05 September 2014 News Round-Up

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AFRICA INVESTMENT-Garment-making finds new low-cost home in Ethiopia

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With rock-bottom wages, cheap and stable electricity and improving transport infrastructure, the continent’s most populous nation after Nigeria is building a reputation for producing clothes, shoes and other basic goods.

The sector is still in its infancy in what was for decades a Communist-run economic backwater. Bureaucracy and poor transport links mean business costs aren’t quite as low as they might be.

But state investment in factory zones and the arrival of firms from Turkey, India, the Gulf and China suggest industrialisation is finally taking root in the east African giant, where many still rely on subsistence agriculture.

“We have to move because of manufacturing’s development in China, due to the high increase in wages and in raw materials,” said Nara Zhou, spokeswoman for Huajian, a Chinese company that makes over 300,000 pairs of boots and sandals a month for retailers such as Guess from a factory near the capital.

“Ethiopia enjoys stability, the government is eager to industrialise and there is also the low labour cost here – a tenth compared to China,” she added.

HIGH GROWTH RATES

For years, investors gave Ethiopia a wide berth, wary of the heavy role played in the economy by a government that shuns the liberalisation seen in other African nations and which has retained its monopoly on telecommunications and bar on foreigners in the financial sector.

However, in the last few years the commercial logic of factory production has started to outweigh those concerns, and the wider effects are dramatic.

The government is projecting gross domestic product (GDP) growth at 11 percent a year, and even though the International Monetary Fund is more sober its 8.5 percent forecast for this year indicates Ethiopia is one of Africa’s – and the world’s – fastest-growing economies.

Despite the government’s socialist roots, there is no minimum wage, letting firms such as Huajian pay salaries of $50-$70 a month – still higher than the average per capita income.

“Almost every young person in this locality now works here,” said Desta, one of 7,500 employees at Ayka Addis Textile and Investment Group, a Turkish-owned factory 20 km (13 miles) west of the capital.

“We all struggled to make ends meet beforehand. We can now afford proper healthcare or sending a child to school,” Desta, who did not give his surname, added.

CHEAP POWER

With 90 million people already and annual population growth forecast to exceed 2 percent until 2030, the government is desperate to attract labour-intensive investment and jobs.

To this end, it says it has introduced incentives such as tax holidays and subsidised loans to investors with interest rates as low as 8 percent – below even the 9.75 percent benchmark rate in South Africa, the continent’s most developed economy.

Ethiopia is also investing heavily in hydropower to boost the scope of a grid that offers electricity at 5 U.S. cents per kilowatt hour, compared with 24 cents in neighbouring Kenya.

“The availability of power and the cost is cheaper than any other country in the world. We are providing power, land and labour all very cheaply,” said trade and industry minister Tadesse Haile, who wants Ethiopia to export $1.5 billion of textiles a year in five years, from just $100 million now.

Other east African nations such as Kenya and Uganda are also chasing textiles investment but cannot compete on input costs against Ethiopia, where wages are 60 percent lower than the regional average, said Jaswinder Bedi, Kenya-based chairman of the 27-nation African Cotton and Textile Industries Federation.

“Ethiopia is a new player,” Bedi said. “They are growing and they are growing rapidly.”

BOTTLENECKS

Even so, bureaucracy and transport impose a major cost on companies, leaving Ethiopia languishing at 141 in a World Bank global trade logistics index published last year.

Importing or exporting a container takes on average 44 days, compared to 26 for Rwanda, another landlocked East African nation.

“Our logistics costs are second to input,” Ayka Addis chief executive Amare Teklemariam told Reuters. “It affects the competitiveness of the company.”

To this end, the government says it is pouring funds equivalent to two thirds of GDP into new infrastructure every year, expanding the road network to 136,000 km by next year, from just 50,000 km in 2010.

It also has grand plans to build 5,000 km of railway lines by 2020 from less than 800 km at the moment.

“Infrastructure development is something Ethiopia is working seriously on,” Tadesse said.

http://www.reuters.com/article/2014/09/05/africa-investment-idUSL5N0R61WH20140905

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Yara Plans $2.5 Billion Gas-Based Fertilizer Plant in Africa

yara

By William Davison

Yara International ASA (YAR), the largest publicly traded nitrogen-fertilizer seller, said it plans to build a $2.5 billion plant in west or east Africa once gas projects come on-stream toward the end of the decade.

Yara has held initial talks with governments in countries such as Tanzania, Angola, Ghana, Nigeria and Mozambique about building a “considerable and world-class” urea factory to produce for African and foreign markets, Chief Executive Officer Joergen Ole Haslestad said in an interview yesterday in Ethiopia’s capital, Addis Ababa.

“We would very much like to participate in greenfield fertilizer production developments,” he said. “This is probably three to four years down the road before it will materialize.”

