31 March 2014 Business News Items


Turkey Talks Business in Ethiopia With a Billion Br Textile Expansion


–  The expansion will create an additional 13,000 jobs and take the production capacity up to 100pc


Ayka Addis Textile & Investment Group is undertaking an almost one billion Birr expansion on six hectares of land. This could see its exports tripling to 150 million dollars and its employees increasing by around 13,000.

The Company moved from Turkey to Ethiopia with an investment of 140 million dollars. Its latest expansion – to take place in two phases, beginning as early as April 2014 – will consume 962.5 million Br, according to Amare Teklemariam, CEO of Ayka. Ayka has already received 3.6ha of land from the Kolfe Keranio District for its first phase, and is in the final stages of leasing an extra 2.6ha, he added.

The Company secured 3.6ha of land last year, through lease that will extend for 70 years, according to officials at the land management office of the Addis Ababa city administration.

The Company currently has five plants in Alem Gena town of the East Shoa Zone,Oromia Regional State(19km from Addis Abeba). These plants, now operating at 80pc to 90pc capacity, have the capacity to spin 40tns of cotton, knit 38tns of thread, dye 50tns of cloth and produce 80,000 pieces of garment – all in a day’s work, with 7,500 permanent and 100 temporary workers. The Company exports its produce mainly to Germany.

Now with a capital of 2.5 billion Br, the expansion projects are expected to boost the Company’s export earnings to 150 million dollars, from 56 million dollars in 2012/13.

“The expansion project will increase our present garment production capacity by 50pc, when the first phase of expansion is finalised and by 100pc when the second phase of expansion is finalised in 14 months,” the CEO told Fortune.  “Once finalised, the project will create job opportunities for 13,000 people.”

From the total project cost of 962.5 million Br, building and civil work is expected to consume 221.3 million Br and 623.2 million Br will be spent on machinery and equipment. The remainder will be used as working capital, he said.

Ayka’s construction wing will undertake the construction and installation works of the new factory itself, as it did with its five other plants in the country.

“We will commence construction as soon as we get the title deed,” Amare says.

The land that has been given to Ayka currently houses stores and pole treatment plants  of ethio telecom; these will move to new facilities to be set up by Ayka.    Currently, there are six other expansion projects ongoing in the textile industry.  Ten new additional factories with a combined production capacity of 100tns a day are also expected to start production during this fiscal year. An additional three new projects are expected to start production during the 2014/15 fiscal year according to Ethiopian Textile industries Development Institute (ETIDI).

Despite all this development, the industry that now comprises of 115 textile factories and 40,000 workers, was only able to earn 52pc of the 111 million dollars that it was supposed to achieve in the first half of the year, according to the Institute. The target for the year is set at 317 million dollars.

With a per capita fibre consumption of roughly one kilogram – far below the world average of 8.7 kg and the African average of 3.2 kg – the country has great potential, which needs to be used properly, according to a research conducted by the African Growth & Opportunity Act (AGOA), three years ago.

The underutilised capacity of existing factories is still a big problem in the industry, according to an expert, who talked to Fortune on condition of anonymity. Factories in the textile sector are currently only utilising around 60pc of their production capacity.

Around 99 million dollars worth of textile products was exported in the last fiscal year. This number is expected to reach one billion dollars by the end of the Growth & Transformation Plan (GTP) period, which is only one year away.



Weaving a New Path with Ethiopia’s First Certified Organic Cotton Cultivation


–  It is an important step for the Ethiopian textiles industry, as the European market demands organic cotton



AYCOOM Agricultural Development Plc has secured 10,000ha of land in the South Omo Zone of the Southern Region. It will now start the first certified organic cotton cultivation in the country at a cost of 815 million Br.

This company, formed by a 55pc share from Ayka Addis Textile & Investment Group and a 45pc share from Omo Valley Agricultural Development Plc, will largely supply Ayka’s demand for organic cotton. Omo Valley is a company owned by the Amibara Business Group, which has already been supplying cotton to Ayka for the past six years from its 13,000ha of land in different parts of the country.

AYCOOM signed a land lease agreement on Tuesday, March 25, 2014, with the Gnangato and Hamer woreda administrations. Construction work on the workers camps had, however, already begun, according to Amare Teklemariam, CEO of Ayka. The agreement will have AYCOOM pay 158 Br a hectare a year for 25 years.

The total cost of the project may depend on the technology to be deployed on the farm, but the feasibility study puts it at 815 million Br, according to the CEO.

The need for organic and quality cotton has pushed the textile company, which sells most of its products in Europe, to engage in such a venture, says the CEO. Currently, there is no certified organic cotton farm in Ethiopia, according to the Ethiopian Textile Industry Development Institute (ETIDI).

The other reason for this move is the increasing foreign exchange that the Company is spending on organic cotton imported from abroad. The Company spent 72.5 million Br for the import of organic cotton in 2013 alone.

“This will also enable the Company to be an end-to-end producer, integrating its production processes,” says Amare.

