability assumes willingness of the individuals in the system to c00perate in change. Much 234 responsibility for the success of development rests on the technically trained professionals in immediate contact with the local people. As the development process continues, cash incomes of the local people will gradually increase. Increasing availability of consumers' goods and services must be fostered as increasing cash incomes is part of the development process; it also is a means of strengthen- ing the position of those in immediate contact with the local people since, ultimately, these local people require adequate encouragement to desire the continuing increase of cash incomes. Recommendations Data, analyses, and conclusions of this thesis have been prepared in order to provide agricultural policy- makers and planners in Ethiopia with information to aid decision-making with respect to mechanized technology. Such information contributes to broadening the base of knowledge on which decisions can be taken. Policy decision-making embraces a much wider range of considerations and seeks a wider base of knowledge than can be provided by a single thesis. However, the investi- gations and subsequent analyses of four case studies in Ethiopia can be a useful contribution insofar as economic implications of policies to mechanize agricultural prac- tices are brought into sharper focus. These analyses serve to indicate the kinds of questions that can be put 235 to investigators engaged in economic research. In the process of investigation and economic analysis of agri- cultural mechanization, the investigator asks questions about this particular area of research; the information gained may be useful in answering questions of concern to policy-makers. When these two groups of professionals put questions to each other, part of the policy decision- making process moves into dialogue between policy—makers and investigators. In this way investigators can discern more quickly the type and organization of information relevant to policy-making and, in turn, policy-makers can be provided with information congruent to their needs. Research and policy-making then become continuing processes each providing information to and guiding the other to relevant areas of mutual interest through the process of continuing dialogue. The recommendations which conclude this thesis are presented as areas of investigation which appear, in the light of research undertaken for this thesis, to be of particular interest to policy-makers concerned with the process of improving agricultural technology in EthiOpia by mechanization. Recommendations relate to the following five areas: (1) questions about the role of agricultural mechanization; (2) specific questions about selection and implementation among alternative mecha- nization programs; (3) project appraisal; (4) project establishment; (5) research organization and priorities. 236 Questions about the role of agricultural mecha- nization are posed anticipating answers which will provide useful information and insights for the development of related policy. Such questions are important because they are used to guide relevant research. The general question, what role does mechanization play in the develop- ment of the agricultural sector of the Ethiopian economy, is too broad to provide answers except in equally broad terms. The discussion of technical relationships in Chapter I of this thesis provides the general terms for answering this question. Conceptually, mechanization is a means of changing the form and amounts of capital em- ployed in the production function: a process referred to as technical progress. This process involves higher production costs, therefore necessitates higher produc- tivity. Thus, insofar as increasing production costs involves raising cash expenditures, commercial viability is a prerequisite to mechanization. Therefore, it is recommended that to guide the planning of agricultural mechanization in Ethiopia general policy questions be couched in terms of already estab- lished policy objectives, e.g., the role of agricultural mechanization in changing employment level, or in improv- ing income generation and distribution. Such questions may be posed for the total economy or for selected regions. They are questions which necessitate a continuing research program in which specified objectives of development plans 237 are employed as evaluation criteria for proposed projects. As proposed projects are approved and implemented, an increasing accumulation of technical data can be antici- pated. The usefulness of a continuing research program for general policy-making lies in the feedback process by which objectives of development plans are employed as evaluation criteria and, in turn, are themselves tested for feasibility against the findings of research. Specific questions about selection and implemen— tation among alternative mechanization programs relate to the form of technology and location for investment pro- posals. Location must be considered among sectors of the agricultural economy as well as the geographical selection of sites for specific mechanization proposals. The ob- jectives of Ethiopian development plans place heavy emphasis on commercial agriculture. The analyses of this thesis indicate certain forms of commercial operations employ scarce resources less efficiently than small farm systems. Relative merits of different proposals should be tested by careful analyses and it is recommended that no proposals be implemented without such prior analyses. The benefit-cost analysis technique specifically draws attention to projects in which arbitrarily selected scarce resources are employed extensively. In this thesis such cases are those in which technological problems associated with the form of mechanization are within the competency of the farmer to solve and manage, given 238 necessary extension facilities. In this way the govern- ment is responsible only for the provision of effective services for extension, credit, research, and necessary infrastructure to support the region's economic develop- ment; the farmer handles daily problems of management without requiring the close involvement of extension agents. Within the bounds of the recommendation to employ capital and the services of technically trained personnel extensively wherever possible, the question of sites for new projects should be examined both from the vieWpoint of rapidity of development and the size of agricultural population for which the selected form of mechanization, when developed, will provide an appropriate learning experience. Commercial forms of mechanized technology are generally more rapidly adopted where technical competency is adequate. However, the introduction of technology appropriate to the Ethiopian small farmer and the learning experience afforded by any single project are likely to have much wider impact on the Ethiopian economy in the long run. Project appraisals should be carried out as eco- nomic analyses taking into account both financial net returns and non-financial effects of project proposals. Tests should be applied to check for consistency between any proposal and relevant objectives of economic planning. The analyses of this thesis serve to illustrate economic analyses of four projects. Such analyses are facilitated 239 by availability of relevant economic and technical data. Data transference tends to weaken the validity of analyses although such analyses are preferable to none at all since they provide a synthesis of functional interrelationships of'a selected case and bring into focus data needed to improve accuracy of analyses. Project establishment necessitates the employment of appropriately qualified technical personnel. The field experience of gathering data for this thesis afforded ample opportunity to observe both apparently successful mechanization projects and the results of unsuccessful projects. Extensive utilization of technical professionals has already been recommended; from the experience of ob- servations in the field, it is recommended that no project be undertaken if availability of technical staff is in— adequate. Adequacy of supply should be interpreted as including provisions for easy consultation between pro- fessionals on daily problems of the project, adequately trained assistants, and provisions to permit the occasional absence of the principal technical professional from the site of the project without adverse repercussions in daily Operations. The inadequacy of data relevant to mechanization in the productive processes has been very apparent during the course of preparing and generating data for this thesis. It is therefore recommended that: new research endeavors be encouraged to improve the availability of 240 relevant data within the Ethiopian Empire; systematic records be maintained of all ongoing projects; records of aborted projects be preserved and made available for re- search purposes. Over time, this will reduce the need for data transference; thus, improving accuracy of economic analyses and efficiency in their execution. Three general areas of research are relevant to problems of agricultural mechanization: (1) research within the technical disciplines of agriculture, i.e., biological and engineering research; (2) research within the discipline of agricultural economics, i.e., case studies and system analyses falling within the province of farm management research; local, national, and inter- national price and demand studies for Ethiopian commodi— ties; (3) policy level research designed to ask questions about the relevancy of mechanization in the total context of Ethiopian development. All three areas need to be placed on a continuing basis coordinated through an appropriate institution (presumably the Institute of Agri- cultural Research). The area of farm management research offers much scope for student papers and master's theses as single and complete study pieces. Such work can be coordinated through collaboration between the Institute of Agricultural Research and the Alamaya Agricultural College of Haile Selassie I University. 241 It is recommended that the total continuing re- search program be coordinated on a systematic basis by a panel of Ethiopian and other invited professionals each competent in a relevant area of investigation: biology, agricultural engineering, and economics. Each of these disciplines includes professional skills for which others have no plausible substitute. The economist is not equipped to determine many of the technical conditions of productive systems, nor to determine which of a range of available machines, or of available plant varieties can be used in any given system. On the other hand the economist can, and should be expected to, play a leading role in suggest- ing to engineers the systems and the form of mechanization within these systems, and to the biological scientists the crops and crop combinations, which are likely to be most fruitful areas of inquiry from the point of view of social benefits and the stated objectives of Ethiopian plans. APPENDICES APPENDIX A AGNALE VILLAGE CASE STUDY APPENDIX A AGNALE VILLAGE CASE STUDY Introduction Agnale Village, approximately 1,083 kilometers from Addis Abeba in the Province of Ilubabor, has been selected as a case study of a hand-powered farming system in which the introduction of technological improvements is limited to hand-powered forms of mechanization. Animal-powered technology is unfeasible because of tsetse fly infestation and engine-power is inappropriate to the peOples' present unsophisticated technological understanding of agricultural production and marketing. Gambela is the area's principal town where there are river port facilities including warehouses and an air— field. Agnale's location is approximately 50 kilometers west of Gambela, close to the northern bank of the Baro River (latitude 8°15' North, longitude 34°0 East) which flows westward to join the White Nile in the Sudan. The altitude at Agnale is approximately 450 meters; the terrain slopes away toward the Sudan and the EthiOpian Highlands begin to rise steeply about 80 kilometers east of Agnale: Gore, some 160 kilometers east lies at an altitude of 2,005 meters. The terrain in the vicinity of Agnale is described as open woodland and savannah,l drained by the Baro which floods annually during the rainy season (June-October). The red soils range from a deep clay to sandy loam. The soil's organic matter, its slight acidity with high availa- ble phosphorus and low salt content is favorable for most crops. The main subsistence crOps are maize, grain sorghum and haricot beans. The Agnale area is "the most favorable for crOp production of any soils tested from the study sites of Ethiopia." Under current agricultural practices, lZerom, 9E3 cit., p. 19. 2Kline, 33 al., 92. cit., Pt. II, pp. 36-39. 242 243 there is little difficulty in growing adequate crOps al- though a short "hunger period" occurs before the second harvest in the middle of the rainy season. Agnale lies between the 1,000 and 1,400 mm. isohyets, having a mean annual precipitation of 1,100 mm. The assumed data shown in Table A.l for rainfall and temperature have been adjusted from data for proximate recording stations. Fieldwork observations have provided data to establish the initiating year (t=0) of the budget model. The economic balance of the system in its existing organi- zation insures adequate production along with an acceptable annual distribution of leisure. Labor requirements during January-March render additional cropping impossible during the dry season. There are fewer available demands on labor during the wet season but any proposals to increase the production of subsistence crops are unlikely to be received enthusiastically since there is no market for surpluses. Thus, proposals for technological improvement at Agnale are aimed at economizing in labor utilization with a more even distribution of labor use in order to employ the released labor to produce high value cash crops such as citrus fruits. Proposals to introduce higher yielding varieties of subsistence crOps are included in the model but the main intent is to reduce the area under cultivation in order to release labor to cultivate cash crOps. Mechanization in the form of improved hand tools will increase labor pro- ductivity in peak demand periods. This type of mechani- zation becomes a realistic possibility only if adequate instructional facilities, infrastructure, and an appro- priate market to realize economic returns to meet increas- ing production costs can also be provided. Present Agricultural Economy The People and Their Habitat The people of Agnale Village are Anuaks, a Nilotic group with a closer ethnic affinity to certain Sudanese groups than to the predominant Ethiopian ethnic groups. Agnale and the other nearby villages in which these Ethi- Opian Anuaks live are situated close to the river on the higher banks which remain above flood water level when the hinterland becomes submerged. The river banks are inten- sively cultivated; the hinterland is left uncropped. Village compounds are surrounded by thicket hedges; each family lives in one or more grass-walled and thatched circular houses. 2‘14 0E00 000 CH 000000 0030H0H0 000 we HH.oH+ >0 00000fl00 0050000QE00 .Aem0HtmmmHv 0000 00 00000000 0000 E000 0000H50H0U .0: v.0 .Ednmuom “.00 0.0 .0NHOE "00NH0 uono .000002 004 cu moo.~ SH?0 0 Ive 0Q QIUHU 0mm .0HnH .H0o0cMus: .EE H.mOVH mo HH0ucH00 H0scc0 c00E H0000 ocH3ocm HommHueva. 0H00E0u 00 00000000 0000 £000 0000H30H000 man on Hm Hm on Hm on Hm m~ Hm Hm on Hm oHnaHHm>n noan Hmuoe 00H m mm 0H mm mm m cm EdaHx0: mmH m.v m.n~ 0 m.mv 0.40 v 5H momuu>¢ -H v mw 0 NM ov m «H ESEHCHZ 0000H H0009 o.o H H H H H H 0000H|t 000>u0c 0003 0:0Hm 000>000 0003 0c0Hm c00000000|n0c00m .m.owuom.mo HHuem kuemm‘ . “HHMDH noanun 005005 000>000 0003 0:0H 000H0 0000000QO||E300000 10.0Huom.mm 00.0em.me Am.vwem.m~ “H0~Hv ”HH~HH lm.0om.m HHMCHHI HHHCH im0~pH uoaaHnu 000>H00 0003 0:0H 000H0 000>000 0003 0c0mm 000H0 000000000|I00002 000H0 00m10x00lc0E :H 00c0E00HJw0u 0000H 0:0 0:0H0000mm‘m000 m.- v.- ~.- m.- H.HN m.m~ m.m~ m.m~ m.m~ H.m~ o.m~ w.- 00o. EdEHcHz n.Hm o.oM v.0m h.Hm v.mm m.vm 0.0m H.0m o.mm 0.mm e.mm m.~m .Uo. EdEHx0z 000500000800 C00: ooH.H v.me o.mv~ o.mmH o.~vH m.QMH 0.00 ~.- m.HH o.m m.~H h.vm 0.00 H.850 0HH0ucH0u :00: . uuuuuuuuuuuuuuuuuuuuu 003 uuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuu nunuxuo IIIIIIIIIIIIIII nuclulnncl 0:00000 H0009 " .0000 " .05¢ u >H50 ” 0:00 0 >0: u .00< u .002 u .000 u .:00 u .000 u .>oz n .000 " 500H .ou0. 000» ocH00HuHcH H000E 000030 .000208 000:0H00 >0 0000000000 0000 no :00090Hu00H0 000 0000 0HO0EHHU ”0H0cmt H.¢ NHMHB 245 No census has been taken in the Gambela Awraja (sub—province)l but local Christian missionaries estimated the village to contain about 20 families. The village elders who control all village affairs, reported a total of 48 actively working men and boys. These estimates suggest a total of 190 persons; census data for other sub—provinces in the area indicate a natural rate of increase of 10.9 per thousand.2 This rate of population increase provides the basis for determining the subsistence crop requirements recorded in Table A.2(a). No legal titles to land exist; these people have title by custom after several generations of settlement. No rents are paid for any land. Agricultural Practices On request men and boys (12 years minimum) are allocated fields by the village elders. Fields are sub- divided into plots which range from 0.6 to 1.0 hectares for maize and 0.6 to 0.8 hectares for sorghum. No obvious divisions exist between fields, nor is there any attempt to arrange for members of the same family to work together or in close proximity. Both maize and grain sorghum are grown in the dry season; in the wet season only maize is grown and the remaining land lies fallow. These obser- vations suggest that 72 hectares of land are under main crops.3 A few minor crops are fitted into the cultivation pattern: haricot beans, gourds, pumpkins, sesame, and cotton were observed. lImperial Ethiopian Government, Report on a Survey of Illubabor Province, National Sample Survey, Report No. 11 (Addis Abeba: Central Statistical Office, June, 1968), p. 4. ' 21bid., p. 18. 3Dry season: 48 plots of maize, 0.8 ha./plot = 38.4 ha. 48 plots of sorghum, 0.7 ha./plot = 33.6 ha. g5 fields 1.5 ha./fie1d = 72.0 ha. Wet season: 48 plots of maize, 0.8 ha./plot = 38.4 ha. 48 plots of fallow, 0.7 ha./plot = 33.6 ha. §§ fields 1.5 ha.7field = 7576—857 2146 u0 now .a.a omN :H mEmuH .Aumoo HmchHHo uo .m.m me .m.a oo.Hm um umumflomuawc .oo.mw um cwsHm>m .Humoo HmchHuo mo .a.m «NH .mucmeUmHawmc "coHumHomumev macho oucwumHmQSQ :H mm: HON .Hmumoo ucw8:mHHnmumw CH new @wvH>oumv mmfidm ucmeuwHawms .nomm oo.~m» um cmsHm> .Hmumou acoELmHHDMumw CH HON vmnH>oumv mucwewumHmmm H x .anmu mHnu mo :0: uuma Eouw mumoo ucweanHnmumm mmnsHocHn .mumHHoc .m.D mum mmmmecd wmwcu new uwsz> umHHoc HH< .Aumou HmcHoHuo "coHumHuwuawcv mumoo ucweanHnmumm cH vwvsHocH unmewumHmwu uOu :onH>0um van umoo .nomm oo.omm um vwus>a .Humoo HuchHuo uo "coHumHomuamov mumoo acmeanHQMumw msuuHo cH vmvsHocH ucwEmomHmou hem conH>oum ocm umoo .oo.Nmm an owsHo>z .mumoo ucwfianHnmumm CH omvsHocH mum mHmwcucmuom ”:oHumHomuawcv nomw om.Hw um UmsHm> .coHuo>HuHso vumcouo msuuHo uou mHOOu Ucmzo .m.a Hm.om an umuMHomumwo .om.mm um nwsHm> u U .muom> NH mo wwHH momuo>m .umn non om.Hw um vwsHm> .Umwn 00: wm>ouQEH .wHocon can flow: uwucmHmu .Humoo HmchHuo wo .m.m oNH .wusqucmmxo HmuHmmu EOuu vwvsHowaImEoocw ammo :30 no use anHsvmu mm «mun» umomHmwu uOuo>HuHDU .mum0a m mo wwHH wmmuw>o .nomm ov.om um cwsHm> .much “mumw> OH wo meH mmauo>m «20mm om.om um vmsHu> .mumnomz n "coHumHomumwvv mummy m we muHH monum>m «some om.ow um umsHm> .mHHmnom oo.NmH c m um I we mm I Hm.n oo.Hmm Nm.Hmm mm NHN OH om.mmH on I we mm I on.b oo.nNm vq.mww mm moN m oo.mw mu I we Nm I mo.n oc.va NH.me Nm NON m om.mm on I we Nm m mm.» om.0Nm om.Nmm Nm moN n oo.mH EHNV H m vs I Nm Hm NH mv.> on.hHm mv.vvm Hm moN o 0N.Hm wa. Hp I No Hm mH hm.h hH.MHm mN.Nmm Hm oo~ m noo.th on I me om vN cm.h om.m0m mm.mNm om mmH v wvm.Hom.H av mH wm om cm NN.~ mm.w0m mm.mHm om omH m Hov.oom.H mN om VN me on mH.h mo.mom Nv.