09 May 2014 Business News Briefs

 

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Fitch Rates Ethiopia ‘B’; Outlook Stable

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PARIS/LONDON, May 09 

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– Fitch Ratings has assigned Ethiopia Long-term foreign and local currency Issuer Default Ratings (IDRs) of ‘B’.

– The Outlooks on the Long-term IDRs are Stable.

– Fitch has also assigned a Short-term foreign currency IDR of ‘B’ and a Country Ceiling of ‘B’.

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KEY RATING DRIVERS

Ethiopia’s IDRs reflect a balance between weak structural features indicating vulnerability to shocks and strong economic performance and improved public and external debt ratios since debt relief under HIPC in 2005-2007. More specifically, the ratings reflect the following key rating drivers:

-Despite impressive improvement over the past decade, Ethiopia’s ratings are constrained by a weak level of development. The country ranks among the weakest Fitch-rated sovereigns on UN human development indicators, with a GDP per capita of USD500 in 2013, well below ‘B’ medians. Governance indicators as measured by the World Bank are broadly in line with ‘B’ medians.

-Economic performance is strong. With an average real GDP growth of 10.9% over the past five years, Ethiopia has outperformed regional peers due to significant public investments in infrastructure as well as growth in the large agricultural and services sectors. Despite a track record of high and volatile inflation, it declined significantly in 2013, reflecting lower food prices and the authorities’ commitment to moderate central bank financing of the government.

-Fitch expects real GDP growth of 9% in 2014 and 8% in 2015. Ethiopia’s growth over the medium-term can be sustained by large, untapped resources, including large hydro-electric potential. However, the private sector’s weakness, reflecting the country’s fairly recent transition to a market economy, and its inadequate access to domestic credit, could limit growth potential over the medium-term as public investment slows.

-Despite large capital expenditure, the general government (GG) budget deficit remained contained to an average 1.4% of GDP over the past five years, due to low levels of current spending, including a limited wage bill and modest interest payments. As a result, headline GG debt declined steadily in 2005-2012 following the 2005 HIPC/MDRI debt alleviation, and reached 25.8% of GDP in June 2013, well below the ‘B’ median and regional peers.

-Significant investments in infrastructure (including roads, electricity and railways) have been made possible by the heavy involvement of state-owned enterprises (SoEs), which finance a large part of investments on their own, mostly through heavy recourse to domestic bank credit. Fitch estimates that total SoE debt amounted to at least 25% of GDP at end-June 2013, doubling consolidated total public debt.

-Ethiopia’s structural current account deficit – at 5.4% of GDP in 2013 – reflects low value-added exports and investment-related imports. It exerts pressure on international reserves, which at two months of current account receipts, are low compared with peers. However, with debt service also low, reserves relative to debt service are above the ‘B’ median. Net external indebtedness has risen steadily since 2007, though it remains moderate and in line with ‘B’-rated peers. However, growing recourse to non-concessional financing, particularly by SoEs, could increase debt service. RATING SENSITIVITIES The Stable Outlook reflects Fitch’s assessment that upside and downside risks to the rating are currently well balanced. The main factors that could lead to a positive rating action, individually or collectively, are: -Stronger external indicators, including higher exports, as well as stronger FDI and international reserves

-A sustained decline in inflation reflecting an improved macro-policy environment

-Further improvement in structural factors, including stronger development and governance indicators The main factors that could lead to a negative rating action, individually or collectively, are: -Rising external vulnerability related to declining international reserves, widening current account deficit or rising external indebtedness

-Increased risk of contingent liabilities from SoEs and publicly-owned banks materialising on the government’s balance sheet KEY ASSUMPTIONS The ratings are reliant on a number of assumptions, in particular, the following: -Continuity in the development model of the country

-Continued strong support from the international community, implying continued aid inflows to the country to support its development

-Demand for Ethiopia’s exports (including coffee, other agricultural products and gold) benefiting from the gradual recovery in the global economy, with world GDP growth forecast to increase to 2.9% in 2014 and 3.2% in 2015 from 2.3% in 2013

-No major change in the political regime in the coming years

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Contact:

Primary Analyst Amelie Roux Director +33 144 299 282 Fitch France S.A.S 60 rue de Monceau – 75008 Paris

Secondary Analyst Richard Fox Senior Director +44 20 3530 1444

Committee Chairperson Tony Stringer Managing Director +44 20 3530 1219

Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com.

Additional information is available on http://www.fitchratings.com

Applicable criteria, ‘Sovereign Rating Criteria’ dated 13 August 2012 and ‘Country Ceilings’ dated 9 August 2013, are available at http://www.fitchratings.com.

Applicable Criteria and Related Research: Sovereign Rating Criteria here Country Ceilings here Additional Disclosure Solicitation Status here

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ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here.

IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM’. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

http://in.reuters.com/article/2014/05/09/fitch-rates-ethiopia-b-outlook-stable-idINFit69988020140509

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Ethiopia-Djibouti Railway Begins Laying

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HONG KONG, May 09, 2014 (Menafn – SinoCast Daily Business Beat via COMTEX) –First overseas electric railway with a whole set of Chinese technology standards begins laying in Dire Dawa, an eastern city in Ethiopia.

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Pictures here  http://english.people.com.cn/business/8622940.html

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Connecting Ethiopia capital Addis Ababa and Djibouti capital Djibouti city, the railway is another cross-nation one constructed by China overseas after the Uhuru Railway in 1970s. Length is 740 kilometers. Designed per-hour speed is 120 kilometers. Total investment is about USD 4 billion, of which about 70% is loans from the Export-Import Bank of China. It started construction in April 2012 and is expected to run into operation in October 2015.

CCECC of China Railway Construction Corp. General Manager Yuan Li said the laying marked a major periodic achievement.

http://www.menafn.com/87bf378e-8dd5-414e-b29a-806ee49cf50b/EthiopiaDjibouti-Railway-Begins-Laying?src=main

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First rail transport training institution to be established in Ethiopia

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Dr. Getachew Betru, CEO of the Ethiopian Railway Corporation, told members of the press that preparations were underway to establish a Rail Transport Training Institute in Ethiopia.

The institution which will become operational within the next Ethiopian year (2014-15) will train engineers and mechanics as well as provide course in security related areas.

The Institution will aim to employ as trainers those students who are currently taking courses at the Tiajing Training Institution in China.

Preparations for the development of the courses for the Institute have been completed said Dr. Getachew, who underlined that establishment of the Institute will help Ethiopia become a hub for railway training in the region as it has achieved for aviation services.

Dr. Getachew said Ethiopia could benefit from providing such services to the region as at the moment such training has to be provided from as far away as South Africa or China.

http://www.mfa.gov.et/news/more.php?newsid=3108

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African Livestock Exhibition and Congress Opens in Ethiopia

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The 2nd African Livestock Exhibition and Congress (ALEC) was opened on Thursday, May 8, 2014 in Ethiopia. The exhibition and congress is focused on facilitating the promotion of trade and investment, technology and integrating all stakeholders across the region, according to The Ethiopian Herald.

During the opening of the exhibition and conference Dr. Mebrhtu Meles, State Minister for Industry, said the livestock sub sector in general and in particular the meat and dairy products is given priority to the development of the manufacturing sector.

He further stated among many challenges of the sector; limited capacity of processing companies, shortage of quality investment, under capacity performance of operational companies, lack of proper animal husbandry management and investment in modern commercial rearing of animals.

Nebeyu Lema, Prana Promotion’s Managing Director, on his part said the event is dedicated for the progress of the livestock industry.

In addition to its contribution to the promotion of the livestock sector, the exhibition is designed to serve as a networking pool for all stakeholders from the region and will be a good opportunity to link professionals, business owners, policy makers and various stakeholders, he added.

More than 80 local and 20 international companies have taken part in the three day event.

http://www.2merkato.com/news/alerts/2939-african-livestock-exhibition-and-congress-openes-in-ethiopia

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Dr. Tedros meets officials of Stella International Holdings and Brown Shoe Company

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Foreign Minister Dr. Tedros met with officials of the Stella International Holdings and Brown Shoe Company on Wednesday (May 7) and explained the business opportunities available in the leather and footwear sectors.

Dr. Tedros noted that Ethiopia, which had almost no economy twenty years ago, had now become the fourth largest economy in sub-Saharan Africa and hoped to get its first international credit rating shortly.

He pointed out the government was committed to encourage industries to export.

Daniel Friedman, Division President, Global Sourcing and Supply Chain of Brown Shoe, expressed his support for the progressive partnership between the government and footwear companies in Ethiopia.

With the largest cattle population in Africa and fine leather quality, he said, he saw a real opportunity for Ethiopia to be an important hub of the leather industry in Africa. T

he footwear companies also emphasized their interest in engaging in capacity building in husbandry and skill development to improve the fundamental knowhow and resources in Ethiopia.

Dr. Tedros said the government would render any assistance needed to facilitate their business in Ethiopia.

http://www.mfa.gov.et/news/more.php?newsid=3113

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Tendaho Sugar Factory to Commence Production This Month

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The first phase of Tendaho Sugar Factory will start production in three weeks time, according to the Ethiopian Sugar Corporation.

Shiferaw Jarso, the Corporation’s Director General, said the factory will have a capacity of grinding 13,000 tons of sugarcane in a single day. He added the second phase of the project will be launched in February 2015.

Apart from the second phase of the Tendaho Sugar Factory project, there are four more projects expected to commence operation next year. According to Shiferaw these projects are; Beles 1 and 2, Kuraz 1, Kessem sugar factories.

