Value chain governance in the eucalyptus value chain in Mecha district, Amhara region, Ethiopia

Eucalyptus growing by smallholders for financial income has rapidly expanded in the district of Mecha, Amhara region, Ethiopia. Nevertheless, a lack of market knowledge on final consumer markets is limiting the income that smallholders receive for their eucalyptus poles. This study aims to uncover the barriers to market knowledge transfer hindering smallholders from receiving higher incomes for their products by analyzing the vertical coordination of actors in the value chain. The qualitative study was based on the Global Value Chain framework, which uses the theory of chain governance to explain the vertical coordination amongst actors. For the study, 18 semi-structured interviews (5 smallholders, 6 traders, 3 service providers, 2 experts, 2 regulators) were conducted with individuals and groups representing a total of 21 individuals. The interviews were transcribed and edited for theory-driven thematic analysis. The coordination between smallholders and traders falls closest to the market governance type meaning that transactions are based on price and product specification. The increased demand for high-quality eucalyptus poles in Bahir Dar reflected by high prices is not communicated through the chain to the producers. This lack of knowledge on the price variation for different pole qualities, together with unclear local pole classification system, leads to the possibility for traders to exploit smallholder tree growers to gain higher rent. Linking woodlot valuation to the market demand in Bahir Dar, increasing smallholders’ knowledge on the price variation for different qualities of poles, and improving the local pole classification system to include pole quality could enable tree growers in Mecha district to achieve higher financial benefits from their participation in the eucalyptus pole value chain