Developmental states reject the free-market model of development because they do not have the advanced-world assets to compete on a level playing field.
For example, despite rock-bottom wages, solid education systems and good infrastructure, Taiwan and Korea had their textile industries devastated by Japan until the 1960s.
Even in labour-intensive industries, emerging markets had no comparative advantage since cheap labour was no match for the technology and marketing finesse of advanced countries.
Free markets simply meant deadly competition.
Thus began their adventurous task of ‘getting the price wrong’ to stimulate industrial transformation.
Where those countries had a potential comparative advantage, as in textile manufacturing, the state provided incentives, privileges and tariffs to induce private-sector investment.
In sectors where they did not have a comparative advantage, the state had to substitute for, rather than complement, the private sector, and then undertake the task of industrial transformation itself.
In an attempt to replicate the East Asian miracle, Ethiopia has adopted and adapted the industrial policies of successful developmental states.
The strategy of mobilising incentives and disincentives to induce investment is most vividly observed in the textile sector.
On the other hand, the state’s policy of import substitution in strategic industries is best reflected in the army-owned Metals and Engineering Corporation (METEC).
Together, these two sectors capture the Ethiopian state’s project of export promotion and import substitution, and the state’s role as both referee and player in the transformative project.
Ethiopia’s growing economy, infrastructure boom and huge market, together with its cheap labour and abundant land suitable for cotton production, give it a potential comparative advantage in textile production.
The key to industrial transformation, however, remains the classic midwifery role the government is playing of inducing investment decisions and stimulating the supply of entrepreneurship.
The result has been an impressive growth in production and an influx of foreign direct investment. From the vibrant domestic textile industry to the newly arriving Turkish and Chinese conglomerates, Ethiopia is turning into a huge textile factory.
From Austria and France to Brazil and India, governments have used state-owned enterprises to engineer their industrial developments.
It is with this imperative that the Ethiopian government established METEC in 2010, in response to an urgent need for import-substituting industries in the engineering sector and a weak response from local and transnational capital.
There are, of course, risks to this strategy. For example, once persuaded to enter a sector, firms require cultivating, nurturing and prodding to move ahead as the sector changes.
While doing so, the state needs to be wary of being captured by the very groups it has helped create.
And where the state engages in direct production, it should engage only in areas where there is a pervasive market failure and in sectors congruent with the talents of the state.
The problem is that a state firm created to carry out endeavours apparently beyond the capacity of local capital may end up competing in sectors where no such rationale applies.
Worse still is if state firms take away profitable territory from the fragile private sector.
Not only does this squash local entrepreneurs but it also damages the state’s legitimacy in the eyes of the private sector, whose support and partnership is vital to the transformative project.
METEC’s expansion into the textile, plastic and hotel industries are manifestations of this danger.
As METEC grows bigger and stronger, Ethiopia’s leaders should be wary of not being able to control and discipline this emerging giant.
Lessons from launching a frozen yogurt store in Ethiopia
It’s Wednesday afternoon and a group of teenagers are quietly chatting and laughing as they enjoy cups of frozen yogurt in Ethiopia’s capital Addis Ababa. Established November 2013, Yogurt-Inn is the first frozen yogurt store in Ethiopia.
Although Ethiopia is not as westernised as other African countries, Yogurt-Inn manager Dagmawi Kesate says as people get more disposable income, they become willing to adopt new products.
“And frozen yogurt is one of the new things the city has to offer. I truly believe Ethiopia is at the cusp of change, socially. People are willing to try out new things if you adapt it to their social understanding. But if you have a concept from the US and dump it just the way it is, it won’t work because we have a different culture,” he explains.
When Yogurt-Inn launched there was a lot of buzz about it, then it slumped and was branded “expensive”. But now the business is gradually re-building its customer base from the ground up.
Learning from mistakes
Kesate recalls that when the store opened they made mistakes because they had no background in the food business. Their consultant, a foreigner, also lacked an understanding of how Ethiopian consumers behave.
“When you open such a business you need to understand the psyche of Ethiopians,” the engineering graduate believes.
“Our chairs [for instance], are not designed for people to sit on for hours. The house is designed for you to ‘pick it up and go’. Now this works in a society where people have things to do and places to go. But a major entertainment for Ethiopians is cafes where they can sit down and talk. Our store was purposefully designed for customers to leave within 30 minutes. That is a wrong concept in this country.”
