12 April 2014 Business & Development News Round-Up

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Polish billionaire shows interest in Ethiopia

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Jan Kulczyk

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Written by 

Poland’s richest man, Jan Kulczyk (Ph.D.), founder and owner of Kulczyk Holding SA (headquartered in Warsaw)

and international investment house, Kulczyk Investments with headquarters in Luxembourg and offices in London, Kiev and Dubai, came to Ethiopia this week and met with Prime Minister Hailemariam Desalegn and officials from the African Union.

With an estimated net worth of USD 3.9 billion, he was ranked 402 on the World’s Billionaire list by Forbes. His arrival makes him the third billionaire after Sheik Mohammmed Al-Amoudi (USD 15.4 billion) and Aliko Dangote (USD 25 billion) to show business interests in Ethiopia. He has a diversified portfolio of investments and currently over half of Kulczyk’s investments are tied up in beer maker SABMiller. Apart from that, Kulczyk Investments holds a 40 percent stake in Neconde Energy Limited, a consortium that acquired an oil production license in Nigeria.

Kulczyk Investments has an international advisory board comprising Horst Köhler, former President of Germany (2004-2009), former Chairman of International Monetary Fund and General Director of the European Bank for Reconstruction and Development, Aleksander Kwaśniewski, former President of Poland (1995-2005) and James L. Jones, a retired US Marine Corps General, former US National Security Advisor and former NATO Supreme Allied Commander.

The company focuses on opportunities in global emerging markets with four strategic sectors namely mineral resources, energy, infrastructure and real estate.

Currently, Kulczyk is looking to expand his investment portfolio in Africa and, apart from Ethiopia, Kulczyk had plans to invest in the newly-formed country, South Sudan, The Reporter learnt, however, Ethiopia turned out to be his pick.

In addition, Kulczyk’s investment firm is looking for gas off the east and west coasts of Africa through Ophir Energy, in which Kulczyk Investments holds a 9.6 percent stake.

All in all, he has invested USD 1.1 billion in Africa, also buying a gold mine in Namibia, a coalmine in Mozambique, fertilizer production in Nigeria, iron ore in Congo-Brazzaville and gas fields in Tanzania. Kulczyk Investments says the African investments are profitable.

Last month the Financial Times reported that Kulczyk had roped several other Polish tycoons into an initiative aimed at boosting Poland’s presence in Africa, which, aside from Kulczyk, is marginal. Trade between Poland and the whole continent came to only one percent of Poland’s trade turnover, although it did grow at a 16 percent pace in 2012.

Asseco, an IT company and Ursus, an agricultural machinery manufacturer, are already present in Ethiopia. Last month, Asseco and the Ethiopian government’s Information Network Security Agency (INSA) signed an agreement valued at USD 10 million. The agreement refers to the implementation of a project aiming at the establishment of a modern energy market in Ethiopia and is planned to be fully implemented by the end of 2015.

The latest entrant, Kulczyk, made the bulk of his fortune by acting as an intermediary in some of the largest privatizations of Polish state-owned companies in the early 1990s.

However, he ran into controversy back in 2004 when he was called as a witness before a parliamentary investigation into management practices at PKN Orlen, the polish state-controlled refiner.

Now, the 64-year-old billionaire is zooming in on Africa and is sharing Poland’s experience in building a modern economy on the ruins of communism.

The Financial Times quoted Kulczyk as saying, “Africa is a continent of poor people and rich countries which have enormous wealth locked up under the ground thanks to a lack of infrastructure.” “But in Europe we have poor countries [with few natural resources] and rich people . . . it’s a win-win.”

Similar, to his plans, the Polish government is also keen on strengthening ties with Africa. The Polish Ministry of Economy last year launched the ‘Go Africa’ program in a bid to strengthen economic and business ties with the continent by encouraging Polish entrepreneurs to do business in Africa.

http://www.thereporterethiopia.com/index.php/news-headlines/item/1868-polish-billionaire-shows-interest-in-ethiopia

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Brazilian mining giant to pull out of Ethiopia

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– Stratex follows suit

The Brazilian mining giant, Vale, which has been engaged in mineral exploration project in Southern Ethiopia since 2011, is to pull out of the country by suspending its exploration project, it was learnt.

