Outside the blue hut is a plaque with a beautifully calligraphed set of rules and regulations – athletes must train hard, respect each other, work as a team and honour their homeland. At the top of the plaque three flags have pride of place: Ethiopia, the local region of Oromia and the Olympics. This is the office of Sentayehu Eshetu, known to everybody as Coach. To be honest, it's more run-down garden shed than office. Inside, it is dark and dusty, but the late afternoon sun lights up a series of photographs of athletes on the wall. All have won at least one gold medal at middle- or long-distance running. Amazingly, six of the champions originate from this tiny town of Bekoji, and have been coached by Coach.

If Sentayehu Eshetu is not the world's greatest coach, he is surely the greatest discoverer of running talent. In London this summer, two of the 54-year-old's most successful former prodigies, Kenenisa Bekele and Tirunesh Dibaba, will defend Olympic golds at 5,000m and 10,000m. Then there's his first champion, Derartu Tulu, who won the Olympic 10,000m in Barcelona in 1992 and eight years later in Sydney, and Fatuma Roba, who won the Olympic marathon in 1996 in Atlanta; and the latest generation of champions – Tirunesh's sister Genzebe, only 21 and already world indoor champion at 1500m, and Kenenisa's younger brother Tariku who won the 3000m gold at the World Indoor Championships.

Coach is a small man with a big smile. He talks quietly and is not one for hyperbole. When I suggest he has a magical touch, he looks alarmed. "No! No magic," he says intensely. "I don't do any magic. It's the weather and the fact that everything is helping them." He must have something special? "They listen well and work hard. And eat well. You know barley? They eat barley." He grins and says I should eat more barley.

Bekoji is 170 miles south of the capital, Addis Ababa. There are plenty of donkeys and horses and goats and cows on the road, but few cars. Coach says around 17,000 people live in the town of Bekoji; there are 25 car owners and he knows all of them. The landscape looks arid but is incredibly fertile. Everything grows here – oil seeds, coffee, tea, spices, sugar cane, cotton, cereals. The centre of Bekoji sits 10,500 feet above sea level and has an average temperature of 66 degrees. Its inhabitants are proud of its climate and special air. On arriving, I find it hard to breathe, but when I do manage to gulp some in, I quickly realise how crisp and pure it is. If you can run here, they say, you can run anywhere.

We head off across the red ochre soil, which blows up yet another mini dust storm, past the corrugated shacks and rubble and randomly parked lorries, and head for Bekoji stadium. It's not as grand as it sounds. There is one primitive stand, a grassy bank for people to sit on and a straggly football pitch in the middle. This is where Coach takes his youngsters, between the ages of 12 and 20, through their paces five times a week.

There must be more to your success than feeding the runners barley, I say to Coach. "I give full attention to my team and I'm always on time, and I will do anything it takes to make them a champion. I tell them what they should do, and if they follow that, they run very well." Coach never ran himself. His sport was football. He taught PE and played in central defence. These days he hobbles more than runs. He shows me the knackered knee that did for his football ambitions.

Until now, the rest of the world has remained oblivious to Coach's achievements, but for the past four years a documentary film crew has recorded in Bekoji and has produced a lovely film called Town Of Runners. It's no exaggeration – any day at sunrise you will see groups of teenagers or adults running up the hill. Most will be on their way to the two-hour daily training session with Coach. Within an hour the sky goes from red to white to perfect blue. By 8am, the sun is burning through in the 80s.

Coach is thinking about why so many great runners come from here – determination, physical strength from working the land, huge lungs, role models, perfect body shape. (Many of the most successful distance runners have been small, light and immensely strong, with a superhuman capacity to endure – the biopic of Ethiopia's most famous runner, Haile Gebrselassie, who comes from down the road in Asella, is called Endurance.) Running is a means of escape and transcendence in Ethiopia – Coach's best runners will go to "finishing school" in Addis Ababa and that is just the start of their journey. Every day, Coach says, parents will ask him to train their children. "Kids want to run to make their parents happy, and the parents want them to run so they don't have to work the land. They say, come and take my son or daughter."