The Company will also get its cotton from the Cotton Made in Africa Project, through farmers in Metema – 900km from Addis Abeba, in the North Gondar Zone of the Amhara Region. Ayka signed an agreement with the Metema Cotton Producers’ Union and member associations on Friday, March 7, 2014, for the supply of 50,000qts of cotton in the 2014/15 harvest season.

Garment made from organic cotton has a greater demand in the global market and could fetch better prices, saysYared Mesfin, cotton and textile marketing director at the ETIDI.

“There was not enough market for organic cotton in the country and the process of certification is cumbersome and costly for small-holder farmers,” said Assefa Aga, general manager of the Ethiopian Cotton Producers, Ginners & Exporters Association (ECPGEA), explaining the reason for the absence of organic cotton farms in the country.

Organic cotton farms cannot use manmade fertiliser and pesticides above a certain threshold level.

AMIBARA has been engaged in agriculture for the last 15 years; it comprises of 11 different companies as subsidiaries, with around 700 million Br capital and 3,000 permanent and 10,000 temporary workers. Its subsidiaries include – Gelista Agricultural Development, Middle Awash Agricultural Development Enterprise, Amibara General Aviation Service, Addis Modjo Edible Oil Complex and Amibara Agrochemicals.

The business group has been supplying cotton to Ayka since the textile Company first became operational in 2008. This has led to the partnership, according to Amare.

“We have been using their cotton for the last six years and we are happy with their performance,”Amare said.”They run some of the biggest cotton farms in the country.”

The business group believes that its expertise in cotton production will enable it to effectively run the farm, says Yusuf Omer (Sheikh), directing manager of the business group.

Amibara is hoping to access loans from the Development Bank of Ethiopia (DBE) and the Commercial Bank of Ethiopia (CBE).

There seems to be a trend with big textile companies in the country investing in cotton cultivation, with the list including Adama Textile, Elyse Textile and Almeda Textile. Such companies are trying to minimise the risks in cotton market volatility, says Yared.

“In the short run, this kind of process integration can solve the raw material problem in the market,” he said.

Yet this development will not pose a threat to already existing cotton farms, according to Assefa.

“There will not be a problem for existing cotton producers, as there is shortage of cotton in the market,”he said. “Even though major textile companies are beginning cotton production to secure their input.”

In the last harvesting season, 2012/13, 55,000ha of land were covered with cotton and 35,000tns of produce was collected, according to the ECPGEA. Total cotton production stood at 79,710tns in the 2011/12 harvest season. Ethiopia expects to import around 20, 000tns of cotton in the current fiscal year, in order to cover the growing demand from the textile industry, according to the ETIDI.

The Institute is trying to rectify problems in the industry by increasing productivity and working on modernising marketing practices, according to Yared.



New Draft Directive to Fertilise Ethiopia’s Flower Industry


The Ethiopian Horticulture Development Agency (EHDA) is in the process of drafting a new directive. This is designed to enable individual exporters, including those with no involvement in flower growing, to export horticulture products they have collected from various growers.

The draft – called ‘Consolidation Directive Proposal’ – will be referred to the Ministry of Agriculture (MoA) after a week’s time and eventually to the Council of Ministers (CoM) for approval, Fortune learnt.

The Consolidation Proposal was submitted earlier, to the National Export Council, at the end of January 2014. The Council then ordered the Agency to conduct research on consolidation and submit it to the CoM by the end of February.

“The research will be finalised within a week,” Wondweson Taddesse, Plan & Strategic Management director at the Agency, told Fortune. “The research team is in Kenya for a week-long visit, as part of the research.”

One of the major objectives of the visit is to take lessons and experience from consolidation in the Kenyan flower industry, Wondwosen said.

The consolidation directive was first initiated by the Ethiopian Horticulture Producers & Exporters Association (EHPEA) and the Agency two years ago. At the time, a group of American flower buyers came to Ethiopia, but could not source growers capable of supplying flowers in as large quantity as they required.

“The capacity of flower growers must be improved, so that they can become competitive in the international market,” Wondwosen said. “The biggest hindrance for Ethiopian growers in trying to become competitive is that they are growing on small plots of land.”

The consolidation directive is designed to give flower growers the opportunity to supply larger quantities of flowers to a wider market in Europe and the rest of the world, according to Wondwosen.

The directive is also meant to increase the quality of flowers by creating better packaging systems and the a greater variety of flowers to be included in a single market.

For Tsegaye Abebe, the owner of ET Highland, the directive will help growers to get additional market opportunities in Europe and the rest of the world. He, however, cautions that growers have to know the destination of their flowers.

Previously, few capable growers practiced consolidation, but the experience was far from widespread, says Wondwosen.

“With the involvement of exporters, who are not necessarily growers, now that a directive is going to be issued, change in the industry is expected,” Wondwosen said.

Based on the experiences of the other countries, the directive will give the task of the consolidation to market agents. The latter will also be consulting growers to grow new kinds of flowers.

