23 January 2015 News Briefs (UPDATED)

Turkey ready to support Africa on all platforms



Speaking at the Turkey-Ethiopia Business Forum, President Recep Tayyip Erdoğan said that Turkey is trying to build not only commercial and economic ties with Africa, but also, as a country aware of Africa’s problems and its potential, wants to support African countries “in all platforms.” He underlined that they want to improve relations with Ethiopia in order to compensate for the 10-year gap in relations, when the government’s latest Africa initiative program was implemented. Erdoğan said that the program was successful and now the ties that have been established need to be strengthened by taking mutual steps. Erdoğan said that with its potential and human-resources, and as the host of the Organization of African Unity, Ethiopia is the center of the continent.


Claiming that the trade volume between Turkey and Ethiopia has reached $421 million as of the end of 2013, Erdoğan said that while there would be a decline in figures in 2014, as the data collected in the first 11 months of 2014 indicated, the trade volume will remain around the $400 million mark.

“Our target is to increase the trade volume to $500 million since both countries together have a population of around 173 million, which means there is a very high potential for trade. We have to start working towards signing an Economic Partnership Agreement to establish a free trade zone as the leading economic actors in the region,” said the President. He said that such matters were discussed during the meeting and Ethiopia is among the African countries that Turkey invests the most in, with investment figures reaching around $3 billion. Erdoğan further said that he is happy about the situation for Turkish investors, whose reputations have gone up after their work in Ethiopia.

He further said that 14 projects, working out to about $2.5 billion worth of invest, has been assumed by Turkish firms and the most important one of these projects was the Avas-Veldia Railway Project, which when completed will be one of the most important achievements of the Turkish construction sector.

See also  http://www.2merkato.com/news/alerts/3532-ethiopia-and-turkey-to-boost-trade-volume-to-usd-500-million

President Erdoğan also called on Turkish businessmen to invest in Ethiopia and said “There is a country that invites you sincerely and is ready to make things easier for you. I want you to do business here in harmony with the Ethiopian people, while taking into consideration the circumstances of the country. I believe our cooperation will be developed strongly.” He further gave examples from the areas available to invest, like building hydroelectric power station, potable water installation, solar power, geothermal and agriculture, which Ethiopian Prime Minister Hailemariam Desalegn promised to assist Turkish businessmen with and provide land for.



Africa debt: Ethiopia tops off banner year for sovereigns


African DCM becoming more sophisticated; Debt sustainability a concern.

Africa’s Eurobond market closed 2014 on a high, following soaring investor demand for Ethiopia’s debut offering. The $1 billion 10-year debut Eurobond, which was priced at 6.625% over 10 years, boasted $2.6 billion in orders.

“The order book was of the highest quality, with fund managers taking up 96% of the bond. It was a tremendous inaugural transaction to end the year with,” says Maryam Khosrowshahi, head of public sector coverage CEEMEA at Deutsche Bank who worked on the deal.

Some 50% of the bond was taken up by fund managers in the US, 35% from the UK and 14% from the rest of Europe. Deutsche Bank and JPMorgan were the lead managers and Lazard advised the Ethiopian government.

The money raised from Ethiopia’s deal will finance a variety of programmes in the country, including projects in the health, education, sugar and energy sectors, as well as the development of economic zones in the country, says Khosrowshahi.

Ethiopia’s successful debut follows Kenya’s debut Eurobond in June, Côte d’Ivoire’s return to the debt capital markets in July – three years after the sovereign defaulted on its 2032 Eurobond – and returns to the market by Ghana and Zambia, among others.

According to Dealogic, there have been nine sovereign Eurobonds from Africa this year worth $8.5 billion. This was marginally less than 2013 which saw 10 deals completed at $10.7 billion.

“We should continue to see issuance from the continent next year,” says Khosrowshahi. “African sovereigns with strong economic performance and prospects should be able to garner investor interest and support once the backdrop is more constructive in the New Year.”

Nicholas Samara, vice-president of CEEMEA DCM at Citi says: “I’m not sure we will see such high volumes in 2015 because large chunks of debt were issued from Africa in 2014. But what we should note is that sub-Saharan Africa is becoming more sophisticated in terms of the development of the capital markets.”

Samara adds: “ Kenya’s issue earlier this year is a great example. The $2 billion Eurobond was spread over two tranches and six months later, the government re-opened the sovereign bond to raise an additional $750 million. This is something that has never happened in sub-Saharan Africa outside of South Africa before.”

