06 October 2014 Economic News (UPDATED)


U.S. farmers latest to sue Syngenta over GMO corn rejected by China




(Reuters) – Farmers from the biggest U.S. corn-growing states have sued Syngenta AG over sales of genetically modified corn seed not approved by China, joining global exporters in pursuing damages from the Swiss-based company.

In coordinated lawsuits filed on Friday in federal courts in Iowa, Illinois, Nebraska, Kansas and Missouri, farmers accused Syngenta of being reckless when it launched U.S. sales of Agrisure Viptera corn seed in 2011 without obtaining import approval from China, a major buyer.

The farmers, who did not plant seed containing the unapproved trait, claimed they suffered losses because the price of U.S. corn dropped when China began rejecting boatloads of crops containing Viptera corn last year.

In April, the National Grain & Feed Association estimated that U.S. farmers had lost more than $1 billion due to trade disruptions linked to the rejections.

The lawsuits seek to open the complaints to all U.S. farmers who grew non-Viptera corn since China began rejecting the trait in November 2013.

Viptera corn, known as MIR 162, was planted on about 3 percent of U.S. corn acres during the past two years, according to court documents. Still, industry members have said the trait can be found throughout the supply chain because it is difficult to segregate one variety from another.

“There are a lot of angry farmers out there who really feel like Syngenta needs to step up and do the right thing, and that is compensate farmers for all the losses that occurred as a result of Syngenta prematurely rushing the product to market,” said James Pizzirusso, a partner with law firm Hausfeld LLP, which is coordinating the farmers’ lawsuits.

Last month, agribusiness company Cargill Inc and another exporter separately sued Syngenta for selling Viptera corn seed before Beijing approved imports. The companies said they suffered combined damages of more than $131 million linked to China’s rejections of U.S. crops containing the trait.

Syngenta had no immediate comment on the farmers’ lawsuits. The company has said the exporters’ complaints are without merit.

The U.S. Department of Agriculture is negotiating with China to synchronize its regulatory review of new traits with the United States in a bid to reduce approval times, Agriculture Secretary Tom Vilsack told reporters on Monday after a speech in Chicago.

According to the lawsuit, farmers felt misled about the prospects for China to approve imports of Viptera corn because Syngenta Chief Executive Michael Mack said in an April 2012 earnings call that he expected Beijing to clear the trait “within a matter of a couple of days.”

Beijing still has not approved Viptera corn.

“We don’t mess with China,” Deb Volnek, a Nebraska farmer who is among those suing Syngenta, told Reuters. “When China buys something, the markets go up. When they don’t, the markets go down.”

Her case is Volnek Farms Inc v. Syngenta Corporation et al, U.S. District Court, District of Nebraska, No. 14-cv-00305. (Reporting by Tom Polansek; Additional reporting by Karl Plume in Chicago)



Ethiopian Airline gets 10th Dreamliner


Tewolde Gebremariam, CEO of Ethiopian Airlines says the company has chosen the 787 as its core fleet

Tewolde Gebremariam, CEO of Ethiopian Airlines says the company has chosen the 787 as its core fleet


Africa’s largest airline, Ethiopian Airlines has taken delivery of a a new B787 Dreamliner, bringing its fleet of the world’s most technologically advanced planes to 10.In 2012, Ethiopian airlines became the second airline in the world, after Japan Airlines, to receive and operate the B787 Dreamliner.

The airline, which took delivery of the new plane on 2 October, said it had chosen the B787 as its core fleet for its mid- and long-range African routes, such as Johannesburg, Lagos, Abuja and Harare.

“We have chosen the 787 as our core fleet on our mid and long range routes as part of our commitment to our esteemed customers to give them the best possible travel experience,” Ethiopian CEO Group, Tewolde Gebremariam, said.

Ethiopian Airlines serves 83 destinations across five continents.

The latest Dreamliner, which the airline has named “Niagara Falls”, will serve international routes like London, Beijing, Toronto, Washington D.C. and Brazil, among others.

In line with its long term growth strategy, Vision 2025, Tewolde said the airline plans to phase-in new and modern aircraft such as the B787s, B777s, A-350 and the B-737-8 MAX to support the carrier’s fast expanding global network.



Ethiopia to issue international bond


Ethiopia announced its plan to issue international bond at the end of this year, the first of its kind move by the country to join the international capital market.

The announcement came following the sovereign credit ratings given to the country by three top international rating agencies last May.

Ethiopia had secured a credit rating from Standard & Poor’s and Fitch assigned a rating of “B” to the country’s sovereign treasury bonds, while Moody’s gave a “B1” (B+).

“On the basis of the ratings, the government of Ethiopia has decided to issue a 10-year international bond and access international capital market,” Sofian Ahmed, Finance and Economic Development Minister told journalist today.

“The bond sale would serve as a potential means for the government to know the risk premium,” he said. This, according to him, will help Ethiopian business to access international capital markets by providing a benchmark for risk assessment.

He further said that the fund to be obtained from the sale of bond would be utilized to finance infrastructure projects.

All the necessary preparations have been done to issue the bond, including selection of world top banks that will issue the bond on behalf of the Ethiopian government, he said.

An agreement would be signed soon with three banks to issue the bonds. Hiring of International law firms that provide legal advice is also underway, he added.