~om av va N wmm.wom.N HANV szv oH mv NH mHvamv Nv hc.h om.Hom mm.mmn mo NmH H . I . I cm I we we oo.h mv.th ov.omh av omH o ImmumHHoc I IIIIIII III IIIIIIIIIIII IIIIIImuvnESGII IIIIII IIIIIIIIIIIIIIIIIIIII IIIIIIIIInHuucH5UIIIIIIIII IIIIIIuwonlscIIIIr ousum w m omnHuu m cunHuu m omHOOu m anOOu m mmHOOu m andwm m Ednmuom m QNHo: m m m IHucwmxou uQEdm H muwxuuau H 302 H 6H0 H nw>ouQEH H uwzuo H 0H0 H H H H H H HmuHmoo” use: H xonmaucz H . H . . u . . mmuoxuozucoHuuHsmom” hum» Houoan H H unHHo moououm H mumu H008 n «mono wocmuuHmndm u H m HoH.....oan H0008 umocsn .munuHocmmxm HouHmou Hosccd chou van .ucwEmszw uo xhoucu>cH .mucmfimuwnvmu mono woCQumHmnSn .mumxuoz uo muonEdc .coHumHsmom .u unoHuQEdmmu oHunm "mecm4 N.< mqm<8 247 In the established agricultural system tools and equipment are unsophisticated, entirely hand operated. The principal tool is the challa, a short, straight, wooden- handled hoe about 60 cm. in length. The narrow iron blade (13 cm. long x 6.5 cm. wide) continues in the same line. The blade is obtainable in Gambela for $0.80.1 The challa is used in a crouching position for cultivation and weeding. In weeding the challa is used along with a homemade long wooden hook, the diagano, to rake up the weeds. There are a number of other general purpose tools observed in use: machete (price in Gambela, $0.80) used for clearing tall grass; knives (price in Gambela, $0.40) used for cutting off grain heads during harvest; and Chisels, spearheads, and fish hooks which can be fashioned in wrought iron by the village blacksmith. The chisels are used to hollow out tree trunks for canoes used in fishing and general transportation. The distribution in the annual calendar of crOp operations along with estimates of labor requirements are shown in Table A.1. Precultivation consists of clearing residues left from previous crops. The ground is then roughly broken, but not turned, prior to planting; weeds and roots are also removed at this time. The two planting seasons are in November, follow- ing flood subsidence, and in April. Maize is planted in a zig-zag pattern by women who drop five or six seeds into holes made by the men using a challa. A foot movement covers the seeds with soil. Sorghum is planted by the men who place 10 or 12 seeds with a little water into a hole around which the soil has been carefully pulverized. Weeding follows planting. Ideally, maize is weeded three times during the wet season and twice during the dry. Weeding sorghum is tedious and there is only time for one weeding. Maize is harvested by digging up the stalks with a challa. Stalks are laid in rows and the cobs from the day's harvest are shucked by the women who carry them to the village in large baskets to dry or to be shelled. Shelled grain is then dried and stored in the cribs. 1All dollar values are U.S. dollars. 248 Sorghum is harvested in April. The harvest pro— cedure is similar to that for maize. During the maturation period the sorghum crop must be carefully protected from birds by boys and men. Crop labor requirements have been estimated on the assumption that each individual cultivator is solely re- sponsible for the crops in his own plots. These data, contained in Table A.l, are the amount of work required annually of each active man; the sum of labor requirements identifies those periods when labor requirements are critical, i.e., in December and January. Seed is saved annually by each family. Crude estimates of seed rates were established at 20 kilograms per hectare of viable maize grains and 14 kilograms of viable sorghum grains. There are no other inputs required by the agriculture in current practice. Production and Value of Subsistence Crops Estimates of maize yields for the wet season were made by random selection of ripe cobs. Allowing for 10 per cent moisture content,1 maize yields approximate 20 quintals per hectare, suggesting about 15 quintals per hectare in the dry season. An estimate of 18 quintals per hectare appears reasonable for grain sorghum (slightly higher than observed yields in Setit-Humera where soils are somewhat less fertile and rainfall a little lower). Annual grain production, estimated on the basis of these yields, appears adequate for 213 adults for one year, enough and a little to spare (for seed, guests, and beer-making) to provide the estimated population with two staple cereals. This conclusion is reached as follows: Assuming 40 per cent loss in storage3 maize available for consumption amounts to 806 quintals. Assuming 50 per cent 1Carl F. Miller, 93 31., Systems Analysis Methods . . ., p. 92. 21bid. 3Annual maize production Dry season: 38.4 ha. x 20 q/ha. Wet season: 38.4 ha. x 15 q/ha. 768.0 q. 576.0 q. 1,344.0 q. 249 ‘3‘!- 1055, sorghum for consumption amounts to 302 quintals.l According to a rule of thumb used by local missionaries, one adult requires 10 kilograms of grain weekly; 1,108 quintals will feed 213 adults for 52 weeks. Supplements to cereals are obtained in two crops of haricot beans totaling about one hectare each and other minor crops. In addition, a substantial quantity of fish is obtained from the river. Beans and sesame crops are grown in small plots; a discussion of the method of esti— mating yields for these crOps follows below. No marketable surplus is produced at Agnale. A small quantity of grains and pulses may change hands for cash at seed times and other times of relative scarcity. A common price for grains is $4.00 per quintal, in times of scarcity prices rise to $10.00 and even above. Bean prices were estimated at $6.40 per quintal, 60 per cent higher than cereals. Technological Improvements Mechanization in this unsophisticated agricultural system is construed in terms of improved hand tools. Other unsophisticated technological improvements, however, can also be incorporated into the system in order to improve its efficiency and draw it closer to the cash economy of the nation. These improvements include: improved grain storage facilities, new crop varieties, the inclusion of high value cash crops, and the use of a simple crop pro- tection program. The introduction of such improvements must follow a workable sequence. Any increases in crop production can only be handled by reducing and improving the distri- bution of labor requirements since bottlenecks have already been observed. This can be achieved by simultaneously improving labor's efficiency, and reducing the level of attrition, thereby reducing the required area of sub- sistence crops. The introduction of improved hand tools and storage facilities involves some cash expenses and,‘ therefore, some cash surplus must be generated as quickly as possible. 1Annual sorghum production Dry season: 33.6 ha. x 18 q/ha. = 1:344-0 q. 250 The area is ideally suitable for citrus fruit pro— duction which can form the basis of cash crop production. The following proposal is made in order to effect a gradual change from a completely subsistence to a partial market economy in a workable sequential order of technological improvement: An area of simply irrigated citrus orchards is to be incorporated into this system simultaneously with the introduction of improved storage facilities and hand tools. Since citrus trees do not begin to bear fruit until the fourth year after planting, an area of sesame, a crop with which the people are already familiar, is also to be established as another cash crop. Sesame is a valuable annual cash crop and can provide a cash income to cover the additional costs incurred in obtaining improved equipment, assuming the initial cash outlays can be covered by a medium- term loan. Hand Tools Two improved hand tools have been designed for use in this area: a hollow shaft for the challa to convert it into an efficient planting stick; a heavier wide bladed right-angled hoe for cultivation. These tools have already been used experimentally and cultivators are interested in using them. Efficiency in labor productivity can be assumed to be doubled in those operations where the im- proved tools are employed, i.e., planting, cultivation, and weeding.1 New tools are to be purchased in small installments as old tools are replaced. Twelve sets of new tools are to be purchased annually, to equip 10 workers. Each set of tools consists of two metal heads and the hollow handle, manufactured at the agricultural school workshop at Jimma for a cost of $1.80 at the village. The second hoe handle can be made locally at no cost. Grain Storage Each of the 60 grain storage cribs observed had an average capacity of 21 quintals. An improved crib, to be constructed locally using woven bamboo and plastered lPieter Van Beyma, personal communication, 6 January 1968. 251 walls with a thatched roof, has been designed at the Jimma agricultural school. Only plaster and a metal chute must be purchased; the rate of crop attrition will be reduced to a maximum of 10 per cent. These cribs have a capacity of 11.3 quintals and cost, including local labor, $6.00 each. It is proposed to replace the old cribs gradually as they deteriorate. Old cribs have a life of about five years and the new ones have been depreciated over six years. The required cribs are to be constructed during September, when work is slack, by hiring labor at the established wage rate ($0.06 per man-hour). In calculating the number of cribs required it was assumed that the more highly valued crops, sorghum and sesame, should be stored in the new cribs first. Maize can be accommodated in new cribs as space becomes available. Beans are to be stored in the homes since only a small quantity is produced. It is assumed that the marketed proportion of citrus fruits (80 per cent) will be transported away from the area as picking pro- ceeds, 5 per cent of the crop is consumed locally and the remainder is waste. Subsistence Crop Yields The budget model has been developed on the assumption that maize, sorghum, and beans will continue to be grown only for subsistence. Grain production has been increased in direct proportion to the rate of popu- lation increase; the volume of bean production has been increased at a slightly higher rate in order to improve the supply of protein in the local diet. Improved seed varieties are introduced at the beginning of the budget model (t=l) only for sesame. After the establishment of improved equipment and the new culti- vation techniques, improved varieties of maize, sorghum, and beans are introduced into the system in the sixth year; increasing yields are anticipated thereafter. Few agronomic experiments have been conducted in remote areas of Ethiopia. Thus, yield assumptions for Agnale are based on best available estimates: a general— ized model published by the Stanford Research Institute for determining crop yields on Ethiopian "type 1" (alluvial) soils.1 This model enables crop yields for 1Carl F. Miller, EE.§£" System Analysis Methods 0 O 0' p. 40. 252 improved varieties to be approximated on the basis of rainfall, temperature, and soil conditions data. Crop yields determined by the SRI model are included in the basic assumptions for the budget model for Agnale shown in Table A.2(b). These data form the basis of estimating maximum yields. Beginning in the initiating year (t=0) with approximations to the actual yields currently being achieved in the area, two levels of production have been assumed from the introduction of new varieties: high- level yields, the calculated maximum being attained in the tenth year; low-level yields, approximately half the maximum being attained in the tenth year. Data for both yield and price assumption for subsistence crops are con- tained in Table A.2(c). Cash Crops Three cash crops are included in the proposed improvements: sesame, lemon, and orange. Sesame, to begin production in the first year of the budget model (t=l), fulfills the need for an immediate cash income to cover additional costs incurred by the acquisition of improved tools and storage cribs. Citrus fruit production begins in the fourth year of the budget model (t=4). Since sesame was not included in the observations of the initiating year, an arbitrary assumption of yields in the first year (t=l) was made of one—half the calcu- lated maximum attainable yield. In the case of the citrus orchards, the fraction of the maximum attainable yield is determined by the value of the aging function (@a). Recent data on citrus orchards maintained under optimal conditions indicate that yield increases can be expected up to almost 40 years after planting and that good yields can be obtained up to an age of 60 years. However, optimal conditions seldom pertain in practice.1 Two aging functions were used to determine yields of citrus for two production levels. The higher level yields were derived from the generalized aging function in which the orchard attains maximum production more rapidly and becomes more rapidly exhausted than in the case of the equation for optimal conditions, employed to establish the lower level. 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" Aoa.....onuv HmUOE umocsn .mnucoe umpcoamo >2 xuflfiwanflm>m com um: henna uo coflusnfiuumwp ovumefiumm "maccvd 5.4 mqm.~ mm~.m moo.~ vom.m mum VHm.~ meuu boom 9 mpdobw,am>oHI3oq ”oHIv mummw Hmm.om vmm.w wmo.m mmo.n vmm.o H-.n mmv.m Hmm.n omm.m -~.n -~.h vmm.o H-.h mannaam>m «cues wwm.vm omo.~ Ommww Hmh moo Ann mmo.v omm.m m~n.b vwh.@ mmm.~ va.H mwawm com: Hmuos cm om I I I I I I I I I I I mcfin 3wz mnv.- 0mm.“ I I I I mov.H moo.~ mmv.m mmv.m Ham.a nvm.a mmo.~ meuu nmmu «Hm.HH I 0mm.H awn moo ahm mnm.~ vvm nm~.~ mmn ~HH.~ vm woo.a mQOuU flock ca omm.mm mnm.w vom.m va.m mnm.o vva.n nmm.m vv~.n nma.m vv~.n vv~.n mnm.m vv~.n manuaao>m «much mam.mm omn.~ Hmm.a mmp mmw mac mmo.v voo.m «OH.» ~H5.m mmw.~ mmo.~ ceawm pom: Hmuoa ova Ova I I I I I I I I I I I mean 3oz oom.o~ omm.H I I I I wmv.~ mmo.m mmm.v mmm.v mov.a nam.a dom.~ macho cmmo oom.mH I Hm~.H was mmo oav Now.~ ova -~.~ m~m mv~.H woa moH.H macho noon m www.mm mom.m anv.m mmv.n mom.o hoo.h o-.o noo.n mno.m hmo.h noo.h mom.w hoo.n mannaflm>m kuOB Nwo.mm 0mm.~ mmm.a mmn was new mma.v mm>.m oov.w an.m whn.~ WHw.H wvowm 0mm: Hmuoe omm cmm I I I I I I I I I I I mean 3oz moo.ma omo.a I I I I omv.a mmo.~ mma.v m-.v om~.~ omv.~ owo.a maouo ammo www.ma I mm~.~ mmn mmn new woo.~ moo.a nom.m mmm omv.H NNH mmm.H macho boom m 265 .umum3 cw COwusaom ucmo you ~.o m mm Umaammm “Boa ofisqfiq .cofiumowammm sumo um won» umm .mcoflumowammm mounu .coHuDHOm ucmo you om m mm pmfiammm “conHsEm Amvm.< manna u “mumoo ucmEnmenmumm mwmm v .humflum> pm>0umEHo .mcflucmam ou uoflum hawumflpmeefl xufloumum mo pofluwm mcfluzc pmmmcousm muwwum> Hmooq n .mumHHow .m.sm wmumm mo mumufla m.v wawumefixoudmm coHnumamE ucmo Mom aumwm MOHN.H maao.a I I I I .m:\H I ma. Ha. om. .mn\v mumm ea. ma. I I I I m.H\m I oen.m one.m ohn.o m.w\w mofium OHIq m OHIV M OHIo m oan m oHIm M when H . . . .umm» | I. o o o o a“ o o o 0 on U 000 m coo m woo m coo m n\H om cm a va on n\ mama m m mv. me. me. me. m.H\m ohh.wa noo.mH noo.oa noo.oH m.v\m moflum MIH m mIH M OHIH M oan m OHIm M OHIm m OHIH m mIo m mIo m mIo M aqua” H . . . . . . . . .umw» n s mmcmuo” COEmA ”mammmm H mammm ”Escmuomu mafia: H .mEMmmm H mcmwm ”Edgmuowu mafia: u H ouH yum» omumoflvcfl um mxmumm mouu m m Ham» vmumowpcw um momma mono m m AoH.....ouuv HmUOE umooap .mxmumm can momma mo musmcm "mamcoc «.4 mqmoo.a aa.m~> mv.m mm.mma no.hmm.a Hm.mm I cm.mno.a Ho.mmm oa mm.mm~.v mm.oam.m om.mmm ma.m~h mv.m mn.moa mv.mmm.a mH.~m I Ha.mmm Nm.omm ¢ mm.oo~.v mm.-~.m on.nnm mm.mm> ~m.m ~m.mm vm.vmm.a mm.mn I mm.mmm mm.mw¢ m mm.voa.v Hm.mma.m wm.mmm mm.m~> om.m mm.o> no.mmm.a mm.n> I m~.~nm mv.mmm n Ho.mHo.v on.Hwo.m m~.Hmm mm.m~n Hm.m -.mm om.~mm.a mv.mn I mm.vam vm.avm m hm.omh.m nm.~m~.~ ov.n~m.a ma.oma mm.m ww.mm mm.mvm.a om.~a mm.oma vm.von mm.mmm.a m Ho.mbn.m mo.mma.~ mm.oam.a mo.sva om.oa mm.ma vm.mvm.a ¢~.~H h>.mma wm.oww mm.a~v.a q moamfiw,am>mHI3oq "OHIv mummy 0H.avm.v mm.mvn.m mm.a~w ma.amn mv.m wo.mam hm.vnm.a ow.vm I ~m.mnm.a mm.mmw oa um.oem.v Ho.mam.m mm.-p mH.om> mv.m Nn.ama Ho.mnm.a aH.mm I Hm.mm~.a mm.mah m nm.m>~.q mm.mmv.m mm.mnn mm.n~w ~v.m mm.nwa ~m.mnm.a mo.mm I om.moa.a m¢.voh m mo.ov~.v nm.nmm.m mn.~¢m mm.m~n om.m Hm.HvH mm.vmm.a mm.vw I v~.omo.a mm.mmm n mm.vv~.v ~H.~m~.m mm.mmm mm.m~n Hm.m HH.~HH om.~mm.H mv.mn I mo.wmm mm.~v¢ m mo.amm.m oo.m~e.~ ov.>~m.a ma.oma mm.m mm.mn mm.mvm.a o~.ma mm.oma mm.Hmm mm.mmm.a m mm.a~m.m vo.am~.~ vm.omm.a mo.nva om.oa mm.mu vm.mvm.H ¢~.~H nn.mma Hm.m~> nm.a~v.a v mpamwm1wm>mHInmfim "oaIv mung» va.mno.~ mv.ov~ no.5mm.~ ov.vm mm.v~ om.a o~.~ mm.m mm.mma on.m> oo.w~n.a m vm.mmm.~ mm.mm mm.~n~.m om.am om.mm om. nm.a mm.m o>.¢o~ mm.mv mm.m~o.~ N on.oon.~ mm.mv ma.amo.~ om.n~ ~m.~m om. hm. Ho.m m~.mm~ om.h~ Ha.mnm.~ H na.a~m.~ I na.mmm.~ I mm.mo I I I o~.~v~ I mo.omo.~ o IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIomumaHOpIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII Hmuoe m ammo H ammoIcoz m ammo mammoIcozm nmmu m nmmo m ammo mammoIcozm ammo m :mmoIcoz m . . . H H H . H . ”umm» mumou unaca Hmuoe H newumflowummo H gawxomm” xmuam u comm H gonna ” Aoa.....ouu. Hmooe ummnsn .Ammmumco Hmfiucmcwu mewUSHoxmv muons“ HON mumoo Hmuou Hansen mo auueasm "mamcmd m.< Wanda .dn‘ ‘ i {I I 268 construction, and the purchase of improved equipment. The charges are amortized to repay principal and interest on each annual amount borrowed over a seven year period. The long-term loan is considered as a special arrangement with an appropriate credit agency.1 The arrangement has to be drawn up in a way that will give encouragement to unsophisticated agricultural systems having particular potential for developing crop production which requires long-term capital investments. When citrus orchards begin to bear fruit the first years of production are quite low, e.g., around 6-14 per cent of maximum production in the first year of fruiting. Full repayment on the long-term loan will be completed in the twentieth year of operation (t=20), the payment of the first will not begin until the sixth year in order to avoid over- burdening the people with the responsibilities of heavy indebtedness before the principal cash crOps begin to yield a substantial harvest. Furthermore, in view of the initial fraction of maximum yield to be expected, weighting has been applied to the debt installments so that at the commencement of repayment (t=6) one-fifteenth of the accrued debt is repaid; the following year (t=7), one- fourteenth of the outstanding debt is repaid; in the final year (t=20), the final installment clears off the full amount of outstanding debt. In introducing technological improvements into an unsophisticated agricultural system,_it appears important that the rewards should be both immediate and appreciable. Thus, depreciation charges for the orchards do not com- mence until repayments on the long-term loan also commence. In this way a higher margin of net income is available for distribution in a manner determined by the village com— munity and their leaders. Details of the financial charges are contained in Table A.10. Budget Summary The complete budget model is summarized in Table A.11; only aggregated income and expenditures are recorded. Income and total costs are a mixture of cash and non-cash quantities, financial charges are wholly cash 1The Development Bank of Ethiopia would be an appropriate agency if it were willing to support such a development program. .nuuaaoo .m.aa 269 so.oo~.n~ mo.-m.H~ on.~vo.m mm.~mm.n -.mm~.o mo.moo.m h~.m~n.~ meoocw uoz mv.mmnI om.mo>I mm.mon hm.v~mI mm.mmNI m~.mav Hm.mn mumou dado Icccau uoc «mod m~.vov.- v~.~o~.o~ ~n.nm~.m -.mov.n vm.wow.m n~.hoe.v mm.mm>.~ wcusumu uwz mo.oqv.v om.mo~.v mo.oo~.e mm..o~.v ”o.n~o.v hm.omh.n Ho.ohn.m .moouoco Anna laundu weavaaoxov mu MOU AQUOU “MOM no.vcm.oH ofl.Hoo.m~ hm.mmv.m~ -.mnm.aa mm.¢hm.m vo.nm~.m mm.mmm.o 0800c” uncuo avaoaN H0>OHIJOA uoHIv mnmo> -.~oo.- vm.mow.o~ mm.mov.n~ om.~no.va oo.oom.- m~.vmm.m c~.hmm.v m~.m~n.~ o~.omm.~ hv.nwm.~ ueoucw uoz o~.ammI no.0mmI ~o.~meI on.m~mI mo.vm~I mm.on mo.vm vv.vH no.o I munoo auwu Icucqw um: «nod oo.o-.- oo.-o.¢~ hm.~>w.o~ am.~v~.v~ mo.m-.- mo.vnm.m vm.-o.v ~w.mvh.~ an.amm.~ nv.ncm.~ mcuauou ucz o~.mvm.v vm.ovm.v no.~n-v no.0v~.v mm.v-.v oo.~mm.n oo.anm.m o~.muo.~ v~.mmmqm n~.m~o.~ Amwouacu dado Icccau usuvomuxmv mumoo aeuOD mmwa -.oom.m~ ow.mmm.m~ vm.omo.om mm.mwm.xg ov.mmv.mH v..m~m.~# ma.mah.m o~.