Vale, the number one iron ore producer in the world, secured exploration area covering 900 sq.km plot of land in the Konso area from the Ministry of Mines in 2011. At that time the company agreed to prospect for gold and base metals like copper, silver, cobalt and zinc. The concession  area is found between the Oromia and Southern Peoples, Nations and Nationalities Regional State.

Sources at the Ministry of Mines told The Reporter that the exploration area is known for gold deposit but Vale was looking for base metals such as Nickel, cobalt and chromium. “They were primarily looking for nickel,” sources said.

Vale conducted geophysical surveys, including an airborne survey. Reliable sources told The Reporter that the company has discovered nickel mineral deposit. However, sources said executives of the company decided to relinquish the concession and pull out of Ethiopia.

“Vale is a giant company and the amount of nickel discovery is not to the level of their satisfaction. They were contemplating to secure additional exploration area but abruptly decided to pull out,” sources said. “It could be a technical reason,’” they added. Officials of Vale were not available for comment.

In a related news, the British mining company, Stratex International Plc, which is prospecting for gold in the Afar and Tigrai Regional States, is to relinquish its gold exploration areas and pull out of Ethiopia. The company recently announced that it relinquished three gold exploration projects in Ethiopia. In a statement sent to The Reporter last month Stratex said that though it discovered gold deposits in different localities in the Afar and Tigrai Regional States three license areas have been relinquished due to technical reasons. Stratex relinquished the Tendaho, Berhale and Tigrai license areas.

Despite the ups and downs encountered in the exploration projects, the company said it remains positive about the potential for a discovery of gold in the northern part of the Ethiopian Rift Valley. The company has applied for two exploration areas in the Afar Rift Valley. The Company said it was awaiting the award of two new licenses in the Rift Valley, covering areas where remote sensing studies have indicated good potential for further discoveries.

However, sources said that Stratex has also decided to pull out of Ethiopia. “It is a technical decision but the delay in processing their application for new exploration area may have contributed to their decision to pull out,” sources said. Stratex reportedly secured an exploration license in Tanzania. Sources claim that the company submitted its application in Tanzania long after it requested exploration areas in Ethiopia.

However, Stratex is denying its decision. In a written response to The Reporter the communication manager Claire Bay said, “Although we have dropped a number of licenses, we do still hold our key Blackrock project in the Afar. We are also awaiting the award of two new licenses in this region.

“The reason is indeed technical and related to the fact that the results yielded at said licenses did not warrant further expenditure,” Claire said.

Industry analysts warn that the Ministry of Mines should pay due attention to the companies engaged in exploration projects in different parts of the country. “The ministry should closely follow up the mining companies’ activities. Officials of the ministry should ask the companies what problems they face and provide solutions. Even if it is a technical problem, experts of the ministry should consult the companies. You can not simply let giant mining companies like Vale and BHP go,” the analyst said. The Anglo-Australian mining giant, BHP Billiton, pulled out of Ethiopia in 2012. The company was engaged in potash exploration project in the Afar Regional State.

Officials of the Ministry of Mines did not respond to phone calls and text messages. Former Minister of Mines Sinkenesh Ejigu previously said that the ministry can not do anything when a management of a company decide to pull out and concentrate on other exploration project found in other parts of the world. “It is a matter of choice and there is nothing we can do about it,” Sinkenesh said.

The Ministry of Mines is hard hit by brain drain. Most senior experts left the ministry in search of better pay. The ministry is now unable to process exploration license applications promptly and local and international companies are furiously complaining about the lack of efficient service in the ministry. Senior officials of the ministry admit the deficiencies in the service provision.

http://www.thereporterethiopia.com/index.php/news-headlines/item/1869-brazilian-mining-giant-to-pull-out-of-ethiopia

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Ethiopia hails Chinese development contributions

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li

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China is currently involved in Ethiopia’s road-building, manufacturing and telecommunications sectors, among others.