Self-service, a new concept for businesses here, has also proved challenging. Yogurt-Inn offers eight flavours of yogurt and over a dozen options for toppings from chocolate to fruits. In the typical buffet culture of piling up plates, some customers would load their cups to overflowing, unaware they would be charged per gram.
“The cups are small but if you put in a lot, it will cost a lot of money. So a kid would put in eight flavours of yogurt and all the toppings, and by the time they get to the till it weighs 700g. So that alone gave us an image of being expensive, even though we are not,” explains Kesate.
He says they had to educate clients about portions and pricing, often a delicate act because it is easy to offend.
“You don’t want to do it in a way that makes someone think you’re assuming they don’t have money!”
Kesate says the emerging middle and upper classes in Addis Ababa present immense opportunities for retail businesses.
“The social structure of Ethiopia is about to change. Today’s teenagers will the middle-income work force in 10 years. They have been so westernised that they no longer even speak Amharic properly,” he notes.
However, investors should understand the uniqueness of the Ethiopian culture, which affects buying decisions. He cites the popularity of the coffee drink macchiato, adding that towards the end of the month, as people become more cautious with their spending, they will do without desserts, even lunch, but not macchiato.
Ethiopia joins Cotton made in Africa initiative
Wednesday, 01 April 2015
It cooperates locally with the Ethiopian Cotton Producers, Exporters and Ginners Association (ECPGEA) and together with the new entrant, the initiative now reaches over 5 million people in Africa.
“With the addition of Ethiopia, there are now round about 650,000 smallholder farmers growing cotton according to the CmiA sustainability standards. With their family members included, this totals over 5.5 million people in 10 countries in Sub-Saharan Africa”, confirmed Christoph Kaut, AbTF’s managing director.
“Our standard is specifically aimed at smallholder farmers in our project countries who only have a small plot of land and who are most in need of support. In order to protect the environment and vital resources, the exploitation of primary forests is forbidden, as is encroachment into established protected areas, the use of genetically modified seeds, and artificial irrigation”, added Kaut.
In 2014, over 150,000 tonnes of CmiA cotton were produced, a figure that is likely to rise significantly in 2015 due to the latest successful verifications in Ethiopia, Uganda, Tanzania and Cameroon.
Apart from quantity, the CmiA standard is also about quality and social justice for cotton farmers and workers in the ginning factories as well as promoting healthy living conditions and the protection of the environment. In practice, this means agricultural and business training for the smallholder farmers but also fair contracts with the cotton companies and reliable payment for their crops.
Egypt eyes taking part in Ethiopia’s Key Road Plan, Airport Project
Egyptian government expressed readiness to take part in Ethiopia’s national road development programme and major international airport in the country’s capital.
Egypt’s Housing Minister Moustafa Madbouly explored on Tuesday with Ethiopian Transport Minister Workenah Gebeyehu means of bilateral cooperation between the two countries.
This comes since Egypt’s leading construction firm, Arab Contractors is currently carrying out Ethiopia’s road development programme for two roads at length of 180 km.
From his part, Minister Madbouly stated that the meeting discussed methods to encourage Egyptian construction firms take part in the Ethiopian transport ministry’s national plan to build up new roads at total length of 50.000 km.
The two ministers have also underlined a possible participation from the Egyptian construction firms’ to implement the new international airport in Addis Ababa.
The Ethiopian government plans to commence works on Addis Ababa’s new airport by end of the current year.
Moreover, Madbouly said his meeting with minister Gebeyehu also tackled the start of training the Ethiopian technical cadres through involving in trading courses at Egypt’s Housing and Building National Research Centre and other centres affiliated to the Egyptian housing ministry.
Next month, Egypt will start the first training session for the Ethiopian cadres, the Egyptian minister noted.
The meeting between Madbouly and Gebeyehu were made on the sidelines of the 18th Common Market for Eastern and Southern Africa (COMESA) summit that took place in the Ethiopian capital.
Equity Bank readies Sh200bn for ten country expansion
The lender said it had already signed loan agreements for Sh36 billion ($400 million)—and Tuesday created additional shares worth Sh20 billion to be used in the acquisition process.
The bank which currently operates in five countries said it will raise the remaining Sh140 billion through a rights issues or a secondary initial public offering.