-w.v ~o.mmo.v vo.wov.v mEoocfi nacho wodolmIHmbodIcmH: ”can muco> 0| IIIIIIIIIIIIII Ill IIIII IIIII. IIIIIIIIIIIIIIIII I IIIII 1wu0-03 IIIIIIIIIIIIIIIIIIIIIIIIIII llllltI0| IIIIIIIII OIIII oz a m m m e w o m m M v m N o m H aqua use» ovunoacca ud >unEE3n ucsouua dwscc< H Ao~.....onuv mucaouoa Hovoe >uQEE3m "wauco< H~.< HAmeoou uuuuvu0>o H~.oo~ om.~o~ ~m.mm~ ob.mo~ vw.no~ m~.hw nv.om nonhuco coca aOhU mason» ~o>oHI3oq ”o_Iq nuso> em.wmmI mw.ommI No.~m~I mMJmNmI ma.vm~- mm.om mo.VMI cdeu unencuo>o oo.om~ vo.mc~ mv.~oa no.ow~ vo.~o~ mn.om o~.sw o~.~ vv.~ vm. mwouoco coed coho magmas ~u>o~ummgz uoqI. whey» IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII IIIII IIIcmuoaaonIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII on a m m m n M m m m M v m n m N d m . Emuu “no; ocuuoacca on women can muvuazo Hanucac.u Hoscc< . rod.....OIu. avvce uwovsn .nuncu aoaucacdu av: Ucc moouucu «quCQCwu Hun::< "caveat o~.< mqnfia amusuasoflum< .mamowzpm \oHémD "mowod mficpdv mammmmc< HMflocmch paw Hamommum pownoum .uomhoum usmfi Imon>wo Eumm macmEmcmmam .ucmemon>mo HmcofiumcumucH “0m wocmmfi mmumum pmuwco Ummfluuoem um>om puma How ovm.mm mo mmauso Hmuflmmo .m.m wmm wumu coflumwomummo "mousom .mumvm wwnnu um>o .m.m wn um n .mumaaoc .m.sm nom.h hom.h 5mm.h nmm.n nmm.> hmm.h hva.h hmo.h hom.o hmh.o I mumoo Hmuoe com com com com com com com com com com I mmHHszm nmm.m hmm.m nmm.m 5mm.m hmm.m nmm.m 5mm.m 5mm.m 5mm.m hwm.m I wumoo maoflnm> Hmuoe com com com com com com com com com com I Hmnm oov 00¢ oov oov oov oow ooq oov oov oov I mocmcmucflmfi maoflsm> nmm.a wwm.a nmm.H nmm.H nmm.a nmm.a nmm.a nmm.fl 5mm.a nmm.a I numoo maow£m> omn.v omn.v oom.v oom.v omv.v omviv omm.v ovm.v omH.v ooo.v I mumoo Hmccom Iumm Hmuoa oov oov oov oov oov oov oov oov oov oov I Soap Hmm omm.v omm.v oom.v oomiv omo.v omo.v omm.m ovm.m omh.m oom.m I humHmm IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII mmumaHOUIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII OH m m M m M e M m M m M v M m M N H H H o M . amuH mom» omum0flccfl um mumoo Hmcofiuflcpm Hmsccd H ACHs o unsouuv IDHOQQSm pom .ucmfimflsqm .ucwmm cowmcmuxm mom mumoo Hmsccm vmumfiaumm UOHHmQ pompsn mQHH5© mommaaw> mHIoa .mumoo umHmcm¢ NH.¢ mqmocmo4 unwEQon>mo Hm:0aumcuwucH smaoo3m "mnwnd mflvccv MHHmmc cfl cam swam mmEsst on» um amouu mmmuom can pamflm mo mcoflum>uwmno can mamwue mo muasmmm .uflca ucosaon>wo kuau~50wum< onchum acmfiv 30Hm .cusn Hwom .3oao .Hflom xmwun IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIAmmfifiu soaawm lumm>umnI Ivmm3 IucmHaI Amwfiwu my 3OHQ . mammm .Iumm>umnI umw3 IIIucm~QI Aweau Av 30am mama IlIumw>um2Ill vow) Illucm~QI “mafia Hy 36am Apmmmcfiav xmam lumw>umcI wwn IucmHQI AmeHu vv 3o~m uuwe Iuww>umnI pom: IllucmHmI IlAmmEflu MINV 30Hm mafia: lumw>umnI vow: IucmHQI Amwfiflu mv 3o~a amaumm llIumw>umnIlI vow: IucwHQI Amwefiu my 30am yawn: . mcoflumummo mono v.o m.o m.w m.o~ o.o~ m.oa H.HH v.0a o.HH v.a~ ~.oa w.m AUov Edeflcaz v.- o.o~ m.oH m.o~ ~.oH w.ma e.ga v.~m b.- m.m~ m.v~ H.v~ .Oov Esawxwz MAmeHv muzumuomswu cum: m.~ I m.mw m.oo m.ov~ m.mva m.~n~ n.mo m.hm m.mv m.mm m.o A.25Vmanwaav Hammadmm IIIIIIIIIIIIIIIII uszIIIIIIIIIIIIIIIIIII mcwuu HHmEm mGOmuom .cmn “ .owo " .>oz u .uoo " .uaom " .os< " >~5n u mash " xmz u .ua< u .umz u .nmm " EouH Aonuv ummx ocfiumfluw:w H0605 ummpsn .msucoe umpcmamo >n mCOaumumdo mono mo sewusnwuumwv can dump uwuuawau "Gawaflno «.m mamas 275 aspirations and attitudes as the modernization process progresses. Farmers appear increasingly to recognize that modern agricultural tillage equipment is superior to traditional oxen cultivation in terms of time and quality of cultivation, for cereal production, providing means can be found to buy or hire the appropriate equipment.1 The use of engine-powered equipment is expanding through the CADU tractor and implement hire services. Owners of larger farms (20 hectares and above) are willing to pay the relatively high charges to hire cultivating services. Some large farmers already own tractors and others are in the process of acquiring tractors and equipment, either inde- pendently or on a cooperative basis. The area has a well established commercial economy; a significant proportion of farm produce is marketed locally although small farmers also provide for most of their own subsistence needs of food and fiber. There are wide fluctuations in the annual cycle of income and expenses. Incomes, negligeable in June, October, and December, increase slightly January through May, and rise to maximum flow in September as the previous year's harvest is being sold. Livestock sales are restricted to January, May, and October.2 Thus, farmers have commercial experience and some ability to plan annual farm activities within the constraints of fluctuating income flows. These features, along with the existence of a monetized economy and a fairly sophisticated level of rural town life, provide a fairly substantial basis for the development of the various specializations of the modernization process. Proposals to improve the agricultural economy are based on the introduction of improved tools and equipment, improved crop varieties and better cultivation practices. The possibility of introducing new products is remote; rather, emphasis is put on improving the efficiency of the established economy. 1Bo Bengtsson, Cultivation Practices and the Weed, Pest and Disease Situation in Some Parts of the Chilalo Awra’a (Addis Abeba: Chilalo Agricultural Development Unit, Swedish International Development Agency, March, 1968), p. 15. 2Lars Leander, A Case Study_of Peasant Farming in the Digelu and Yeloma Areas, Chilalo Awraja, Ethiopia, Report No. 22 (Addis Abeba: Chilalo Agricultural De- velopment Unit, Swedish International Development Agency, January, 1969), p. 81. 276 Two strategies have been examined as alternative approaches to improving economic efficiency. In strategy I tools and equipment in current use are to be replaced by improved designs and more powerful oxen. In strategy II less equipment is to be owned by the individual farmer and a tractor hire service is to be established for major tillage and harvest operations, weeding to remain a hand operation. Farmers produce a substantial amount of total output for consumption. Subsistence crop requirements are the first concern of the farmer in planning the deployment of his resources. The estimated requirements for sub- sistence consumption are shown in Table B.2(a) and the necessary tools and equipment to be owned by the farmer for the two strategies are recorded in Table B.2(b). Present Agricultural Economy The People and Their Habitat The people of Chilalo belong to the major Ethiopian ethnic groups: Galla constitute the majority and Amhara, the minority. Farmers live with their families either in the small rural towns or on scattered farmsteads. A recent survey1 shows a small prOportion (5.1 per cent) of farmers have occupations at which wages are earned to supplement their income in order to support the farm family. The average size of a farm family is 6.3 persons and the average size of farms is 8.1 hectares of which 5.1 hectares is cropped and the remainder is grazed. The average farm has 2.4 fragments. The area has been settled by this population for several generations. Some 52 per cent of farmers are tenants. Four different kinds of tenancy agreements lChilalo Agricultural Development Unit, General Agricultural Survey of the Project Area (Addis Abeba: Swedish International Development Agency, July, 1968), pp. 11-18. 2Persons Equivalent Consumption Unit 3.1 adults 3.1 units 3.2 children 1.6 units 6.3 Average 4.7 Average .me .Ammma .umnouoov N .02 .HHH .NmoHoHoom can moHEocoom Housm mo cfiumaasm :.mHumon cnmnuuoz CH mEumm co Hm30m new mxooHHsm mo me one: .ucmusmq .x .00 .xaco mm: uwummeoo Homo .Humuoan ucmpwmwu a mafia n.vv muHcs coHumEdmcoo n.m wo paonmmson momu0> Hv.H HoH.....Huuc .HH swmumuumc Hmuoa OH. OH. I mm. VH. hm. SH. H.0maI.>ozc Hoan HmcoHuchm I I I I I oo.~ I .smxcou H .mmuos Ho 60mm Hmch¢ ms. nu. mm. H~.H SH.H vm.v m~.H mucwEwuHsvmu uHumwsoo AoH.....Huuc HH mmmumuum m~.H m~.H mm. mm.m vm.a mm.MH mo.~ Hoa.....auu .H >mwumuumv Hmuoa om. om. I VH.H vs. vo.m mm. Hmuoa ma. mH. I mv. mm. vH.H am. one A A.cmnI.>ozv Hm. Hm. I Hp. mv. om.H mm. cos a A.oon.o=4 IIIIIIIIIIIIIIIIIIIIIIEdccm Hod mHmucHDUIIII IIIIII IIIIIIII madmm m mmwm mommmcwqm muma m «mam: m >waumm m unocz EwuH aouo Hoa.....ouuv Hobos uwmpsn .mucmEmuflsvmu aouo oucwumwmndm .m mcofiuafismmm onwm "onHHno ~.m mqmda 2'78 .vmm .m .HH .um ..anHm .va .m .HH .um rcHnHN .mmH .m .HH .um ..Mmm .mm ..mm mm .mcHwa .cmxo om>oumEH no Mama how umoo HmooH cwumEaummo .mHoou 0cm: nm>oume u0u umoo HmooH pwumewummo .mHmHHOU .m.D mum mmm>aucm anon» new mwzam> unaaov Hadn .cofluwmfizvom Mo umoo uw UwDHm> u ummx :w cmumwowumwv maHSM uo: ucwemwovw can maooam r 00.00H oo.mmv OH.~HH Hmuoe oo.m oo.om oo.ov oo.m oo.om oo.ov oo.oa 00.x ow. mnfluu nacho I oo.omm om.- om. ucwEmHsgo cmxo Hmuoe I oo.mH voo.ov oo.o¢ I muumm wumam I oo.~a uoo.o~a oo.o- I ammo I oo.~H woo.vq oo.vv I Housman I oo.~H moo.m~ oo.m~ I zouumm I oo.~a woo.ov oo.ov I 30am I oo.~H woo.Hw oo.Hw I nun Hoop ucwEQHsvm xo cw>ouQEH I I o~.mm ov.VH o~.n acmemHsum :wxo msowcmHHmo Imdu can outwam x0 I o~.mm ov.m om.~ AHmUOAV 30Hm I no.oH voo.mma oo.vw hw.wH oo.~h oo.wm :mxo oo.m~ on.om oo.ma oo.om oo.ma om.m mace» flaw: HMUOH mm.~ omm.~ mm.~ 0mm.~ c~.H o~.H mxmonm Nh.H Umh.a Nh.a U~5.H om. om. 0x4 mm. com. com. 66m. ow. o¢. mama ma.m Uno.a ma.~ Uho.a oo.H om. mHo>onm om.v me. Om.v owm. COIN ov. mmom mm.m coo.H mm.m oov.H om.m mm. monon IIucwo uwQII IIIIIIIImmumHHOU IIIII IIucwo uwQII IIIIII nwumHHOOIIIII IIIIIucwo uwmIIII IIIIIInmumHHocIIIII Acmmuvm umoo m ouwuam Anamovm mumoo m wowuam ammo " gmmUIcom m canon m coauam cofiuowowumopn Hmuoa H coflumeSUom”newumfiowuampu kuoa ”coduwwasvom COMuMHUmumuc H Hmuoa ”newuwmwswomn Huaccmmucuum Aoa.....anuv H >omumuum Hana. Hmw> uawumduwcH HwQOE umwnzn .HoH....wHuuv HH can H mwflmmumuum .Aouuv Haw» mcwuuwuwcw new ucoEQfisvm can MHOOB .m Uwscfiucou N.m Manda 279 prevail.1 A generalized situation has been adopted for the case study: the landlord is entitled to one-tenth of the gross value of farm product (as the landlords share of land tax) and one-third of the balance of gross farm product; in return, the landlord pays a cash contribution of one-third of the seed costs.2 Agricultural Practices A wide variety of crops is grown annually. There is only one season as shown by the climatic data and distribution of agricultural operations contained in Table 8.1. The estimate of crop areas in the initial year of the case study (t=0) was based on the CADU survey of crops grown in 1967.3 In subsequent years, these areas are adjusted in the budget model according to a decision- making rule to be discussed later. Under current agri- cultural practice, there is a general tendency to over- graze. Moreover, most farmers lack the technical skills and capital resources to make a significant income out of livestock. Therefore, the budget model has been developed in terms of concentrating the farmer's efforts on improving crop production and reducing the livestock enterprises, a minimum area being left as fallow which can be grazed by livestock. In strategy I, cultivated land is increased to a maximum of 6.6 hectares from 5.1 hectares in the initi- ating year. In strategy II, no work oxen are to be kept by the farmer, therefore the maximum cropped area is raised to 7.1 hectares. A wide range of hand tools is used along with the local oxen plow. The following tools were observed in the survey of 12 farmers: lChilalo Agricultural Development Unit, General Agricultural Survey of the Project Area . . ., p. 18. 2Based on information from Leander, op, cit., p. 89. 3Chilalo Agricultural Development Unit, General Agricultural Survey of the Project Area . . ., p. 20. 4U.S. Agency for International Development, "Shashamanne Farm Development Project . . . ," p. 8. 280 Sickle, machid--common throughout Ethiopia, the princ1pal harvesting implement. The local sickle is made with a saw—toothed cutting edge. The average number owned was six and the local cost was $0.50-0.801 each. Hoe, esso--common throughout the Empire, the prinCipal cultivating hand tool. This is a short-handled hoe with a flat blade set at right angles to the handle (60 cm. length). The number owned was four or five and the local cost was $0.40 each. Shovel, akafa--a standard long-shafted (about 1.5 meters) shovel. Average number owned was one and the local cost about $0.50 each. Saw, megaze--simi1ar to the American or European tool. Average number owned was one and the local cost was $0.40 each. Adze, mekotkocha--a two-edged metal head on a shaft, a widely used chopping and digging tool. One edge is sharpened for chopping and the other edge is pronged for digging. The head is about 30 cm. long and the wooden shaft, set into the head at right angles, is about 90 cm. long. Farmers interviewed owned one each and estimated its cost at $0.60. Axe, metrebia--similar to the American or European tool. Some farmers owned none, others owned as many as five axes. Estimated cost was $0.80 each. Pickaxe, doma--simi1ar to the American or European tool. Farmers interviewed owned either none or one; estimated value was $1.20 each. Local plow, maresha—- . . . consists of a bent wooden beam with a small iron [or steel] point. This plough, being almost the only farm implement, is very inefficient since it only breaks up the surface of the soil and lacks mould- boarding properties. 'This also influences 1 All dollar values are U.S. dollars. 281 weed growth which is very little checked [sic]. However, many farmers do not con- sider the ploughing as anything else but [a] means of seed-bed preparation. Although farmers admit that they have many weeds in their fields . . . there is only one-fifth of interviewed farmers who regard ~ploughing as being a weed control method as we11.1 Using the plow strains both oxen and operators. Oxen work in two to three hour stretches and then must be given rest for about an hour. Working steadily for a full day under ideal conditions a farmer might prepare one-half hectare of land with a pair of oxen. Farmers interviewed owned three or four plows and estimated the local cost to be about $2.70. Regular plowing begins with the small rains; breaking and plowing fallow land is a lengthy process which is begun in September or October. The third plowing prepares the seed bed; the planting operation includes a covering in which the plow is used again. In the case of flax and peas there is only one plowing, in the case of teff there are four preparatory plowings before the seed is trampled into the soil by men and animals.2 Labor requirements in the initiating year (t=0) are provided by the farmer and one resident laborer, assisted by the farmer's wife at times of critical demand. The custom of laboring for cash wages, resident laborers receiving both cash wages and board and lodging, is es- tablished in this area. Resident laborers receive $30.00 to $40.00 per annum in cash. Total labor costs were computed on the basis of estimated man-hour requirements for the year evaluated at $0.05 per man—hour. During the initiating year one resident hired man is not fully occupied for the whole year; his board and lodging are estimated at $59.00 per annum. In the operational years of the budget model one man is fully occupied and a second is hired for the weeding period; total board and lodging are estimated at $110.00 per annum. The estimated value for board and lodging was deducted from total wage costs to estimate the annual cash wage for labor. Any cash amount above the $30-40 taken by hired laborers can be assumed to be cash taken by the farmer. 1Bengtsson, op. cit., p. 5. 21bid., pp. 5-10. 282 The concentration of people in the area is quite heavy (36.14 persons per square kilometer, calculated over the entire area of the Awraja; 114.56 persons per square kilometer, calculated over the cultivated area). This population concentration contrasts with that of the other three case studies. In Chilalo there is a well organized land market and rent has been included in the budget model. Other inputs include seeds, sacks, transportation, and storage. In the initiating year it has been assumed that farmers retain their own seeds from previous seasons; in the budget model improved varieties are introduced in the first operational year (t=l). Sacks are included at a standard charge of $0.10 per quintal. Grain is usually transported on the backs of donkeys which are usually owned but can be hired at a standard charge of $0.16 per quintal. Until consumed or sold grain is stored in basket- like grain cribs (gotera). The cribs in this area tend to be smaller than those described at Agnale. Chilalo cribs, constructed of clay, teff straw and manure, have capacities from 2.5 to 6.5 quintals and last 10-15 years.1 The level of attrition for produce stored in these cribs is a current subject of controversy.2 For the purposes of this case study the farmer is assumed to have 10 cribs with a total capacity of 50.67 quintals,3 teff and linseed being stored inside the farmhouse. Waste level was assumed to be 10 per cent in the initiating year to be reduced to 3 per cent as improved storage facilities are introduced. Production and Value of CrOps Estimates for crop yields for the initiating year have been made by reference to the variius sources observed in CADU literature for the 1967 season. Some adjustments to allow for the possibility of over estimating yields were lClarence J. Miller, Production of Grains and Pulses . . ., p. 33. 21bid. 31 x 3.57; 6 x 4.60; 3 x 6.50. 4Chilalo Agricultural Development Unit, Crop Sampling in the Chilalo Awraja . . ., pp. 3-9. 283 made on the basis of the sample survey carried out in 1968.1 These yield assumptions are recorded in Table B.2(c). The area required to grow crops for domestic consumption has been calculated on the basis of yields, giving due allowance for waste, and the remainder is considered as marketable surplus. In years subsequent to the initiating year (i.e., t=l,...,10) two levels of production have been used; the calculation of area for subsistence requirements is based on the lower yield since the farmer must at least cover his minimum family re- quirements. Prices have been held constant for the entire eleven year period. Assumed prices arg those reigning in Addis Abeba during the 1967-68 season, less costs of transportation of $0.48 per metric ton for the haul of 150 kilometers.3 Assumed prices are also contained in Table B.2(c). Technological Improvements Improvements in mechanization can follow the two basically different courses represented by strategies I and II. The objectives of improving the level of mecha- nization in this system of farming are (l) to relieve the heavy demand for labor requirements which occur during December-March, and (2) to facilitate better cultivation techniques in order to realize the higher yield potential of improved crop varieties. The total aim of technological improvements includes increasing gross income, economizing on the use of resources and introducing appropriate mechanical assistance to c0pe with the changes. These improvements include: (1) increasing labor capacity and land productivity through the introduction of improved tools and equipment; (2) reducing attrition through the introduction of improved storage facilities; (3) increasing the productivity of land through the introduction of improved crop varieties; (4) increasing land productivity lLeander, 9p, cit., p. 46. 2Carl F. Miller, ep El}! System Analysis Methods . . ., p. 115. 31bid., p. 101. 284 .nIm .Qm .Amwba .OCdn .xocmm< unwEQon>mo Hmcofiuucuwucu nmwpm3m “nomad mva<~ 00£H>OHAIHMmdu4 .mhmwzc onHHmU mnu aw mafiamadm mouu .uwcs ucoEQon>mo Hwnsuasu Iwumm onstu can .mhIhH .mm .. . . mCOwum>ummno can mamflua mo muazmwm .uwca acmanam>mQ amusuasowumd Gawawnuo .mmH .a .HapmH .sumacun .musuHumcH noummmmm puoucmum ".HHHmu .xuma oHcmz~ ucwaduo>ow cummowmumIHmmuwQEH man uo hucuvd unawcnoms «nu Haw ouummwnm .ommoIDH uowmoum Hum .oa .oz uuomom .wfl Ownum cw momasm can mewmuo mo c0wuoupoum .cwconocox aswaquam new .xoom .> xcuum .Emom .3 cumzox .HOHHH: .b mucoumaon .mumHHop .m.=p o.HH h.oa v.0H H.0H m.m m.m N.@ m.m me m.m o.m A oo.m A 304 AUmOumv m.wH o.mH m.vH o.¢H H.MH N.