Asked about devaluation of Ethiopian birr, Sofian said, “The government has no intention to devaluate birr. There is no economic reason to devaluate birr. Ethiopia’s economy is now stable.



Agricultural products export projected at USD 2.5 billion


The Ministry of Trade (MoT) plans to earn USD 2.51 billion or 16.6 percent more than they targeted last fiscal year, from exporting non-manufactured or agricultural products.

The office’s biggest target item is no surprise as they plan to rake in USD 862.5 million from coffee, the item that has been historically the nation’s highest foreign currency earner. This year plans are for coffee to bring in a whopping 20 percent more than last year’s earnings.
A document released by the ministry forecasts that the nation will export 235,950 tons of coffee during the 2014/15 budget year, a significant increase from 190,876 tons during the 2013/14 fiscal year. The current year’s target has a 23.6 percent higher volume compared with the previous year. In the past budget year the country generated USD 718.8 million from coffee exports.

During the previous fiscal year Ethiopian coffee growers and exporters suffered at the hands of the international coffee market as prices plummeted. However this year coffee prices are expected to increase as other countries that export coffee have suffered from crop damage and their production may decrease. Despite the fact that MoT has set a higher target for coffee this fiscal year it is still less than the GTP target that was set about four years ago. This is largely because during the past four years, coffee did not bring in as much revenue as the GTP predicted it would. The plans of the GTP called for revenue from coffee to be over USD two billion by the end of the plan, which is this fiscal year. It targeted for coffee’s export volume to be 600,970 tons for the current fiscal year. The goal for the past year of the GTP was to be USD1.6 billion with a volume of 468,052 tons.

The lower than expected results are largely being blamed on the international market.
Coffee is now forecasted to earn nearly USD 4,268.68 per ton this fiscal year whereas last fiscal year it earned an average of around USD 3,765.75 per ton.

One thing the government wants to do to improve results is to establish a strong institution to fully follow the harvest (plantation), marketing and exporting of coffee beans with the goal of getting more from coffee. The office would be at the ministerial level and would exclusively follow coffee. Currently, different offices like the MoT and Ministry of Agriculture are responsible for coffee.
Experts said that this should help coffee earn more.

“For instance very few individuals are responsible for the coffee sector at MoT,” the expert said. Even though the Ethiopian coffee has a high premium compared with international brands, it is still not gaining its value.

The other major sector that MoT is looking after is the export of oil seeds. During the current budget year the ministry has targeted to expand the export earnings by 12.77 percent compared with the past fiscal year’s achievement. During the current year USD 725 million is expected to be earned, an increase from USD643 million during the 2013/14 budget year. The GTP target indicated that the revenue from oil seeds should be USD 1.12 billion.

Despite the fact that some have mixed feelings about khat, the stimulant leaf brings in a lot of hard currency.  According to the ministry’s target, khat should generate USD 332 million through 60,435 tons of exports. Khat is the third highest earning export crop and in the past fiscal year its 52 thousand tons export brought in USD 297 million to the country. The export of pulses for the current year will be USD 307 million with the export of 409,287 tons of the crop. The projection is a 22 percent higher value and 16 percent higher volume compared with the past fiscal year.

From livestock exports the country expects to earn USD 222 million from 808,747 live animals. In the 2013/14 fiscal year the country earned USD 187 million from exporting 647,713 animals, mainly cattle, sheep and goats.

According to the GTP Matrix, the government had projected to earn USD 4.04 billion from exporting coffee, oilseeds and pulses in the 2014/15 budget year. But according to the latest plan the ministry office plans to earn half of the original GTP target which is USD 1.9 billion.

The other sectors that MoI follows are cereal, natural gum, tea and spices. From these items the ministry has targeted to earn USD 58 million in the current budget year.
This is the final year of the five year Growth and Transformation Plan (GTP).



Coffee Futures Soar to 32-Month High, Signal Retail Jump




By Marvin G. Perez and Luzi Ann Javier


Coffee futures surged to a 32-month high as persistent drought curbs harvest prospects in Brazil, increasing the odds for higher retail prices.

Dry weather was forecast for the next 10 days after no “meaningful” rain fell over the weekend in Brazil’s main growing regions, Drew Lerner, the president of World Weather Inc. in Overland Park, Kansas, said yesterday in a telephone interview. Arabica-coffee prices have almost doubled this year as drought cut 2014 output and dimmed the outlook for 2015 in Brazil, the world’s top producer and exporter.

Some U.S. retail prices will increase as soon as mid-November, says Ross Colbert, a global beverage strategist at Rabobank International. Brazil’s National Coffee Council has estimated that farmers may collect less than 40 million bags in 2015, creating the longest output slump in five decades. Options show that some investors are betting that futures will climb to $3 a pound, up 36% from yesterday’s settlement.

“At the price level we are in futures, I would expect we’ll see maybe a 10 percent to 12 percent price increase” in certain outlets, New York-based Colbert said in a telephone interview yesterday from Utretch, the Netherlands. “By Thanksgiving, you’re taking in the holiday season, and coffee retailers will use this opportunity to nudge pricing up before the holiday traffic builds.”

Arabica coffee for December delivery climbed 6.9 percent to settle at $2.208 yesterday on ICE Futures U.S. in New York, the biggest gain for a most-active contract since April 22. The price reached $2.255, the highest since Jan. 20, 2012.