It must be heartbreaking telling them that they are not going to make it, I say. He shakes his head. If they have any natural ability, he insists, you can never write them off. Athletes come through unexpectedly – and fail unexpectedly. He tells me about Zegeue Shifarawu Abebe, the young man who takes training with him. "He used to train with Kenenisa, and we thought he was the better runner; that he was the one who was going to win Olympic medals." For whatever reason, Zegeue never made it, and now he's out every morning coaching tomorrow's champions.

At the Bekoji stadium, the kids are gathering on the grass banks. It's 7am, but no one's yawning – perhaps its something in the air. Alemi Tsegaye is one of the girls featured in Town Of Runners. She and her friend Hawii Megersa were two of the most promising local athletes when the film-makers started shooting. But they may not be quite good enough. In the early days, Hawii tended to win the races and Alemi would finish runner-up. She said it made her just as happy to finish second to Hawii as if she had won. In the film, we see both girls graduate to "running camp" – they leave home for a promised land of concentrated training, healthy food, a small wage and school. But it didn't work out that way. The camps, or clubs, were well intentioned but badly run by regional government, and the girls felt neglected; Alemi returned home disappointed and Hawii returned distraught, suffering what appeared to be a breakdown.

Since then, Hawii has gone off to another camp where she is said to be happier, and Alemi is between camps. Today, back at training and now 18, she is glad to be with her friends.

Like many Ethiopians, Alemi is reserved. I ask questions through a translator and she stares straight ahead when answering, nodding her head from side to side, avoiding eye contact. "I wanted to go to school, but it is very far from the camp. They keep promising we can go to school, but there's not enough money and it never happens."

There was another problem at camp – the food. All they were fed was injera, the Ethiopian yeast-risen bread that is rich in iron but tends to bloat the stomach. "Injera, injera, injera," she says. "Not enough milk and honey."

We talk about the freakishly high number of great runners from Bekoji. She mentions the special air, of course, and points to the landscape. "We can run on the flat and in the hills. So we can train for all conditions." Then she points to Coach, looks at me for the first time and smiles. "Good coach." What makes him so special? "He's like a parent. You can ask him anything."

Why does she want to become a champion? "For my country and for my family." It's the answer they all give. "If I can't make a living as a runner, I want to be doctor." Is that realistic? Well, she says, her family farm wheat and maize, and are relatively wealthy for this area, so yes. "It was possible, but I've fallen behind in my learning. Most of the children who go to the running camps fall behind."

Later that day I meet Frehiwot Sisay, a friend of Hawii's who was at camp with her. She tells me how awful it was there. She tells me how awful it was there. "Out of 55 of us, 53 left." Runners leave for a variety of reasons – they are not good enough to make the required times, they are unhappy or homesick. "They fed us for only three days. The other four days we had to provide for ourselves. We had to sleep on the floor. The two girls who were left weren't even good runners. They were in their late 20s, too old to go home."

Coach blows his whistle to start training. All 200 run round the 400m track. It's easy – barely a trot. Then Coach whistles and they speed up. Within seconds they are half a track away from me – their strides massive, elegant, easy. One time round the track and my chest tightens, my lungs burn, my head hurts and I feel sick. The special air, no doubt.

Coach takes us through our paces for the next two hours. The emphasis is on stretching and loosening, and he refers to the routines as gymnastics. There are so many different exercises – running on the front of your toes, on the back of your heels, bending low and scattering imaginary crops, skipping with an invisible rope, duck-walking, goose-stepping, horse-cantering. "Up, up, up," Coach says, as the athletes lift their legs ever higher. In the distance cocks crow and dogs howl, but otherwise the silence in the Great Rift Valley is overwhelming. Occasionally it's broken by "Up, up, up up" and the drum of feet beating the soil in perfect time.

It's beautiful here – red soil, blue sky, green savannah, mountains in the distance and the smell of eucalyptus everywhere. "It's the best," Biruk Fikadu says. Both his parents died in their 30s and he has lived with his grandmother ever since. "It is very beautiful here, but it is also boring. It is a happy place, but there is no money. You have to go to Addis to make money."