~H v.HH m.oa h.m m.m QHMUOA SUM: mcmom o.m m.m m.m h.w w.m m.m v.m m.m N.w H.m o.m A No.5 A 30A o.oa w.m w.m v.m N.m o.m a.» w.m v.m N.m QHMUOA zmwm mama 0.0 m.h m.h 5.5 v.5 m.h v.h m.h «.5 H.h o.h A Nm.m A 30A o.wH H.mH N.vH m.ma v.NH m.HH c.0H h.m m.m o.m UHQUOA 50w: XMHh nooNIHoNa o.NH m.HH H.HH $.0H N.0H m.@ m.m m.m v.m o.m 0.5 A "0H.....Hlu mv.oaA 304 o.wN m.NN M.HN o.o~ h.mH n.5H o.wH h.vH m.ma o.NH “HMOOAuOHU 26w: mama ummamm o.m~ H.¢N N.MN m.- m.HN v.0N m.m~ o.ma $.5H 5.0H 0.0HA OHMwaHOH.....Huu Nm.m A 304 0.0m N.hv v.vv h.Hv m.mm H.wm m.mm m.om m.hN o.m~ “Hmooquolu coax Onme 0 o o o o o o o o 0 5H u no... u m VA 6 VA w MA A ma 0 NH N NH w AH m AH w OH v OH 0.0HA U u.:D OH H u Nm.w A 30H o.mH H.mH ~.nH m.mH v.m~ m.vH o.m~ h.- m.HH m.oH “Hmooquolu no“: xmaumm cow wumcwmzuoa.....nuu auoxu! x unannouh m.ma o.ma ~.ma v.nH h.oH m.ma w.v~ ~.m~ m.HH 0.0H o.a A manucvxuo.....auu ~h.m A 304 o.mm ~.hm ¢.mm m.vm H.mm s.Hm m.h~ m.m~ w.mH «.mm uHoooquolu now: poms: IIIIIII IIIIIIIIIIIIIIIIIIIIIIIIwumuoos Hum manyCMDUIIIIIIIIIIIIIIIIIIIIIIIIIIII o.v\w . a M o o N a n v m o m ca >u0quo> mono Ho>oa mono vowum How «ma uo mumo» oawww Hum» nmumowcca um vawwh Hascc< Aoa.....ouuv H0008 uooosn .mGOwuoasamn vamfl> danced can mmoaum .0 ILIIIIIIIIU vwscwucoo «.0 wands 285 by improving weeding and cultivation techniques;1 (5) increasing total production through increasing the area under crops. The agriculture of Chilalo is based es— sentially on cereal growing and it is proposed to develop this potential in view of a fairly stable market for major cereals. Increasing both crop yields and required cultivation raises farm labor requirements. These demands can be met by hiring labor as required since the practice of working for wages is already established. Furthermore, the popu- lation is expanding at a modest rate and, the availability of a gradually expanding labor supply is a reasonable assumption. Since the farmer grows cereals for both subsistence consumption and cash sales, a decision—making algorithm was included in the budget model for the operational years (t=l,...,10) in order to determine the distribution of available area among the various crops. Domestic re- quirements have been calculated according to the number of consumption units in the household.3 In the case study the principal cash crop is wheat. There are marketable surpluses for all crOps and the farmer changes his cash cropping pattern from year to year as relative market prices change. In the area, wheat, barley and flax are the principal cash crops; maize and broad beans are important sources of revenue. These two crops are also particularly useful as cleaning crops since the wide rows facilitate good weeding. The assumption made to determine the area of cash crops was that, after the area necessary to meet the requirements for domestic consumption (calculated on the basis of low-level yields) had been deducted from the total area available, two-thirds of the remaining area is to be devoted to the principal cash crop and one-sixth each to maize and beans. The criterion for making the decision to 1Chilalo Agricultural Development Unit, Results of Trials and Observations . . ., pp. 55-60. 2U.S. Agency for International Development, fl "Application . . ., p. 14. 3Eichberger, "Food Production and Consumption II o o o, p. 21. 286 grow wheat, barley or flax is the operating margin of the previous years. 1The decision-making algorithm to determine the distribution of total area among seven different crops is defined as follows: Variables (Xi) Crop yield: Y Xi’ i =,...,7 (decisions based on low-level yields) Total area for individual crops: ATxi Crop area for subsistence requirements: Asxi Crop area for cash marketing: Acxi Physical outputs--wheat, barley, maize, teff, flax, peas, beans: i=l,...,7 (quintals) Physical inputs--labor for each crOp: i=8,...,l4 (man-hours) --seed for each crOp: i=75,...,21 (quintals) --ferti1izer for each crop: i=22, 000,28 7(quintals) --sacks: 1:29, (X29 =i§1 YXi' where one sack holds one quintal) --domestic requirement: H Xi Other values--waste level: Wxi (per cent) --prices: Pxi (dollars per unit) Machine rates--plowing: rX30 (hours per hectare) Px30 (costs per hour) --planting: rX31 (hours per hectare) PX31 (costs per hour) —-discing: r (hours per hectare) X32 PX32 (costs per hour) --combining: r (hours per hectare) X33 PX33 (costs per hour) 287 Strategy I Preliminary Definitions X. = (Y )(A ); l(t)I Xi(t)I TXi(t)I A = H / (l-W ) (Y ); SXi(t)I Xi(t)I Xi(t)I Xi(t)I A = A + A , for i=l,...,7 TXi(t)I sxi(t)I CXi(t)I where t is the year of operation. (X )(l-W )(P ) E 1(t-l)I Xl(t-l)I Xl(t-1)I 1 ‘ A (t)I TX1(t—1)I ’_ "'1 z (Xl(t-l)I)(in(t-l)1) - i=8,15,22 . + ATX (t-l)I (Y )(P ) Xl(t-l)I X29(t-l)I E2 . same form of equation as El , use X (t)I (t)I in place of X1, X9 in place of X8, X in place of X15, X23 in place of X22; E3 : same form of equation as El . , use X (t)I (t)I in place of X1, X12 in place of X8, X19 in place of X15, X26 in place of X22. 288 Determination of Cash CrOp Areas 1. Wheat (A ) CXl(t)I a. For t=0: A = A CXl(t)I SX1(t)I b. For t=l,...,10: If E >E and E > E I l(t)I 2(t)I l(t)I 3(t)I 2 7 7 . then A = — X A - Z A CXl(t)I 3 1:7 Txi(t)I 1:1 SXi(t)I If E 7 E or E 7 E I l(t)I 2(t)I l(t)I 3(t)I then A = 0 and A = A . CX1(t)I TXl(t)I CX1(t)I 2. Barley (A ) CX2(t)I a. For t=0: A = 2.09 - A CX2(t)I SX2(t)I b. For t=l,...,10: If E > E and E > E I 2(t)I l(t)I 2(t)I 3(t)I 2 7 7 then A = - Z A - Z A CX2(t)1 3 i=1 TXi(t)I i=1 SXi(t)I . If E f E and E 7 E I 2mI l(t)I 2mI 3mI then A = 0 and = A CX2(t)I ATX2(t)1 CX2(t)I . 3. Maize (ACX ) 3(t)I 289 a For t=0: ACX3(t)I = '29 - ASX3(t)I b For t=l,...,lO 1 7 AcX3(t)I = 3 1:1 ATXi(t)I - 1:1 Axi(t)l Teff (ACX4(t)I) a. For t=0: ACX4(t)I = .27 — Asx3(t)I b. For t=l,...,10: ACX4(t)I = ATX4(t)I _ ASX4(t)I Flax (ACX5(t)I) a. For t=0: ACX5(t)I = '41 - ASX3(t)I b. For t=l,...,lO: If E3(t)I > El(t)I and E3(t)1 > E2(t)l I 2 7 7 then ACX5(t)I = § iil ATXi(t)I _ 1:1 ASXi(t)I If E3(t)I 7 E1(t)I and E3(t)1 7 E2(t)I ' the“ ACX5(t)I = O and ATX5(t)I = Asx5(t)I. Peas (ACX6(t)I) a. For t = 0‘ ACX6I = .10 - A3X61 b. For t=l,...,10: Acx6I = ATX61 - Asxsl Beans (ACX ) 7(t)I 290 Tools and Equipment In strategy I emphasis is placed on improved animal-powered tools and stronger oxen. In strategy II animal-powered tools are dispensed with and hired engine- powered equipment is used for harvesting the main cash crop and for all operations except weeding. Chilalo is a rugged area in which engine-powered technology may not be a feasible proposition for very hilly farms. This strategy is appropriate, however, since there are many farms on which the proposal is feasible and CADU Hire Service is already putting this form of agricultural power into operation to a limited extent. a. For t = 0: A = .92 - A CX7I SX7(t)I b. For t=l,...,10: A = % z ATX — 2 ASX , CX7(t)I i=1 i(t)I i=1 i(t)I Strategy II The algorithm in strategy II is identical in operation to that in strategy I. However, the equations which define the operating margin on the major cash crop (wheat, barley and flax) include machinery hire charges. Thus: 34 El(t)II = El(t)I + 1:30 (rxi(t)II)(Pxi(t)II); 34 E2(t)II = E2(t)I + 1230 (rxi(t)II)(Pxi(t)II); 34 E3(t)II = E3(t)I + 1230 (rxi(t)II)(PXi(t)II). Determination of the Acxi(t)II follows the same procedure as in strategy I. 291 For the budget model details of tools and equipment in use are recorded in Table B.2(b). Locally-made hand tools, the local oxen plow, sledge and miscellaneous oxen equipment are on inventory in the initiating year. In strategy I it has been assumed that improved varieties of the necessary hand tools are available at a slightly higher cost. Important new equipment to be purchased through medium-term loan accommodation is a pair of improved oxen and a set of oxen equipment, including a simply constructed cart.1 In strategy II only improved hand tools are necessary for cultivation; most field operations are to be performed by hired tractor equipment. Grain Storage Improved grain bins are to be introduced at the beginning of the operational period of the budget model (t=1) to replace the local grain cribs. A suitable type of bin, developed at the Alamaya Agricultural College (Haile Selassie I UniversitY)I 1.7 meters diameter, 2.5 meters high, is constructed of corrugated circular zinc sheets with a flat metal top. The bin's capacity is about 14 quintals; the cost is $40.00 with an estimated depreciation of 5 per cent of the original cost per annum. Subsistence and Cash Crop Yields and Areas No crops are specifically designated as cash crops, relative market prices, yields and production costs determine the farmer's decision-making process. Despite the fact that case studies in the Digelu and Yeloma areas of Chilalo show barley to be the predominant cash crOp, it is anticipated that the area will tend to specialize in wheat production because wheat yields slightly more than barley and wheat prices are 75-100 per cent higher than barley prices.3 The budget model shows a trend in this direction. A considerable amount of agronomic experimentation has been carried out in this area. There is clear evidence lKline, ep 31,, pp. cit., Pt. II, p. 280. 2Leander, pp, cit., pp. 89-90. 3Chilalo Agricultural Development Unit, Results of Trials and Observations . . ., p. 8. 292 that improved cultivation practices increase crop yields significantly1 and that a combination of improved varieties along with improved cultivatign practices leads to sub- stantial increases in yields. . . . greatest change in farm output for the least cash cost and the highest return per dollar spent results from improved seed, plus associated improved cultural practices that cost little more than present farming methods. Introduction of other improved production inputs will usually cost more and return less per dollar spent. For example, fertilizer will not normally return as much per dollar spent as improved seed . . . Thus, the budget model includes proposals to use improved crop varieties along with improved cultivation techniques but excludes the use of fertilizers and sprays. Assumptions for crop yields during the operational period (t=l,...,10) of the budget model are recorded in Table B.2(c). Two production levels have been used for each crop. The high production level assumes that farmers are able to reach the estimate of maximum attainable yields under commercial conditions in the 10 year period; the low level assumes half the maximum level is attained in the tenth year. Crop rotation is important4 and the cleaning facilities afforded by maize and beans render the combi— nation of wheat or barley or flax with maize and beans an excellent cash crop combination. For the cash crop areas the year-to-year rotation has the following pattern: wheat wheat wheat wheat or or or or barley--bar1ey--beans--barley--barley--maize or or or or flax flax flax flax lIbid., pp. 52-60. 2Clarence J. Miller, ep'gl,, Production of Grains and Pulses . . ., pp. 77-78. 3 4 Ibid., p. 78. Ibid., p. 70. 293 Labor Utilization The assumptions for labor requirements, shown in Table B.2(d), are Erude estimates based on observations published by CADU. The number of plowing operations has been maintained at the level already established in current practice: teff receives the highest number to produce a fine tilth; flax is found to grow better after a single plowing. In strategy I after the initial introduction of improved equipment and supervision of techniques (t=1) it has been assumed that some improvement in efficiency of operation takes place: by the fourth operational year of the budget model (t=4) plowing efficiency is double that of the initiating year and weeding efficiency has increased by about 12 per cent; by the fifth year (t=5) planting efficiency is double. Machinery requirements and hire charges for strategy II are recorded in Table B.2(e). Where hand operations are retained the same labor utilization rates as in strategy I have been used. Budgets Outputs and Inputs The previous discussion has established the basic assumptions from which the budgets have been prepared. Only the accounts for strategy I, high-level yields are presented in detail: Table B.3 contains the annual income accounts and Table B.4 contains the corresponding annual input accounts. Summaries of these data for both production levels are presented in subsequent tables: annual crop areas and total annual production are contained in Table B.5; annual gross incomes are contained in Table B.6; annual distri- bution of labor utilization according to operation is contained in Table B.7; seed requirements are contained in Table 8.8; the summary of annual total costs (excluding financial charges) is contained in Table B.9. 1Bengtsson, gp. cit., pp. 5-25, and Leander, 9p, cit., pp. 24-45. 229l1 .coucmaa can: who Loan) mucuu uwmu can con Ham udmuxu pang ~Hoo omfio M Qucch M uion M Ewan mcoHuwuwdo How mumou can nouns wcficun: M AoH.....Hnuv proe umopsn .HH >voumuum new mucoEmuwsqou Hocofluouoao mchouz .o pmscwucou m.m mdmH oH.HHm mm.omm mm.avm mv.mom -.no oo.m~ oo.oM oo.om ~v.wm Hm.mv mo.vm nn.mo Hm.~n n mcoom mn.m em.nH oH.~Hm mm.0mm mo.mom mv.¢om -.na oo.m~ oo.om oo.om ~v.mm Hm.mv mo.vm ~5.mw Hm.~h n mcwm oo.m ho.n NH.ovH mm.mvH mm.an mn.owH Hm.Hm oo.mm oo.om oo.om «H.~H 5H.mH H~.m~ v~.- n~.v~ a xaHm nm.m mm.~H oo.ooH oo.onH oo.omH oo.ooH oo.ooH oo.v~ oo.v~ oo.om mv.mv mm.oo ~w.~h mm.vm wo.nm v much m~.n vv.nH oo.v0m oo.m~m oo.~vm oo.Hom oo.mo oo.v~ oo.v~ oo.om ~v.mm Hm.mv mw.vm ~n.mw ~m.~n n usual wv.o om.~H mn.mh ~m.om o~.mm oo.oo vs.vo oo.m~ oo.o~ oo.om ~v.wm Hm.mv mw.vm wn.mo Ho.~h n >0~uam ~H.s oH.~H NH.an vo.~oH vH.-H vo.~mH Hm.mo oo.mm oo.o~ oo.om ~v.om ~m.mv mm.vm ~n.no Ho.~h n anon) IIIIIII HmucH:v\musocIcueIIIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIoLmuowc nod musochmEIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII oHIo M oHIo M oHIv M H M H M H W o MoHIm M .IH M o M CHI. 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Strategy 11 Years 1~10: ngb-level yields Non-cash Food 6 caeh 101.61 101.61 101.61 101.61 101.61 101.61 101.61 101.61 101.61 Cash Cash 661.56 716.23 1,027.00 1,191.85 1,356.52 1,633.85 1,513.62 1,576.99 1,667.23 Other - 12.71 15.35 17.99 18.01 18.03 18.05 18.08 18.10 Total I t IlIlg-BU I I I ' l ' I Strategy 11 Years 1-10: Low-level yields Non-cash Food 6 caeh 101.61 101.61 101.61 101.61 101.61 101.61 101.61 101.61 101.61 101.61 Cash Cash 301.11 628.66 576.85 832.81 687.66 725.16 760.65 799.27 837.22 875.96 Other - 12.71 15.35 17.99 18.01 18.03 18.05 18.07 18.08 18.10 18.11 Total 6 . . 696.65 . . . 885.32 918.97 956.93 . ‘U.8. dollare. bSmal) errors due to rounding. TABLE 8.7 Chilalo: Annual labor use in field operations, budget model (t-O,...,10) Annual field labor requlremente at indicated year op.r.t1°n 5 z e e a e : I C D : 0 . 1 . 2 ; 3 Z 6 2 5 j 6 _ 7 : 8 : 9 ; 10 ------ .. ----------man-houre------------ -- --------- Strategy 1 Years 1-10: High-level yields Plowing 358 329 337 303 262 262 262 262 262 262 262 Seedlnq 255 . 168 176 191 191 166 166 166 166 166 166 Heedxng 682 1,067 1,230 1,279 1,211 1,216 1,221 1,226 1,231 1,235 1,260 Harvesting 616 936 _ 1,338 1,686 1,910 2,132 2,261 2,392 2,500 2,666 2,775 Threshing/winnowing 327 671 677 858 977 1 095 1 158 1 222 1 273 1,366 1 608 Tatfll 116:; 105:5 50,5: ‘05:, 1155! m m 5:213 5:116 I 5:52; Strategy 1 Yeare 1-10: Low-level yield: Plowing 329 337 303 262 262 262 262 262 262 262 Seeding 168 176 191 191 166 166 166 166 166 166 Heading 1,066 1,230 1,279 1,211 1.216 1,221 1,226 1,231 1,235 1,239 Harvesting 711 926 1,081 1,161 1,237 1,293 1,369 1,608 1,665 1,526 Threehlng/winnowlng 358 665 565 587 627 656 686 716 763 773 Tat-.1 215;! III}! 313;; 383;: 3,15; 395,; 3'33; Spas; 30!]; 3051: Strategy 11 Yeare 1—10: ngg-level yield! Plowlnq - - - - - - - - - - Seeding 9 9 8 8 7 7 7 7 7 6 Weeding 1,138 1,313 1,662 1,380 1,383 1,385 1,388 1,391 1,393 1,395 Harveeting 695 633 787 868 911 975 1,039 1,098 1,160 1,226 Threehing/vinnoving __295 __351 __1Qfi Jig 375 398 61g 661 663 Total 1,867 2,208 2,565 2,566 2,653 2,762 2,831 2,91 3,001 3,088 Strategy It Yeage 1-10: Lou-level yielde Seeding 9 9 8 8 ' 7 7 7 7 7 6 weeding 1,137 1,313 1,662 1,380 1,383 1,385 1,388 1.391 1,393 1,395 Barveeting 396 673 560 581 601 621 662 662 682 703 Threehing/vinnowing 169 197 227 236 261 268 255 262 269 276 Total 1,759 1.99! 77237 T763 2723'! m 2779'! 27322 27331 W 301 TABLE B.8 Chilalo: Inputs of seeds, budget model (t=0’. 00,10) Seed price at 3 Seed rate at indicated year : indicated year Crop ' 0 1-10 0 1-10 --------- $/q.--------- ---—---—q/ha ---------- Wheat 8.20 10.00 1.15 1.00 Barley 5.60 8.00 1.16 1.00 Maize 4.00 6.00 .60 .30 Teff 9.80 15.20 .50 .22 Flax 15.00 18.00 .74 .25 Peas 5.20 6.00 1.31 .90 Beans 5.00 6.00 .90 .90 23(322 .vc«uc:0u 0» can nuOuuu ”gnaw .auadaoo .m.=a n Ho.vvw ao.mwn oo.mm mv.mo~ oo.w I oH.mmn wo.n~ vm.vm I no.vo oo.mm cu ~m.o~m ~m.«nh oo.mm oH.mo~ om.w I ~n.~nn om.- a~.vm I vm.~w oo.mm a mv.mom nv.vmh oo.mm m>.mo~ oo.w I mw.nmn mo.- m~.vm I ~H.Hw co.mm o am.~mn om.th oo.mm om.~o~ ow.o I ~m.~vm mm.~H o~.vm I mo.om oo.mm h om.mnh wa.o~h oo.mm om.~o~ oo.o I -.m~m mo.- v~.vm I wo.mm oo.mm o nm.nmn rm.~on oo.mm mv.~m~ oo.o I m~.m~n am.o~ eo.vm I «u.wm oo.mn m v~.mnh va.mho oo.mm ~o.ow~ oo.w I wm.~m~ oo.m mo.vm I ma.mm oo.mm v mm.fian mm.omw oo.mm mm.oo~ oo.o I mm.oe~ w~.a wa.nm I no.5m oo.mm m mm.omm mm.mnm oo.mm nm.om~ oo.w I ~m.o- -.n vo.ov I oc.vv oo.mm N mo.>hv no.-v oo.mm vv.~ma ow.o I mm.mm~ ~m.m -.mm I nv.on oc.mm A madmaw ~0>0~I304 ”OHIA muuor an amounuum vm.am~.~ vo.oo~.~ oo.mm oo.nh~ ow.c I m¢.nmh vm.v~ vn.vm I Nv.oa oopmm cu ma.v-.~ -.¢m~.u oo.mm mm.sh~ oo.o I n~.~o~ vv.m~ o~.vm I mo.mm oo.mm o o~.nm~.~ oa.~o~.~ oo.mm mn.~o~ oo.o I Ho.moo H~.- m~.vm I mh.om co.mm a m~.s-.~ m~.wo~ oo.mm cm.~w~ oo.o I m~.~vw cm.H~ o~.vm I hm.om oo.mm n hm.omo.a nm.vmo.~ oo.mm om.~o~ oo.o I mm.aow m~.o~ vH.vm I v~.~o oo.mm w No.~mo.~ mo.hmm oo.mm mv.Hw~ oo.w I oo.mnm n~.oa oo.vm I mw.hn oo.mm m mv.oma mv.m~m oo.mm Ho.oo~ oo.w I om.mam o~.n~ no.vm I an.nh oo.mm v cm.-o an.nmm oo.mm mm.om~ oo.w I oo.mvv Ho.m~ mm.mm I h~.~h oo.mm n mm.a~n mm.vcw oo.mm >o.o- oe.o I we.v~m wa.o~ vo.ov I mn.mm co.mm ~ as.ovm ~>.nav oo.mm n~.wo~ oe.o I mm.n- no.5 -.mm I . om.bn oo.mm H avfiuwawa>oAInma= "OHIA mung», nu auouuuum IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIumuoHHOUIIIIIIIIIIIIIIIIJMIIII duuos m :ueu M gmau m zmuu m ammo m cmau m game m nmuu m smou m nmau m :muo m sumo m m m -coz H w H -coz H , H H H -coz H H -coz N “no, momwuzu u nu=QCu dquoe wu.: coauafiuotdoo ucom mxumm vuum nonflq . on.~no om.mwm oo.oHH vm.~e I n~.ovm 55.na mm.mv I -.nm oo.oaa 0H o~.mmo oH.nvm oo.o- vm.>w I no.~mm ~m.- os.ov I v~.~m oo.o- o oo.vmo oo.v~m oo.oHH vm.no I wm.m~m wm.o~ on.mv I va.hh oo.oHH c om.me om.mom oo.oHH vm.no I wm.v0m ov.o~ mo.ov I m~.mn oo.o- n mv.~mm mv.>ov oo.o- vm.n¢ I mw.ao~ oo.o mm.ov I om.mo oo.o- o m~.osm m~.oov oo.ofl~ vm.no I Hm.m- ~m.m ov.mv I Hm.vm oo.o- m n~.mmm ma.mvv oo.o- vm.ne I oo.om~ No.o mm.ov I mo.mm oo.oa~ Y om.va oo.v~v oo.o~a vm.h¢ I ~o.om~ ¢~.m Nm.mv I va.mm oo.o- n mm.a~v mm.oom oo.o- vm.ho I wo.mo~ eo.~ m~.mv I mm.mv oo.o~a N vo.van vo.von oo.oH~ vm.nm I n~.vm~ ~v.m nm.nm I om.ma oo.o- a avaoww Hw>0~IJOJ "OAIH nude» a Nwouauum oo.-o.~ mo.~oo oo.o- vm.~o I n~.~ve ~o.a~ no.av I mv.~m~ oo.o- od m~.~mo.~ m~.-o oo.o- vm.no I ~m.-m oe.o~ on.ov I vv.~h~ oo.c- o m¢.wwo mo.w~m oo.oaa vm.nw I «n.onm mw.a~ on.¢v I mm.ow~ oo.o- a mm.vmo mm.vvm oo.o- vm.~o I v~.omm ww.m~ no.0v I o~.~ma oo.o- h om.m~o ow.mom oo.o- vm.no I mm.o~m mo.n~ mm.ov I ~m.~v~ oo.o- o oo.mnm o¢.mo> oo.o- vm.nw I vm.nm¢ mw.w~ mv.mv I ov.~n~ oo.c- m o~.~cm ¢~.Aoo oo.oa~ wm.no I om.mvv mm.vH am.ov I nm.o- oo.oa~ v m~.mmh m~.m~o oo.o- vm.no I om.hmm OH.MH mm.ov I mm.mo~ oo.o~a n mv.vHo mv.v0m oo.oH~ vm.no I om.mom mm.o~ m~.mv I «$.55 co.o- N nov.ewv umv.omm oo.oHA vm.ho I #o.¢om o~.h Mn.hm I nv.on oo.o- H mvdmax ~e>o~I£mAz "caIA undo» “INMUuouum v~.mo~ on.vca om.moA mo.o~ oo.~u o~.w- ~m.v I on.hn «o.~v oo.am o IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII IIIIIIIII IIIIIIwanna«oflIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII ”ouch m game m ammo m cmuu w cauu m snau m nmuu m gmou m nmou m gnaw H sumo m H w -coz H H Icoz H H H H Icoz H . 