Mozambique may become the world’s third-largest gas producer in 2018 after companies such as Eni SpA of Italy and Woodlands, Texas-based Anadarko Petroleum Corp. begin output from reserves estimated at 250 trillion cubic feet. Tanzania, which has the biggest reserves in east Africa after Mozambique with 46.5 trillion cubic feet, expects that figure to exceed 100 trillion cubic feet within the next two to three years, Energy Minister Sospeter Muhongo said in February.

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Joergen Ole Haslestad, Chief Executive Officer of Yara International ASA.

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Latin America

Yara acquired Brazil’s Galvani Industria Comercio e Servicos SA for $318 million last month to expand further in South America. It bought Bunge Ltd.’s operations in Brazil for $750 million in December 2012 and OFD Holding Inc. from Omimex Resources Inc. for $425 million in November last year.

“Obviously the west part of Africa is good for Latin America where have big operations,” Haslestad said about the export possibilities from the planned fertilizer plant. “So we can take advantage of that.”

Yara, based in Oslo, plans to add to its existing seven African bagging and warehousing facilities by opening a $20 million unit close to the harbor in Dar es Salaam, Tanzania’s commercial capital, in October. It plans a similar venture in Ghana once the economic situation improves in that country, Haslestad said.

The West African nation has turned to the International Monetary Fund for help in rescuing its currency, which has lost 37 percent against the dollar this year.

A decision on whether to proceed with potash extraction at Yara’s majority-owned project in northeast Ethiopia will probably be made early next year, he said. Production of sulphate of potash for export could then begin three years later from what would be a $1 billion project, according to Haslestad.

“There will be resources enough for having mining operations there for the next 30 to 40 years,” he said.

The company expects to see sales grow “gradually” in Africa, which is the world’s fastest-growing fertilizer market, he said.

Yara rose 0.2 percent to 309.60 kroner at 3:49 p.m. in Oslo, extending the gain this year to 19 percent.

http://www.bloomberg.com/news/2014-09-02/yara-plans-2-5-billion-gas-based-fertilizer-plant-in-africa.html

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Under Construction: Uganda’s First Fertilizer Plant

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By Godfrey Olukya

Tororo fertilizer plant<br />
http://in2eastafrica.net/tororo-fertilizer-plant-set-to-be-launched/

Tororo fertilizer plant

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More than 1200 local Ugandans and about 100 Chinese workers will be employed at Uganda’s first phosphate factory, under construction by a Chinese company, the Ugandan president promises.

President Yoweri Museveni launched construction in August of Sukuru Phosphate Project in Eastern Uganda Tororo district, promising jobs. He appealed to area residents to produce more food that they can sell to a large population of employees working in the factory.

Siraj Sinde lives near the site where the factory is to be established. “We welcome the project,” Sinde told AFKInsider. “It is going to get us jobs. Many youths here are unemployed and therefore such a project is appreciated.”

Until now, Uganda and neighboring countries have had to import fertilizer from other countries at exorbitant prices, according to a statement from the Ugandan government. With the $620-million factory, the country plans to change that.

Although phosphates were discovered in Eastern Uganda in 1960, the resource wasn’t exploited because the government said it had no capital to establish a factory to make fertilizers.

Ministry of Energy official Micheal Kizza blames Idi Amin’s dictatorship and subsequent regimes for making it difficult to get investors interested in exploiting phosphates. During Amin’s brutal rule from 1972 to 1979, Asians and other foreign investors were expelled from the country.

Museveni helped restore sanity and foreign investors started coming back, Kizza said.

“The Chinese expressed interest in exploiting the phosphate by making fertilizers and the government made an agreement with them,” Kizza said.

It is the only phosphate project in Uganda. Apart from making fertilizers, other byproducts of the mineral will also be manufactured at the site.

“I am glad to come here to start the construction of this project,” Museveni said on Ugandan national TV. “You people of Tororo will get jobs. You can grow more food and sell some to the workers. If I was here, I would get rich because I would sell my milk to the workers and earn money.”

The $620-million plant will include a complex of factories with an annual production of 300,000 tons from the phosphates plant, 300,000 tons from a steel plant, 200,000 tons from the sulphuric acid plant, 100,000 tons from a rare Earth factory, 300,000 tons of gypsum from a gypsum plant and 12-megawatts of electricity from the waste heat power-generation plant, according to a government statement.

The plant is expected to start production in December 2016 and to employ more than 1,200 Ugandans. The mineral deposits at Sukuru Phosphate Project are expected to last more than 100 years and generate $350 million annually, the Ugandan government says.

Museveni performed a groundbreaking ceremony with Lv Weidong, president of Guangzhou Dongsong Energy Group Co. Ltd.

In his speech, Museveni said the government spent more than $40 million to explore minerals in the country in a geological survey. He said the minerals belong to the state and proceeds will be used for strengthening infrastructure and education.