Before long the going gets too tough for me and I drop out. I'm not the only one who's exhausted. Coach tells me that after training most of the children fall asleep in the afternoon and miss school. Few runners manage to combine training and education. As a former teacher, Coach has mixed feelings about this – yes, of course, he'd rather they studied, especially now that all children can go to government-funded local schools, but if running is their passion, it's pointless trying to deny them.

Ephren Dejenne, 17, has been training with Coach for three years. He is running 400m and 800m, and hopes to work his way up to 1500m. He's not yet graduated to club level, but Coach says Ephren is one of his most promising runners. He has a tattoo on his upper arm, drawn in pen. "It says 'I am' – it is a statement about me, about believing in myself."

His trainers are falling apart, but he says there is plenty of life left in them. He will sew and resew them, and when the sole goes, he will buy a newer sole and glue it on. Like most of the youngsters here, he will have saved up for between six months and a year for his pair of secondhand trainers. But these are far from the poorest people in Bekoji. To own any kind of trainers, you are likely to belong to the middle class – owning a few dozen cows or goats. Ephren's father is a chauffeur and his mother has a butter business. Like everybody here today, he says he will succeed and go on to run in the Olympics. "If I win, I will buy a house for my mum."

Some of the locals live in very nice houses – three or four rooms, made of bricks, lots of land – but many still live in one-room shacks made from mud. Next door to the newish Hotel Wabe where I am staying for £7 a night is a row of run-down shacks. In one, three children live in one dark room with a sleepy cow and a goat. The shacks are government-owned and cost around 12 birr a week to rent – just under 50p. Farther along the road, a woman is cooking injera on a fire. The only possession the family seems to have is a TV and a huge satellite dish that dominates the backyard.

Back at the hotel, an official from the regional tourist board stops to chat. Sinkeneh Tilahun says he can't stand the way Ethiopia is perceived by the rest of the world. "What is Ethiopia labelled?" he demands. "We're labelled famine country. Greece is a country dependent on aid, but would you call it a dependent country? Yes, we still have drought sometimes, but this is a land of plenty. Now the area is completely developed, and lots of it's been done without aid – like the massive dam on the Nile." He has a point. Over the past three years a road linking Bekoji to Addis has been built by the Chinese. But the fact remains that, for all Ethiopia's wealth, 39% of the population lives below the international poverty line of $1.25 a day, and in 2011 the country ranked 174 of 187 countries in the Human Development Index.

Sinkeneh thinks Ethiopia has produced such great distance runners because kids here always had to run to get to school. "I was lucky I only had to run half an hour a day. Gebrselassie had to run six miles to school. Maybe our runners won't be so good now they don't have to run great distances to school."

After training the next day, we head off in a Land Rover to see Derartu Tulu's house, at the end of a long mud track. Derartu now owns a hotel in Asella and lives in Addis, but she often returns to Bekoji and has provided well for her family. Her mother, an orthodox Christian (the second religion in Bekoji is Islam), has gone to church to fast for three days. A woman stands outside the gates and says we cannot enter. She has a severe, handsome face and holds herself with immense dignity. It turns out she is Tejetu, Derartu's aunt. She soon relents and lets us in. "Derartu used to practise on the field here every day. She used to help her mum and do training every day. She cooked and cleaned. When she was five or six we knew she was unusual." In what way? "She was a very strong, powerful girl."

Tejetu is joined by an older woman who balances herself on a stick and has an expressive singsong voice. Habersha is Derartu's stepmother (her father's first wife) and helped bring her up. "Her mother was not happy she was running, but she helped her all the same," Habersha says. "She was afraid she might go away and she'd lose her. She didn't want her to leave home."

Did they have any idea she'd become an Olympic champion? "No, we never knew," Habersha says. "The first time she ran a race, she was given a dress for winning and she hid it so her mum wouldn't know. She showed it to me. The second time she ran, she brought home a glass trophy. She showed that to her mum, and her parents allowed her to run after that."

Did they watch her winning her first Olympic gold? "No, we listened on the radio. About 60-70 people came round. We were dancing. Her father was alive at the time. We were all so happy."