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H BouH umw> voucoprw um mumoo can mmoumco amHocmcfiu Hmzcc< H Asa.....onuc HwUOE uwmpsn .mumoo Hawocmmwu um: can mmuumnu Huwococwu Husccd "Camawzo o~.m mqmml vv.HmmI mm.HmmI vo.mmVI mm.vNVI mm.mmmI cm.v-I mm.HmI noxuu nouns uEOUCH umz mv.VH ~v.vH ~v.vH Nv.vH Nv.VH ~v.vH NV.VH Nv.VH ~v.vH ~v.vH mmxou mmmH nm.mHmI no.mva m~.mmmI No.5va HH.mHmI mm.anI vm.movI oH.v~MI mm.aomI Hv.th mwxnu mucuwn QEOUCH uwz vo.ono mh.mno hb.nwm mh.mmm ma.omm mo.H~m m~.m~v mo.hom mw.voH Hm.mH numoo HUHO IGQCHH aw: mmoH bbhHmH MHqQMH wMLbeII mn.mm vm.mm Hm.ov m~.mH oH.hHI mm.m~I bw.HmI mcuauwu uoz Hw.vvm Hm.o~m mv.mom mm.Hmn wo.mnh nm.nmn vH.mms mm.HHh mm.omm mo.hhv munoo Huuou mme mm.m¢m mo.omm nm.mH¢ ~m.omm om.vvm mo.bom mv.~mh mv.vaw ~o.mvm mv.mHv n QEOUCH nmouo mvaHNlHo>0HI304 uoHIH mummy HH Nmmuuuum vo.mmm oo.ovm ve.mom -.vhv 0H.~mv ~v.o¢m vm.oa~ wo.~mH om.m~ VH.vI mmxmu nouum QEOUCH uwz Nv.vH Nv.vH Nv.VH Nv.vH NV.VH mv.vH NV.¢H Nv.vH N¢.vH Nv.va nome mmmd mv.hmm Hm.mmm oo.o~m vo.mmv hm.ovv mm.vov on.MHm hm.hmH ~h.~v m~.0H moxmu OH OH ”2 2006.." 002 mm.nH Hm.nH wv.5H Hv.nH om.~H Hm.nH wm.nH mm.on ~m.os mm.mH aunoo HGHU IanHu um: muwH oo.mHm mm.mmm mm.bmm mo.wom ma.mov vH. v wn.nmmll bm.vmm NM.n—H wn.wn mausumu umz vm.Hm~.H NH.vH~.H wH.an.H mm.h~H.H sm.owo.H No.~mo.H mv.omm 0m.~Hm mm.lo Hh.mvm nmumoo HouOu mmmH vm.oom.H v¢.omn.H mw.vom.H 0m.mmo.H om.mmm.H wH.v5v.H hv.HHm.H oo.wvH.H mH.mmm hm.mnm OEOUCH mmOuU mpHme Hw>0HI£mHI "oHIH whom» HHIxmoucuuw mv.o0H Hm.~H mv.me mn.mHHI mv.anI oo.mnHI ~m.vaI ~m.moHI vm.w~HI Nn.omI mwxuu u0uuo OEoocH uwz ~v.vH Nv.vH NQ.VH Nv.VH ~v.vH ~v.vH Nv.VH ~¢.wH Nv.vH Nv.vH mwxou mmoH nm.m~H mn.w~ Ho.ovI Hm.moHI Ho.mvHI vm.voHI ov.onHI om.vaI mm.HHHI 0m.omI mwxmu Unawon oEoucH umz -.~o H~.n~H ov.mm~ mo.mn~ . oo.omm om.~0m on.mm~ n~.ov~ nm.mmH vo.m¢ numou HoHU IcocHu um: mmoH mo.mHm vo.a©H omhbmHII whammH mm.mmH om.wMH mm.mHH bqum )mo.hv vb.o unusuwu uoz mm.Nno oH.mmo oo.vmm mm.me mv.hom mH.onm ma.mmm mm.VMm Imm.mnv vo.vam nnumou HduOu mama mv.mmm no.mmm oa.me mn.mmn mH.Hmh mm.th No.0nw nh.o~o mm.o~m mh.oov OEOUCH mnOHU mUHwa Hw>oHI304 "OHIH muoo> H meuouum Hm.Hom -.mov mH.omv on.mov H~.onm mH.nmm mm.Hnm no.0oH vm.mm >~.~H oh.- nwxnu houuo mEoocH aw: ~v.v~ Nv.VH mv.VH Nv.VH Nv.vH Nv.VH Nv.VH ~w.vH NV.VH Nv.VH ~v.va nUXMu mmOH m~.on vw.~mw hm.vvv ~H.mHv mo.vmm nm.~mm oo.wm~ mn.va w®.~h mm.o~ H~.bm mwxmu I II .III uncuwn OEOUCH umz cm.mv om.mv n~.mv mH.mv no.mv no.vv mn.vv Hn.qv mm.H¢ Hm.mv I mumou HoHo ICQCHH um: mmoH mquom mo.m~m vw.omv cm.mcv on.o~q «m.wom mb.omm wo.©MN mm.v H om.oo Hm.hm mausumu uuz mo.~no.H mH.~mo.H mo.owo mm.vm@ om.mfim om.mnm mH.Hom wH.mmn m¢.vHo av.wov v~.mm~ nmumoo HauOu mama Hv.vmo.H mH.ocm.H on.ohv.H mo.nHv.H am.mvm.H om.on~.H no.HMH.H v~.~om om.mnh mm.omm mm.omm wEoocw anuU mpHme Hw>wHIzmHm "OHIH mumor H Nmounuum IIIIIIIIIIIIIII IIIII IIIIIIIIIIIIII IIIIIIII IIIIIIIIIImmumHHOpIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII OH H o w m m a m o m m m v m H m ~ m H m o m . . 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I mausuou umz Ho.vvm Hm.o~m mv.oom mm.Hmn wa.mn> nm.nmn VH.mm> mm.HHs mm.omm mo.h>v munou HmuOu nuoH mm.mmm n¢.wm¢ na.mHm mm.omm om.vvm mo.nom mv.~mn mv.vmm ~w.mvm mv.mHv n «EoocH amouo mvaHthw>wHI304 uoHIH nuco» HH Nmmumuum vo.mmm om.ovm vc.mom -.vnv mH.~mv ~v.o¢m cm.ow~ oo.~mH cm.m~ vH.vI mmxou nouns oaoucH umz ~v.vH ~v.vH ~v.vH ~v.vH ~v.vH ~V.VH ~«.vH ~v.vH ~v.vH ~v.vH noxmu mmmH mv.ham Hm.mmm oo.o~m vc.mmv hm.ovv mm.vov oh.mam hm.haH Nh.~v m~.oH wwxuu mnemon ueoocH uwz mm.nH Hm.nH ov.nH Hv.hH om.nH Hm.nH w~.nH mm.on mm.on mm.mH wunoo HmHo IcmcHu um: mme oo.mHm mm.nmm mm.bmm mo.oom hmwmov uH.wwv mn._mmll o .vmm ww.mHH MH.mm mahzumu umz cm.Hm~.H ~H.¢HN.H wH.an.H m~.b~H.H hm.omo.H No.~mo.H mv.omm 0m.~Hm mm.¢H> H5.mvm nmumoo HmUOu mmuH vw.com.~ vm.omn.H mo.voo.H om.mmw.H om.mmm.H 0H.vnv.~ hv.HHm.H ow.ovH.H oH.mmm hm.mhm UEOUCH nacho mpHoHNIHm>mHIzmaz "oHIH gnaw» HH amououuw mv.ooH Hm.~H mv.an mn.¢HHI mv.nVHI mm.mnHI ~m.vaI ~a.moHI vm.w~HI Nh.omI mmxuu nouuu wEoocH umz Nv.vH Nv.vH ~v.vH No.VH mv.vH ~v.vH Nv.wH ~q.¢H ~v.v~ ~v.v~ mwxou mmoH nw.m~H mn.wm Ho.avI Hm.moHI Ho.mvHI vm.voHI cv.onHI om.vaI ~0.HHHI 0m.wnI mmxmu ouowon oeoucH uwz -.No H~.th ov.mm~ mo.mnm co.oom om.~0m on.mm~ h~.ov~ no.mmH vo.mv numoo HcHU IcccHu um: mmuH oowmwn vo.mmH omwwmw PWume wwmeH om.mMH om.mHH nw.mm umo.~v v».o acuSuou uoz om.~no oH.mmm oo.vmo om.mgo mv.nom mH.onm HH.mmm am.¢mm mm.mnv vo.vmm nnunoo HauOu amoH mv.mmm mo.mmw oa.m~m mn.mmn mH.Hmh ~m.n~m ~m.o~w nn.o~o mm.o~m mh.oov DEDUCH nacho mprHN Hw>mHI304 “oHIH munU» H xmmuuuum Hm.Hom -.mcv mH.0mv on.mov H~.onm mH.>mm mm.Hnm no.0mH cm.mm hN.~H on.- uwxuu uwuua oeoucH uoz mv.vH mv.vH wv.VH ~v.vH Nv.vH ~v.va ~v.vH ~w.vH ~v.vH Nv.vH NV.VH mwxmu nmoH m~.on vm.~wq nm.vvv NH.mHv mo.vmm pm.Hmm oo.om~ mm.vH~ wo.~h mo.o~ H~.hm moxou I II II ouOHwn wEoocH uoz om.mv mm.mq n~.mv mH.mv no.mv no.vv m~.vv Hb.qv mm.Hm H~.mv I mumoo HoHU IcucHu um: mmaH mb.me mo.m~m «m.omv phumwv on.o~v vw.omm mh.omm oo.om~ Mm.vMH oo.ao ”n.5m mcusuou uoz mo.~no.s ma.mmo.s ma.omo mm.omm mm.mHo so.mnm oH.Hom ma.nm~ mv.v~w mv.wo. «H.mo~ nmuaoo Hugo» mama Hv.vHo.~ mfi.ocm.u oh.ohv.~ mo.~uv.a om.mvm.s om.o-.~ hm.um~.a v~.~ao om.a- am.omm mm.oMm 6200:“ mmouo museum Hm>mHIcmum ”OHIH mumo> H amoumuum . IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII IIIIIII II IIIIIIII nmucHHOpIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII OH H a m m M h m o M m m v m m m N W H m o M . . . . euuH umw> poucofipcfi um >umEE3m uczooum stccd . H rod.....ouu. m322086u Hence Deacon “0 shoeesm "oHuHflco HH.m u4mHUHnu I .s . I Hs . I .s . vs Hs . vs Hs . vs As . vs Hs . vs Hs . vs .s . vs Hs . «H.H» s ..q.a vs. ouan Hock I .s . I As . I Hs . was Hs . was Hs . own Hs . was .N . was Hs . vmm Hs . vow Hs .uH.us s ..-.n vs. cHHHuo chuu I .s . I Hs . I As . mvv .s . mvv Hs . mvv Hs . svv Hs . mvv As . mvv .s . mvv H~ . m..us s “.-.m vs. auoucaHs I .s . I Hs . I As . svs Hs . sss Hs . sss As . sms Hs . sss HN . sss Hs . sss Hs .o..u s ..v.n vs. :OHHv; ouHo I Hs . I .s . I .N . sms As . sss Hs . svs Hs . sss .s . svs Hs . sss .s . sss Hs . «H.H» s “.v.a vs xaoHa uvHa Hmm.H Hs . Hmm.H As . Hmo.H Hs . Hms.H As . Hmv.H Hs . Hms.H Hs . Hms.H Hs . Hmo.H As . Hms.H .s . Hmv.H uHs. o..u> m “.-.o vs. nauovouus . ucoflmasmm ¢o~.H oo~.H oo~.H oo~.H oo~.H oo~.H oosuH oo~.H oo~.H oosuH mmmwmmmw smm.s Mmm4m svm.~ swm.~ smm.~ smm.~ smm.~ svm.s ssm.~ Mmmqm oHuHso> msw.mH msn.0H was.oH mn~.9H as .s mam.» sms.s “Hm.m msm.m mso.m Huuoa av mv av av ov av av av av ov uuucounannam «as mas sms sms vms sms ass smo sum was cacao: cvv.v ovv.v oo~.s oo~.s ovv.v ovs.v oss.m owv.m ovs.» ooo.m aoHu “on v aoHuoHam Hmquumu om. HH ouuuum H0::0wuom moo.vH mom.~H HHs.~H mmw.wH vmn.vH DHH.vH 0mm.mw vvv. mos.mH ~.n.nH uuuou Hquoa mm mm ow ms. mm ow ow MH 3 S 00:253.. Samoa cow sms Mphhw bmwhw Hbshw wmmww wmwww behh ”ssII sbsII Haves vo As . vs As . vs HN . vs .N . vs AN . vs Hs . vs IN . sm .H . ss .H . as uHH. o..us m n.v.a vs. guaos< vsm Hss. mam Hss. Hvo.H Ios. vmv.H Hos. ssH.H HsH. mmH.H HvH. va.H .vH. sso.H HvH. svs HOH. mvv oHo. oH.us s i...a vs. Hmch ucwe H: oo~.H oo~.H oo~.H oo~.H oo~.H oo~.H oo~.H oo~.H cos.H mmmqm mmmmmmmw sum.“ sm .s swm.m smm.s smm.m smm.m smm.s saw.“ samum sow.“ Houoa com com com oom com com cow com com com Hops oov oov oov. ocv oov oov OOv oov oov oov coconuucwm: ssm.H HH . sms.H HH . smm H HH . smm.H HH . smH.H HH . smm.H HH . smm.H HH . smm.H HH . sms.H HH . sun.H uHH. H.H» n H.u.n vs. umou o uoHanu> m m m m m m m m m m uoocmuuHansm sm sm sm sw sm sm sm sm sw sw havoc: cow oov com com com com com com com com soHo nos ovv.m eve.» oov.v oov.m osH.m ovH.m oss.s osv.s cvv.s oo~.s amovuaHnm Hugonhflm .nuwsumv oosIomH. H Hmovvuum I IIIIIIIIIIIIIIII I IIIIIIII III-mum;HOflIIIIIIIIIIIIIIII cH s M m M s M o M m M v M s M s m H M . . aouH uno> nwucoHch an mumou HacoHquUw Hmacc< ” HoH.....onu. noHuwn uowvsn mcHusn Hmuuauau om. HH abounuua find HauoEuuu oomnomH. H xmwumuum Hem mumou ocHuu0ddsm pea .ucwestqo .HwCCOwuwa HocoHuHUna new nuaoo Hascdd vouQIHuum "OHQHHAU «HID mdm<8 308 .H>IH.< .ssIss .am .. . .munoqucuEuno>cH HnuHQuo co . uuunOHm ucmamoHo>wo Eumm occcfidnwmcm .ucmeaoHo>oo HanoHuucuoucH uOH >ucou< .m.o "00u30m vm.m vocucoucHnE can uHmnou “ocHnEou new comm van Houuuuu non can» oucdonHo\Hosm> .H >uouuuun :H as usua<= .H >oouauuu :H no mchu .oov» a con uHHuoE a uuoHHauem .covo oov» v uuquxoquozoa uuoHHmcmu .nuuu oo~.mm w osz .E s.m "ocHneoov .nuqo oasm a 30m ~ "noua>HuH:um .nooo ocwm uuan H0090 .zuuo omm.Hm w ucHa .a s.n nHHHuo: .como oo~.H» o zou v "noucdei .cuau comm m .onH: .e s. unHo n “zouuun uuHoH x .nuao oco.v» o .m.n mv "vuouuuuss .cumm xup Hod oo.om um cucos one new uuouonoH oau “zoom canoe uvm oo.ovm .nouo oovm o ovHo saunas s “.68 um veHu umw>uaz ocHunp mum>HHn HucoHqupw 03u mst mcucoe ucoHo new posoHnEm uw>HuU oco Uco awconuoEIuo>Huc UCOH .zuou onHm o “ocHoco .m.: n ..aHv no uu505¢r .mHmocunwuoa :H pochucou nuHc: ucoaawzuo Ho nonfidzu .numm oovm m "uHaucHav com .>uHuomnu ”uCHMH .pm .ucHn “on .ucoEdHJUm wcHuo>HuHso “vow .muaosm .mocHnEoo .muouoouu “van .meanw> "moumu :oHuoHoouaov Hosan< .UoHuoa coHuuHUOHQmo chuHJ ucocuenou cnoH Hoowwm ou poumzspo coHDQNHuHOEw no poHHmm .EouH some ou mHmmnucuuan nH uuou Hoouocu coHuouHuuoadu .uuHHQ coHanHSUUo sumo ovo.mm m uo>om 0:640 .wcp non oH.ow “oucuszHu poem .uuo>Huu van .nuouonaqo .mzvcoe owunu no“ nwonaau Hump Mom o¢.om. unnuonuH 0:9n .wHHaavo and umuHuwo couumnom vcu ucwo< concouxma numHHov .mIDc sHo.o Hmm.s mHH.v vvs.HH sHm.HH Has.» sHo.m mHH.v ems.HH sHs.HH HsH.- mmv.- vmv.- Hmo.m~ ~Hv.v~ -s.~ ~ss.~ sss.~ -s.~ -s.~ HHv.HH vvo.HH va.cH sso.sH HHm.HH muHoHs Ho>mHIsoq HHv.HH vvo.HH va.oH sso.~H HHm.HH noHoHs Ho>wsIHoH= wom>ummeum£ emwm WCMDHQH meH mumOU H1008 va.v~ vso.v~ ooo.m~ HHH.H~ smm.- unoo Haves -v.~ -s.~ sov.~ ovo.~ ses.~ mumoo mcHumwmmm > 309 and storage during the two months of combining; two laborers are to be hired for a total of one month each to assist in dispatching grain to market. One of the tractor drivers should have sufficient mechanical skills to perform field maintenance and repair work. Infrastructure Asela and the surrounding area of Chilalo is already served by a major road. Farm roads are extremely rough but passable for agricultural equipment. Much needs to be done to improve the feeder road system. General improvements in road facilities throughout the Empire are anticipated in the Ethiopian Third Five-Year Development Plan. lImperial Ethiopian Government, Third Five-Year Plan . . ., p. 46. APPENDIX C SETIT-HUMERA CASE STUDY APPENDIX C SETIT-HUMERA CASE STUDY Introduction The third case lies in the remote Province of Begemdir and Simen close to the Sudanese border about 750 kilometers northwest of Addis Abeba. The Setit-Humera area, lying between the Setit and Angareb Rivers, is roughly divisible into two parts: 350,000 hectares bounded by the Tekeze River, the northern branch of the Angareb River, the Sudanese border and longitude 37° East; and 150,000 hectares lying south of the northern branch of the Angareb River, bounded by the Sudanese border and longitude 37° East. The first area, at an elevation of 600 meters, consists of 175,000 hectares farmed entirely by tractor and another 52,000 hectares of useful land not yet being farmed; the second area, at an elevation between 600 and 1,000 meters, consists of 30,000 hectares of useful farmland of which less than 1 per cent is farmed. Farming in second area is entirely by oxen. Humera (location: 14°20' North, 37°60 East) on the Tekeze River is the principal town of the area. Recently, the area has been developed primarily by private entrepreneurs using modern engine-powered equipment although a large number of oxen farmers with small farms of six to eight hectares have settled in the fringes of the area during the past 50 years. Concessions of land, hitherto unsettled and uncultivated, have been relatively easy to obtain through the local vice-governor's office. The area of concessions vary from 400 to 1,000 hectares (the first one was 7,000 hectares, on a 70-year lease); no titles, other than leases, have been granted. The soils are described as vertisols (self- mulching, black cotton soil) containing about 50 per cent clay.l African soils of this classification are among the lKline, gt‘al., 92, cit., Pt. II, p. 135. 310 311 best soils for growing cotton, maize, wheat, sorghum, oilseeds, rice, tobacco, fodder crops and pasture grasses.l No irrigation is practiced despite its proximity to the Tekeze River. The surrounding farmland is considerably higher than the river, irrigation pumping would be a costly operation. Local agriculture depends entirely on annual rainfall which is a major limiting factor. Rainfall data is recorded in Table C.l. The Setit-Humera area is of considerable interest to the Imperial Ethiopian Government and development agencies because of its high economic potential. A large number of migrant laborers are employed annually by the farmers although there is also extensive employment of engine power in the cultivation operations. Economic expansion in the area has been rapid and unplanned over the past ten years. Supportive infrastructure has not been adequately developed. Facilities for the provision of drinking water, housing, transportation, communication and medical services are all poor. There are shortages of storage facilities, credit accommodation, labor and general agricultural services.2 At present the inadequately developed infrastructure is a serious threat to economic expansion of the Setit-Humera area. This case study has been prepared from observations made in the area during the 1968-69 season (t=0) and data published by the Institute of Agricultural Research. Supplementary data for the many assumptions were obtained largely from materials published by Stanford Research Institute.4 1Report of the SurveyiMission on the Agricultural Development of Setit-Humera, 31 October-3 November, 1967 (Addis Abeba: Institute of Agricultural Research, December, 1967), pp. 10-11. 2 3 Ibid., p. 6. Ibid. 4Carl F. Miller, et_al,, Systems Analysis Methods 312 OHN-QH on“ so 0 . conme Nw>u5m on» my uuomomn .om .m .. . . moonumz mHmmHocd mEmumNm ..wm mm .uOHHHz .m Humum moo: acumNIHUmH uwm>umnI Edcuuom :Houo wow: ucmHm .omsp onm couuou umm>umz poo: ucmHm .ome oecmom Inmowuomum ucmuuso cw mcoHumummo mono s.m~ m.m~ H.m~ s.w~ H.m~ o.Hm v.~m H.~m o.a~ v.m~ m.m~ s.w~ Hue. mousuouomawu can: m.~ s.HH v.ooH m.sH~ s.omH s.vm H.v~ o.m I I I I H.EE. uHHoucwmu cum: IIIIIIIII IIIIIIIIIIIIIu03IIIIIIIIIIIIIIIIIIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIII>uoIIIIIIIIIIIIIIIIIIIIIIIIIIII acmmom .>oz u .uoo “ .umom u .ms< " stn u mean u an: " .uaa " .uuz u .nom u .cun « .000 » auuH Houu. Hum» ocHuQHuHCH Hones ummpan .wnucoe unpcoHuo xn acoHunuomo menu Ho coHuanHuumHo was auov uwquHHU ”uuoeuquHuom H.Q wands 313 Present Agricultural Economy The PeOple and Their Habitat Currently, the area is one of rapid, unplanned expansion. Experienced and inexperienced farmers have been able to obtain land with relative ease and have established homesteads throughout the area. Some 60,000 migrant workers come into the area annually for employment during the planting and weeding season beginning in May and for the harvest season be- ginning in October. Farmers have built simple forms of accommodation on their farms for their labor force. Humera, with a population of 20,000 in 1967, is the local market and trading center as well as the center for administration, security and law enforcement. The town is the collection and storage point for agricultural produce to be transported to Asmera, the principal market, some 430 kilometers east. Since there is no local marketing organization, most farmers are obliged to sell their crops to local merchants to whom they are heavily indebted by harvest time. Larger and more progressive farmers sell in Asmera. Transportation involves double handling because no bridge exists over the Tekeze River. Tractors are only able to haul produce across the river during the period January through May, and the road connection to the main all-weather route from Asmera to Tessenei is only passable for trucks during the dry season.1 Farm roads and main roads within the area are extremely poor. Until settlement began some ten years ago, there was no indigenous population other than nomadic herdsmen and camel caravan drovers. Thus, the area is virgin agricultural country in which the number of scattered farmsteads is gradually increasing. The average size of farm is 800 hectares. Under present conditions one tractor is sufficient to farm about 40 hectares; one tractor is required for hauling water and for general transportation.3 Thus, many farms of this average size are likely to use three tractors. Three tractors appear to be more useful than two tractors and a Land Rover since one additional tractor is available for the early tillage operations and is used for general 1 2 3 Ibid., p. 13-14. Ibid. Ibid., p. 25. 314 haulage and transport for the rest of the year; the farmer can make long distance journeys by grain truck or by the bus service. Agricultural Practices In the initiating year (t=0), the distribution of crops was observed to be: grain sorghum, 45 per cent; sesame, 30 per cent; cotton, 25 per cent. This year of observation followed a substantial decline in the market price of grain sorghum in Asmera and, consequently shows a marked decline from the proportions of crops observed by the Mission from the Institute of Agricultural Research which reported crop dispositions for the 1967—68 season as grain sorghum, 55 per cent; sesame, 16 per cent; cotton, 29 per cent. The cropping pattern appears to be quite sensitive to changes in market prices. Usually each farmer grows all three crops each year. No particular pattern of rotation is followed; when an area becomes weedy grain sorghum, which tends to compete against weeds more successfully, is planted in the following season. Fallow cultivation is not practiced. Crop areas are determined on the basis of market considerations with the exception of grain sorghum which is both the important subsistence crop of the area and an important cash crop; therefore the area of sorghum grown is determined by both market considerations and local consumption requirements. Despite the current dependence of farmers on hand labor a wide variety of tractor equipment is also employed in the area.2 The annual capital inventories are shown in Table C.2(a). The principal cultivation implement is the wide-level disc harrow (18-24 discs). Data presented throughout this case study are for two strategies, the basic differences between these two strategies are depicted in Table C.2(a). In strategy I less tractor equipment is employed than in strategy II: all planting, weeding, thinning, spraying, harvesting and clearing operations are to be performed by hand in strategy I; tractor equipment is to be employed for some of the crops in planting, cultivating, and clearing operations, and grain sorghum is to be harvested by combine in strategy II. 1 2 Ibid., p. 14. 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It is intended that there should be well-qualified supervisory personnel in the area, adequate storage facilities for cash crop production, and in strategy II adequate equipment available for cultivation and harvesting operations. The costs of these additional requirements are shown in Table B.12. These personnel and equipment are considered to be adequate for 150-2001 farmers in strategy I and 50 farmers in strategy II forming an operational unit or cooperative. This unit covers an area of about l,200-l,600 hectares of cultivated land in the case of strategy I and about 400 hectares in strategy II. Supervision Two technically competent individuals are to be appointed to the operational unit. Their duties cover demonstrations and guidance in the implementation of improved techniques, distribution of information and improved inputs to farmers, the recording and administration of loan transactions, the supervision of the Hire Service and, in cooperation with the Grain Corporation of Ethiopia, the supervision of storing and marketing cash crops. Some differentiation of duties is envisaged, thus the two appointees are given different titles: Extension Agent and Research Officer. Equipment In strategy I, in addition to supervisory, demon- stration and recording duties, the operational unit is to be equipped for grain storage. In strategy II, in addition to storage facilities, a complete range of tillage and harvesting equipment is maintained on inventory for hire by farmers in the area (Table B.12). Additional labor will be necessary in strategy I to store grain during the harvest period and to remove grain from storage for marketing. In strategy II additional personnel will be necessary to maintain the Hire Service: two tractor operators for eight months of the year and two additional driver-laborers to assist in grain transportation 1 tations. An arbitrary figure of 175 was used in compu- 307 Hemp» thnm shkhh hhbhm manna when» shun» "snub wswnb shun» Haves vs Ha . vs Hs . vs Hs . vs Ha . vs Ha . vs Hs . vs Hs . as HH . as HH . as HH . oH.us s ..