Museveni congratulated the Chinese company for overcoming hurdles that threatened the start of the construction, including corrupt government officials who wanted to bribes.

“I would like to congratulate these investors. They did what they told me within a short time. They will bring us other investors. These people have built a lot of capacity. They can help us also build our capacity,” Museveni said in a statement.

Prime Minister Amama Mbabazi said phosphates offer Ugandans opportunities, especially
in the agricultural sector which accounts for 30 percent of total economic output.

http://afkinsider.com/69632/uganda-getting-first-fertilizer-factory/

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American And Canadian Investors Meet Ethiopian Government To Explore Phase 2 Of Power Sector Transformation

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Event banner image

Powering Africa: Ethiopia will take place from 20-21st November 2014 in Addis Ababa

The Powering Africa Ethiopia Executive Meeting connects Ethiopia’s government and energy ministries with international and local power and infrastructure developers and financiers seeking new investment opportunities within the region.

The 3rd Annual Powering Africa: Ethiopia is a concentrated two-day meeting set to bring together senior level executives in the power value chain to drive forward investment into Ethiopia’s energy sector. Ethiopia is leading the way for a green economy with resourceful emerging markets. Powering Africa: Ethiopia is proud to shine the light on this region, providing an intimate and interactive learning environment to unravel solutions for key strategic issues faced by public and private sectors.Download the 2014 Agenda At A Glance
Now in its 3rd year, the meeting connects Ethiopia’s government and energy ministries with international power-infrastructure developers and financiers seeking new investment opportunities within the region. With exclusive case studies, lively discussions and networking, meet East Africa’s key stakeholders to discover how to put Ethiopia on your investment horizon.
What to expect at the 2014 meeting
With the rise of European and Chinese investments in the region, the meeting will explore different financing models to support power projects, as well case studies of live projects led by leaders and their partners.
Finance is critical to the sector, where an estimated $2.5 billion a year will be required to develop critical generation projects and achieve energy demands in Ethiopia. Although the engagement of the private sector is paramount, regulatory frameworks have been a recurring issue that has proved limiting. With developed regulatory enforcements in place since January 2014, the meeting will discuss legal frameworks, PPAs, structure financing and more to solve the uncertainty around laws and regulations in Ethiopia.
With other focuses such as power interconnections and alternative energy developments, the content-led programme of Powering Africa: Ethiopia aims to support the economic development of the region bringing the industry’s key players in one place to invest and grow this potential land.
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Government Finalizes Preparations to Support Commercial Farmers

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Government Finalizes Preparations to Support Commercial Farmers

Ministry of Agriculture announced that it has been making preparations to solve the challenges investors in commercial farming face.

The ministry is striving to engage more investors in farming cotton, wheat and the likes, it was also indicated.

Agricultural Extension Director- General with the ministry, Tesfaye Mangiste, said the government encourages investors that fill the demand and supply gap of agricultural produces.

Preparations are this Ethiopian fiscal year finalized to address well ahead the problems commercial farmers raise and provide inputs, experts and training to further motivate farmers, he added.

More than 183 investors are currently engaged in cultivating wheat and efforts are underway to increase the number of investors in the sector by expanding on their experiences, the director-general pointed out.

The ministry called on investors to effectively make use of the policy and benefit themselves and the country.

Even if many investors are engaged in the agricultural sector, the government would give special support to investors cultivating cotton and wheat in the present budget year, it was pointed out.

A consultative forum that brings together investors, associations and unions would be created to solve the problem of market raised by wheat producing farmers.

http://213.55.98.22/enae/index.php?option=com_k2&view=item&id=2226:government-finalizes-preparations-to-support-commercial-farmers&Itemid=200

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Relations between Ethiopia, European Union Register Significant Growth

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Relations between Ethiopia, European Union Register Significant Growth

The relations between Ethiopia and the European Union (EU) have been showing significant growth as their friendship is based on mutual benefits and is strategic, Ethiopia’s Permanent Envoy and Plenipotentiary to EU said.

The envoy, Ambassador Teshome Toga, told ENA that Ethio-EU relationship is based on mutual benefits and on strategic principles.

Ambassador Teshome, who pointed out the close working relationship Ethiopia, has developed with the European Union Commission and the EU Parliament, said the country has been receiving huge support from the union for its development activities.

He also said the trade relationship is strong and 40 percent of Ethiopia’s export goes to EU member countries while foreign direct investment flowing from the union to Ethiopia has been increasing.

Ethiopia is benefiting from the development aid extended to 79 African, Caribbean and Pacific countries, the envoy said, adding that the union would further give 200 million Euros to Ethiopia for human rights and related issues through its development fund.

The support of the union to Ethiopia is strong and comprehensive as the EU appreciates the role Ethiopia has been playing in bringing about sustainable peace and stability to Africa, and East Africa in particular, Ambassador Teshome elaborated.