Aggregate futures trading was 56 percent above the average for the past 100 days, according to data compiled by Bloomberg.

Options Trading

Calls giving owners the right to buy December futures at $3 traded an estimated 947 contracts yesterday, the third-most active option. The price more than doubled to 2.4 cents, the highest since June 16.

December calls with a $2.50 strike price traded 1,021 contracts, the most-active. The option price almost doubled to 8.83 cents.

Starbucks Corp. and J.M. Smucker Co. raised retail prices this year after futures surged 61 percent in the first quarter.

Companies including Kraft Foods Inc. and Smucker, the maker of Folgers, the top-selling U.S. brand, “have shown a willingness to raise prices” as green-coffee costs increase, Colbert said. “They are early movers.”

Flowers for the crop that blossomed from August to late September may fall off before developing further, Cepea, a University of Sao Paulo research group, said on Oct. 1.

‘More Premium’

“Now, trading is all about the weather,” Fain Shaffer, the president of Infinity Trading Corp. in Indianapolis, said in an e-mail. “Since the chances of rain have been pushed back another week, we are seeing more premium being built into prices.”

Production this year may be down as much as 18 percent to 40.1 million bags, the National Coffee Council estimated, after a 3.1 percent slide last year. Prospects for the next crop are worsening as spring starts and temperatures rise in the Southern Hemisphere.

“The situation is going to get rather dire if there is no rain for another two weeks,” Judy Ganes-Chase, an industry consultant in Panama City, Panama, said yesterday in an e-mail. “There is no ‘if’ any more regarding sparing the crop from harm. Rains will simply keep this disaster from being even worse.”

Real Rally

Coffee rose as Brazil’s real strengthened against the dollar in the past two sessions. President Dilma Rousseff faces a runoff election with Aecio Neves, who has appealed to investors by pledging to slow inflation. A stronger real erodes the appeal of export sales of the commodity priced in dollars.

Coffee has posted the biggest gain this year among 22 raw materials in the Bloomberg Commodity Index of 22 raw materials. The broad gauge has dropped 4.9 percent in 2014.

Yesterday, robusta coffee for November delivery rose 4.1 percent to $2,165 a metric ton on ICE Futures Europe in London. The price reached $2,169, the highest since May 2. The commodity has climbed 29 percent this year.

The arabica premium to robusta jumped 9.3 percent to $1.226, the highest since Feb. 10, 2012. The ratio has more than tripled this year. Arabica is brewed by specialty companies including Starbucks, while robusta beans are used in instant coffee.

Brazil is the biggest grower of arabica, and Vietnam is the top producer of robusta. A bag weighs 60 kilograms (132 pounds).



Dangote Industries (Ethiopia) Ltd., Muger, Ethiopia


Dangote Cement PLC has commenced project works of US$ 400 Million green field cement plant of 2.5 million tons/ annum capacity at Muger in Ethiopia. Mobilization of men and machinery is done and project execution is underway in full pace. The Plant is scheduled to be commissioned by the Q1 of 2015.

Dangote Cement’s foray into Ethiopia in the Oromia region close to Addis Ababa, comes at a time when the Horn of Africa nation is grappling with a severe cement deficit amidst rising demand as a result of substantial investments in infrastructure like roads, dams, bridges and railways. Currently, Cement demand in Ethiopia is around 7 to 8 MTPA, while production stands at 2.4 MTPA forcing the nation to import the deficit for several years. Over the next five years, demand is expected to soar to 13.8 MTPA, while local supply will reach 8 MTPA when existing manufacturers complete the upgrading of their factories. This provides Dangote Cement an ideal investment opportunity to bridge the deficit and consolidate its operations.

Key Features

Name of the Plant : Dangote Industries (Ethiopia) Plc, Muger, Ethiopia
Capacity : 2.5 million tons/annum

Raw Material Sources

Limestone : Muger Mines
Shale : Muger Mines
Red Soil : Muger Mines
Gypsum : Muger Mines
Power Source : 1 x 30 MW Coal Based Captive Power Plant
Fuel Source : Coal, LPFO
Cement Packing : 3 Roto Packers of 2400 Bags/hr Capacity
Cement Loading : Auto Loading of 8 Trucks simultaneously



East African Cement Industry Production and Investment Forecast


– The low per-capita consumption of cement within the enlarged East African region offers scope for growth

East Africa’s average consumption is low and the process of catching up with international averages will drive future growth. The Democratic Republic of the Congo (DRC), Kenya, and Burundi are expected to display the most rapid consumption growth. Certain high-growth markets — such as those in the DRC, Rwanda, and Burundi — which are characterised by low cement consumption per capita, are expected to continue to grow and attract imports from cement manufacturers based throughout East Africa. Most countries from this group have or have had political instability, which has curtailed the development of the infrastructure and construction sectors.

Cement demand in this region is anticipated to remain strong in the medium term, supported by the resurgence in infrastructure and housing sectors, which are boosting investments in new cement production lines, the retrofitting of old cement plants, and the expansion of existing cement production capacity. Key drivers for cement demand in East Africa are infrastructure development, urbanisation, high regional gross domestic product (GDP) growth rates, and high population growth.

