09 May 2015 Business News Briefs


Ethiopia Commodity Exchange Mulls Adding Stock, Bond Trading




The Ethiopia Commodity Exchange plans to broaden the range of crops it trades and wants to introduce stocks and bonds under a five-year expansion plan, Chief Executive Officer Ermias Eshetu said.

The market plans to move from coffee and sesame seeds, which account for more than 90 percent of volumes and are the two biggest generators of foreign exchange in Ethiopia, to sugar and grains such as corn, Ermias, who became CEO in January, said in an interview. Equities, government debt, power and metals may also be added on the bourse, which traded 26.2 billion birr ($1.3 billion) worth of goods last year.

“We want to be a marketplace for any kind of stock, be it derivatives, agricultural commodities, financial instruments,” Ermias said on April 30 in the capital, Addis Ababa. “That’s the ultimate vision,” he said, adding that formal discussions have yet to begin on trading securities.

The commodities exchange started in 2008 with the support of donors including the U.S. government’s aid agency and the United Nations to improve the efficiency of food markets in a nation where millions regularly went hungry. Within a year, it became the main route for coffee exports in the continent’s largest producer of the beans after the state decreed traders must sell to exporters at the bourse.

Ethiopia allocated 162 billion birr in a five-year plan that ends in July to upgrade its infrastructure including roads and power plants to improve the efficiency of its markets.

Hydropower Dam

The Export-Import Bank of China is funding a railway along Ethiopia’s main trade route to neighboring Djibouti’s port, and a nationwide network of 4,744 kilometers (2,948 miles) is planned. Chinese state banks are also investing in sugar processors, while Ethiopia is funding Africa’s biggest power plant on the Blue Nile river that’s designed to generate electricity for export.

During a government five-year plan starting in July, the state-run ECX will begin serving 24 so-called “agro-centers” that will have increased storage and warehousing facilities and improved transport links, said Ermias.

“With the two components, logistics and scalability, we will be able to introduce multiple commodities to the market,” he said. “ECX must offer the truly transparent marketplace for anything that’s going on in the Ethiopian economy.”

Ethiopia is expected to be sub-Saharan Africa’s fastest-growing economy this year after the Democratic Republic of Congo, with growth forecast at 8.6 percent, according to the International Monetary Fund. The Horn of Africa nation sold $1 billion of Eurobonds in a debut issue in December.

Portfolio Investors

The economy is state-planned and driven, though the introduction of the ECX, along with the sale of Eurobonds and discussions about a secondary debt market, point toward an “increasingly capitalist orientation,” Alan Cameron, economist at Exotix Partners LLP, said in a research note.

“The major question for portfolio investors is how long will it take Ethiopia to open up?” Cameron said. “The official rhetoric suggests five to 10 years, yet the view from inside the business community is more like two to three years.”

The government is establishing an enterprise to oversee the upgrading of warehousing, which will rely on a mixture of public and private capital, said Ermias, a former executive at Addis Ababa-based Zemen Bank. Donors including the World Bank and Bill & Melinda Gates Foundation are considering supporting what will require “huge investment,” he said.

The ECX has the capacity to expand beyond agricultural commodities within 12 months, said Yohannes Assefa, the director of Stalwart Management Consultancy, a Dubai-based group working on Kenyan and Tanzanian exchanges.

Robust Platform

“The existing platform is robust and the regulatory system is mature and well managed,” he said in an e-mailed response to questions on Wednesday.

The ECX can overcome obstacles to trading financial products aside from government regulations, which “may require serious internal consultation before a change of policy,” Yohannes said.

Coffee exporters including Fekade Mamo, general manager of Addis Ababa-based Mochaland Import and Export, have criticized the ECX for not allowing futures trading to hedge positions in a volatile global market. While the ECX plans to introduce futures, farmers first need insurance options in case they can’t deliver, better access to credit and the strengthening of the legal system, Ermias said.

“We don’t see it in the next year or so,” he said.



Ethiopia seeks Turkish companies to venture in power generation


Power transmission and distribution loss ‘beyond the acceptable limit’


Ethiopia is seeking potential Turkish companies that can venture in the business of electric power generation and transmission line projects, Ethiopian Electric Power (EEP) disclosed. 

An Ethiopian delegation, while on a business and investment visit in Turkey, signed a Memorandum of Understanding (MoU) with four Turkish companies to join the energy generation and transmission projects. 

Azeb Asnake, Chief Executive Officer of Ethiopia Electric Power, said negotiations are expected to commence “soon” with a view to materialize the projects.

