IFC Supports Rural Employment in Ethiopia with Investment in Afriflora
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Washington DC, April 13, 2015 —
IFC, a member of the World Bank Group, will lend up to €90 million to support Afriflora Group, a leading large-scale rose grower and distributor based in Ethiopia that employs more than 9,000 workers, more than 80 percent of them women. The funding will support Afriflora’s plan to expand production by 60 percent, install water recycling systems, and increase employment by more than 50 percent. Afriflora is founded and run by the Barnhoorn family.
IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. Working with private enterprises in about 100 countries, we use our capital, expertise, and influence to help eliminate extreme poverty and boost shared prosperity. In FY14, we provided more than $22 billion in financing to improve lives in developing countries and tackle the most urgent challenges of development. For more information, visit www.ifc.org
Afriflora Group, founded in 2004, is a family-run manufacturer and marketer of cut-rose products with a large scale production farm based in Ethiopia. The group’s main growing facility is located in Ziway, Ethiopia and is one of the largest single rose growing facilities in the world. In 2014, US Private Equity Fund KKR & Co., LP acquired a controlling stake in the group to support its global expansion program. For more information, visit http://www.afriflora.nl/en/.
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners’ capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE: KKR), please visit KKR’s website at www.kkr.com.
Ethiopia’s Credit Rating Kept at B by Fitch as Total Debt Rises
Expansion in the fiscal year that ends July 7 will probably be in the nine to 10 percent range, down from an average 10.2 percent in the past five years, the company said in a statement yesterday. Fitch confirmed its stable outlook for the country.
In a debut rating in May, Standard & Poor’s and Fitch assigned Ethiopia B, while Moody’s gave it B1. The B rating from Fitch indicates “that material default risk is present, but a limited margin of safety remains,” according to its website.
Ethiopia made its first sovereign-debt offering in December, selling $1 billion of 10-year Eurobonds with a coupon of 6.625 percent to European and American investors. The government said proceeds would be spent on infrastructure projects.
The economy grew quicker than that of any other African nation, at an average of 10.9 percent, over the past decade, boosted by spending on infrastructure, International Monetary Fund data show.
Public debt will probably increase to 27.1 percent of gross domestic product from 26 percent last year, which is largely on concessional terms and so at “moderate” risk of sustainability in the short- to medium-term, Fitch said.
State-owned-enterprises owed 22 percent of output at the end of June compared to 12.1 percent in 2010, with entities like the Railways Corp. and Sugar Corp. increasingly borrowing abroad on non-concessional terms, according to the company.
“The authorities expect this debt to be repaid from commercial receipts, but Fitch views this as a rising contingent liability for the government for which data availability remains limited,” it said.
Over the course of a 5-year growth plan that ends this year, the state has borrowed heavily at home and abroad for ongoing projects like Africa’s largest power plant and a Chinese-built railway along the main trade route to Djibouti.
The current-account deficit is expected to be 7.6 percent this year amid “limited” signs of diversifying exports and sluggish foreign direct investment, Fitch said. The IMF said in October it expected last year’s current account deficit to be 7.1 percent. Foreign-currency reserves will probably remain tight and external debt continues to increase in the “coming years,” Fitch said.
KEFI granted Tulu Kapi mining licence
METEC to handle Upcoming Ethiopian Mega Projects
Addis Ababa, 11 April 2015 –
Metals and Engineering Corporation (METEC) said that it hopes to handle upcoming Ethiopian Mega projects.
Acting Head of the Corporation Letenal colonel Kidu Tsegaye told WIC that the corporation’s performances on hydro mechanical, electromechanical and software development works are good ground and indicators that it could handle various mega projects.
Homemade metals, machineries and spare parts could minimize import rate at high level, besides the corporation is attaining skill and technology transfer.
Micro and small enterprises operational and technology capabilities are being enhanced to transfer them into the next level of excellence, Letenal colonel Kidu added.
The corporation’s magnificent contributions have been observed in Grand Ethiopian Renaissance Dam Projects (GERDP), Tana Beles one and two, Omo Sugar Factory, Yayu Fertilizer Factory and natural gas constructions.