-.a vs. auaasa svs Hvs. svo.H Hvs. oaH.H Has. sas.H Has. ssv.H Hos. saa.H HsH. ssH.H HsH. aao.H HvH. svs HOH. svv Hs . oH.us s ..u.a vs. uvcvn I Ha . I Hs . I Ha . svH Hs . svH Hs . svH H~ . svH Hs . svH Ha . avH Ha . svH Hs . eH.u> s H.v.a vs. vuoHHnus I HH . I HH . I HH . vs HH . vs HH . vs HH . vs HH . vs 1H . vs HH . vs HH .oH.u> s s.s.a vs.uuoHHo:u :uoo vv~.~ HH . vv~.s HH . vv~.s HH . vv~.~ HH . vvs.~ HH . vv~.~ HH . vvs.s HH . vvs.s HH . vv~.s HH . vv~.~ HH . oH.us s H.v.a vs. aucHnsou I Hs . I Hs . I HN . ass Hs . ass Hs . ass Ha . ass H~ . ass Ha . ass Ha . ass Ha . oHIus s s.s.a vs. avou~>HuHsu I .s . I Hs . I .s . vs Ha . vs Hs . vs Ha . vs Hs . vs Ha . vs Hs . vs Hs . u..us s ..v.a vs. ouan Hoes I Hs . I Ha . I Hs . sas Hs . sas Hs . sas Hs . sas Hs . sas Ha . sas Ha . sas Hs .uH.u> s “.a.a vs. :HHHue cHuuo I Hs . I Ha . I is . svv Hs . svv Ha . svv Ha . svv Ha . svv Ha . svv Hs . svv Hs . MH.u> s H.v.a vs. auoucha I is . I Ha . I is . sas Ha . sas Hs . sas Hs . sas Ha . sas is . sas Hs . sas Hs .uH.u s 1... vs. abuse; case I Hs . I Hs . I is . sas Hs . sas Ha . sas Hs . sas Ha . sas Ha . sas Ha . sas Ha . oH.us s ..v.a vs xona uvHa Hsa.H .s . Hsa.H Hs . Hsa.H Hs . Hsa.H Hs . Hsa.H Hs . Hsa.H Hs . Hsa.H Ha . Hsa.H Hs . Hsa.H .s . Hsa.H aHs. oH.u> s ..-.0 vs. Hsuouuuus uculmHamm mmmqm oo~.H ooa.H oo~.H oo~.H oo~.H mmmqm oo~.H mmmqm mmmqm mmmwmmmw sas.s sasss sas.~ sss.s sas.s sas.~ sas.~ sas.s sas.s sss.~ uHoHHu> msv.nH mswsmH mam.nH ms~.oH saa.a saa.a ams.a mHm.m mnwwm mas.» Haves av av av av av av av av av av ueoseueHnnsm aaa aaa aaa aaa aaa asa asa asa aaa aaa usuas: ovv.a ovv.a oo~.a oo~.a osa.a ssa.s oss.a osv.s ovs.a ooa.m aoHc sea a uoHuqum Hmuufiueu om. HH oueuum HoncOnnoa won.nH mom.~H mHm.mH www.mn www.mn an.wH mam.m_ svv.m moa.mH mam.ww euaou Hooch ow em on mm sm sN on m_ mH MH oucssoHHs uHemez oww sma son.“ 0mm.H Hon.n “mm.“ mwm.H Hwo.H Nb» Hun HeuOB vs Hs . vs .s . vs Hs . vs Ha . vs .s . vs is . vs Hm . sa HH . as HH . as aHH. uH.us s H.v.a vs. zuaasv sas Has. sas Has. Hvs.H Hos. sav.H Hos. saa.H HsH. saH.H AsH. aaH.H HsH. aao.H HvH. svs HOH. svv aHs. oH.us s s.s.a vs. Hsch save H: m oo~.H oo~.H oo~.H oo~.H oos.H oos.H oo~.H cos.H oo~.H mmmqm mmmmmmmw ham.“ mmm.~ wmm.m wmm.m smm. saw.“ nmm.m saw.“ mam.“ ram.“ HsUOH sas cos oos cos oos com com cos oos cos Hess oov oov oov. ocv. oov. oov oov oov sov oov oocucoucHu: ssa.H HH . saa.H HH . sas H HH . sas H HH . ssa H HH . ssm.H HH . ssH.H HH . saa.H HH . sas.H HH . san.H uHH. oH.ua a s.s.a vs. umou eoHovco> a m a a a a a m m a cocoon-Hansm ss sa ss ss ss sa ss ss ss ss ovum»: ooa cos oos sas cos cos ooa aos sos cos smHe has ovs.s avs.s oov.a sov.s osH.s osH.a osa.s oas.s svv.s oo~.s vssHuvHus Hansenuum Hsumeuvs oosIosH. H Hmoumuus IIIIII IIIIIIsmHMHHOUIIII IIIIIIII oH a M s M s s M s M v M a m s W H m . . “ smuH Howx pwuoOHch um mumou HmcoHuHOUo Hmacc< H HoH.....ouu. pOHHOQ youpsn ocHuzp Hnuoflueu om. HH Mouusuue one Heuuaueu cowlomH. H amounuum qu mumou ocHquQQDm one .ucosstqo .Hocs0nu0m HecoHUprs new eueou Hsscne veuelmunm uoHeHHnu NH.n NHQIH.< .mmI~n .nm .. . . uUmHOum ucosmoHo>oo Such occofionwszm .uc08n0H0>oo HscoHuecuouCH uOH aucoo< .m.o "ovusom .nunoqucefiune>cH HnuHasu co om.w eocacoucHuE one uHsQUH nocHnEOU ecu comm one Houusuu use can» secesOHHe\H03h> us OEHu ume>uen ocHusp mue>Hup HocoHquom 03» .H abousuue cH es usaoHuHsoa uuoHHsuem .sooa sass "van Hooso .zavo oas.Hs s 66H: .a s.s .HHHuaa .cuvo sos.Hs a sea v “HoucuHss .cuee comm m HopHJ .E a. unHv n .zoso com» a ueHo abuusu n ”son "sauna: ueHoH x .zuou ooo.vs a .a.n sv .nuoao-uas .2060 son use oo.om us cocoa 0:0 uoH eueuonsH 03» "goes cocoa use oo.mvm mst mnucoe ucoHe saw peaoHQEm Ho>Hup uco one uHcsnuoEIuo>Huv osoH .2060 OMHm o “ochco .m.£ m ..sHv no vusosct .mHsocuneued cH oecHeucou muHcs usesaHsve Ho nonfisza .noem 00'» w uanucHDU com .>UHueneu "ech H .om .ecvn ”voH .uaseaque acHue>HuHso ”sow .muaoae .socHnEou .muOuueuu HvHH .meHuH:o> "moves coHueHuoudev Hs:::< .ooHuea coHueHuoudeo cquHJ ucoEanneu ceoH uuosso ob ooumsste coHuoNHuuoEo no ooHued .EOuH zoom 0» mHmezuCOHsa :H sues someone coHuenHuuofldo .ouHud coHanHsgus some ovo.nm w ue>oa ocsHu .aco Hod oH.om "oucmonHe poem .nue>Hup one .nueuonsqu .mcucoe emunu sou ooaoHdEu H>eo sea oo.om. euuuonoH oshn .aHHesqo oHen sooHuHo coueemem use ucwo< conceuxmo nueHHoo .m.oc sHoHa HHmHa mHH.a ssa.HH aHm.HH HHv.HH vmo.HH Hvs.cH aso.~H HHm.HH moHeH> He>sHIJOH Ham m NHs a mHH.a osa.HH aHm.HH HHv.HH vac.HH Hvo.oH aso.~H HHm.mH monHa HW>wHILoH= wow>ugsImuHc Beth mausuou nmoH eunoo Hsuos HaH.- mmv.- ssv.- Hmo.m~ mas.v~ Hmv.v~ vao.v~ oss.H~ HNH.H~ Ham.- umoo Hence -a.~ -a.~ mma.~ -a.~ -a.~ -a.~ -a.~ aoa.~ oao.~ aoa.~ >mumoo mcHusummo 309 and storage during the two months of combining; two laborers are to be hired for a total of one month each to assist in dispatching grain to market. One of the tractor drivers should have sufficient mechanical skills to perform field maintenance and repair work. Infrastructure Asela and the surrounding area of Chilalo is already served by a major road. Farm roads are extremely rough but passable for agricultural equipment. Much needs to be done to improve the feeder road system. General improvements in road facilities throughout the Empire are anticipated in the Ethiopian Third Five-Year Development Plan. lImperial Ethiopian Government, Third Five-Year Plan . . ., p. 46. APPENDIX C SETIT-HUMERA CASE STUDY APPENDIX C SETIT-HUMERA CASE STUDY Introduction The third case lies in the remote Province of Begemdir and Simen close to the Sudanese border about 750 kilometers northwest of Addis Abeba. The Setit-Humera area, lying between the Setit and Angareb Rivers, is roughly divisible into two parts: 350,000 hectares bounded by the Tekeze River, the northern branch of the Angareb River, the Sudanese border and longitude 37° East; and 150,000 hectares lying south of the northern branch of the Angareb River, bounded by the Sudanese border and longitude 37° East. The first area, at an elevation of 600 meters, consists of 175,000 hectares farmed entirely by tractor and another 52,000 hectares of useful land not yet being farmed; the second area, at an elevation between 600 and 1,000 meters, consists of 30,000 hectares of useful farmland of which less than 1 per cent is farmed. Farming in second area is entirely by oxen. Humera (location:y 14°20' North, 37°60 East) on the Tekeze River is the principal town of the area. Recently, the area has been developed primarily by private entrepreneurs using modern engine-powered equipment although a large number of oxen farmers with small farms of six to eight hectares have settled in the fringes of the area during the past 50 years. Concessions of land, hitherto unsettled and uncultivated, have been relatively easy to obtain through the local vice-governor's office. The area of concessions vary from 400 to 1,000 hectares (the first one was 7,000 hectares, on a 70-year lease); no titles, other than leases, have been granted. The soils are described as vertisols (self- mulching, black cotton soil) containing about 50 per cent clay.l African soils of this classification are among the lKline, et_al., pp, cit., Pt. II, p. 135. 310 311 best soils for growing cotton, maize, wheat, sorghum, oilseeds, rice, tobacco, fodder crops and pasture grasses.l No irrigation is practiced despite its proximity to the Tekeze River. The surrounding farmland is considerably higher than the river, irrigation pumping would be a costly operation. Local agriculture depends entirely on annual rainfall which is a major limiting factor. Rainfall data is recorded in Table C.l. The Setit-Humera area is of considerable interest to the Imperial Ethiopian Government and development agencies because of its high economic potential. A large number of migrant laborers are employed annually by the farmers although there is also extensive employment of engine power in the cultivation operations. Economic expansion in the area has been rapid and unplanned over the past ten years. Supportive infrastructure has not been adequately developed. Facilities for the provision of drinking water, housing, transportation, communication and medical services are all poor. There are shortages of storage facilities, credit accommodation, labor and general agricultural services.2 At present the inadequately developed infrastructure is a serious threat to economic expansion of the Setit-Humera area. This case study has been prepared from observations made in the area during the 1968-69 season (t=0) and data published by the Institute of Agricultural Research.3 Supplementary data for the many assumptions were obtained largely from materials published by Stanford Research Institute.4 1Report of the Survey Mission on the Agricultural Development of Setit-Humera, 31 October-3 November, 1967 (Addis Abeba: Institute of Agricultural Research, December, 1967), pp. 10-11. 2 3 Ibid., p. 6. Ibid. 4Carl F. Miller, et 31., Systems Analysis Methods 312 sow 8Q .H~ImH .da .. . . conmHz ae>uom ecu Ho uummom A §e s soonest mHmeocd newsman ..flm mm .ueHHHx .h Huoue owe) ucsHm .umH ume>us£I .. Escauon cHeuo owe: ucon .umHo qum couuou umm>uon one: ucon .UmHo oEomom Ipmuwuooum ucmuuso ow acoHuouomo mono s.a~ o.a~ H.m~ s.sw H.w~ o.Hm v.~m H.~m o.a~ v.o~ m.m~ s.w~ Hos. sousueHOQBmu coo: m.~ s.HH v.ooH m.sH~ s.amH s.vo H.vN o.m I I I I H.EE. sHHsucHou cue: IIIIIIIII IIIIIIIIIIIIIuozIIIIIIIIIIIIIIIIIIIII IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIauoIIIIIIIIIIIIIIIIIIIIIIIIIIII acmawm .>oz " .uoo n .udom " .a3< " aHsn " scan a an: " .uda " .usx u .neh u .den s .000 v BouH Hon». use» acHueHuHcH Hmooe ueaosn .nnucoe HoocoHeu an acoHueuedo done we coHuanuumHo one sueo UHquHHU "sumasquHuom HIU mHmHuH=O eno “OOH.Hw m houneHd omen one nsHm H aboueuun nH owes unusaHsvmo .Esnne sea onum noHUHnHavOe HO unou Hem OH ue oeueHooumeo one noes Omww ue oesHe> .aHmasn oooH HeuoH 00H oouHsUeu Escapes nHeum onHuoun new noes sHeunHoU OO~ auHuedeUu .Ednne use umou noHanHsUue HO uneu use OH ue oeueHoeudeo one noes OO.H» ue oesHe> mHooa .naeo aonuos ~HN u0>o daemon one Essence nHeua anwunm>uen one: HOH nequHn one naeo aonuoz me HO ooHued e uo>o anHue>HuHsu one anHoeos HOH noonIonemu .asnne Hon unou noHuHuquoe uo uneo use mN ue ooueHueuaea .nueo OOH» m nueaeuau xoemeoen auuwnso .Ennne nod noHanHoqoe HO uneu use OH ue oeueHueunoo unuSstUe Houoeua .Ooam w euwHHeuu nouIm 03» “cues Ovam w HmumHo vm. msouuen omHo He>oHIOoH3 sonny “noes OO~.vw O uuouoeuu Home: .d.n msImm mousse .eueHHoo .m.o one noeaHene sauna HOH mesHe> ueHHoo HH .oeueHomHamo aHHsu eon one .noHueuoao uneuusu nH unoBstUme ass.sa nss.sm webhhh Dashen sss.sm vas.sn Has.sm mss.sm smm.sm was.sm . Huuos oos.H oos.H oos.H cos H oos.H oos.H oos.H oos.H oov.H osv.H acHn cHuHo asv asv asv osv asv vsv Hsv ssv sav sHv «Hoe» ens: ooo.a ooo.a ooo.a ooo.a ooo.a ooo.a soo.a oos.a ooo.a ooo.a auosuuas ooo.~H ooo.~H ooo.~H ooo.~H ooo.~H ooo.~H oso.~H ooo.~H soo.~H ooo.~H ocHnsou oss.s~ oss.o~ oss.os oas.os o~s.o~ sss.os oss.o~ oss.o~ sss.a~ . oss.os aucwsaHsao Houoeus HH Hauuauum vmm.ss was.Hn oas.mm mam.sm sss.s~ aHsnws sHs.- oHs.ss som.mm sss.s~ mas.sH Huuos ooo.s ooo.s ooo.s oso.~ cos.H oos.H soa.H oss.H cos.H soa.H usaHn aHoHo vHs vHs oHs sos sas aas sas sas sss sss ass osHoOu ens: ooo.a ooo.a ooo.a soo.a ooa.a soo.a ooo.a ooo.a ooo.a ooa.a euuosouas oo~.sH o-.sH oss.sH o-.sH oss.sH os~.sH os~.sH os~.sH cs~.sH o-.sH o-.sH oucoaassao savanna H Hauuvuus IIIIIIIIIIIIIIIIIIIIIII IIIIIIIIIIIIIIIIIIIIIIII one 0 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII - . a HH 6 0H m a m s m s m s m s m v m a m s m H m o m I , . souH new» oeueuHonH ue unou Hequeu Heonn< Hoods uoaosn noHueuedo nH auoanu>nH HeuHaeo Ho unou Hesnne Heuoa .e mnoHunanene uHmem HeueasquHuem ~.U mqmds .HOH.....HIH. HH ecu H smsaouvuus .Houu. Hews acHueHchH uou a 3116 ..Hm mm .uuHHH: .n Husu nan» .mo .w “Nah. u so I ~IaHH .aa ..6HnH E , .ss I a use “mo 0 50 m0 0 :0 E uosHIEm .assHso.Im .oanes .ss.s~Is .H mxm.Hss\s.Heest~.Hes\sIs. I no . so "sums: HnOHuunsu nOHuusoOHd oeanEOo Ecuu oeueHsoHeu enema Hauo. uOOHuen new auHHHnHmmOQ oHeH» .a m” e“ he s s u moonumz mexHend unoumxm "mouHuueum nOHue>HuHso oe>OHQEH noon: noHeHa anenHeuue ooueEHumo no ommen eoHeHa oo>oHaEHo .Hm .d .. . . nOHmmHz m0>usm ecu HO uuomen "mnOHue>ummoo oHoHH no oememo .ssHoHs HsaoHIaoHo .aeHmHs Hu>oHIcaHmn .sHvHHoe .s.:e O.vH m.MH o.~H O.NH m.HH 0.0H 0.0H m.a w.m O.m I H Ow.a H H Heuunoowx 0.0~ O.mH m.nH a.mH o.vH m.MH a.HH 0.0H m.a uo.m m onomz enema uOUHHe: m.aH N.aH o.hH 0.0H m.wH ~.OH O.oH m.mH m.mH N.mH O.mHH vm.v H H O.o~ m.aH o.aH m.OH O.aH s.sH O.sH s.sH O.sH em.mH o : EdnaHOm nHeuo m.m O.m O.v u.v m.v H.v a.n v.n v.m N.m o.m H OO.mNH H Nv.v Ho m.s a.s o.o H.v a.m ~.m w.v m.v a.m ev.m o m aHmH eHeU< nOquU s.s s.s v.s ~.s O.s a.s s.O s.s a.s «.O . . H o.a s.s v.s H.s s.s s.s s.s a.s s.s oa.s as s H sH osH m: oesuo: masses IIIIIIIIIIIIIIIIIIIIIIIIIIIIII oueuumn Hem mHeunHSUIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII e.U\m oH m a m s m s m s m s w v m a m s m H m o m m m m . . . . . . . . . . H euHHn ”nOHmeowu H aueHue> H mono Hema oeueOHonH ue onHa Heznnn H H .u o a” H HOH.»...ous. HooOE uoaosn .mnoHuQEdeme oHeH» Heonne one sound .m ouncHuCOU NIU NHQ X(t)_ 4 Z AX i=1 i(t) Margin (per hectare) for individual crops (mxi) m = [(A ' Y )P Xl(t) Xi(t) X1 X1 - Z X.P ] A i=5,9,13,17,21,25 1 Xi/// Xl(t) m = [(A ° Y )P . X2(t) X2(t) X2(t) X2(t) - Z xiPX ] AX i=6,lO,l4,18,22,26 i 2(t) m = [(A - Y )P X3(t) X3(t) X3(t) X3(t) - X XiPX ] AX i=7,ll,15,19,23,27 i 3(t) m = [(A ° Y )P X4(t) X4 X4 X4 - E XiPX ] AX i=8,12,16,20,24,28 i 4(t) Constraints 1' [AX - AX | 7 - 2 i(t-l) i(t) A Xi(t-l) 2. AX (min) = 50 for i=l,2,4 i (t) __ (AX )l.l—i . _ 3(t-1. 3. AX3(min)(t) — l-wx 3(t-l) YX 323 Labor Utilization The rates for labor utilization are set out in Table C.2(d). Since the labor force in the area has already 11) years experience of these operations, and since no change in hand tools is envisaged, the level of efficiency in these operations has been held constant. Increases in labor requirements in the operational years of the budget model are due to increasing the intensity of manual operations in the improved cultivation practices shown in Table C.2(c). Crop Protection Weeds and insect pests are the major production problems of the area.1 Improved cultivation practices are designed to reduce weed infestation thereby facilitating improved crop yields. Recommended cultivation practices Areas (for both strategies) 1. For X. where m > m 1 Xi(t-l) X(t—l) m A _ [A ] xi(t-i) X. _ X. l) m 1(t) i(t X(t-l) 2. For X. where m < E 1 Xi(t-l) ‘ X(t-i) A = A Xi(t) Xi(t-l) F' mXi(t-l) for all i where for all i where m > m m < E xi(t—l) X(t-l)___xi(t-l) ‘ X(t-l)j 1Report of the Survey Mission . . ., pp. 26-30. 324 for Setit-Humera1 include an insecticide spraying program for each crop. In the budget model, sesame, cotton, and sorghum are to be sprayed once by hand. Hand spraying has been employed because while the farmers must keep a large labor force for weeding and harvesting, a lull occurs in the work requirements between these operations during which the farmer must retain the laborers in order not to lose them as demand suddenly surges for harvesters. Insect pests of cotton are a very serious threat to the crop, and therefore, three aerial sprayings are incorporated into the plan of improved cultivation practices. These sprays must be applied promptly when they are required and an air spray service is the only practical solution to avoid serious crop damage. Budgets Outputs and Inputs Data contained in Table C.2 are the basic as- sumptions on which the budget model has been prepared. Table C.3 contains the high-level annual income accounts for strategy I and the corresponding annual input accounts are contained in Table C.4. Summaries of output and input data for both strategies and both production levels are contained in subsequent tables. Table C.5 contains annual areas and the summary of total physical production for each crop; Table C.6 contains a summary of annual incomes. Input data are contained in the three following tables. Table C.7 contains the annual distribution of labor used in field operations; Table C.8 contains the inputs of seed, spray, and transport requirements; Table C.9 contains a summary of annual total costs for inputs (excluding financial charges). Depreciation rates are recorded in Table C.2(a). As with the previous case studies, the purchase of capital equipment has been assumed possible through medium—term loan accommodations. Therefore, the depreciation charge represents an accumulated cash fund which has been applied to defray annual financial charges to the farm. 1Carl F. Miller, 32 al., Systems Analysis Methods . ., pp. 242-43. 3225 TABLE C.3 Setit-Humera: Annual income accounts, budget model (t=0,...,lO)--strategy I, high-level yields, years 1-10 ' ' ' . Pro- ’ Non-cash ' Cash ' Gross Year 3 Crop E Area 3 Y1EId 1 duction 3 product 5 product 3 income hectares g/ha. quintals ------------ dollarsa -------------- 0 Sesame 240 6.0 1,440.00 - 29,016 00 29,016.00 Cotton 200 3.0 600.00b - 15,000.00 15,000.00 Sorghum 292 15.0 5,202.63 5,413.12 19 767.63 25,100.74 Total 000 5, . 001200763 69.106720 Strategy I Years 1-10: High-level yields 1 Sesame 413 .3 ”2,601.00 - 52,420.20 52,420.20 Cotton 137 3.4 465.00 - 11,645.00 11,645.00 .Sorghum 150 .5 2,275.00 7,024.56 3,106.44 11,011.00 Beans 199 .0 000.00 - 7,600.00C _146§g;ggc Total 000 , 2 .56 207000700 02,764.29 Sesame 446 .6 2,943.60 - 59,313.54 59,313.54 Cotton 154 .9 600.60 - 15,015.00 15,015.00 Sorghum 120 .0 1,060.36 0,000.06 962.02 9,042.00 Beans 00 .3 744.00 — 7,142.40 7,142.40 Total 000' 07000700 027002706 007010i02 Sesame 455 .9 3,139.50 - 63,260.92 63,260.92 Cotton 163 .3 701.90 - 17,522.50 17,522.50 Sorghum 110 .5 1,094.67 0,109.32 900.09 9,170.20 Beans .23 .6 670.40 - 6,512.64 6,512.64 Total 000 07100f02 007276195 90.466722 Sesame 462 .2 3,326.40 - 67,026.90 67,026.96 Cotton 171 .0 020.00 - 20,520.00 20,052.00 Sorghum 116 .0 1,119.02 0,290.05 997.21 9,200.06 Beans _§1 .9 606.90 - 5,026.24 5,026.24 Total 000 07200700 00.020541 1027001726 Sesame 463 5 3,472.50 - 69,970.07 69,970.07 Cotton 173 .2 099.60 - 22,490.00 22,490.00 Sorghum 114 .5 1,941.62 0,353.02 1,043.62 9,397.43 Beans 50 .3 665.00 - 6,304.00 6,304.00 Total 000 07000702 00,000040 1007202701 Sesame 464 .0 3,619.20 - 72,926.00 72,926.00 Cotton 174 .7 991.00 - 24,795.00 24,795.00 Sorghum 111 .0 1,944.10 0,422.44 907.39 9,409.03 Beans 51 .6 744.60 - 7,140.16 7,140.16 Total 000 07022.44 1007057143 1107220.07 Sesame 465 0 1 3,766.50 - 75,094.97 75,094.97 Cotton 175 6.1 1,067.50 - 26,607.50 26,607.50 Sorghum 109 10.5 1,962.23 0,492.71 1,004.49 9,497.20 Beans 52 15 9 026.00 - 7,937.20 7,937.20 Total 001 07002721 111,524724 1207010.95 Sesame 466 0 4 3,914.40 - 70,075.16 70,075.16 Cotton 176 6.6 1,161.60 - 29,040.00 29,040.00 Sorghum 107 19 0 1,970.24 0,569.55 1,005.13 9,574.60 Beans 53 17 3 916.90 - 0,002.42 0,002.24 Total 002 §7569.55 ll , l26,2§2.0§ Sesame 465 0 7 4,045.50 - 01,516.02 01,516.02 Cotton 170 7.0 1,246.00 - 31,150.00 31,150.00 Sorghum 105 19.5 1,992.40 0,622.06 1,021.10 9,643.24 Beans 54 10 6 1,004.40 - 9 642.24 9,642.24 Total 002 07022700 1207000720 131,952.30 Sesame 459 9 0 4,131.00 - 03,239.65 03,239.65 Cotton 102 7.5 1,365.00 - 34,125.00 34,125.00 Sorghum 103 20 0 2,004.00 0,655.64 1,047.06 9,702.70 Beans 50 20 0 1,160.00 - 11,136.00 11,136.00 Total 002 07000700 129,007.01 1007200205 aU.S. dollars. bWaste of 15 per cent reduced to 3 per cent in improved grain bins after t=0. cSmall errors in additions are due to calculated values being rounded to 2 decimal places. 326 run: n.o\oo.~m .mcsvb n.o\om.sm .mnu cs cosusuvao Ca on On pwEdnme wooaum .EozcuOm u.c\o~.mm .gcspCSOu Ou 03o steppe Assam .COuuoo p .>Ho>auooamou m~.~m nosbcsooxoo.