World Bulletin / News Desk

Ethiopian State Minister for Finance and Economic Development Ahmed Shide on Wednesday thanked China for its valuable contribution to Ethiopia’s impressive economic performance.

The recognition came during the eighth session of the Ethio-China Joint Commission on Economic, Scientific and Technical Cooperation and Trade, held in Addis Ababa on Wednesday.

Shide said Ethiopia had registered a successful macroeconomic performance over the past 20 years, thanks in part to contributions from friendly nations – with China at the top of the list.

“Development partners like the People’s Republic of China have contributed a lot,” he said.

“In the road sector, China has provided a concessional loan for a toll road project, which is the first of its kind in the country and for Bole road upgrading,” he said.

The Chinese loan was also used in the energy sector for the establishment of several power-transmission and generation projects and wind power facilities, Shide said, going on to list various kinds of support that Ethiopia had received from China.

Loans for major railway projects, three sugar factories, an airport, a number of telecom expansion projects, and for the purchase of nine ships represented other examples of Chinese support for Ethiopia, according to the minister.

The Chinese delegation to the meeting was led by Assistant Commerce Minister Zhang Xiangchen, who asserted that China would work on boosting cooperation with Ethiopia further.

The two countries are expected to sign a framework agreement for future cooperation at the end of the meeting.

Earlier this month, Ethiopia and China agreed to ink a comprehensive cooperation framework deal with a view to strengthening bilateral ties and maximizing mutual benefits.

The framework deal is expected to focus largely on the aviation, space sciences, tourism and mining fields.

Ethiopia-China diplomatic relations were first established in 1970.

In 2000, the China-Africa Cooperation Forum was launched, quickly becoming an important platform for dialogue and cooperation between the two countries.

China is currently involved in Ethiopia’s road-building, manufacturing and telecommunications sectors, among others.

http://www.worldbulletin.net/economy/133390/ethiopia-hails-chinese-development-contributions

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Indian firm eyes textile but is hindered by cost

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Indian-based Sutlej Textiles and Industries Limited has been in contact with Ethiopian officials for the past seven months to head ways to the local textile sector with less success, The Reporter has learnt. 

Sutlej communicated its intent to the government to join the textile business in Ethiopia but has been lingering for the past seven months concerned with transportation and construction costs, which, according to Manoj John, vice president for strategic initiatives at Sutlej, are higher than most countries, mainly compared to India where it has set up shop. If it is possible to reduce costs, Sutlej has interest in investing in 25,000 spindles immediately as an initial investment while planning to raise its investment to 50,000 spindles in the second phase. With an estimated investment cost of 25,000 birr per spindle, the first phase alone will cost Sutlej some 625 million birr, according to John. “We will submit our formal business proposal to the government in a month or two,” John told The Reporter.

He said he had been meeting with both federal and local government officials about accessing a plot of land but with no success so far. “This time, I am having a fresh round of meetings. Meeting with the minister of agriculture, I am getting familiar with the federal and regional set-up here. I do not know how much success I will have this time around,” Mr. John said.

If successful, his investment will sit on 200 acres of land. But to kick things off, the company needs half of the total land to build a textile plant that will integrate spinning and weaving. Terry towel manufacturing is the other alternative to look at, according to Mr. John.

Though it is Sutlej’s first time to Africa, the company is reputable in India with a turnover of 20 billion rupees or close to eight billion birr annual.

Sutlej is also eying coffee in Ethiopia. As far as coffee is concerned, the company is looking to invest in an Arabica coffee plantation for which it needs two thousand hectares. But that seems unlikely to happen since Ethiopian investment law reserves the business only to Ethiopian nationals.