Azeb told The Reporter, on the sidelines of an Ethio-Turkish Business to Business meeting at Sheraton Addis on Wednesday, that Turkish businesses have been familiarized with the government’s targets on energy sector in the coming five years. The Turkish companies are mostly sought after to invest in the energy generation sector, Azeb said. The meeting was attended by 24 Turkish businesses including members of Istanbul Electrical, Electronics, Machinery and ICT Exporters Association.

According to the CEO, Turkish investors are advised to embark on power generation projects beyond the capacity of 500MW electricity. The minimum energy generation limit is, however, set at 300 MW which by itself could be considered as a megaproject.

“Interested companies in megaprojects are already making contacts and if deals are to be stricken, the government would buy energy generated by these companies. Currently, the tariffs are being worked out,” Azeb said.

Power generation development is one of the major areas the government has embarked on with a view to satisfy domestic demands and transform the country to an energy hub by exporting electricity to neighboring countries. However, the country continues to struggle to address local demands as frequent power interruptions and blackouts frustrate businesses and users alike.

Power loss during distribution and transmission is often cited by the government as one of the major factors for power outages. Power transmission and distribution losses include losses in transmission between sources of supply and points of distribution and in the distribution to consumers, including pilferage or thefts.

Although Azeb refrained from disclosing the loss in percentage, the CEO admitted that Ethiopia’s electric power transmission and distribution loss as percentage of the total output is “beyond the acceptable level”.

According to some studies, losses in the national grid have reached as high as 20 percent in 2008, which is much higher than the international average of 13 percent. In 2012, the loss stood at about 140MW, more than the installed power generation capacity of Ashegoda Wind Farm. If the losses are not solved, it is projected that the country can expect to lose 700MW power at the end of 2015.

Azeb said the government is replacing old transmission lines and sub stations to address power wastage.

Despite the loss, EEP is adamant that power interruptions are temporary challenges considering the number of power projects currently underway. The long awaited Gibe III, which has an installed power generating capacity of 1870MW, is the one project nearing completion.

According to Azeb, who served as project manager of Gibe III prior to her appointment to EEP, some units of the plant will start commissioning before the end of the year depending on the amount of rainfall in the area.

Genale Dawa hydropower project, which has an installed electric generating capacity of 250MW, is the other nearing completion. Currently, some 70 percent of construction is completed, according to Azeb. The country’s power generation capacity currently stands at 2268MW.



Newly inaugurated food giant pleads for power interruption remedies


Ahadukes Food Products SC, a joint venture between a UK-based Vasari Global and Ahadu PLC, a local firm, which aims at exporting biscuits and pasta for the export market, has pleaded with the government to address power interruptions impacting the production capacity of the plant. 


powerOn Tuesday, during the inauguration of the food plant located at the Bishoftu town, some 40km southeast of the capital, Solomon Wondimneh, shareholder of Ahadukes Food Products SC, said that the joint venture plant faces power supply and distribution problems.

“The transmission line should be upgraded to ensure an uninterrupted power supply to our plant”, Solomon said at the inaugural which was attended by Mulatu Teshome (PhD), president of the republic, and Muktar Kedir, president of Oromia Regional State.

The plant rests on a total area of 78,000sqm out of which 12,600sqm is occupied by the plant which produces biscuits. The pasta producing plant lay on a 6,048sqm area while the remaining 1,175sqm is occupied by office buildings.

According to Solomon, the biscuit plant has commenced production with a capacity of 500 quintals per day. Additional five production lines are to be operational in the coming three years, Solomon added. The pasta plant, with possible construction of four production lines, will have a production capacity of 6,600 quintals per day, he said.

The construction of the food complex commenced in 2012 with the acquisition of 42,000 sqm plot of land and due to the plant’s expansion an additional 36,000 sqm was provided in 2014 by the Oromia regional state.

At a press conference held at the premise of the plant, representatives of both companies refrained from disclosing the share of each party in the joint venture and the financial contribution they made for the plant.

According to Solomon, however, Dashen Bank has extended loans for the project the amount of which remains undisclosed. The total cost of the project stood at USD 36 million and created job opportunities for some 600 workers, Solomon said. Ahadukes projects its investment to quadruple to USD 150 million with possibilities of employing some 3,000 workers in three years.

Currently, Ahadukes plans to export its products to markets in Africa, the Middle East and European markets. By 2017 some 32 million dollars or 50 percent of the revenues are expected to come from export markets, according to Solomon.

Sweet biscuits, cream crackers, savory biscuits, instant desserts, instant noodles, pasta, instant fruit drink mixes, food beverage and the likes are among the food items to be made available both for local and international markets.

However, power interruption problems which is affecting the plant’s production capacity as well as concerns regarding international food and drug standards due to the factories location where there are emissions from chemical factories nearby could dampen the company’s export ambitions.

“Unless these issues are accorded the immediate attention of the government, our export ambitions are unlikely to met,” Solomon said.