Equity plans to enter Ethiopia, Burundi and the Democratic Republic of Congo in the next two years before expanding southwards to Mozambique, Malawi, Zambia and Zimbabwe.
The bank will turn to West Africa after five years, eyeing Nigeria, Ghana and Cameroon.
“In some countries it is difficult to start from scratch because they are too big so we will enter by acquiring a medium-tier bank and upscale it. For acquisition we will give shares in Equity Bank instead of cash which is why we are asking you to create new shares,” said the bank’s chief executive James Mwangi.
Mr Mwangi said the bank will make acquisitions in three countries with the rest being new investments.
The shareholders, however, capped the cash to be spent in each at Sh9 billion ($100 million).
Equity currently operates in Kenya, Uganda, Tanzania, Rwanda and South Sudan with Uganda being the only market it did not start from scratch. All the subsidiaries recorded profits last year, the first time in the last five years.
Acquisitions will be funded by long term borrowings from international development companies including the International Finance Corporation and the Africa Investment Bank. Its long-term borrowings stood at Sh25 billion at the end of last year, up from Sh719 million the previous year.
Management said Burundi had been urging it to enter the country, which is the only eastern African state that it has no presence in.
The mineral-rich Kiswahili speaking Democratic Republic of Congo was said to be attractive due to its high population, estimated at 84 million with a low financial inclusion of 13 per cent.
“There is a strong belief that Ethiopia will sign the World Trade Organisation agreement which will make it open its market to private companies,” said Mr Mwangi.
The Ethiopian government has locked out private investors from its financial sector through law.
Equity said it hopes to ride on agency banking, on which several countries have consulted them on, to grow in the new markets, keeping a lid on its expenses.
Equity Bank said it factored in proximity, common language, countries that would have high impact on its financial performance and regional integration in selecting the investment destinations.
The lender estimates its shareholders will be diluted 10 per cent with the creation of the new shares. Equity Bank shares Tuesday traded at Sh52 per unit compared to Sh51.50 in the previous trading session.
It became the most profitable lender in the country this year with an after tax profit of Sh17.1 billion.
In a financial disclosure, World Bank’s private investment arm, IFC said it had set aside Sh7.2 billion to participate in a private placement in a listed regional bank whose description fits Equity Bank. Equity said it had been working closely with IFC in risk management.
Heineken, Diageo and privately-owned Dutch brewer Bavaria, have snapped up state breweries or built new ones in the past four years, introducing new beverages and increasing competition for St George, Ethiopia’s oldest beer brand, that was itself bought by France’s Castel Group in 1998.
When breweries go in, you know there’s definitely the demand
The east African nation that once could not feed itself now draws investors keen to profit from the increasing prosperity of its 96 million people. “We recognise the huge potential in Ethiopia,” Diageo said in a statement e-mailed to Reuters.
It bought state-owned Meta Abo brewery for $225 million in 2012 and has doubled brewing capacity and invested in new brands. It launched Zemen Beer in December and non-alcoholic Malta Guiness in August 2013.
Heineken bought state-owned Bedele and Harar Breweries for a combined $163 million in 2011, introducing the Walia beer, which bar staff in Addis Ababa say is catching up St George.
A few years ago, small bars struggled to get hold of crates of St George as they were bought up by hotels or bigger restaurants but Castel has increased brewing capacity, meaning they are now readily available.
Prices have dropped as a result of the extra competition and supply.
A St George bottle sells for 15 birr ($0.75) at Mery’s Pub, down from 18 birr in December.
“We have variety now for our customers — and more supply,” said Meron Girma, who runs the pub in a small shack with a corrugated iron roof next to the capital’s increasingly affluent Bole Medhane Alem district.
Per capita income is still below Sub-Saharan Africa’s average at just $470 a year, according to World Bank figures for 2013 but annual economic growth rates are 8 to 9 percent and the political outlook is stable.
The Ethiopian People’s Revolutionary Democratic Front (EPRDF), in power for a quarter of century, is expected to sweep a May election.
“Ethiopia has started to attract high quality foreign direct investment,” Abraham Tekeste, state minister for finance and development, told Reuters.
The IMF estimates foreign direct investment will reach $1.8 billion in fiscal year 2014/15 and $4.3 billion in 2018/19.