Meanwhile, at the moment there are about 15 foreign textile companies awaiting the completion of the construction of the Bole-Lemi industrial zone located east of the capital. According to information from the Ministry of Industry, all of these companies, mainly from South Korea and India, have settled their initial payments while some are installing machineries in the new sheds for production.

http://www.thereporterethiopia.com/index.php/news-headlines/item/1861-indian-firm-eyes-textile-but-is-hindered-by-cost

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Kenya’s Comcraft Group discussing possible share offerings-chairman

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By Drazen Jorgic

(Reuters) – Kenyan industrial magnate Manu Chandaria said his family-owned conglomerate Comcraft Group is in discussions about taking parts of the business public, reflecting its growing size and need for capital as it expands internationally.

Comcraft Chairman Chandaria said both the steel and aluminum sections of the family business – which in Africa mainly make corrugated iron roofing and pots and pans – could go public within the next two to three years.

“Ultimately groups of our size cannot remain only private,” Chandaria told the Reuters Africa Summit at his home in a lush Nairobi suburb, perched on the edge of the dense Karura Forest.

But with Comcraft companies rapidly expanding in Asia and Africa, especially in Nigeria, Ethiopia, Kenya and South Africa, Chandaria said there are fears among some in the group that an initial public offering (IPO) could hinder growth due to short-term shareholder demands.

“Some of (our) top management still don’t think that we are ready for taking it public. I would have taken it public a long time back,” said Chandaria, who is also a leading Kenyan philanthropist.

Formed during World War I by Chandaria’s semi-literate father and relatives who immigrated to colonial-era Kenya from India, the business is now one of East Africa’s biggest. The group has 40,000 employees across 45 countries.

U.S. business magazine Forbes in 2011 estimated Comcraft to be worth $2.5 billion, the last time it valued the business. Chandaria declined to comment on the current value of the group.

Chandaria added that some sections of the business could merge ahead of the IPO, which could be one of Kenya’s biggest if the Chandaria family decide to list on the Nairobi bourse.

AFRICA’S NEW CHINA

The 85-year-old said the family’s drive was undiminished ahead of the business’s centenary in 2016. A recent trip to fast-growing Ethiopia, where he observed new railways, roads and

offices, also confirmed Chandaria’s optimism about Africa’s potential.

The Horn of Africa state has become a symbol of the “Africa rising” narrative, with companies such as Diageo (DGE.L) and Hennes & Mauritz (H&M) (HMb.ST) seeking to set up production in a country once synonymous with famines, coups and communist-era purges.

To the frustration of many foreign companies, the government has not loosened its grip on the banking, telecoms and other state-run sectors in the country of 90 million people. But Chandaria believes the rulers of Africa’s second-most populous country will follow China’s model and loosen controls.

“It’s opening up very fast,” he said, animated about Ethiopia’s chances of becoming a manufacturing powerhouse.

Over the next two years Comcraft plans to treble the number of factories in Ethiopia to nine, even though in the 1970s the regime that overthrew Emperor Haile Selassi also seized the Chandaria businesses, a fate the family also suffered in Uganda.

In neighboring Kenya, Chandaria said Comcraft is looking to build several factories and grow 50 percent over three years.

Comcraft is also targeting expansion in Nigeria, where it already employs more than 4,000 people, hoping to tap into a market boasting a growing middle class among its 140 million residents.

Chandaria said the group is undeterred by the threat from Islamist Boko Haram rebels and has set up businesses in their stronghold areas.

“Yes, it is difficult, it’s demoralizing but you do not see that as a stop,” he said. “If you live in the sea, you have to live with sharks.”

http://www.reuters.com/article/2014/04/09/us-africa-summit-comcraft-idUSBREA380HY20140409

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Heineken seeks for 700 mln birr loan from CBE

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–  Raya beer secures close to 300 mln birr 

Nearing the completion of a new Greenfield factory in the capital, the Dutch giant brewer is awaiting the Commercial Bank of Ethiopia (CBE) to approve a 700 million birr loan request the company submitted, The Reporter has learnt. 