The implementation of sustainable cost optimisation strategies focusing on alternate fuels, low-cost technology, and value-adding models are expected to reinforce the local producers’ presence and competitive positioning in the East African cement industry. Modernisation at the plants, improvement of plant processes, and absorption of the best practices in mining and manufacturing — in the pursuit of cost efficiency — is required if East African cement producers are to compare favourably to leading global cement producers in terms of profitability.



European businesses plead for urgent improvement in business licensing, taxation


Ahmed Shide

Ahmed Shide


“We are here to listen to you and make swift improvements,” Ahmed Shide, MoFED

The European Union Business Forum Ethiopia (EUBFE) pleaded for an urgent improvement of the business climate in Ethiopia on Thursday during an event held at Addis Ababa Hilton.

“We are here to listen to you and to act accordingly.” Ahmed Shide, State Minster, Finance and Economic Development (MoFED) assured that the government would undertake swift improvements on the implementation of policies.

The occasion that drew a number of EU ambassadors, members of the business community, international business consultants, and experts showed a direct structural dialogue with the Government of Ethiopia. “Despite the ongoing construction and infrastructure boom in the country, we the EU business community need to get a comprehensive business climate that is easy, efficient and flexible,” an EU investor said.

Barbara Plinkert, Charged Affair of the EU Delegation in Ethiopia said that EUBFE has been in continuing direct dialogue with the government of Ethiopia to realize a favorable business environment.

The Ethiopian Revenues and Customs Authority (ERCA) and the Ministry of Industry (MoI) repeatedly reacted on the wider range of showcases obtained from an independent legal expert. Impediments identified in the survey conducted in the ERCA and MoI revealed the obstacles and failures that have halted investment with the EU members and other foreign companies. “The survey could show us some of loopholes, but I think we are seeing encouraging progress,” Nuredin Mohamed, Trade Inspection and Regulatory, director and advisor to the state minister of MoI said.

Nebyou Samuel, deputy director of ERCA on his part said that implementing the laws and best practices enshrined in the Authority’s mandate significantly solves all the indicated obstacles. “We have to accept part of the shortcomings, but implementing the laws will relive our customers’ burden,” he said. According to Semaw Nigatu, a legal expert, some of the problems he enumerated were a shortage of foreign currency, inconsistency with the institutions, rigidity of rules, lengthy registration, and renewal of licenses. “We absolutely consider the EU a very important partner for trade and investment so we will work hard on our weaknesses,” Ahmed said. The state minister wrapped up the government’s response for the criticism his government received from the conference.

With a membership of 13 different countries, a steering committee of 12 members – supported by a permanent executive secretary – EUBFE’s inception was realized in May 2012 to foster the trade and investment between the two sides. “We are encouraged by the feedback from government officials who really took the points very seriously,” Chris De Muynck, Chairman of the EUBFE said.

Prime Minister Hailemariam Desalegn confirmed that his government greatly seeks more trade and investment links with the EU during his meeting with Jose Emanuel Barosso, EU commissioner as he hailed the 300 companies of EU members sates have already engaged in agro-processing and horticulture investments in Ethiopia. According to government officials, EU companies’  investments are estimated at 80 billion birr. International consultants and representatives of the regional economic block also indicated some of the principal factors missing in Ethiopia’s business environment. “We would like to see Ethiopia moving forward in its economic growth with the help of attractive business climate since it covers 25 percent of the Common Market for East and Southern Africa (COMESA),” Theirry Mutombo, director, investment promotion and private sector for COMESA, said.



Ethiopia, Switzerland Sign Memorandum of Understanding


Ethiopia, Switzerland Sign Memorandum of Understanding

Ethiopia and Switzerland signed on Monday, October 06, 2014 a memorandum of understanding that strengthens their bilateral relations.

The memorandum of understanding was signed by Foreign Affairs State Minister Ambassador Berhane Gebrekristos and Yves Rossier, Swiss State Secretary for Foreign Affairs.

According to Ambassador Berhane, the MoU would help the countries collaborate on political issues at bilateral and international forums.

Switzerland would also provide training on federalism and extend technical assistance in science and technology as well as other spheres, it was learned.

Switzerland State Secretary for Foreign Affairs, Yves Rossier, expressed his appreciation for the role Ethiopia is playing in the Intergovernmental Authority Development (IGAD).

”The strength of IGAD is only the strength of its member states and the role of Ethiopia is determinant,” he said.

Rossier added that the agreement helps the two countries to work closely in various issues.
Ethiopia and Switzerland are expected to sign agreements in economic and technical areas soon, it was learned.


Ethiopia’s economy shows 10.1 per cent growth


President Mulatu Teshome said Ethiopian economy has shown a 10.1 per cent growth on average during the past four-year implementation period of the Growth and Transformation Plan (GTP).

The President made the remark here today while opening the fifth term joint session of the House of Peoples’ Representative (HPR) and the House of Federation (HoF).

He further said the county managed to register 10.3 percent growth last Ethiopian fiscal year. He also predicted the economy to show 11.4 percent growth this budget year.

According to President Mulatu, agricultural productivity grew by 21.7 quintals per hectare on average, while tax revenue has surge by 17.6 per cent.

More than 18,800 kebeles (districts) have become beneficiaries of telecom services, thereby attaining 96 per cent of the target set out in the Growth and Transformation Plan (GTP), he said.