Investors will have to wait for entry into many areas of the economy, which is still dominated by the state. It rapidly opened up the beverage sector, but has moved more cautiously in other industries.
Telecoms remains in state hands while banks and retail businesses are off limits to foreigners.
The government says it needs the revenues from telecoms to pay for new railways, roads and dams. It says some businesses need protection until they can compete with foreigners.
Critics say the approach supports inefficiencies at state-owned companies, noting how the brewing industry has changed and prices fallen as international firms have come in.
They say better run companies would deliver bigger profits, pay more tax and generate jobs.
Investors are watching developments in the drinks industry closely.
“When breweries go in, you know there’s definitely the demand,” said Guy Brennan of Ascent Capital, a private equity fund that this year bought a stake in a healthcare firm.
Some of Ethiopia’s new spenders crowd Abebe Yohannes’s bar even on a workday evening. He says the investment of big brewers has been good for his business.
“We have more sales altogether,” he said in the shack near one of the five-star hotels that have gone up in Addis Ababa.
When Castel bought St. George in 1998, beer consumption per capita was two litres a year but now is seven litres, said Gebreselassie Sifer, regional sales manager of Castel’s BGI Ethiopia unit.
“Every producer in the country will sell what they produce,” he said of the new competitors in the market.
But there are also challenges for investors. One concern is the availability of foreign exchange to repatriate profits.
In principle, there are no restrictions. In practice, requests for dollars can face delays as the central bank holds foreign exchange reserves that barely cover two months of imports – half the level of neighbours such as Kenya.
One source with knowledge of the Diageo deal said the firm had quietly reassured the government it would be investing for several years so had no immediate plans to take profits abroad.
“That is how it was presented,” he said. When asked if repatriating profits was an issue for Diageo, the firm said in its statement it was building “for the long-term future growth” and could deal with any such challenges.
There are other difficulties. While Ethiopia is expanding the road and rail network, the nation’s fleet of trucks is old and transport costs are three or four times those in Europe.
Part of Bavaria’s investment involves operating its own vehicles. “This is really a long-term deal,” said Thijs Kleijwegt, finance director of Bavaria-owned Habesha Breweries. “The potential is huge.”
Ethiopia: World Bank to Finance Expanded Agriculture and Better Livelihood Opportunities for its Small Farmers
WASHINGTON, March 31, 2015 –
The World Bank Group’s Board of Executive Directors today approved US$350 million to help the government Ethiopian increase agricultural productivity and enhance market access for smallholder farmers in more than 150 of its rural districts.
The new financing, from the World Bank’s highly-concessional lending agency- the International Development Association, will further boost the development potential of Ethiopia’s agriculture industry which accounts for 45 percent of the country’s total output and occupies nearly 80 percent of the nation’s labor force. It is also a major contributor to export earnings.
According to the World Bank’s 2014 Poverty Assessment for Ethiopia, agricultural growth was a key driver of the impressive rate of poverty reduction over the past decade.
The Second Agricultural Growth Project (AGP2) will operate in 157 woredas (districts) in Amhara, Oromia, SNNPR, Tigray, Benishangul-Gumuz, Gambella and Harari regional states as well as Dire Dawa city administration. The project will directly benefit 1.6 million smallholder farmers, who live in areas with the highest potential for agricultural growth.
The project builds upon the impact of an on-going AGP1 project by increasing its geographical coverage and incorporating the lessons from the original project. AGP1 has benefited communities in 96 woredas including through the construction of irrigation, feeder roads, footbridges and market centers, the establishment and support to farmer groups, strengthening public agricultural services, and improving smallholder farmers’ access to markets.
“We are encouraged by the positive results achieved under AGPI, which is helping to improve the livelihood of smallholder farmers and their communities. The new financing will further empower smallholder farmers, especially women and young people, to define the support they need to raise their productivity and get better access markets” said Guang Zhe Chen, World Bank Country Director for Ethiopia.
AGP2 will support the Government in increasing productivity and commercial opportunities for smallholder farmers by:
- increasing access to agricultural public support services;
- increasing the supply of agricultural technologies through support to agricultural research;
- increasing access to and efficient use of irrigated water;
- better connecting smallholder farmers to markets;
- improving project management, capacity building, and monitoring and evaluation.
The World Bank Group’s support to AGP2 is expected to leverage additional support from other development partners to create well-coordinated donor support for Ethiopian agriculture.