~m .mo .seemomnlempann 0c .Amuo>aup sou poo“ oocwumamnsm .ouasaoo .m.ou .ss .o..s» “muuou uuommcsuhn .o~.awucmsoaun NO umAmCOU HUWOU HOUUUHu EMMUICOCV ucwu bod mm .wucscoucsoE\muued above sea 0H .mwgez nucoo sod hm .Aoam ".0mou oneness Ca and suseauas unoo uOuueuHs mm.wmm.om Om.mow.mm Mm.mnn.m mm.mmn.m u ~H.~Ho.m mm.wam.o bmuNmm.q om.~mm nn.w@m.vv vH.oo .o Wm.mnm.m -.bm deuce mo.~uv.o vm.omm.m as.nov mo.smH - 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AA use A sOAOOusuus sou suaoo oc.uuomdse pce .ucufid.:go .Auc:0mu0a Asco.6.00e qu sauce Aeneas ususflAusm neuuadquAuom NA.U «Amdh 336 The Grain Corporation has already built a small grain storage warehouse at Humera. By offering storage facilities to local farmers the Grain Corporation is able to buy grain at a price approaching the seasonal average; by holding the grain in storage the Corporation is able to benefit from seasonal rises in market prices. The cost to the farmer for receiving a price higher than that ruling at harvest time is the fact that he only receives partial payment at the time of delivering the grain, the balance being paid when the Grain Corporation has sold the stored grain. Supervision It is estimated that two technically competent field officers (Extension Agent and Research Officer) will be necessary to each hundred farmers. Their duties will consist of disseminating information, conducting demon- strations and giving advisory help to farmers. Thus, the two field officers are responsible for the development of about 80,000 hectares of land. The adoption of a group of model farmers increases the efficiency of field officers' endeavors.l In addition to the two field officers, a financial officer will be required to handle the arrangement and servicing of loans and overdrafts. The financial officer is to be appointed to the local branch of the Development Bank of Ethiopia; his appointment will be half-time per 100 farmers. The establishment of storage facilities (to begin operation in t=3) will entail considerably more work than the two field officers can handle. Therefore, under this assumption, a marketing officer is also to be appointed. His responsibilities will be to handle the storage and subsequent marketing of grain sold to the Grain Corpo- ration. He may also develop an advisory service to assist farmers in marketing their produce, either directly or through the storage facilities. lChilalo Agricultural Development Unit, "Memo- randum: Criteria for Selection of Model Farmers" (Addis Abeba: Swedish International Development Agency, June, 1968). (Mimeographed.) 337 Equipment The required equipment is set out in Table C.12. It has been assumed that about 33 per cent of the farmers will avail themselves of storage facilities. Equipment on inventory is sufficient for this level of demand. Infrastructure In the year of observation it was apparent that road conditions and the lack of a bridge were serious handicaps to the economic development of the area.1 Both the International Bank of Reconstruction and Development and the British government have sent survey teams into the area with a View to giving financial support to road and bridge construction. It is anticipated that these in- frastructural improvements will be introduced in the near future; in the budget models transportation and handling charges have been reduced in the third operational year (t=3), assuming that the bridge will have been constructed by then. Farm (feeder) roads are also extremely inadequate but are negotiable by tractor and trailer. Since these roads are unlikely to be improved in the near future, it has been assumed in the budget model that the farmer employs EH1 extra tractor almost completely for haulage and general transportation. There is an obvious need for an agricultural experimental station in a region of such high economic potential. Recommended cultivation techniques and antici- pated crop yields should be carefully tested under actual environmental conditions. This need has already been recognized by the Ministry of Agriculture. A small experimental farm was in the process of being established during the 1967/68 season. It is anticipated that this establishment will work in close cooperation with extension programs to be developed in the area. 1Report of the Survey Mission . . ., p. 38. APPENDIX D TENDAHO PLANTATIONS CASE STUDY APPENDIX D TENDAHO PLANTATIONS CASE STUDY Introduction A system of large—scale commercial plantations contrasts sharply with the three previous case studies. The operation of the Tendaho Plantations Share Company represents a system of capital intensive single crop (cotton) farming under expatriate management, a form of development which is not uncommon in Equatorial Africa. This system employs imported technology and management intensively while using local labor extensively during the weeding and picking seasons. Tendaho Plantations Share Company (share capital in 1967/68 amounted to $2,472,000) is a joint commercial venture between agencies of the Imperial Ethiopian Govern— ment, private Ethiopian shareholders, and Mitchell Cotts and Company (Ethiopia) Limited. Total accumulated in- vestment, including long-term loans in 1967/68, amounted to $5,840,000. The plantations are located in the Danakil Desert about 580 kilometers northeast of Addis Abeba in the lower Awash Valley. The full concession of land, a rent free agreement with the Imperial Ethiopian Government sanctioned by the Emperor, amounts to 10,000 hectares which is gradually being brought into cultivation as the operation expands. The operational unit is the "farm." "Farms" vary in size as the plantations have been expanded. In reality Tendaho Plantations consist of three plantations: Dubte, Dit Bahari and Logghia. However, since all three are managed directly from one headquarters on the site, and administered from one head office in Addis Abeba, this case study treats the entire area as a single plantation enterprise. The plantations are accessible by road and air. Cotton is transported along the main route from Addis 338 339 Abeba to Aseb. The terrain of the country and the present condition of the road make a rugged haul for the cotton crop, either to Addis Abeba (altitude: 2,408 meters) for sale in the domestic market or to Aseb (altitude: 11 meters) for export. Tendaho Plantations are situated 370 meters above sea level on a deep silty clay alluvium deposited by the Awash River.1 Mean annual rainfall is 100 mm. and under natural conditions the area is a flat semi-hot desert. When irrigated the soils have proved to be extremely fertile although in the early years of operation a saline crust repressed plant growth. Continuous cultivation and irrigation have broken up this saline crust and the area is ideal for large—scale engine—powered operations. Climatic data for the area are shown in Table D.l which also includes crop operations for the cotton-growing season, May-October/November. Data for the Tendaho Plantations operations were obtained during the sixth and seventh years of actual operation (1967-1969). This budget model has been prepared as a synthesis of actual experience of the management and company accounts made available for inspection during the observation years. In this case the agricultural system is already established. The budget model seeks to present the case as the operation expands from the initiating year (t=0), when the area under cultivation was 1,100 hectares, to the full concession of 10,000 hectares in the final operational year of the budget model (t=10). As the oper- ation expands, a gradual inmrovement is assumed to take place in the efficiency of operating the field equipment which is reflected in the estimation of cultivation machinery contained in Table B.2(a). Two strategies have been considered. Strategy I is established on the assumption that the plantations produce and sell only raw cotton. Strategy II assumes that after the initiating year, the cotton is ginned to be sold as cotton lint and seed in the proportion of 36 per cent (by weight) lint and 62 per cent seed. lKline, 33 al., op. cit., Pt. 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JI .I N m.ooN.N mamINquw navqfldoqm N v ..~ one v pmo FNN v o.n vow N NNo Non n was «co N NHN Non N sNo .m@ N N «Midway ooo.o¢N.N com.NNo.N coo.NoN.N accuva.N omv.moN.H omo.moN.N oom.mao.~ .Nm.on omN.mN. mmm.sas sho.mm Hnm.nnn.a nnr.hnn.w nHm.Hhm MNv.mno mao.~nm Hmr.mmb mma.mmr vmm.wqm mNo.wNw an ”awn momumnn Noo NN pom.NN mNm.mH vNo.NH Noo.NN amv.NN mov.s~ moo.os moo.oN mvs.m va.v vNo.pNN oNo.moN omo.mHN omo.aoN aao.mNN s.s.vOH smo.mm 2N...m xmnnvv moN.oN Non.» vaa.omv ..o.oav .da.oa. .sa.oov who.mnv cao.mav who.mhv mac.ma. mac mN. omm.mmN omn.mmN Non.o.N Non.o.N Non.o.N «am.o.N NNN.hoN aNN.NoN FNN.NoN oNNm.hoN mam.oa~ poo FNN Nwo ANN lul u m . hnn.nHH . manbww www.mn www.mn mam.Hn . wqumbw wquwnw mwmqwmw wmmqwhw omn.o wmmquw ooN.v ooN.v coo.N oooHN wmmwwm NN»..N NFN..N N-.vN NAN..N aNN.m ¢N4.a odd.» oH~.m oNNum osN.m aNN.a oo~.Nn owN.Nn oe~.Nn ooN.Nn vvo.o~ vvm.oN vvm.o~ ovm.oN evo.o~ vvo.o~ NNv.oN ooh.NNN oov.oNN ooN.¢m ooo.~a oNN.Na o.v.oh o...op omm.~w can so ovo o. ooh Nn nom.o amn.wm~ choo.hh~ mmv.~ vmo.o va.ou ovw.n A x oodun newuwoasvua ue cauuduoao cu «nuance coda) Nauoa Nauos unacsaan xuocunuql a and Axuocho ucul N: naauw '0 HQCOwuwvflt ovuun cauuunaaaon an coda-uoao aw aluannu os~u> Hauofi unauadu Nauop unocuo acuNNoa a vooNNN> unocoownux ancowuauoao a awv~waa Nanak undo auNNNua Ixoauh Inga m3 nauauuzo> 343 Present Agricultural Economy The People and Their Habitat Local inhabitants are groups of nomadic Afar (Danakils) whose way of life-is linked to cattle, camels, sheep, and goats. Traditionally, women and children labor; men are concerned only with animal movements. Thus, Afar men are not easily persuaded to undertake field~work which is viewed both as woman's work and as part of the way of life for settled peoples. Some Afar men are employed as guards and watchmen. Since the Tendaho operation is not concerned with settlement, the main labor requirements are met by workers from the surrounding highlands who belong to farming families. These people are able to supplement their own incomes with cash wages earned on the plantations during cotton weeding and harvesting periods. Highlanders are able to take employment on the plantations after most of their own farm work is over for the season. In the 1967/68 season, approximately 5,600 people were employed in the fields at the height of picking (November), in addition there were 340 regular laborers and 500 more were employed in the ginnery from February-June. Management consisted of seven expatriates and thirty Ethiopians. The expatriate staff is in charge of the general direction of the plantations; Ethiopian staff manages farm operations and general management duties. Each farm has one manager, one assistant manager, a full complement of regular workers, and day labor as required. Agricultural Practices Cotton is the only crop; Acala 1517C variety has been planted throughout the plantations during recent years. Experimentation suggests that Acala 4.42 probably yields equally as well as Acala 1517C and may prove to be better yielding if the supply of water is adequate.1 The budget model has been based on an assumption of gradual expansion to 10,000 hectares over the 10 year lMelka Werer Research Station, Progress Report for the Period February 1966 to March 1968 (Addis Abeba: Institute of Agricultural Research, 1968), p. 6. 344 operational period. A full complement of SOphisticated engine-powered machinery is assumed. Simple hand tools are also necessary and have been included in the inventory of cultivation equipment and machinery shown in Table D.2(a). The quantities of these tools (shovels, spades, pickaxes, used in canal repair and maintenance and in field irrigation) have been estimated on the basis of an approximate cost per hectare under cultivation. Loose tools used in the hand cultivation operations of weeding and thinning are entered as an annual input cost. In the sixth operational year (t=6), farm staff consisted of 30 managers and assistant managers, and 340 regular workers employed over an area of 5,555 hectares divided into units of 12 farms. Since one manager and one assistant farm manager are appointed to each farm, the other 16 individuals are assumed to be members of the general management staff. The 340 regular employees consist of tractor drivers, drivers' assistants, maintenance assistants, and general laborers. The remunerations of all this group of indi- viduals is included in farm staff wages to distinguish them from the wages to field labor which is hired on a daily basis. Labor and machinery costs for the various field operations are based on data available from the company's accounts for the years 1966/67 and 1967/68. These basic assumptions, recorded in Table D.2(c), are based on a charge of $0.60 per day for hired field labor working an eight-hour day and $4.201 per tractor hour for field operations in a working day which varies between 8 and 12 hours. Production and Value of Crops Estimates for yields of 5.6 quintals per hectare in the initiating year (t=0) were taken from the practical experience of the plantations. The management realized that yields far in excess of this level can be anticipated, indeed, in excess also of the estimated yield of 16.5 quintals per hectare assumed for the seventh operational yield of the budget model. These assumed yields are recorded in Table D.2(b) along with the prices for the produce. Tendaho cotton is high quality and the management hopes to export in increasing quantities. The assumed 1Breakdown for this cost is shown in Table D.2(c). 3115 .hwwm.om u w .cwnu .oo.H u so u No n we . no . :0 cw>fiu .ooa. n m m.am u a “mum monam> pwumHsuHmo on» cam m.Nm u m» mma. u Em m.N~ n ma «ma u ux mma. u x "mum mucoumcoo cm>flm mnu mumn3 ‘5 0E umflnon Ni mImcmxI Ni NINV xI e e umonHOu mm cw>Hm mum couuoo u0u mu0u06u meOQmmu awauuma may New muoumEduma coNuQCSM :oNuospoud QONU .~.< wanna cN cm>No mum .6 New mEumu Hmcofiuoczu 029 y z > n > uwN c0uuoo new cofluocsw cofluospoua UchnEou one II II .vaomN .am .. . . moorumz mflmwamc< mEmumNm ..Hm um .umaaaz .h ammo 0mm .4 Nv.v m~mu< no“ maanNm>m numb :0 pwmmn mumefiumm UHUN> Edwaazn .mumNNoo .m.:m oo.~m oo.~m oo.mm oo.~o oo.~o oo.~w oo.~o oo.~c oo.~o oo.~m I oo.m oo.m HH 4.: comm neuuou oo.wm oo.mm oo.wm oo.om oo.om oo.om oo.mm oo.om oo.om oo.wm I vm.mn oo.oh HH 4.: uCNH neuuoo mpawfl> c0uuou 3mm new cm>Nm mUHwN> mo momucwoumm OHIv ” MIC Humor o.wH o.ma m.ma m.ma m.HH m.o~ m.m N.m N.N 0.0 w.m oo.m~ HH.H A no.0m w.h~ H.m~ N.- ~.om m.NH «.ma m.- m.oa o.m o.m oo.m~ HH.H : COuuoo 3mm HH.H mmu< IIIIIIIIIIIII IIIIIII IIIIIIIIImumuomc nod mamucflsv IIIIIII IIIIIIII IIIIIII IIIII IIIIm.U\wIII ON m a m a m N w o m m w v m N m N m H m o m m m m . . . 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Nm. mN.N mm.N mm.N mm.N mN.N mm.N mcflucmNm No.N mo.N NN.N VN.N mN.N NN.N mN.N NN.N NN.N om.N om.m ocNum>NuNsu omNo mm.N mm.N mm.N mm.N mm.N mN.N mm.N NN.N mm.N NN.N mN.N chsouumr umNa mN.¢ mN.v mN.v mN.v mN.v mN.v NN.V mN.q oN.v mN.v mN.v chcMNm oo.v No.4 vo.v mN.v NN.N NN.« om.v mo.m NN.m om.m om.m chzoNa omNa omcofiumummo Mouomue I I I I I ON.N ON.m «3.0 No.N oo.m oo.m wcflummNo No.v mN.v mm.v ao.m mN.m NN.o wo.N mm.N mo.N oo.m oo.m mcflpmmfluuH ON.V ON.v ON.V ON.V ON.V mm.o mm.o Nm.w oN.N oo.m oo.m chwmmz IIIIIIIIIIIIIIIIIIIIIIIIIII IIIImumuomn nod mmumHHooIIIIIIIIIIIIIIIIIIIIIIIIIII oo.N oo.N oa.N oo.N oo.N oo.N oo.N oo.N oo.N oo.N oo.N ochoNa QHOQMH Hmscmz IIIIIIIIIIIIIIIII IIIIIIIIIIIIIIHmuCHSU nod mmumaHOUIIIIIIIIIIIIIIIIIIIIIIIIIII oN M m M m M N M m M m M q M N W N W N M o m . coflumumdo ummx pwumoflpcfl um mumou Hmcoflumumdo Hmdccd Aoa.....ouuv Hobos ummpsn .mcofluwumdo moanome pom HmscmE MOw mumoo Hmsccm pmumeflumm .o pmscflucoo N.Q mqm<9 347 price of $70 per quintal for cotton lint is based on the world price for good quality Egyptian cotton during 1963-66 when prices appear to have been stable.1 The price assumed for raw cotton was that being realized by local cotton producers in 1967.2 Technological Improvements There is no intention in this case to change the level of mechanization. Those operations not already mechanized employ a large quantity of hand labor which would be displaced in the event of increased mechanization. Thus, technological improvement is to be sought in the opportunities for improved operational efficiency in the use of equipment, the utilization of improved cotton varieties, the development of effective pest control programs, and the use of fertilizer where appropriate. Improvements in Operational Efficiency There is clear evidence from the records of the plantations that substantial increases in operational efficiency have occurred since the establishment of the plantations. These improvements are reflected in the Operational cost data presented in Table D.2(c). Im- provements in weeding efficiency have gradually taken place as the plantations have become less weedy; the irrigation operations have been implemented with improving efficiency; hand clearing operations have been gradually eliminated. The operational efficiency in disc plowing has improved with increasing drivers' skills, improvement in land conditions, and improvements in the layout of the farms. Records show that for the period 1966—1967 an increase of 60 per cent occurred in area and for the period 1966-1968 an increase of 80 per cent occurred. There is no evidence of changing efficiency for planing and harrowing, but some small improvement in efficiency has occurred in the use of the wide-level disc harrow. Significant im- provement in planting occurs in the sixth year when six-row planters were introduced, constructed from the four row 1United Nations, Production Year Book, 1966, XX (Rome: Food and Agriculture Organization, 1967), 563. 2Carl F. Miller, 23 31., Systems Analysis Methods . . ., p. 115. 348 planters previously used. Clearing has been assumed to increase slightly in cost due in the first place to the abandonment of hand clearing and, in the second place, to the fact that in the later years of expansion a higher proportion of rougher land, requiring more clearing, is under cultivation. Yields The assumptions for cotton yields recorded in Table D.2(b) are based on data available for Acala 4.42 cotton.l Two production levels have been assumed based on high- and low-level yield possibilities. The high-level yields are based on the assumption of reaching maximum attainable yields in the tenth operational year. The lower-level of yield estimates was based on the lower projected boundary of yield fluctuations already experi- enced on the plantations. A modest fertilizer program is introduced into the model, beginning in the fourth operational year (t=4). The estimated area of medium growth soil to receive fertilizer amounted to 13 1/2 per cent of the total area under cultivation which received an ap lication of one quintal per hectare of 40:40:0 mixture costing $20.16 per quintal; this was increased annually by 1/2 per cent to reach 16 l/2 per cent in the final operational year. Crop Protection Application of insecticides is an important part of the plantations' operational routine. Aircraft are hired for the purpose. The total cost of applying in- secticides has been estimated at $37.00 per hectare. 1Carl F. Miller, 33 31., Systems Analysis Methods . . ., p. 149. 2H. M. Benedict and S. A. Cogswell, Potential Fertilizer Demand in Ethiopia, Report No. l, SRI Project IU--6350, prepared for the Technical Agency of the Imperial Ethiopian Government (Menlo Park, Calif.: Stanford Research Institute, April, 1968), p. 25. 