He further said that more than 26 million people have participated in the watershed development and natural resource conservation activities carried out across the country
The mega project being carried out in the country has created jobs for 2.7 million people, he said.

The president also told the parliament about the activities to be carried out in this budget year.

He said efforts would be made to maintain the single digit rates of inflation as well as improve education quality in this budget year.

He said the government is doing to solve the current power interruption and alleviate problems facing the manufacturing industry sector.

Efforts would also be made to make the upcoming general election fair, free and participatory, he noted.

He said the country would consolidate its efforts to bring about durable peace in the region, especially in Somalia and South Sudan.



Rwanda seeking 400MW electricity from Ethiopia


Rwanda seeking 400MW electricity from Ethiopia

Faced with a high cost of energy, Rwanda is planning to import 400MW of electricity from Ethiopia in the medium term.

Kigali is exploring other avenues that will enable it achieve its ambitious second Economic Development and Poverty Reduction Strategy (EDPRS II) target of 70 per cent access rate to energy and an electricity generation capacity of 563MW by 2017.

For it to achieve its desired access rate, the government is planning to supply 1.7 million customers with electricity. Currently, the country’s total energy generation stands at 119MW.

Rwanda has designed a five-year electricity strategic plan in which it projects to deliver about 232MW of hydropower, 310MW geothermal power and 300MW from methane gas, as well as strengthen and expand transmission lines by an additional 2,100km.

Hydropower projects in the pipeline include Rusumo falls, Rusizi III and Nyabarongo II.

However, because most of them are in their infancy, the rising demand for energy will partly be met through significant energy imports, which is cheaper than generating energy from costly thermal projects.

Currently, 50 per cent of Rwanda’s energy is generated via thermal means which is expensive largely due to fuel costs.

Fuel – in particular diesel and heavy fuel oils – account for approximately 40 per cent of the country’s 119MW installed energy capacity. Hydropower accounts for 59 per cent and methane gas 1 per cent.

Last year, for example, the energy sector requested the government for $46.7 million for buying fuel to be used in thermal power generation but received only half the amount.

This cost is passed on to consumers; hence Rwandans pay higher per unit cost for power than their neighbours in the region.

Rwanda’s current generation portfolio stands at $0.24/kWh compared with Kenya’s $0.15/kWh, Uganda’s $0.17/kWh and Tanzania’s $0.05/kWh.

Rwanda’s energy deficit is hampering its plan to achieve a middle income status by 2020 by empowering the private sector.

As part of plans to boost its capacity, Rwanda has signed a memorandum of understanding with Ethiopia.

However, the expression of interest is not a guarantee that the flow of electricity from Ethiopia will be immediate, as Rwanda must first sort out infrastructure and regulatory challenges.



Kessem to commence sugar production


Kessem will commence production by the coming December, according to general manager of Kessem sugar development project.

The factory is under construction in Afar Regional State, 50 kilometers far from Metehara sugar factory.

“The factory is now 90 per cent complete and it will begin trial production after three months,” Kaba Merga, general manager of Kessem sugar development project told WIC.

The factory is being built mainly by Complant Group Inc., a Chinese construction and engineering company, he said.

Two Chinese sub-contractors and SATCON Construction Plc, a domestic construction firm, are also participating in the construction activities of the factory, he noted.

He said based on the agreement signed between Ethiopian Sugar Corporation and Amibara Agriculture Development P.L.C, the latter is developing sugarcane on 6,000 hectares of land.

The Corporation and Amibara Agricultural Development plc signed an out-grower agreement on March, 2014, – the latter to develop sugarcane on 6,000 hectares of land and supply it for the factory.

Kessem sugar development project itself is developing sugarcane on 1,800 hectares of land, he noted.

Factory division deputy general manager at Kessem sugar development project, Worku Chekol, on his part said the factory will use improved sugarcane crushers and modern technology to alleviate contamination.

Pastoralists, who were benefited from the villagization program carried out in connection with the sugar development project, are currently engaged in crop production, it was noted.

Kessem sugar development project is part of the government’s drive to increase the country’s sugar production capacity to 2.25 million tons during the Growth and Transformation Plan (GTP) period.



Chinese company plans to produce gas by 2018


– Prepares bid documents

The Chinese company that acquired the Calub and Hilala gas fields in eastern Ethiopia, POLY GCL Petroleum Investment Limited, this week announced that it plans to start extracting natural gas from the gas fields by 2018.

On November 16, 2013, the Ethiopian Ministry of Mines and POLY GCL Petroleum Investment Limited signed petroleum exploration and development agreements in Addis Ababa.

The agreement enables Poly GCL to develop the Calub and Hilala gas fields found in the Ogaden basin in Eastern Ethiopia. The agreement also allows Poly GCL to prospect for oil and gas in Blocks 3&4, 11&15, 12&16, 17&20 exploration blocks in the Ogaden basin.

According to Li Wei, general manager of Poly GCL, since signing the PSA, Poly GCL organized a competent project team and set up a management system in accordance with international petroleum industry practice. “We have submitted the 2014 work program and budget, finished the comprehensive geology and geophysical study, signed the contract with a company to begin the Environment Impact Assessment (EIA) study,” Wei told The Reporter via email.