According to the report of the Ministry of Trade (MoT), Ethiopia exported nearly 1.76 billion stems of flowers in 2011/12 and 2.25 billion stems in 2012/13. Despite the growth in exports, however, its revenue was down from 197 million dollars to 187 million dollars.



Glaxo to Invest Millions in Factories and Jobs for Africa




GlaxoSmithKline is poised to announce a multimillion pound investment in Sub-Saharan Africa to step up its presence in the region, the Telegraph can reveal.

Britain’s biggest drugmaker will tomorrow unveil plans to build up to five new factories, creating hundreds of jobs. 

The company, which already manufactures drugs in Kenya, Nigeria and South Africa, is looking at sites in Ghana, Ethiopia and Rwanda for its new facilities.

Sir Andrew Witty, the chief executive, will make the announcement at the EU-Africa Business Summit in Brussels. He will also announce investment in research and development activities in Africa.

Sir Andrew, writing in the Telegraph, has underlined the importance of the region for GSK’s long-term business. “The transformation of Africa into a successful growth region is one area that we need to focus on,” he said. “There is a great opportunity for business to play a role, alongside governments and other agencies, to help deliver improved infrastructure and create prosperity to lift people out of poverty for good.”

GSK considers Africa to be at an economic “tipping point” and believes it will be one of the world’s most important growth drivers within 20 years.

GSK currently brings in around £500m in revenues from the Sub-Saharan region, a tiny fraction of its £26.5bn sales.

Sir Andrew said GSK had a “responsibility to use our scientific expertise and our global reach to develop innovative medicines and deliver them to people who need them around the world.”

He admitted many companies, including GSK, “haven’t always got it right”. He called for the private sector to use its “innovation, resources and reach to create prosperity, provide employment and deliver goods and services that people want and need.”

GSK’s sales model for much of Africa is based on volume rather than profit growth. For the countries that fall into its “least developed” category, the company sells its patented medicines for a quarter of the price they fetch in the UK. In 2013 it established a new unit dedicated to selling drugs in Sub-Saharan Africa, which it described in its annual report as “the first step in a broader growth strategy for Africa”.

The company also reinforced its presence in the continent last year by partnering with Save the Children to “save the lives of one million children” by broadening access to vaccines, investing in health workers, improving child nutrition and researching new medicines. Programs have been launched in the Democratic Republic of Congo and Kenya.

GSK is also in the advanced stages of developing the world’s first malaria vaccine, which could make a “significant impact” on the health of millions of young children.

It has already committed to selling the vaccine on a not-for-profit basis, but has not yet disclosed how much it will cost to manufacture.



Ethiopia, America to launch farmers exchange program


The Ethiopian and united States governments  are set to launch a new farmer to farmer exchange program between the two countries to improve productivity and economic opportunity in priority sectors of agriculture, starting with the grains sector, and then expanding to other priority food security and export sectors.


USAID Ethiopia in collaboration with Catholic Relief Services and the Ministry of Agriculture will launch the program in Addis Ababa this week. 

The exchange program will bring 125 American farmers to work side by side with Ethiopian farmers, researchers, and educators, according to the press statement from the United States embassy in Addis Ababa, Ethiopia.

“USAID Ethiopia Mission Director Dennis Weller will launch the new program with Mathew Davis, Country Representative, Catholic Relief Services Ethiopia. Mr. Berhanu Gezahegn; Director, Training and Advisory Service Directorate will represent the Ministry of Agriculture. Dr James Worstell, an agronomist and new Farmer to Farmer Volunteer for Ethiopia will attend the launching.”



Rift Valley restoration project envisions restoring indigenous trees



Rift Valley Restoration Project aka Shega Rift Valley Restoration is working with a view of reconnecting the missing culture of selecting , domesticating, propagating, and cultivating Ethiopia’s indigenous trees. The project has been endeavouring to restoring indigenous trees for the last eight years.

Shega organized a fund raising programme at the residence of former President Girma Wolde-Georgis here yesterday.

Speaking at the programme, Founder, Patron and Board Chairman of the project Girma Wolde-Giorgis said that the forest resources in the rift valley is dwindling devastating at an alarming rate. All tress are gone and the threat of desertification is real challenge to the area. “So, we are trying to restore the forest to its status,” said Girma.

Project Founder and General Manager David Valle on his part said that over the last 30 years, the landscape and ecosystem of the rift valley lakes area has undergone severe degradation.

“Much of the rift valley area shows signs of rapidly becoming a windswept desert as pressures from population charcoal production, agriculture, grazing and industry increase; soil erosion is extensive,” David said.

He added: “The Shega concept is developing, restoring, and preserving native tress, shrubs, herbs, grasses and wildlife , which are interwoven with people’s livelihoods and major determining factors for the success of true sustainable development in our nation.”

The project has planted over one million tress over the last seven years. And it is now developing 33 species of different indigenous trees. It also distributed over 90 million seedlings to local farmers from its nursery in Zeway.





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