The corporation has also contributed a lot in developing the design of GERDP to enhance its power generation from 5, 250 to 6,000, he added.
It was noted that out of 38 internationally licensed Ethiopian welders fifteen are working in METEC and particularly seven are in GERDP, he said, adding that some 300 dwellers are also working in the corporation.
Ethiopia to trade using regional ports
Ethiopia has launched a national logistics strategy to use multiple ports in neighbouring countries to improve trade ties.
By ANDUALEM SISAY GESSESSE
Ethiopia has launched a national logistics strategy to use multiple ports in neighbouring countries in order to improve the country’s international trade.
Supported by the United Nations Development Programme, the country will use the Mombasa port, the Port of Sudan and Berbera port in Somaliland, in addition to the Djibouti port.
“We will consider using all the ports in the region,” said Workineh Gebeyehu, Ethiopia’s Minister of Transport, at the launch of the strategy.
The Port of Sudan primarily serves the export trade from northern Ethiopia to the Middle East, Europe and Asia.
According to the strategy, developed by Nathan Associates in 2013, developing more import trade through the port will lower the cost of transporting goods.
The Mombasa port will cater for the southern part of Ethiopia and connect the country to the EAC market. Additional terminals are being constructed at the Mombasa port to increase capacity, and the road from Mombasa to Mariakani will be expanded to four or six lanes.
Berbera, a shallow port in Somaliland, is about the same distance from Addis Ababa as Djibouti. It has two berths with a depth of 9.8 metres. It is used mostly for food aid, but could become more important if it is further developed. The route is also used to transport fruit, vegetables and other commodities from Ethiopia to Somaliland.
Currently Ethiopia imports a total of $13 billion’s worth of goods, and exports around $3 billion annually. Except for flowers and some perishable agro-processed foods such as meat, which are exported via Ethiopian Airlines, Ethiopia uses Djibouti port for above 95 per cent of its imports and exports.
Ethiopia’s international trade has been facing multiple challenges including shortage of transportation and poor management and co-ordination in the logistics system.
It is becoming difficult for the country’s products to be competitive on the global and regional market, while the high cost of doing business is also becoming a burden for investors.
Last year, the World Bank ranked Ethiopia 104 out of 160 countries in logistics performance.
Border Crossing between Sudan and Ethiopia to be Opened
The final arrangements for the opening of Galabat-Matamma border crossing between Sudan and Ethiopia will be made this April.
State Minister at the Ministry of Transport, Sirajuddin Ali Hamid said the competent authorities held a meeting that included representatives from the ministry, Department of Passports.
He stressed the need to integrate the roles for the extension of the state’s prestige and coordinate efforts to reverse the bright face of Sudan and provide excellent service.
“The crossing comes in implementation of the passenger transport agreement, which was signed in December 2013 with Ethiopia, and approved by the Council of Ministers,” Hamid said.
Galabat – Matama crossing is one of the most important strategic crossings for its economic and political importance of the two countries.
Road connecting Kenya, Ethiopia to be completed in May
The construction of the Merille-Marsabit-Moyale road which is set to connect Kenya to Ethiopia is almost complete.
The Marsabit-Moyale road is to be completed by early May, according to a Kenya National Highways Authority (KeNHA) official.
The Isiolo-Merille-Marsabit-Moyale road is part of the Lamu-Port-South Sudan Ethiopia Transport (Lapsset) corridor funded by the Kenyan government and the European Union at a cost of Ksh13.7 billion ($147 million).
The project was initiated by former President Mwai Kibaki in 2007.
A spot check by the Nation revealed that construction workers were making final touches of the highway that would connect Kenya to Addis Ababa, Ethiopia.
According to an engineer involved in the construction, the road is currently being covered with a layer of tarmac chips to make it more durable. The road is also being marked from Moyale to Marsabit Town in an exercise expected to be completed early May.
The section from Marsabit that runs through Turbi covers 240 kilometres.