After the Olympics, Derartu went on to win a great deal of prize money (in 2009, aged 37, she won the New York marathon in her comeback race – a prize of $130,000) and was given land by the Ethiopian government for which she bought more cattle. Tejetu says with 50 cows they were never a poor family, but Derartu's success has made a big difference to their life. "She came back and built this house here. We got a television, and she bought more animals. She supported everyone, giving clothes and money to family and neighbours. Everyone."

Did people treat them differently after Derartu won? "If the neighbours have problems, they ask, and Derartu will help. Even if they don't ask, she can see and will help. That's how she is."

On the way back, Coach tells me Derartu has always been his favourite champion. "Everybody loves her. She is sociable." Do the successful runners keep in touch with him when they leave for Addis? "Some do. Some come back and say thank you after they have won the Olympics, some don't. Derartu and Kenenisa and Tirunesh all said thank you, the others didn't." Does it bother him? "No. The reward is seeing them win."

We're on the road to Addis to see Haile Gebrselassie's empire. He's considered by many the greatest ever distance runner, and he's already on the way to becoming Ethiopia's greatest tycoon. He's 38 and it's only four years since he won the Berlin marathon in a world record time of two hours three minutes and 59 seconds. At the time he could command $250,000 appearance money just to run in a city marathon. He runs a number of successful businesses, including, in the centre of Addis, a complex dedicated to his wife, Alem: here is the Alem gym, car salesroom, cinema complex. In a multistorey, glass-fronted building, he and Alem also run a holiday resort business.

A lift takes us to the top floor, which looks out over all of Addis. Haile is out working, but Alem welcomes me. She tells me how they got together. She had a shop in Addis, on Haile's running route. She didn't know who he was – just another man who ran past quickly every day. After a year he walked in and asked for her phone number. It took her a while to realise he was asking her out: "He was shy." He thought she was above his station.

Alem is dressed in an elegant trouser suit. She stands on the balcony as we talk, queen of all she surveys. Is Haile one of the wealthiest men in Ethiopia now? "Yes, he is one of them." She giggles, embarrassed. Does he still run? Try stopping him, she says. "He runs everywhere. There is construction work we are doing, and he runs there. Then he runs in the mountains."

They have four children, the oldest 13, the youngest six. Are they runners? She looks shocked. "No! They are students." Would she prefer it if they won Olympic gold or went into business? "For me, I prefer first learning. The same for Haile."

Back in Bekoji, Coach welcomes me to his home. He has saved all his life for this four-room house. It cost the equivalent of £3,000. How could he afford it? He says he can't really, and expects to be paying it off for the rest of his life. He is paid £70 a month before tax by the local government, and struggles to make ends meet. "I have three children, two adopted children and a wife. It is not easy." But he's not complaining. He was born in Harar and grew up in a mud shack – that was real poverty, he says. He talks about all the changes he's seen in his life: he lived for many years under Mengistu Haile Mariam's communist military dictatorship. Although the current government has been condemned for silencing dissenters (in January, Amnesty revealed that at least 107 opposition party members and journalists have been charged under terrorist offences since March 2011), Coach says life today is incomparable.

"Now there are more factories, more schools, more people working. You just had to do what the military told you in the dictatorship." He introduces me to his son, Beck, who wants to be a doctor. Does he run? "No." What went wrong? Coach smiles. "Nothing. He's just concentrating on his studies."

Coach talks about his own plans for the future. In five years he hopes to retire. Maybe then he will train a small group of runners privately. He is looking forward to taking it easy, but he worries that he won't know what to do with his time. I ask if he has received official recognition from the government for his work. "No." He stops, and says that's not quite right. "The local government gave me a gold chain a few years ago."

Has he ever wished he was on a percentage of all the money his champions have earned? "No." He laughs. "What would I do with it?" Surely there's something he's desperate to buy? Actually, there is. "When my marathon runners train, I have no way of seeing how they are doing. What I'd love is a motorbike so I can follow them, but there is no way I could afford one."

• Town Of Runners is released on 20 April.