349 Budgets Outputs and Inputs On the basis of the assumptions established in the foregoing discussion the income accounts for the budget model are presented in Table D.3. As in the previous case studies, only the accounts for high level yields are presented in each strategy. Input accounts are presented in Table D.4. In this case, the input data for high- and low-level production in strategy I are shown instead of the data to correspond directly with the output data in Table D.3. The reason is that inputs for both strategies are exactly the same except for the inclusion of the ginnery in strategy II. A summary of all the input and output accounts follows in subsequent tables. Table D.5 contains the data 'on annual crop areas and total annual physical production of cotton; Table D.6 presents a summary of annual incomes from these levels of production. Table D.7 presents an account of the distribution of labor use in field operations of the plantations. Data in Table D.8 are different from data presented in the corresponding table in other case studies. Since the other inputs of fertilizer and insecticide are only two of a' large variety of inputs, many of these are compounded in the input accounts contained in Table D.4. Therefore inputs have been analyzed and presented in terms of the basic components in Table D.8. Finally, the total costs of inputs, excluding financial charges, are summarized in Table D.9. Financial Costs Banking and loan arrangements to finance such a large operation are obviously complex. It was assumed that financial accommodation is available from commercial banks and the Development Bank of Ethiopia, and that periodic issues of share capital have been taken up. Prior to the initiating year (t=0) in the budget model there has been an issue of $900,000 worth of equity. Share capital has been increased to $1,100,000 for the third operational year (t=3), and has been increased to $2,472,000 for the fifth operational year (t=5). In the model no dividends have been declared until the third operational year (t=3) when a 6 per cent payment on equity has been made in this and the following year. 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This situation follows the actual experience of the company fairly closely except for the payment of dividends. In reality there was no payment of dividends for six years in succession from the commencement of operations, a situation which the shareholders felt was unreasonable. Share capital subscriptions are assumed to be used entirely for the purchase of items on the capital inventory. Total capital requirements (new purchases of capital equipment and replacement of depreciated equipment) have been computed annually, and the unused balance of share capital applied to this expenditure. In operational years of the budget model (t=l,...,10) the depreciation account fund was also applied to the expenditure on capital equipment. Unused balances of funds have accrued interest at 4 per cent per annum and overdrawals on available funds have been accommodated by a medium-term loan in which the amount of funds needed was amortized at 7 per cent per annum over a period of seven years. A crop loan is used annually to finance the Oper— ational costs until the sale of the annual crop at the end of the season. Interest on the crop loan has been charged on a monthly basis at the rate of 8 per cent per annum. Any residual cash balances from previous years were intended to be used as available cash for operational expenses. In fact, the budget model for the first ten years of operation shows no available cash balances to be carried forward into the next operating period. Finally, overdraft accommodation has been assumed. Any cash deficits accrued in the previous year of operation are brought forward into the current operating year as a cost to be repaid at an interest rate of 7 per cent per annum.1 The operation runs at a cash deficit for each Operational year of the budget model until the ninth year (t=9) on the high-level yield assumptions. Thus, in the tenth year the overdraft charge, the largest single charge in each year of operation, will have reached its maximum and this charge will then disappear in the following year. Financial charges and net financial costs are shown in Table D.10. lAssumed rates of interest are compatible with the policies of the Ethiopian commercial banks and the De- velopment Bank of Ethiopia. Harry J. Robinson and Ato Mammo Bahto, op, cit}, p. 187. 357 ..NONNoo .O.:¢ .O N. . 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Novas uovvsn .nuaou NoNocchu um: and nevuazo Nawocacuu Nascc< NOAGUCUB 0N.a mania Budget Summary The accounts of the budget model are summarized in Table D.ll. In this case, no additional requirements, outside the budgets, are necessary to run the operation. 359 .auwoo NuNococNu noszuxmn .nuuNNOU .m.D¢ NN.NOO.oou.NI eq.nNm.vn-.NI va.vam.Nom.NI oa.moNHONOHNI om.Nvo.NOO.NI ON.ONO.NNO.NI OO.NOo.oOm.NI NO.OOO.NNN.NI mv.oNN.va.NI ON.NNv.aOaI «Hausa uoz NN.OOO.OOO.N NN.NO0.00N.N O0.00N.NNO.N NN.OON.ONO N OO.ONO.ONN.N NO.OON.NOO.N OO.NON.NNO.N OO.NON.OOO.N ON.NON.ONO.N NN.ONN.ONO nunou .cNN uo: OOoN OO.NOO.NON.N o0.0NO.NNN.N ON.ONN.ONO NO.NOO NOO. 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OO.ONN.OON.NI NO.ONN.NNO.NI NN.NOO.OOO.NI NO.OOO.OOO.NI NO.OON.ONO.NI ON.OOO.NOO.NI NO.OON.NOO.NI OO.OOO.ONN.NI OO.NOO.ONN.NI OO.NNO.ONOI uaoocN Ooz ON.NON.NON.N NN.OON.OON.N N0.000.000.N NN.NON.NON.N NO.ONO.NOO.N OO.ONO.OOO.N OO.OOO.NNN.N NN.NON.OON.N O0.0NN.ONO ON.ON0.000 nuuoo .cNN No: OOoN OO.NNO.NNO.N OO.NNN.NOO ON.NON.NOO ON.NOO.NON OO.NOO.ONI ON.NON.ONN- NO.ONO.NONI OO.OON.NONI NO.OON.NNOI NO.ONN.NNOI Ocuauuu uez ON.NOO.NOO.N ON.NOO.ONN.N ON.NOO.ONO.N ON.OON.NNO.N OO.NNN.NOO.N ON.NNN.ONO.N NO.NO0.00N.N OO.OON.NON.N NO.OON.ONN.N NO.NON.OON nuance Nquou nOoN O0.000.000.N O0.0NO.NOO.N O0.0NO.NNO.N OO.NN0.000.N OO.ONN.OOO.N OO.NO0.00N.N OO.NNN.ONO.N O0.000.000 O0.000.00N OO.NO0.0NN uloocN nacho mon M Nm>oNI304 noNIN ammo» N mmwuouuw O0.0NN.NON OO.NOO.NNNI OO.NNO.ONOI ON.NON.ONOI ON.OOO.NON.NI NO.OON.OON.NI ON.ONO.NON.NI NO.NNO.OOO.NI OO.ONN.ONN.NI OO.OON.NNOI OO.NNO.OOOI uaouaN uoz NN.OON.OOO.N NN.ONO.OOO.N ON.NNN.OON.N O0.000.0NN.N O0.00N.NNO.N NO.OOO.NNN.N O0.000.000.N O0.0N0.0NO.N NO.OOO.NNO N0.000.000 O0.000.NO ounce .aNO No: OnoN O0.0NO.NOO.N NN.NOO.ONO.N OO.OOO.NOO.N ON.OO0.00N.N OO.NON.OOOI OO.ONO.OOOI OO.NOO.ONNI NN.OON.ONI NO.OOO.OONI OO.NOO.NONI OO.NNO.NONI acuzuou No: ON.OOO.NON.N NN.ONO.OOO.N ON.ONN.OOO.N ON.NO0.000.N NO.NON.ONN.N ON.NON.OOO.N NN.NOO.NON.N NN.OOO.OON.N NO.OON.NON.N OO.NOO.NON OO.NO0.0NO nauuou Nau0u OOoN oo.ooo.ooo.o oo.oOO.NN0.0 O0.0N0.0N0.0 OO.NN0.000.N O0.0N0.0NO.N OO.NON.OOO.N OO.OOO.NNO.N OO.OOO.OON.N O0.000.000 O0.00N.OON O0.000.NON «noucN «coho nvNoNNINu>oNI:MO: uoNIN annoy N Naouuuum IOIIIII IIIIIIIIIIIIOIIIUIIIIIIIIIIIIII IIIIIIIIIIIIIIIIIIQHNQN NOUIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIOU ON m N O H N H O H O H O H N m N m N W O m Nao> UONQUNUCN an >O1££3m ucaouou Nescc< AOAOan-OOUUV MUSOUU' Hove “vnvan No rim “Ofivcg Hdoa “4:“ APPENDIX E INTERVIEW SCHEDULE 10. ll. 12. APPENDIX E INTERVIEW SCHEDULE Account of Current Practices on Individual Farms Farmer (name, location, size of family, number of dependents, level of education). Soil (type, condition, general topography). Climate (rainfall, temperature, sunshine, humidity, evaporation). Indigenous plants. Tenure arrangements. Land use (total area, crop distribution). Crop enterprises (crops, crop year, inventories, yields, sales, consumption, sequence of operations, labor utilization fertilization, pest control, seeds). Livestock enterprises (animals, inventories, pro- duction, purchases, sales, family consumption, death, labor utilization, other products, feeding). Labor (family, hired, unpaid). Power and transport (hand, oxen, tractors, trucks, mules, donkeys, inventories, purchases, sales, deaths, tractor hire use, fuel requirements). Machinery, implements, equipment (hand tools, animal/ tractor tools and equipment, inventories, purchases, sales, depreciation, owned, hired). Buildings (home and farm, storage bins). 360 l3. 14. 15. 16. 361 Taxation expenses. Additional funds (fuel refunds, other employment, loans). Market (distance, mode of travel, frequency of visits, items bought and sold). Miscellaneous (fencing and drainage work, holidays observed, household expenditures). APPENDIX F SELECTED DATA FROM BENEFIT-COST ANALYSES 362 TABLE lhl Data required for evaluation of benefit-coat criteria from budget data (t-0,...,10) high production level using 10 per cent diacount rate by caee, Ethiopia Co-puted data required for evaluation of NPV, IRR. B/C. NPV/K I :Additional data for evaluation of NPV/TH, NPV/Tws Year Total rev-' Sue fCapital : Operating ’ Sumb ‘ c : Salaryd : Otherd : Salary and f Otherd ;enue (TR) PVTR‘ ;coet (K) : coate (O) ' PVTC ’ NPV : coata (TH); coete aupport (Tws) : coata - dollaraa ----------------------------------- dollarae ---------------- dollarae ----------- a. Anale Village (run 1) 0 4,497 4.497 118 2.862 2.980 1,517 - 2.980 - 2,980 1 4,606 8,684 2,707 3,081 8,314 370 300 5,568 753 5,115 2 4.698 12.567 1.445 2.749 11.945 621 310 4,084 461 3,933 3 4,822 16,190 1,902 2,469 15,230 960 320 4,051 470 3,901 4 8.794 22.196 335 4,194 18,323 3,873 330 4,199 784 3,745 5 12,325 29,849 18 4,282 20,993 8,856 340 3,960 491 3,809 6 15,459 38,575 80 3,999 23,296 15,280 340 3,739 490 3,589 7 18,384 48,009 387 4,006 25,550 22,459 350 4,043 803 3,590 8 20,950 57,782 142 4.038 27,500 30.282 350 3.830 501 3.679 9 23,354 67,687 66 4,113 29,272 38,415 360 3.819 510 3,669 10 25,560 77,541 325 4,209 31,020 46,521 360 4,174 813 3 721 criteria evaluation NPV 46,521 NPV/Y“ 22.897 NPV/THS 12.54 1R8 ’ 400 B/C 2.50 NPV/K 7.57 b. Agnale Village (run 2) O - - 118 - 118 118 - 118 - 118 1 109 99 2,787 219f 2,850 -2,752 300 2,706 753 2,253 2 201 265 1.645 -113 4,116 -3,851 310 1.222 461 1.071 3 325 509 1.902 -393 5,250 -4,741 _320 1,189 470 1,039 4 4,297 3,444 335 1,332 6,389 '2,945 330 1,337 784 883 5 7.828 8,305 18 1,420 7,232 1,023 340 1,098 491 947 6 10.962 14,493 80 1,137 7.969 6.524 340 877 490 727 7 13,887 21,619 387 1,144 8,754 12,865 350 1,181 803 728 8 16.453 29,294 142 1.176 9,369 19,925 350 968 501 817 9 18.857 37.292 66 1.251 9.927 27,364 360 957 510 807 10 21,063 45,412 325 1.347 10,572 34,840 360 1,312 813 859 Criteria evaluation NPV 38,840 NPV/Tw 17.14 NPV/T 9.39 IRR 0.611 "5 B/C 4.30 NPV/K 5.67 c. Chilalo Awraja: Strategy 1 (run 1) 0 330 330 558 270 828 -498 - 828 - 828 1 536 817 35 460 1,277 -460 41 453 75 419 2 779 1,462 9 608 1,787 -326 43 574 56 561 3 992 2.206 9 729 2,341 -135 44 694 58 680 4 1.132 2,980 26 798 2.904 76 45 779 80 744 5 1,271 3,769 - 872 3.446 323 47 825 61 811 6 1,344 4.527 133 911 4,035 492 47 997 60 984 7 1,418 5,255 45 954 4,548 707 48 951 83 916 8 1,477 5,944 330 986 5,162 782 48 1.269 62 1.255 9 1,560 6,606 5 1.033 5.603 1.003 49 989 64 974 10 1,634 7,236 21 1,073 6,025 41,211 50 1,044 84 1,010 Criteria evaIuation NPV I,211’ NPV/T 4.33 NPV/T ‘2.92 ma 0. 397 ”5 B/C 1.20 NPV/K 1.37 d. Chilalo Aggnjgx Strategy 11 (run 1) O 330 330 100 270 370 -40 s 370 - 370 1 576 853 703 648 1,598 -745 142 1.209 263 1,088 2 033 1,542 32 784 2,273 -731 149 667 197 619 3 1,147 2,403 32 948 3,009 -606 154 826 203 777 4 1,311 3,299 92 1.015 3.766 -467 158 949 279 828 5 1,474 4,214 16 1,090 4,452 -238 163 943 212 894 6 1,554 5,092 463 1,128 5,350 -259 163 1.428 211 1.380 7 1,633 5,930 109 1.171 6.007 -77 168 1.112 290 990 8 1,695 6,720 3 1,201 6,569 152 168 1.036 216 988 9 1,787 7,478 16 1,245 7,103 375 173 1.088 222 1,039 10 1,868 8,198 73 1,248 7,631 586 173 1,148 294 1,027 Criteria evaluation “PV' 586 NPV/T 0.60 NPV/T 0.40 :33 0.219 " "5 l/C 1.08 NPV/R 0.48 e. Chilalo ggraja: Strategy 1 (run 2) 0 213 213 558 174 732 -519 - 732 - 732 1 419 594 35 363 1.094 -500 41 357 75 323 2 662 1,141 9 512 1.525 -384 43 478 56 465 3 875 1,798 9 633 2,007 -208 44 598 58 584 4 1,015 2,492 26 702 2.504 -12 45 683 80 648 5 1,154 3,208 - 776 2,986 222 47 729 61 715 6 1,227 3,901 133 815 3,522 380 47 901 60 888 7 1,301 4,568 45 858 3,985 584 48 855 83 820 8 1.360 5,203 330 890 4.554 649 48 1.172 62 1,158 9 1.443 5.815 5 937 4.954 861 49 893 64 878 10 1,517 6 400 21 977 5,339 1,061 50 948 84 914 Criteria evaluation NPV 1,061 , NPV/T ”43.50 NPV/T 2553' run 0.353 "5 l/C 1.20 NPV/8 1.20 363 Computed data required for evaluation of NPV, 1R8, 8/C, NPV/K :Additional data for evaluation of NPV/TH, NPV/Tws Year {Tota1 rev-f Sum fCapitai Operating Sumb c Salaryd : Otherd Salary and Otherd :enue (TR) PVTR‘ ;coat (K) coate (O) PVTC NPV coata (Tw); coata support (Tug) coat. --------------------------------- dol1ara°--—---------°---------------- ------dollara°------- ---------dol1ara°----------- f. Chilalo Awraja: Strategy 11 (run 2) 0 213 213 100 174 274 -61 - 274 - 274 l 459 630 703 552 1,415 -785 142 1,113 263 992 2 716 1,222 32 688 2,010 -788 149 571 197 523 3 1,030 1,996 32 852 2,675 -679 154 730 203 681 4 1.194 2,811 92 919 3,365 -554 158 853 279 732 5 1,357 3.654 16 994 3,992 -338 163 847 212 798 6 1,437 4,465 463 1,032 4.836 -371 163 1,332 211 1.284 7 1,516 5,243 109 1.075 5,444 -200 168 1,016 290 894 8 1,578 5.979 3 1,105 5.960 19 168 940 216 892 9 1,670 6,687 16 1,149 6.455 233 173 992 222 943 10 1,750 7,362 73 1,152 6,927 435 173 1,052 294 931 criteria eva1uation NPV 635 NPV7TH 0.45 NPV’THS 0l30 IRR 0.184 B/C 1.06 NPV/K 0.36 g, Setit-Humera: Strategy 1 0 69.197 69.197 21.898 69.391 91.289 —22.092 - 91,229 - 91.289 1 82,764 144,437 225 81.354 165,452 —21,014 90 81,489 158 81.421 2 90,514 219,242 20 83,206 234,233 -14,991 93 83,133 125 83,101 3 96,466 291,718 17 81.196 295.249 - 3,531 96 81.117 128 81,085 4 102,661 361,837 3,043 82,413 353,617 - 8,220 99 85,357 168 85,288 5 108,242 429,047 12,603 78.956 410.468 18.579 102 91.457 134 91.425 6 114,280 493,555 4 80,326 455,812 37,743 102 80,228 134 80,196 7 120,017 555,143 39 81.451 497,629 57,513 105 81.385 173 81,317 8 126,292 614,059 3.004 82.648 537,587 76,472 105 85,547 137 85,515 9 131,952 670,020 4 83,622 573,052 96,967 108 83.518 140 83,486 10 138,203 723,303 17,635 84,619 612,475 110,827 108 102,146 177 102,077 Criteria eva1uation NPV 110,827 NPV/‘1‘w 181.79 NPV/Tws 123T55 IRR 0.15 B/C 1.18 NPV/K 2.75 h. Setit-Humera: Strategy 11 0 69,197 69,197 37.536 69.391 106.927 -37.730 - 106.927 - 106,927 1 82.823 144.491 36 69,960 107,559 -26,068 90 69,906 158 69,838 2 91,346 219,983 21 72,772 230,718 -10,735 93 72,699 125 72,667 3 98,196 293.759 873 70.766 284.541 9.218 96 71,543 128 71.511 4 104,420 365.080 3.063 71,922 335,757 29,323 99 74,886 168 74,817 5 110,028 433,398 12,623 68.721 386.265 47.133 102 81.242 134 81.210 6 116,149 498,961 44 69,832 425,708 73,253 102 69,774 134 69,742 7 121,917 561,524 58 70,893 462,117 99,407 105 70.846 173 70,778 8 127,940 621,209 3,026 71,873 497,058 124,151 105 74,794 137 74,762 9 133,643 677,887 - 72,641 527,865 150,022 108 72,533 140 72,501 10 140,118 731,908 33,193 73,428 568,972 162,936 108 106,513 177 106,444 Criteria eva1uation NPV 162.936 NPV7TW 267.27 NPV/Tws 181.65 IRR 0.579 B/C 1.29 NPV/K 2.61 i. Tendaho Plantations: Strategy 1 0 141,680 141,680 843,384 447,702 1,291,086 —1,149,406 89,194 1,201,892 154,603 1,136,483 1 398,360 503,825 171,099 660,422 2,047,014 -1,543,189 ‘ 104,504 727,017 140,504 691,017 2 966,000 1,302,173 819,112 1,019,184 3,566,267 -2,264,095 122,432 1.715.864 258,512 1,579,784 3 1,186,800 2,193,833 481,567 1,060,049 4,724,506 -2,530,673 130,973 1,410,643 232,664 1,308,952 4 1.627.549 3,305,471 390,852 1,228,232 5,830,362 -2,524.891 143,868 1,475,216 222,750 1,396,334 5 2,059,282 4,584,123 254,645 1,417,744 6,868,784 -2,284.661 159,702 1,512,687 239,542 1,432,847 6 2,578,530 6,039,636 220.847 1,542,363 7,864,070 -1,824,434 174,917 1,588,293 279,928 1,483,282 7 3,458,924 7.814.611 730,314 1,845,591 9,103,811 -1,289,201 192,160 2,223,745 294,576 2,121,329 8 4,474,075 9,901,800 490,957 2,176,473 10,348,187 -446,387 208,161 2,459,269 295,401 2,372,029 9 5,633,850 12,291,102 495,774 2,556,187 11,642,517 648,586 226,868 2,825,093 353,399 2.698.562 10 6,900,000 14,951,351 833,459 2,935,311 13,097,468 1,853,883 245,037 3,528,733 368,355 3,405,415 Criteria evaiuation 88V 1,853,883 NPV/'1‘w 1.74 NPV/Tws 1.08 IRR 0.187 B/C 1.14 NPV/K 0.51 ]. Tendaho Plgptationa: Strategy 11 0 141,680 141,680 843,384 447,703 1,291,086 -1.149,406 89,194 1,201,893 154,603 1,136,484 1 523,015 617,148 440,777 712,725 2,339,725 -1,722.577 113.290 1,040,212 149,290 1,004,212 2 1,268,282 1,665,315 819,112 1,146,015 3,963,797 -2,298,482 143,738 1,821,389 279,818 1,685,309 3 1,558,176 2,835,996 481,567 1,215,869 5,239,106 -2.403,110 157,149 1,540,287 258,840 1,438,596 4 2,201,550 4,339,684 390,852 1,445,066 6,493,063 -2,153.378 179,767 1,656,151 258,649 1,577,269 5 2,785,546 6,069,289 254,645 1,661,488 7,682,830 -1.613.541 205,123 1.711.010 284.918 1.631.215 6 3,487,921 8,038,129 220,847 1,885,893 8,872,030 -833,901 231,791 1,874,949 336,802 1,769,938 7 4,678,796 10,439,092 570.314 2.306.412 10,348,246 90.846 268,452 2,608,274 370,868 2,505,858 8 6,051,984 13,262,387 490,957 2,771,541 11,870,225 1,392,162 306,844 2,955,654 394,084 2,868,414 9 7,620,786 16,494,344 495,774 3,306,768 13,482,874 3,011,470 351,131 3,451,411 477,662 3,324,880 10 9,333,480 20,092,804 838,459 3,854,578 15,292,243 4,800,562 397,227 4,295,810 520,545 4,172,492 Criteria eva1uation NPV 4,800[562 NPV/TH 3.45 NPV/T 2.367 IRR 0.287 "5 B/C 1.31 NPV/K 1.23 9 t Tat b ' (Ot+Kt)‘ Sun Preeent Value Total Revenue - I ’-__—T" Sum Preaent Value Total Costa - . t-o (l+i) (141) cNet Preeent Value ( - Sum PVTR - Sum PVTC). d(Salary coete + other coata) I K401 thua, for NPV/TN and NPV/Tug, Sun PVTC haa aame value aa aum PVTC for evaluation of NPV, IRR, B/C, and NPV/l. .Dollar valuea for theae analyaea are U.S. dollara. 1 Small errora in addition due to rounding to neareat digit. 9Negative operating coata due to economiea in inpute which reduce operating coata production which haa been deducted in run 2 below level required for aubeiatence APPENDIX G RESULTS FROM SENSITIVITY ANALYSES .3ES4 E0uu cousaeou eHuouHuo unooluHuwcun cw mwocunu 0>HueH0u .muonuunB UOOH ' ‘ "0:00:09 “H0. 8 < "muwfidmluHuwm “mo. 1 d "onHch “no. 4 uoHocvd on» :0 and on Afluvm + t I m coHuocsu onuQ 0:» CHO c new mmsHm> ocH3oHH0m 02» Cu mcHUuouom Omumanvo 0003 oHneu mqu CH eumc .uoan 000 ouHua ucmumuuHo e m>oHQEQ 0000 £00m .- 0HQMB :H c3026 mHmen 0>Humuuaeoo w .mm 0Hnoa cH 030nm anen 0>Humunmeou may :0 you ou mm x an poumamne 0003 mHnmu chu CH eumo EOuu 00050800 eHumuHuu amounuHuwcon cH amwcenu 0>HueHvu .UHOuvuoca .mm a a .Huvm + < u m coHuocou wuHud 0:» cH ..H wwwumuumv 0:00:09 no 0000 ch .Eaccm M00 ucmu nod m.H mH unduso :H 000000 ocwuu ochewuucH con» .mHo. n m can .0.H I 4 00:3 .Huvm + < n 0 "5600000 ozu oucH voyeuoauoocH coHuucou onum >0 vmcHeuno uumuuo 600090 .ucoo nod 0m >0 nmmemuucH ucmsstvw omquQEH Ho umou zqu omuoaeoomu mmm>Heu3 quUIunucmmu .ucmu ~00 00 xn qucH no .usauso vouomem momemuocH Hauoeu oHeumo .mumHHou .m.u mum nwmmeco mumnu :H nmoHe> ueHHov HH.0 >0.H 00.0 mH.H 0.0m h 000.H HH ~0.~1 m0.vu m~.H1 m0.0 0v 0HA HMH.H| ~0.m 00.m 00.H 0m.H ~.~v v nmm.H H oHoHch mv.m 00.0 m~.m 00.H v.0m h Hm~.0~ 00.0H m0.0H 0m.0 05.0 0.00 m -0.mm 0Heco< 0mH0.um ununde HondH CH vcwuu mcmewuucH .0 va0.nm nuomuso cH ocmuu mchmouucH .m mo.~ mo.m m0.H 0~.H 0.o~ m 0N0.~00.v 00.H me.” Nm.0 -.H n.m~ 0 Hn0.vvh.~ HH ~0.0 Nm.H 0m.0 HH.H 0.5H o 0mm.va.H mv.0 mn.0 0~.0 00.H n.0H 0 0~H.0~0 H 0:60:09 o~.~0H vm.mm~ n~.~ >~.H ~.~m m mmo.mMH m~.~0H v0.0mw m~.~ m~.H m.pm m HMH.0HH 0006:: hh.00H 00.00H Hm.~ nH.H 0.00 v Nom.~0 nn.00H 00.00H Hm.~ mH.H 0.Hm v 000.55 H tuHumm ~H.0 m~.0 nH.0 n0.H v.vH m HHN NH.0 0H.0 HH.0 m0.H «.mH 0 mvH HH ~m.~ ms.m 0H.H 0~.H 0.0m m Hvo.H 00.~ mo.m hm.0 0H.H m.mm m >00 H oHuHHnu 0H.m mn.0H mm.m v~.v n.00 m www.mm 50.5 nv.vH m~.v 00.m H.Ho 0 vv0.m~ mHmco< 000~ n wumu umcenoxm :mHuu0H cH unawuucH .0 mH.uH "mumu ucnoomHv CH amewuocH .m H0.~ vo.~ m0.H 0~.H 0.0w 0 vmv.H00.v 0n.0 0m.0 ~0.o 0n.m em.H o.~m m v00.nmm.~H HH 00.0 n0.H Hm.0 00.H v.mH m svn.vVH.H 00.0 mm.v mm.n mH.~ 00.H 0.00 0 mmv.vm0.h H 0:60:09 0m.mmH mh.0h 05.0 s0.H ~.H~ w 500.00 00.0 no.00m 0v.nvn 0m.h 00.H 00vA H 005.mmv HH amass: ~H.mm3 -.mvn 00.04 00.0 H.~ 0H. men.0~ mm.0 0H.0ov nm.0m0 v0.0 m0.H 00¢A Hv 00H.000 H IuHuwm 00.0 00.0 50.0 H0.H m.HH 0H Hm v0.0 nm.~ nv.m mn.~ me.H «.mm m 00m.m HH ~H.H 00.H ~m.0 00.H ~.H~ n 000 v0.0 ~>.0 00.~H 0H.v 00.H 0.00 N H~0.m H onHch vn.n nH.vH 00.0 ~h.~ 0.~v 0 Hmn.m~ v~.0 m~.0H 00.0w m0.0 H0.0 n.m> m m00.mm oHeco< eov.H u 000060 wHeow nuade noneH cH unmouocH .m nov.H 0 000000 oHoum "0030000 H0000 cH omemuocH .H 11-11111110Hueu uuHHoonnutnu a u80> emumHHop -uuucnn-coaunu uwHHom 111111 a a uew> omumHHOo mze\>mz" 30x>mzu x\>az" o\m " mxH " mm " >62 "06 “mmwuwum30\>azu xux>aznx\>azu o\m " mmH " ma 1 >02 ">mwuouum" ammo m m m m m H m 28% H m m H H H m m AudacH noneH use .usauso "CH mucouu ocHueouocH “moon ucdoomHo .uoch noan .0020000 H6000 "cH memomuucHunmmocecu uou¢£eucdv momoo ceHdonum 0000 Ho mouxHece umOUnuHuocon cH muoumsmued owuoonm me cH moocmcu c0>Ho uou nousoeoo oHumuHuo 00:06000000 HmHucech H.v mqm