According to Wei, Poly GCL is in the process to hire a company that would undertake a seismic survey and drill exploration wells for additional discovery. “We are preparing bidding documents for seismic and drilling work tender,” Wei said.

According to the current plan, the first stage of the project will produce around 3 million tons of LNGs (Liquefied Natural Gas) annually and is expected to go into production in 2018. According to the exploration and development plan, 4 billion cubic meters of natural gas will be produced each year from Calub and Hilala block and option is to transport the gas northward through a pipeline of 800 km long to Djibouti port and finally market the products in the international market.

As to the figure of total investments, the company said it can only be estimated after certain exploration work and the completion of the Master Development Plan.

“Empirically, we have started both the exploration and construction work, for instances, the site survey, the bidding process for different packages, the Preliminary Front End Engineering Design (Pre-FEED) studies, the renovation and construction of the camp site, etc.”

The company said it is planning to start the seismic acquisition of exploration in 2015 and the construction and the installation for surface engineering in 2016.

The Calub gas field was first discovered by an American oil company, Tenneco, in 1972. The Hilala gas field was discovered by Soviet Petroleum Exploration Expedition (SPEE) in the 1980s. The total gas reserve is estimated at 116 billion cubic meters. (4TCF). Eight gas production wells were made ready for production by Zhongyuan Petroleum Exploration Bureau (ZPEP), a Chinese petroleum exploration company.



Ethiopia Main Beneficiary of Hotels Forum


If the third African Hotel Investment Forum (AHIF) has proved propitious for any of the participating countries, one might well earmark Ethiopia. The burgeoning nation now has the prospect of seeing its international hotel brands growing to 10, with the signing of six agreements between international hotel management groups and Ethiopian real estate owners.

Playing a major role in all of these agreements was Calibra Hospitality Consultancy & Business Plc, whose managing partner, Yonas Moges, remembers an international company moving a conference four years ago from Ethiopia, where it was intended to take place, to Dubai, because it wanted to find a hotel able to accommodate all 500 of its guests. The two international standard hotels at the time, Hilton and Sheraton, had 100 rooms each.

“This forced them to change the meeting to Dubai,” he said.

The AHIF was officially launched on Tuesday, September 30, 2014, at the Sheraton Addis Hotel, by Prime Minister Hailemariam Dessalegn. It drew 500 participants, including international branded hotels, consultancy firms and hotel developers, from around the world.

The Forum, organised by Bench Events, was intended to take place at the Intercontinental Hotel in Nairobi Kenya, but, ironically, had to be moved to Addis Abeba because of space limitations. It had more than 37 sponsors, including ACCOR, Carlson Rezidor Hotel Group, Hilton Worldwide, Mangalis Hotel Group, Marriott International, InterContinental Hotels Group (IHG), Starwood Hotels & Resorts International and the Wyndham Hotel Group. The event is organised at a time when Addis Abeba has only three internationally-branded hotels in business – Sheraton Addis, Hilton Addis and Radisson Blu – with 869 rooms. These numbers pale in comparison to some major African countries, such as Nigeria and Morocco, with 40 and 29  international hotels, respectively, with 6,514 and 4,828 rooms, according to data from World Hospitality Group. Egypt has 21 such hotels, according to Yonas.

However, tourist flows to Ethiopia continue along an upwards trajectory, reaching 724,000 during the 2013/14 fiscal year – a 12pc growth. It is, however, still lagging behind Kenya’s 1.5 million tourists and Tanzania’s 1.2 million.

Prime Minister Hailemariam, in his speech at the Forum, said that his government was aware of the problems and had set up the Tourism Transformation Council, which he chairs, with 16 members, including ministers, regional state presidents and industry stakeholders.


Haile Gebresillasie, Olympic gold medalist and hotel owner (left) explaining about Ethiopian hotel industry for Patric Fizgibbon, senior vice president development, Europe and Africa of the Hilton World Wide (right), and Yonas Moges, managing partner of Calibra Hotel Hospitality & consultancy business.


The shortage of international hotels in Africa, especially Ethiopia, where diplomats are coming for African Union (AU) and United Nations (UN) conferences, is what is driving the development of such hotels, according to David Tarsh, managing director of Tarsh Consulting and head of media at the AHIF. Addis Abeba stands at third position globally with 118 diplomatic missions, following Brussels with 185 and Washington with 176.

The two-day forum, which attracted 115 hotel development investors, with half of the 500 participants from Africa – mainly Kenya, South Africa, Nigeria and Ethiopia – saw a flurry of talks and deals among stakeholders, with several hotel groups signing deals with counterparts in Ghana, Nigeria and Uganda, in addition to Ethiopia, in the days before, during and after the Forum. At the conference venue itself, a management agreement was signed between the Wyndham Hotel Group’s Ramada Brand and Ethiopia’s ADM Business Plc for the development of a four star hotel, with 136 rooms. It was also announced that Radisun Blu, of the Mangalis Hotel Group, had agreed to sign contracts with two businesses from Uganda and Ghana.

The other cooperation agreement signed during the event was between World Hotels, which has 500 hotels worldwide, and the African Azalai Hotels Group, with 20 hotels.