Ethiopia’s success comes despite a challenging backdrop. Plummeting oil prices this year have put pressure on commodity exporters in Africa such as Nigeria, Gabon and Angola and pushed up rates for some African securities in the secondary market. Nigerian borrowing costs are now higher than Kenya, Rwanda, Senegal and Ivory Coast, despite the fact that they all have lower credit ratings than Nigeria.

amelie roux, fitch
The falling oil price may actually be beneficial for Ethiopia as 20% of the country’s imports of goods is purely spent on fuel – quite a substantial amount. Lower global oil prices may help to plug the current account deficitAmelie Roux, Fitch Ratings

“The falling oil price may actually be beneficial for Ethiopia as 20% of the country’s imports of goods is purely spent on fuel – quite a substantial amount. Lower global oil prices may help to plug the current account deficit,” says Amelie Roux, analyst at Fitch Ratings based in Paris.

Ethiopia’s current account deficit widened to 8.6% of GDP in 2014 from 5.9% a year earlier.

Investors were drawn to Ethiopia’s debut as a diversification play away from oil, says Khosrowshahi, as Ethiopia’s economy is driven by the agriculture, industry and service sectors.

“What is also important to note, however, is that the plummeting oil price has affected secondary bond trading for all countries with links to oil,” she says. “While Africa is the last frontier, the last emerging market region which investors can expect to benefit from real growth, the region is also becoming more and more integrated into the global capital markets landscape. It’s a good sign.”

Debt sustainability, however, may be an issue, with FX reserves in Ethiopia covering less than two months of exports. “This is low in absolute terms and low in comparison to Ethiopia’s peers. To manage this will be difficult and the government will need to make structural changes to the economy to change this,” says Roux.

But as Khosrowshahi says: “Debt to GDP levels in Ethiopia are low. Central government debt to GDP is 22%. Public sector debt to GDP is 46%. The country has had strong GDP growth over a number of years, and significant focused investment in social, infrastructure, and industrial development should contribute to maintaining similar economic expansion in the years to come.”

“While FX reserves are low, investing in tertiary sectors will help with debt sustainability. Debt to GDP levels in Ethiopia are lower today than they were in the last decade following the debt relief package by the IMF. There aren’t that many countries in Africa with such good metrics,” says Samara.

GDP growth for Ethiopia has averaged 10.9% between 2004 and 2013 compared to a regional average of 5.3%, according to the World Bank.

But Ethiopia has long been closed off to foreign investment, with the banking and telecoms sectors kept exclusively for locals, and the public investment effort has been financed by domestic credit, bilateral loans – usually from Chinese lenders – or concessional loans from the World Bank.

“Ethiopia has exhausted these avenues. For instance, domestic credit is not enough to fuel the country’s huge infrastructure needs: The country’s stock of domestic credit is around 30% of GDP, not that low, but not enough for what the country needs,” says Roux.

“The Eurobond issue is an indicator that the country is looking for alternative sources of funding and highlights the country’s need for dollar funding in particular.  It may also be an indication that the country is starting to open up to international investors more generally,” she says.



Indonesian investors to set up factories in Ethiopia


Indonesian investors to set up factories in Ethiopia

Addis Ababa – Two Indonesian investors will start noodle and soap production in July 2015.

In a meeting with the Ethiopian Minister of Foreign Affairs Dr. Tedros Adhanom, the newly appointed Indonesian Ambassador to Ethiopia, Ambassador Imam Santos, pledged to focus on boosting trade and investment recognizing that there is a great potential for growth.

Dr. Tedros welcomed the ambassador to Ethiopia and expressed his wishes for a successful tenure.

Indonesia first opened its embassy in Addis Ababa in 1964 and various Indonesian investors have established several businesses in electronics and detergent production.



ERCC performs over target


The Ethiopian Road Construction Corporation (ERCC) presented its 6 month report for stakeholders yesterday here at the Global Hotel.

Presenting the report, Planning and Business Development Department Manager Yared Lema said that as the Corporation has 60 years of experience on road and bridge construction and maintenance, it was able to construct 130.6 km and repair 6,981-kms road, a performance well above the half year plan: 101 and 142 per cent respectively.

Among the projects, the Zarema-Mayitsebri and the Mayitsebri-Shire are completed while the Chancho-Derba-Becho, Kong-Bogundi-Wonbera and the Sugar Development Linkage Roads are under construction, he added.

ERCC General Manager Eng. Habtamu Tegegne noted that the Corporation has exerted due efforts for the last six months in conducting construction works with standards, providing the necessary components for road construction projects on a timely and balanced basis, pursuing and evaluating the completion of the projects.

Before ERCC separated from the Ethiopian Road Authority, it had been an operational wing and has acquired the experience of road construction for 60 years.

The Corporation has also given capacity building training to 5,275 permanent and 9,790 contract employees besides improving the nine road construction project offices and the ten road maintenance offices throughout the country.



Standard Bank to open rep office in Ethiopia


The office will provide a foothold for the South African bank to build relationships with local businesses.

. Standard Bank. Picture: Standard Bank.