Sources told The Reporter that Heineken had been looking to get hold of some three to five billion birr since joining the local market in 2011. However, CBE hesitated to approve such a huge loan, the biggest ever requested by a single foreign company in the history of the beverage industry. After waiting three years, Heineken was forced to cut the loan size down to 700 million for final negotiations with CBE.

The 120-million euro consuming factory is set to brew 1.5 million hectoliters a year. The construction of Greenfield seized some 25 hectares of land on the outskirts of Addis Ababa, a place called Kilinto, near the new correctional facility of the capital.  Following the commencement of the new factory, the construction was planned to take 18 months starting in August 2013.

Owning some 19 percent share of the market, Heineken first joined the Ethiopian beer industry in 2011 acquiring both the Harar and Bedele beer factories from the government for USD 163 million. Efforts made by The Reporter to collect comments of Heineken officials bore no fruit since phone calls and e-mail requests were turned down.

In a related news, the newly-formed Raya Beer Share Company has pocketed a 279 million birr loan from CBE. Sources said the Commercial Bank approved loan is, of course, less than the 350 million birr Raya was looking for. Prior to the recent approved loan, Raya was able to amass some 630 million birr loan from some financial institution. Lemma Bekele, general manager of Raya Beer, said that CBE would officially announce the approval of the loan this week.

The construction of the factory has been progressing well according to the recent information officials of Raya Beer have provided. By September, Raya Beer is expected to hit the market with an annual production of 600,000 hectoliters. Currently, Raya has raised its paid-up capital to 600 million birr against 500 last year and currently has accounted for a total investment capital of 1.5 billion birr.

Dawit Gebregziabher, a successful businessman who is well established in the Middle East and is currently here, owns 25 percent of shares by investing 157.5 million birr. BGI, a French-owned beer factory, is the other giant contender owning 42 percent of shares in Raya Beer.

http://www.thereporterethiopia.com/index.php/news-headlines/item/1862-heineken-seeks-for-700-mln-birr-loan-from-cbe

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UK slams Ethiopia’s human rights record

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The 2013 edition of the Human Rights and Democracy Report of the government of the United Kingdom (UK)

severely criticized the government of Ethiopia for its application of its Anti-Terrorism Proclamation and the Charities and Societies Proclamation, which hampers the activity of the opposition camp of the country. 

The report says that the UK is concerned about continuing restrictions on opposition and dissent in Ethiopia through use of the Anti-Terrorism Proclamation (ATP) and the Charities and Societies Proclamation (CSP) .

Those detained under the ATP include members of opposition groups, journalists, peaceful protesters, and others seeking to express their rights to freedom of assembly and expression while the CSP has had a serious impact on Ethiopian civil society’s ability to operate effectively, according to the report.

Section 11 of the report, which covers and focuses on the issues related to Human Rights in countries of concern contains a review of the human rights situation in 28 countries where the UK Government has wide-ranging human rights concerns.

This part of the report explores the concerns of the government of the UK. The report takes Bahrain, Bangladesh, Ethiopia, Nigeria, Rwanda and Egypt as case study countries.

In this regard, the report presents the condition of human rights abuse in Ethiopia as follows. The report chooses to highlight a number of reports of mistreatment of prisoners in detention.

In May, the Ethiopian Human Rights Commission (EHRC), whose mandate and powers are defined by Parliament, published a report, “Monitoring Report on Respect of Persons Held in Custody of Ethiopian Police Stations” which described generally poor detention conditions with some incidents of human rights abuses and unlawful interrogation tactics.

The report was based on the monitoring of 170 police stations and inspections were conducted without any prior notification. One institution, the Meakelawi Police Detention Facility, has drawn a high level of criticism from former detainees and international NGOs for alleged mistreatment of its inmates.

Allegations of abuse by the “Special Police” in the Somali Region are also a concern of the report despite the report saying the increased security presence in the region had brought some benefits including some development of basic services and infrastructure – albeit from a low base.