There were six agreements in all for international hotel brands in Ethiopia. Marriott has had a deal with Sunshine Construction for the past four years, and their hotel, located on Cameroun Street, is expected to begin operations in 2015. The latest deals, however – signed between Saturday, September 27,2014 and Tuesday, September 30, 2014 – included Aschalew Belay Hotel Projects and the Louvre Hotel Groups to open the Golden Tulip Addis; Tsemex and Intercontinental Hotels Group to open the Crowne Plazza Addis; Wyndham Hotel Group and ADM Business Plc for the Ramada Addis Hotel; Accor Hotel Group with Enyi General Business for the Pullman Addis Hotel and Best Western International with Great Abyssinia Plc and Noah Real Estate for the Best Western Plus and Best Western hotels. All these hotels are expected to be opened between 2015 and 2017, with the next year seeing Crowne Plaza-Marriott and Ramada Addis coming into business. Last on the list will be Pullman Addis in 2017.

“All of these deals are taking place in Africa at this time because the economic tourism growth of Africa is four percent, while it is just 2.5 percent on other continents,” said Tarsh.

According to data obtained from the Ministry of Finance & Economic Development (MoFED), the contribution of tourism in income revenue to Ethiopia’s economy has increased over the last three years – from 17 billion Br in 2010/11, to 18.7 billion Br and 22.2 billion Br, respectively, over the next two years.

Investors want to invest their money where the returns are high, and in countries where there are efficient local partners to work with; this attracts international hotels to come and invest in Ethiopia, said Trash. However, David Grossnikalus, Starwood Hotels representative, operating with 1,200 hotels in 100 countries, including the Sheraton, feels that architectural designs in Ethiopia fail to meet the standards of international hotels.

On the other hand, inbound tourist arrivals and planned events and conferences are growing faster than the supply of international standard hotels and accommodation in Addis Abeba, with the gap expected to widen, according to a 2011 study by Awash International Bank. Awash estimates that the gap will increase from 1.3 million hotel nights in 2015 to 3.1 million in 2020, the research use the number of the rooms for all sample years is same with the 2011.

Amin Abdulkadir, Minister of Culture & Tourism, says that the Tourism Transformation Council, Ethiopian Tourism Board and the Ethiopian Tourism Organisation will solve all problems in the sector starting from the next fiscal year, citing as evidence that his ministry will finally be able to implement the long awaited hotel standardisation by the end of this fiscal year. He also believes that graduates from government training institutions will address the lack of skilled human resources.

“Within the coming two years, international branded hotels will be common in Ethiopia,” said Tarsh. “So, the old hotels should be refurnished, relaunched and reflagged, in order to balance the hotel development of the country.”

So far, three additional international brand hotels will join the Ethiopian sector soon and make the total number six, along with the Hilton, Sheraton and Radison Blu. The management companies who have signed agreements to join the sector are the Marriott, Golden Tulip Addis Abeba and Crowne Plaza Addis.

In addition to the 209-room Courtyard by Marriott Addis Abeba, opening in 2016, there will also be a 104-unit Marriott Executive Apartments Addis Ababa, opening in 2015.

The government is ready to amend policies that are bottlenecked for the development of the whole tourism value chain, creating problems related to customs and logistics, said Solomon Tadesse, chief executive officer (CEO) of the Ethiopian Tourism Association.



Credit Suisse delays USD 1.4 bln loan for railway project


Credit Suisse, a syndicate of banks and Export Credit Agencies, has delayed a USD 1.4 billion loan, which it has agreed to extend to the Government of Ethiopia  for the financing of the Awash-Woldiya railway project, due to the Environment Impact Assessment (EIA) report, The Reporter learnt.

According to reliable sources approached by The Reporter, the reason that prompted the bank to withhold the anticipated loan is in connection with the impact assessment that was carried out and submitted by the Ethiopian Railways Corporation (ERC) that is said to have failed to meet the Equator Principles up on which the bank considers it as a guiding principle for evaluating EIA. Equator Principles is a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and social risk in projects and is primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making.

The Corporation has been planning to build the second longest railway line in the country that stretches from Awash to Woldiya/Hara Gebeya passing through Kombolcha town. The planned 447-km-long railway also includes an underground tunnel which is some 25 KM long.

Credit Suisse had hired Pricewaterhousecooper (PwC) as its main consulting firm with a responsibility of reviewing and evaluating the EIA conducted by the corporation.

This railway project, which is estimated to cost of some USD 1.7 billion, demands a strict EIA, already undertaken by a couple of companies in four lots. The findings of the impact assessment was provided to Credit Suisse earlier and was expected to draw the required project finance under long-term loaning scheme.

The Equator Principles and the International Finance Corporation (IFC) Performance Standards are crucial requirements set by the bank to meet the issues raised in the EIA. From a total of 37 subheadings that are expected to be met under the Equator Principles the EIA have failed in 17 subheadings, according to sources.

Meanwhile, sources said that if the concerns raised in the EIA could be rectified then the Corporation would be able to get the financing for the project.

However, Dereje Tefera, communications directorate director at the ERC, denied the report and claimed that the loan has already been secured.

However, The Reporter has learnt that the required loan, which was expected from the Turkish EX-IM Bank has not been earmarked until last week. Ethiopian Foreign Minister Tedros Adhanom (PhD), who was in New York last week to attend the 69th UN General Assembly, twitted from from the Big Apple that he had a “fruitful” meeting with his Turkish counterpart and discuss on possible ways of securing the loan.