“Achieving transformation in agriculture will further fortify Ethiopia’s ambition to become a middle income country by 2025. This latest project will support this vision through its special focus on smallholder farmers and providing them with the production and marketing services and infrastructure they will need to thrive.” said Andrew Goodland, World Bank Program Leader.
* The World Bank’s International Development Association (IDA), established in 1960, helps the world’s poorest countries by providing loans (called “credits”) and grants for projects and programs that boost economic growth, reduce poverty, and improve poor people’s lives. IDA is one of the largest sources of assistance for the world’s 81 poorest countries, 39 of which are in Africa. Resources from IDA bring positive change for 2.5 billion people living on less than $2 a day. Since 1960, IDA has supported development work in 108 countries. Annual commitments have increased steadily and averaged about $15 billion over the last three years, with about 50 percent of commitments going to Africa.
Addis Light Railway Project Reaches Final Stage
The Addis Ababa Light Railway Project is in its final stage, the Ethiopia Railways Corporation (ERC) said.
Over 90 percent of the construction of stations has been completed, and 33 trains are assembled and readied for operation, it was indicated.
The light railway project is reportedly the first of its kind in sub-Saharan Africa.
ERCPublic Relations Head Dereje Tefera said that some African countries have started and dropped their light railway projects for various reasons.
The Ethiopian project is fortunately left with only few months to go operational after its launching three years ago, he added.
The railway system will have 39 stations and some 40 crossings, according to the head.
Out of the total 41 trains required, 31 are readied for work while the remaining have arrived at Djibouti and will reach the capital city next month.
More than 240 professionals have been trained and are ready to render services at the light railway project, it was learned.
By Jacey Fortin in Adama
The sugar plant at Wonji-Shoa is chugging along, but the government’s 10 other projects – estimated to cost more than $5.5bn – face problems of their own.
The tiny, street-side coffee shop run by Senait Ashagre encompasses little more than a short table covered with little ceramic cups, a ring of plastic stools and a clay coffee pot resting on hot coals.
This is the only factory in Ethiopia so far that does power generation
Senait, 23, tries to stay open seven days a week. But a few times a month, she runs out of an essential ingredient – sugar – and is forced to close.
“I get 2kg of sugar each month from the local government for about 15 birr ($0.74) each, but that’s not enough. So I usually have to buy five more kilograms from the shops, and those cost 32 birr,” she says.
“It’s stupid we have to wait in a queue to buy sugar,” says one customer, a young rickshaw driver. “We produce it right over there!”
He is pointing toward the Wonji-Shoa sugar factory, which began producing at nearly full capacity this year.
It is run by the Sugar Corporation, a government-owned entity that is spear-heading one of the most ambitious development projects in Ethiopia’s history.
On top of three working factories, another undergoing testing and another project still under construction, the government is building no less than 10 new sugar facilities across the country.
In the main, these projects are being financed by agreements whereby the corporation hires Chinese contractors in exchange for loans from China’s state-owned banks.
Five years ago, when these plans were announced, the cost was roughly projected at $5.5bn.
Today the Sugar Corporation is working on a new cost evaluation that will be significantly higher.
Mother of all industries
Of all the massive public investments Ethiopia has made in recent years, these projects are uniquely far-reaching – and not only geographically.
According to state minister for industry Mebrahtu Meles: “The sugar industry is the mother of all industries.”
The factories can generate their own energy and produce ethanol for clean fuel; they can bring small- scale farmers into the fold of industrial development; and they can generate foreign exchange.
Outside the Wonji-Shoa headquarters on a Tuesday morning, two speakers are blasting a song about the factory, with voiceover from a man with a microphone stationed behind the main doors.
That day’s broadcast informs workers that this year’s output goal is 160,000tn, with the plant having produced 34,921.5tn so far.
The upper level of the building houses the office of Furo Beketa Berisso, Wonji- Shoa’s general manager.
“The production level is greatly increasing this year,” he says, noting that the facility processes more than 6,000tn of cane and churns out at least 600tn of sugar each day.
In the coming years, extra machinery should double the plant’s capacity.
In a giant room for the first stage of sugar extraction, the roar of machinery forces Tsega Kifle, Wonji-Shoa’s deputy general manager, to shout.