Construction of the Merille-Marsabit road is ongoing and the 86km section remaining is expected to be complete by mid-2016. The section was set to be completed in October 2014 but the contractor sought an extension because of the rough terrain.
The road is being constructed by Gulsan, a Turkish company.
With heavy rains pounding the region, the contractor sometimes has to wait as it is difficult to work on the road during heavy rains.
The new road infrastructure is set to open up the region as farmers will now transport their produce to market when still fresh. In addition, tourists will travel to the county easily from other regions of the country.
Marsabit has a game reserve inside Marsabit forest that attracts wildlife such as elephants, buffaloes, zebras among others.
Ethiopia: Ambitions to become a global force in leather production
Ethiopia is home to the largest population of cattle in Africa. In recent years the country’s leather industry has attracted several foreign companies that have set up factories here. For instance in 2012, Chinese footwear manufacturer Huajian Group opened a factory at the industrial zone outside Addis Ababa where it manufactures 6,000 pairs of shoes and boots per day.
“The industry has a big future,” says Yigzaw Assefa, chairman of the Ethiopian Leather Industries Association (ELIA) and CEO of Bahirdar Tannery.
As one of the government’s priority sectors, investors in leather enjoy incentives including duty exemptions on capital goods and construction materials, and five-plus years of an income tax holiday. Other positives of operating in Ethiopia are free access to US and EU markets as well as cheap labour and electricity.
Transfer of knowledge, expertise
With more foreign investment comes competition for local players, but Assefa says it will also lead to the transfer of knowledge and technical expertise.
For decades Ethiopia has exported its leather to Europe and Asia where it is transformed into fashionable items. But Assefa believes investment in Ethiopia-based factories by foreign companies will help change this. Local tanneries too are tapping into opportunities to produce shoes, bags and belts for export. One example is Assefa’s own tannery which he established in the 1980s.
Today it mostly processes animal skin for export as leather, but the company is expanding its production with the construction of a new plant that will undertake processing of leather into bags, wallets, belts, binders and gloves for sale abroad.
“We are constructing the building and training of workers. In the meantime we are testing the market with a small quantity of fashion gloves and industrial gloves which have already gotten acceptance in Italy, Russia and the US,” says Assefa.
“We have to change the image we have today, that we only produce raw materials.”
Potential for manufacturers
The local market is also opening up for other manufacturers. In the early 2000s plastic shoes from China entered the market and were quite popular, raising concerns among local shoe manufacturers. But this is shifting, with more shoe companies now selling locally and proudly displaying their ‘Made in Ethiopia’ tags. There are also multiple SMEs that manufacture leather bags for sale in the country.
Although exports dominate, Assefa believes local consumption of Ethiopian leather products will increase as people’s income levels rise.
Supply of raw materials a challenge
However, the increasing investments and activity in the industry has caused a shortage in the supply of hides. Most factories source animal skins from suppliers who in turn source from small-scale suppliers who collect hides from different homesteads.
Although most families in rural Ethiopia are farmers and keep cattle, Assefa says commercial farming needs to be developed. Inefficient farming methods by small-scale farmers, such as not properly treating animals and grazing them on the same fields year-in year-out, leads to poor quality skins, meat and milk. Careless handling and poor sanitation post-slaughter also leads to damage of the hides.
“In order to have healthy and productive sheep, goats and cattle, more modern farms should be developed,” Assefa says.
“Backyard killing should not be practised because people damage the skin at home when peeling it off the animal. We need modern abattoirs so the collection process will be easier, centralised and the skin will be well preserved.”
Encourage local talent
In coming years Assefa expects to see more investors pump money into expanding existing facilities and establishing more factories.
“The number of shoe and leather goods factories will increase,” he predicts. “There is a conducive and enabling atmosphere in terms of both the political and economic situations.”
To compete with industries in other parts of the world, Assefa says investors in Ethiopia should prioritise local talent development.
“A cheap and trainable labour force is available. Our people are honest, polite, friendly and co-operative. But they need training, and this should be done by the government and private sector,” he says.
“These factories will only create value if they have qualified human power.”