The Ethiopian government awarded the turnkey project to a Turkish company – Yapi Merkezi – two years ago while the Turkish EX-IM Bank agreed to lend some USD 300 million.

However, an official of the Ethiopian Railways Corporation, who requested anonymity, told The Reporter that the project may commence this week. Asked about the source of finance the official declined to comment on the issue.

The project connects the northern and eastern economic and traffic corridors of Ethiopia and provides a vital link to Addis Ababa and the Djibouti Port – the main import and export terminal for the region. The railway will connect the lines from Mekele to Hara Gebeya and then Addis to Djibouti.



 A Recipe for Success: Introducing fertilizer blends to farmers in Ethiopia


Moving bags of fertilizer at the new blending facility in Becho-Woliso. Photo Credit: Ethiopian ATA

Moving bags of fertilizer at the new blending facility in Becho-Woliso.


On June 1, 2014, the first fertilizer blending facility in Ethiopia was inaugurated in the Oromia region at the Becho-Woliso Farmers’ Cooperative Union. The facility, along with four more under construction, will play a leading role in supplying farmers with fertilizer blends that target missing nutrients in their soil. The years leading up to the inauguration included many actors to make the concept of a blending facility into a reality.

It started with a simple observation. The soil types in Ethiopia vary considerably throughout the country. It is evident when driving through the countryside where variations in the soils’ color and texture are visible to the naked eye. But traditionally, all soil has been treated the same. Farmers typically apply two types of fertilizer and disperse the same amounts, regardless of the crop or soil needs.

Back to basics

In 2009, the International Food Policy Research Institute (IFPRI) conducted a soil diagnostic study in Ethiopia. Key recommendations included creating a tailored soil fertility plan that attends to local soil conditions and a national soil information infrastructure. When the Ethiopian Agricultural Transformation Agency (ATA) was formed in 2011, soil became a priority for the agency. There was added momentum because within the Ministry of Agriculture, Professor Tekalign Mamo, State Minister of Agriculture, who is also a soil scientist, was very interested in pushing the agenda forward and had been for some time.

“There are a number of studies showing that farmers in Africa are harvesting more nutrients from the soil than they are putting in. As a result, there is a depletion in nutrition, which will be reflected in [the] food and in human health,” says Shahidur Rashid, IFPRI Senior Research Fellow and Project leader of the IFPRI-led Research for Ethiopia’s Agriculture Policy (REAP) project.

Fertilizer blends—a novel concept in Ethiopia

“Ethiopia has not really changed its fertilizer policy, probably in 30 years, and was just importing and distributing DAP and Urea,” says Vanessa Adams, Project Director of the USAID Agribusiness Market Development Project that is funding the bulk of the new facility in Becho- Woliso. Making the switch to blended fertilizers is a big change from the norm in both “operations and types of fertilizers.”

Creating fertilizer blends means that farmers will now have the right mix of ingredients to replenish missing nutrients in the soil. “Blending fertilizer enables the country to introduce specific nutrients that the soil is lacking, and the crops need in order to grow,” said Tim Durgan, Project Coordinator for the Blending Facility Initiative at the ATA. “In combination with the soil mapping and the soil testing that the ATA has done, we now know what nutrients are deficient, and we know what nutrients the crops need to achieve maximum yields.”

Choosing Becho-Woliso Cooperative Union as the site for the first blending facility was a strategic decision. “The area is highly productive,” says Dejene Hirpa, General Manager of the cooperative union that will run the blending facility in Becho-Woliso. He explained that during the planting season, the demand for fertilizer in the area is high. Additionally, management at the union is top-notch – Becho-Woliso is “one of the top five cooperatives in the country,” according to Adams. Lastly, the location of the facility is “optimal,” according to Adams, as it is close to Addis Ababa and not far from Adama, a transportation hub in Oromia. This location makes it ideal for distribution.

Jeff Ivan, VP from Yargus Manufacturing, has been working with the ATA and International Fertilizer Development Center (IFDC) for two years to design a fertilizer blending system for the first facility. During a field visit in May, Ivan was on-site to inspect crates full of state-of-the-art equipment that would be installed by the company later that week. Ivan explained the easy-to-use automated blending system where “operators can simply enter in each nutrient that is required, and the kilograms of each product,” which will be blended with “a high-level of accuracy.” At full operational capacity, the facility will crank out 50 to 60 thousand tons of fertilizer each year. Another design feature is that as business grows, blending capacity can be stepped up.

According to Durgan, Ethiopia will need at least 18-20 blending facilities to address the nutrient deficiencies throughout the entire country. “The success of the first facilities will determine how soon the others will get up and running,” he says.

Already, the private sector is eager to get involved, and encouraging private sector investment will increase the strength and resilience of the country’s economy. But Adams points out, “In order for the private sector to come in and invest more in a country like Ethiopia, they have to see facilities that are working. So really, this fertilizer blending factory should be one of many to come.” When discussing private sector investment and looking at model facilities, such as the Woliso blending unit, Adams continued, “It’s important because…already people [in the private sector] are coming in and saying, I want to do this too.”

This article originally appeared in Volume 2 of REAP’s project Newsletter. Read the full newsletter here. Download a PDF of Volume 2


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