“This is the only factory in Ethiopia so far that does power generation,” he yells, explaining that bagasse, a cane by-product, is burned to generate steam.
At full capacity, the factory should use about 10MW and supply another 20MW to the grid.
As sugar is such a hot commodity – and cheaper in Ethiopia than neighbouring countries – smugglers some- times spirit sacks away to the border to turn a quick profit.
Foiling far-flung rent seekers is tough work for a corporation whose management methods are decidedly top-down.
The Addis office is in charge of supplying sugar to the government wholesaler, which pays 11 birr/kg before tax.
Demand is greater than supply, so free-market principles have been set aside for a system of regional quotas and price caps.
They called a meeting and told us not to farm anything on our land because it would be for sugar.
The Sugar Corporation splits its revenue, giving 49% to the factories for operational costs while the remaining 51% gets deposited into the Sugar Industry Development Fund.
In a couple of years, some of that income will begin to repay the Chinese loans. Sugar exports are “in our short-term plans,” says the Sugar Corporation’s deputy director of finance, Mesfin Melkamu Girma.
With a few factories scheduled to commence production this year, he says they will provide enough to meet domestic needs and then some.
But given Ethiopia’s track record, banking on ambitious goals is a risky businesses.
All 10 of the new factories were meant to start working this year, but most will not.
Reports indicate that the country produced around 300,009tn of sugar in 2014, far short of the 2.3m tonnes the corporation once hoped to see for the year 2015.
Now that it is churning out sugar crystals at a healthy clip, Wonji-Shoa has become a role model for the new factories springing up.
But with even nearby customers like Senait complaining of shortages, it is clear that some system adjustments are still needed.
Gesturing to thousands of kilos of sugar in the Wonji-Shoa storeroom, deputy manager Tsega says Ethiopia “has no problem with supply. It’s only distribution.”
The trade ministry doesn’t share that opinion and had to import an extra 160,000tn of sugar last year.
The 10 new factories – and the plantations, dams and irrigation they require – are harbingers of the transformation Addis officials hope to see across Ethiopia: a shift away from small-scale farming; more production of processed goods; and an emphasis on modernisation over tradition.
The price of progress
In pursuit of these goals, the government has been known to act with a strong hand.
The Kuraz sugar project in the southern Omo Region, which encompasses a dam, an irrigation scheme and five factories, has been criticised for displacing tens of thousands of people to make way for plantations.
Of Wonji-Shoa’s 17,000 employees, about 10,000 are outgrowers who retain nominal control over their land but cultivate sugar cane for the factory. These farmers get inputs and are paid a small salary every two weeks.
Shushay Legesse, Wonji-Shoa’s project manager for agricultural expansion, says these farmers get 50 birr per 100kg of cane they harvest minus the cost of the inputs, leaving them with around 14 birr per 100kg.
“If we bought the land, where would they live?” he asks.
“So in order [for them] to be part of the industry, we get them involved in sugar cane production.”
But outgrower Mengistu Regasso, 50, wants to go back to his life of farming maize. “They forced us into this,” he says.
“They called a meeting and told us not to farm anything on our land because it would be for sugar. But for a few years afterwards, the land was totally undeveloped.
There are outgrowers whose life has improved, but there are others whose lives have not. They are not looking after us.”
The government disagrees. Despite quotas that squeeze Senait’s business, plantations that disrupt Mengistu’s livelihood and loans that create extra liabilities for a cash-strapped administration, it argues that industrialisation, employment and foreign currency revenue are worth it in the long run.
“The government looks at this industry as strategic. It’s centre stage to spur the growth of other industries,” says state industry minister Mebrahtu.
“So we are borrowing from other countries. We are investing from our own budget. That way we can jump-start the process of industrialisation.”
Gilgel Gibe III to Start Power Generation in Ethiopian Rainy Season
Gilgel Gibe III Hydro-power Project would start generating electricity during the Ethiopian rainy season.
Project Coordinator, Mebratu Teshome said the dam will store the three billion cubic meters of water in the season and the first two units will start generating power successively. The functioning of the remaining eight units depends on the amount of water to be stored in the dam.
The dam has the capacity to hold 15 billion cubic meters of water of which about 80 million cubic meters has been collected since January, 2015.
The artificial lake dam that would be created will not displace even a single person, the coordinator said, adding that it instead helps prevent the frequent occurrence of floods.