However, there have been many reports of mistreatment associated with the special police including torture and execution of villagers accused of supporting the Ogaden National Liberation Front (ONLF) .

Moreover, the report said the UK government and the UN have pressed the Ethiopian government to articulate a reform plan for the Special Police, and the Ethiopian government has agreed this is needed. So, according to the report, the UK government promises to encourage the government of Ethiopia to take action.

http://www.thereporterethiopia.com/index.php/news-headlines/item/1866-uk-slams-ethiopias-human-rights-record

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Private broadcasting questions remain unanswered

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Despite the outstanding issue of allowing the private sector to invest in broadcasting media, which still remains in limbo, the government insists the expansion of the mass media is performing well and being implemented. 

According to a report by the Ministry of Finance and Economic Development (MoFED) presented before the House of Peoples’ Representatives (HPR) on Thursday regarding license granting and service registration of the media business, based on achieving audience satisfaction, it was able to uplift the audience’s horizons to 91.6 percent in the first three years of the Growth and Transformation plan (GTP) period, which was 85 percent prior to the current five-year development program.

The report says there were only eight community radio stations before GTP but it was able to maximize that total number to 16 out of the planned 20 by the end of the GTP. Implementation performance is 80 percent in the three years of the GTP period while it is only 53.3 percent compared to the five-year plan, which was targeted to meet 30 in 2016.

It further indicated that it was able to achieve issuing commercial radio licenses from five radio broadcasters, which was at the beginning of the GTP   and of the three years it reached ten while the five year target was to grant a total of 11 licenses.

Similarly, the report says efforts were being undertaken to uplift the existing number of public television stations? to seven for the same reported period underlining as a successful performance during the concluded three years of the GTP. Government reports further indicated that some 10 press laws and directives had been enacted “to support the expansion of mass media.” These legislations and directives include one advertisement and promotion proclamation, three operational directives and three standards that sum up seven legal and procedure bills.

The report also incorporated governments performance that it said had been implemented so far with monitoring and support activities. Accordingly, it was able to monitor and correct over 557 cases that were breached by broadcasters in three years, which is much higher than the planned target to achieve 400 breaches of laws and procedures.

The plan for last year alone was set to be 150 cases but it says it had monitored 267 breaches of law.

However, MoFED’s report does not say anything regarding the longstanding question of the broadcast license for the private sector.

There are still only five private radio broadcasters in the nation but no single private television station so far.

http://www.thereporterethiopia.com/index.php/news-headlines/item/1864-private-broadcasting-questions-remain-unanswered

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Acumen to assist Makalle poultry farms

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Improving the livelihood of smallholder farmers through addressing

the malnutrition problems is at the centre of Acumen’s programme.

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Acumen, a global company working to change the way the world tackles poverty by investing in companies, assisted Makalle poultry farms established three years back.

This would help the farms to produce highly fertile diseases resistant chickens and sell them to smallholder farmers through unique scale-able distribution model.

Acumen East African Director Duncan Onyango told journalists yesterday that it is the first investment of Acumen in the country where there is huge potential for agro-industry investment with a population of over 90 million.

He said Acumen is engaged in supporting Makalle farms in different ways including capacity building, extension services, operational consultancy and financing.

He noted that improving the livelihood of smallholder farmers through addressing the malnutrition problems is at the centre of Acumen’s programme.

Farms Managing Director David Ellis said that the support would enable them to supply smallholder farmers with productive breeds which can thrive the environment and fast maturing compared to local chicks.

According to him, the farm has produced one million chicks annually and plans to increase to two million within three years. It also produces and distributes, affordable feed for rural farmers, he added.

Agricultural Transformation Agency Public Private Partnership Senior Director Yohhanes Tilahun thanked Acumen for choosing Ethiopia as one of its East Africa investment destination.

http://www.ethpress.gov.et/herald/index.php/herald/national-news/6635-acumen-to-assist-makalle-poultry-farms

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