When most of these factories commence production, the Corporation will acheive 70 percent of the target set under GTP plan. According to Shiferaw, residents of the sugar factories area are benefiting from infrastructure facilities that have come along with the construction of the factories.

http://www.2merkato.com/news/alerts/2940-ethiopia-tendaho-sugar-factory-to-commence-production-this-month

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MERCK Opens Office in Ethiopia

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Merck, a German company engaged in innovation and provision of high- tech pharmaceutical, chemical products and other medical services has opened a new office in Ethiopia.

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At a press conference held on Thursday, May 8, 2014, Franck Stangberg, Board Chairman of MERCK, said the opening of the office will be an alternative for the Ethiopian heath sector with regard to medicine, vaccine, biological therapies, consumer care and animal health products.

Frank noted MERCK is planning to create a long term business relation with Ethiopia as it’s economy is growing at a healthy pace. He added “We are committed helping Ethiopia to improve access to health through our quality pharmaceutical products”.

During the press conference, Frank announced his company has donated two mini-labs to Ministry of Health in order to assist the Ministry’s effort to fight counterfeiting. Frank added, his company’s products are affordable and very effective in curing diseases.

Eleni Ergunon, Executive Vice President and Global Head of Commercial MERCK SERNO, on her part commented on the good will of MERCK. She said “I strongly believe that our trusted name and products, value and unique qualities will support partnership approach to build and sustain success in Ethiopia.”

MERCK was established in 1668 in Germany.

http://www.2merkato.com/news/alerts/2938-merck-opens-office-in-ethiopia

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Adami Tulu Pesticide Expands its Plant to Produce 2,4-D

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The Ethiopia’s Adami Tulu Pesticide Processing S.C. has announced that it is expanding its factory to produce Dichlorophenoxy Acetic Acid (2,4-D), The Ethiopian Herald reported. This chemical is a common systemic pesticide that is manufactured to control broad leaf weeds.

According to Dr. Teshome Fetene, Company Project Coordinator, it was following the high demand of pesticides and the wide adoption of chemicals in the agricultural sector that the company made the feasibility study for the project. He further elaborated the nation imports these chemicals.

The project is being run by Adami Tulu’s management. According to Teshome if the project was undertaken by a private construction company it would have costed the company 63 Million Birr. However, the imported machinery and spare parts of the project have costed the company only 15 Million Birr.

Teshome added the project is now 85 percent through. When it is over, the company expects itself to produce 1.5 Million liters of Dichlorophenoxy acetic acid every year. And it is expected to create job opportunity for 70 to 100 people. The company expects to produce as much chemicals for the Mehere and Belg season.

The remaining task is addressing the dalliance of electric supply for the project, Teshome noted. And if the electric supply is effected within the scheduled time, the company will be able to produce all the chemicals according to the plan set.

It is also the company’s plan to produce chemicals needed in sugarcane and other large-scale framings.

According to Lema Bogale, representative of the Deputy General Manager, in the last fiscal year Adami Tulu managed to earn 45 Million Birr out of the targeted 42 Million Birr. He says the company’s products are the favorites for farmers, the community and customers because of their relatively expire dates and their easy accessibility in the market.

Nonetheless, Herald has written the country’s 60 to 70 percent of pesticides demand is met from import.

And with to regard to safety, Lema said workers of the company wear and also use safety keeping materials. There is also a clinic in the company compound. The employees are also insured and they get medical treatment at hospitals as per the agreement the company has entered into.

Adami Tulu is a public enterprise that was established in 1985 E.C. for the production of chemicals that are used for agricultural purposes and the prevention of malaria. It currently produces around 22 types of chemicals that are used in the health and agricultural sector.

http://www.2merkato.com/news/alerts/2936-ethiopia-adami-tulu-pesticide-expands-its-plant-to-produce-24-d

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PVH Corporation Eyeing Investment Opportunities in Ethiopia

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The American PVH Corporation, a clothing company, is to consult with the Ethiopian government as well as investment consultants on the opportunities in Ethiopia, according to a press conference held on Monday, April 28, 2014.

The Reporter has learned from Bill McRaith, Chief Supply Chain Officer at the PVH Corporation, that PVH has seen an encouraging situation in Africa. In fact he compared the situations here in Ethiopia to what he saw in China in the 1990s when he was operating the company there.

Minister of State for Industry, Tadesse Haile, said his country is ready to host giant global companies. He highlighted the double digit growth, dependable energy supply and low inflation rate. He added the nation expects the Grand Renaissance Dam to generate its 6000 Megawatt energy in three years time. He further noted Gilgel Gibe III Dam will start producing 1800 Megawatt in the coming year.

On the other hand McRaith also had things to say about the nation’s infra structure and labor rights. Commenting on the infrastructure he said infra structure should come ahead of need. He continued, China is the only country whose infrastructure goes ahead of need”.

PVH Corp. is a global company that owns brands such as Tommy Hilfiger and Calvin Klein.

http://www.2merkato.com/news/alerts/2934-pvh-corporation-eyeing-investment-opportunities-in-ethiopia

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