The dam would be full within three years, he indicated.
Projects that benefit the localities around the natural lake through tourism and fishery would be built simultaneously, according to Mebratu.
A UNESCO team would next week travel to the locality to assess the impact the dam may have on Lake Turkana.
Experts from 26 countries have taken part in the project, it was learned.
Some 77 percent of the cost for the dam is covered by the Ethiopian government and the remaining sum through loan obtained from the Chinese government.
Doctor-turned-entrepreneur bullish about Ethiopia’s healthcare sector
As Africa’s second most populous country, Ethiopia’s healthcare industry holds significant potential. According to Dr Mohammed Nuri (42), founder and CEO of local pharmaceutical company Medtech Ethiopia, the industry commands more than 18bn Ethiopian birr (about US$881m) in annual sales. In recent years imports from abroad have risen, while foreign investors have entered partnerships with local players.
Medtech was established in 1998 as an importer and distributor of various medical supplies and equipment. Today it distributes products for 26 global companies, particularly from India and the Middle East. In the last few years the company has also diversified into pharmaceuticals manufacturing.
“Health expenditure and health awareness among the people is growing day by day. We are seeing growth in the adoption of health insurance, and when people are covered their expenditure in the sector increases,” says Nuri.
In 2013 Medtech entered a joint venture with the UAE’s pharmaceutical giant Julphar to open a 170m Ethiopian birr ($8.3m) production plant. Last year it also acquired the previously state-owned Ethiopian Pharmaceuticals Manufacturing Factory (EPHARM) for $25m. The oldest drug manufacturer in Ethiopia, EPHARM has eight manufacturing lines for various products.
“There is big opportunity for pharmaceutical manufacturing [because] nearly 85% of the Ethiopian demand is covered by imports,” says Nuri. “At Julphar Ethiopia, for instance, we have taken orders from the government that we will supply over the next six months. We cannot take any more orders. So for the next six months we are working 24 hours, seven days a week to service that order. You can see, for a new investor, this is really an attractive area.”
Destined to become a businessman
Nuri also runs a general hospital called Zenbaba, two pharmacies and a pharma wholesaler. He graduated from medical school at age 23, and later gave up an opportunity to lecture at his university to start his own small business.
“I knew my destiny was to be a businessman,” he explains.
He credits his success in entrepreneurship to not making rushed decisions when upset, or when facing challenges. And crucially to respecting his employees and treating them as family.
“I also reward good performance.”
A potentially lucrative industry
The medical doctor-turned-entrepreneur says the heath sector is one of the “most lucrative and profitable” industries in the country, and one that also enables him to touch peoples’ lives.
But he warns that pharma, by nature, is a “highly sensitive venture”. For starters, it requires heavy capital investment.
“One of the main challenges is to maintain quality, and to do so you need skilled experts. Although there are locals who have those skills, a lot of them left for Europe or the US. Due to the brain drain, talent is one area where we have very big difficulties. We have to bring back some of that expertise and engage in knowledge and technology transfer.”
Securing raw materials on time is also a headache. Nuri’s factories import 99% of their inputs, mostly from Europe, India, China and the UAE. These are flown in by air or shipped via the port at Djibouti. To navigate logistical challenges associated with a landlocked and vast country, Medtech operates offices in six major regions across Ethiopia and a fleet of 40 trucks that deliver its goods.
“To transport goods from Djibouti to Addis Ababa takes almost two days, but a new railway is coming up soon. By next year [getting goods here] will be a matter of hours,” he says.
The future looks positive for the Ethiopian healthcare industry, notes Nuri, citing the country’s stable and secure environment, availability of cheap labour, affordable electricity and a government opening up to foreign investment.
“Many foreign investors who neglected Ethiopia before, especially in the pharmaceutical sector, are now eager to come. Companies like ours have shown them this is a really lucrative venture. In the future I’m sure the market will continue to grow.
“There are some Indian companies that are coming. Branded multinationals are also on the way. There is a huge gap, so there will be room for all of us. Ethiopia needs more drug manufacturers.”
Nuri’s ambition is to grow his companies and eventually export to neighbouring countries. One step toward achieving this goal is already in the works. EPHARM recently acquired more land where it will undertake a $100m expansion project.
“Our vision is global,” he says. “We want to export.”