NAIROBI – South Africa’s Standard Bank aims to open a representative office in Ethiopia by the end of March, joining others eyeing a fast growing African economy although foreigners are barred from offering commercial banking services there.

The office will provide a foothold for the South African bank to build relationships with local businesses and develop market intelligence to help advise clients interested in investing in Africa’s second most populous country.

It will not offer commercial banking services, such as taking deposits or lending, as only Ethiopian state-owned or private institutions are allowed to run such operations.

“We are looking to open up a representative office, hopefully by the end of March this year,” Taitu Wondwosen, a senior vice president at Standard Bank who will become the representative, told Reuters.

“We go where our clients are. More and more of our clients are starting to ask about Ethiopia,” said Wondwosen, whose bank has operations across the continent. “It just makes sense to for us to start to get to know Ethiopia.”

Ethiopia, a market of about 96 million people whose agriculture-dependent economy has been growing at eight percent or more a year, has been heavily investing in new roads, railways and power plants to attract manufacturers and other investors.

Foreigners are restricted from areas such as banking and telecoms, but Ethiopia offers attractions because of its new infrastructure and as labour and other costs in Asia and elsewhere rise.

Wondwosen said clients and potential investors had shown interest in manufacturing, such as the textile industry, construction and infrastructure work, as well as other areas



Ethiopia to set up textile Technology Park


Ethiopia to set up textile Technology Park

Addis Ababa – A textile technology park, aiming to assist the sector in skilled manpower and technology will be set up in Ethiopia. The Ethiopia-South Korea Textile Industry Linkage summit is being held in Ethiopia.

State Minister of Industry Mebrahtu Meles (PhD) said the meeting will enable Ethiopia to share from South Korea’s vast experience in the sector. The textile technology park will be established learning from the experiences of South Korea, he added.

The park will will be piloting operations at the Bole Lemi Industrial Zone and will be replicated in other industry zones.



Qatari investors plan new cement plant in Ethiopia


Qatari investors plan new cement plant in Ethiopia


A Qatari business group plans to invest US$500 million in Ethiopia, according to reports.

The group met with Ethiopia’s president to discuss their investment plans, which include a cement plant in Dire Dawa, a sugar factory and other industrial facilities.

No specifics have been announced as to the capacity of the cement plant.

Ethiopia’s Ministry of Industry has released a draft Cement Industry Development Strategy with the aim of increasing cement consumption to 20 million tonnes within 10 years from its current level of 6 million tonnes.

Greenfield and expansion projects are underway in the country, which earned almost US$10 million from cement exports in the last full budget year.

Current capacity is at around 15.7 million tonnes.



Close to Half of ERC Trains Being Assembled in Addis Ababa



tramSome nine additional trains that have arrived here are being assembled by Ethiopian professionals, according to the Ethiopian Railway Corporation (ERC).
ERC Public Relations Head Dereje Tefera told ENA that out of the 41 trains that are being produced in China, 19 are being assembled in Addis Ababa.
The remaining 22 trains are expected to reach the country by the end of this Ethiopian fiscal year, he said.The trains are being assembled at Kaliti Depot by professional compatriots, it was learned.
Upon completion, each train will transport over 200 passengers. The light railway system, which is scheduled to begin road-test next month, will have 39 stations.
The total cost of the project is 475 million USD, it was indicated.



Meles Referral Hospital to go operational next month


Meles Zenawi Memorial Referral Hospital built at a cost of 200 million birr in Somali Regional State will go operational next month, according to the regional state health bureau.

The hospital, named after the late Prime Minister Meles Zenawi, remained idle for more than a year after completion due to lack of the necessary facilities and skilled manpower, Dr. Umer Mohammed, head of the bureau told WIC.

The hospital will begin rendering service at the 2nd week of February as it was furnished with the necessary water and electricity facilities, including hiring of 100 health professionals and the purchase of 270 beds.

According to Dr Umer, internal diagnosis, emergency, child and maternal care are among the health services that the hospital will provide initially. But it will provide all variety of health care services in the future.

The hospital will serve 5 million people from the Somali and neighbouring regions.



Poly Technologies to produce potash in Ethiopia


Poly Technologies to produce potash in Ethiopia

 Addis Ababa – The Chinese company Poly Technologies, already engaged in natural gas and petroleum exploration projects in Ethiopia, announced its desire to produce potash in the country.

Vice President of the Company Mr. Li met President Mulatu Teshome and discussed the company’s activities in the country. President Mulatu on the occasion noted that the company is performing very well and expressed his encouragement for the company to conduct its projects with efficiency.

The President added, Poly Technologies will play a crucial role in the industrial transformation of the country with its production of petroleum and potash.

Mr. Li on his part said the company will strive for quality and efficiency and aims to create job opportunities for more than 700 Ethiopians before the year 2016.


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