The peace keeping role of Ethiopia in Somalia and South Sudan has for instance been winning support in various ways, he added.

According to the envoy, the European Union has allotted 745 million Euros that would be used for agriculture, food security, infrastructure building, education and health from 2014 to 2020.

Out of the 28 EU member countries 20 have embassies in Addis Ababa.

http://213.55.98.22/enae/index.php?option=com_k2&view=item&id=2224:relations-between-ethiopia-european-union-register-significant-growth&Itemid=260

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Ethiopia’s Trade Relations with Middle Eastern Countries Growing

Ethiopia's Trade Relations with Middle Eastern Countries Growing

Ethiopia’s trade relation with Middle Eastern countries is growing, according to Ambassador Abdulkadir Rizku.

In an exclusive interview with ENA, Ethiopia’s Special Envoy and Plenipotentiary for United Arab Emirates Abdulkadir stated that demand for the agricultural products of Ethiopia in the Middle East market has been growing.

He also said investors in the region are making Ethiopia their investment destination.

The ambassador said Ethiopia decided to open its embassy in Abu Dhabi in January considering the fact that the city has a good market for any trade and investment.

Investors have channeled their capital into the country as the embassy carried out promotional works that explained the investment opportunities in Ethiopia to big businesspersons in Abu Dhabi and the surroundings, Ambassador Abdulkadir explained.

The ambassador recalled that a 35-person business delegation led by the country’s Economy Minister, Sultan bin Saeed Al Mansoori, visited Ethiopia in March to discuss about the investment opportunities in Ethiopia.

As a result, Emirati investors are currently engaged in exporting agricultural, horticultural and floricultural products as well meat and fattening animals.

The embassy is also working to protect the rights of Ethiopians living in the area, according to Ambassador Abdulkadir who added that associations of communities and coordinating office for mobilizing support for the Grand Renaissance Dam have been established.

In these regard, the embassy has facilitated the effort of the Ethiopian Diaspora to pledge 216,000 USD and deposit over 80,000 USD, he concluded.

http://213.55.98.22/enae/index.php?option=com_k2&view=item&id=2227:ethiopias-trade-relations-with-middle-eastern-countries-growing&Itemid=199

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EEP says Gibe III 87 % complete

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Some 87 % of Gibe III hydropower project has been completed, according to the Ethiopian Electric Power (EEP).

Once completed, the Gibe III project under construction on Omo River in Ethiopia will generate about 1,870 megawatt (MW).

Work on the project is being expedited,’ external relations head at EEP, Miskir Negash, told WIC. “Electrical and mechanical works are nearing completion,” he said.

Upon completion, the project housing 10 turbine units with a power of 187 MW each will increase the electric energy coverage in the country by 94 percent, he said.

According to him, two of the ten turbine units will begin generating electric power this Ethiopian budget year.

Installation of electric transmission line is also underway in conjunction with the construction of the project, he said.

In addition to improving their socio-economic benefits, the project protected residents of the area from frequent flooding, he said.

According to Misiker, over 7,500 Ethiopians and 120 foreigners are taking part at the project.

Gibe III hydropower project was commenced in 1999 EC, it was learnt.

http://www.waltainfo.com/index.php/explore/14870-eep-says-gibe-iii-87-complete-addis-ababa-5-september-2014-wic-some-87-of-gibe-iii-hydropower-project-has-been-completed-according-to-the-ethiopian-electric-power-eep-once-completed-the-gibe-iii-project-under-construction-on-omo-river-in-

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Ethiopia in Category 1 in Aviation Safety Assessment of FAA

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Ethiopia in Category 1 in Aviation Safety Assessment of FAA

Following months of examination, the US Federal Aviation Administration (FAA) has reportedly confirmed that the Ethiopian Civil Aviation Authority (ECAA) is in category 1 in the aviation industry.

The Ethiopian Civil Aviation Authority told ENA that FAA’s official letter has reaffirmed that Ethiopia has maintained its status of belonging to category 1 in the aviation industry.

The Ethiopian Civil Aviation Authority is in the stated category for its operational organization, air space licensing and supervision as well as flight safety, it was indicated.

According to State Minister of Transport Getachew Mengiste, the certification by FAA has enabled the Ethiopian Airlines to secure flying permits to the US, Europe and other continents without difficulty.

He added that the air traffic of the country has registered over 20 percent growth on average during the previous years.

Authority Director-General Colonel Wesenyeleh Hunegnaw on his part said Bole International Airport alone has been accommodating over 200 airplanes in a day. Duration of landing and takeoff have also fallen under three minutes, he added.

http://213.55.98.22/enae/index.php?option=com_k2&view=item&id=2225:ethiopia-in-category-1-in-aviation-safety-assessment-of-faa&Itemid=200

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