Since its establishment 20 years ago, Ahadu PLC has ventured in businesses including tea processing, pharmaceuticals, commercial farm, real estate, packaging and trading investments. Ahadu Tea and Axum Pharmacies are the well-known businesses ventures of the company run by Solomon.

Vasari Global is also not new to Ethiopia. It has an investment in the Dashen Brewery expansion project. Vasari Global together with Duet Group – a UK based asset management firm has made an equity investments into the beer maker in 2012.

According to Derek Gordon, board member of Vasari Global, the total investment of Vasari in Ethiopia has reached USD 200 million so far.



World Bank gives Ethiopia $350m for small holder farmers


By Tinishu Solomon
Photo©ReutersThe World Bank has extended a $350 million loan to Ethiopia to assist the Horn of Africa country’s small holder farmers.

The loan will go to the country’s Second Agricultural Growth Project (AGP2).

Finance and Economics minister Ahmed Shide, and World Bank country representative Guang Zhe Chen, signed the agreement on Thursday.

Supporting targeted areas with the highest potential for the production of agricultural commodities can stimulate agro-processing in the country

The programme intends to increase agricultural productivity and enhance market access for smallholder farmers in more than 157 of Ethiopia’s rural districts.

The first programme benefited communities in 96 Woredas through the construction of irrigation, feeder roads, footbridges and market centers, among others.

Shide said the primary target of the AGP II would be smallholder farmers who live in areas with the highest potential for agricultural growth.

“Supporting targeted areas with the highest potential for the production of agricultural commodities can stimulate agro-processing in the country,” he said.

Guang said AGP2 “will directly benefit 1.6 million smallholder farmers”.

Agricultural growth was a key driver of the impressive rate of poverty reduction over the past decade, according to the World Bank’s 2014 Poverty Assessment for Ethiopia.

The bank indicated that the new finance will further boost the development potential of Ethiopia’s agriculture industry which accounts for 45 percent of the country’s total output and employs nearly 80 percent of the nation’s labour force.



Ambitious strategy aims to improve the lives of millions in Ethiopia

Ambitious strategy aims to improve the lives of millions in EthiopiaAddis Ababa: May 8, 2015  –
Research conducted by the International Water Management Institute (IWMI) has been highlighted as influential in an ambitious initiative of the Ethiopian government to boost food production and the incomes of five million farmers.

Realizing the potential of household irrigation in Ethiopia, a working strategy document from the Ministry of Agriculture and Ethiopian Agricultural Transformation Agency, outlines specific plans for agricultural development to complement the government’s vision of achieving middle-income status by 2025.

Agriculture in Ethiopia accounts for half of the country’s gross domestic product (GDP) and 85% of employment. However, around 95% of smallholder farms rely solely on rainfall. According to the report, household irrigation involving simple water-lifting and water-saving technologies, together with the cultivation of high-value horticultural crops, could more than double farmers’ incomes where implementation is possible.

The strategy proposes “27 independent systemic interventions to increase the adoption and effectiveness of household irrigation technologies and build a vibrant and self-sustaining household irrigation sector.”

These measures take into account every step of the value chain, including research and policy development, technology access and adoption, input production and distribution for the cultivation of high-value crops, on-farm production, post-harvest handling, and market links.

Furthermore, they will “take into account the continuing challenges of gender sensitivity, water resource management and sustainable impact.”

In his foreword, Sileshi Getahun, State Minister, Ministry of Agriculture, writes: “IWMI has made significant contributions to research on irrigation in Ethiopia, with work on water management, agronomy, technology, scheme performance, and even market conditions for irrigated crops. Indeed, various studies made by IWMI were used as baselines during the development of this sector strategy.”

As well as contributing to the strategy’s review process, the report cites IWMI’s research in a number of areas. These include:

  • assessment of the current irrigated area in Ethiopia, and performance of irrigation schemes in those areas;
  • groundwater mapping in Ethiopia;
  • reasons for lower engagement and productivity of female famers;
  • issues of soil salinity as a result of inappropriate management of groundwater resources; and
  • the efficacy of different kinds of pumps

Simon Langan, Principal Researcher – Agricultural Water Management, and Head of IWMI’s East Africa and Nile Basin Office, Addis Ababa, Ethiopia, said:

“We are delighted to have been able to contribute to what is a robust and ambitious strategy for the development of irrigated agriculture in Ethiopia, a country where IWMI has been active for many years. The potential for improving agricultural practices and livelihoods outlined here is enormous.”

“This is part of our ongoing engagement with the Ministry of Agriculture and a number of other ministries, donors and nongovernmental organizations to provide the scientific basis for establishing best practices and new policies for improved water and natural resource management.

“We now look forward to supporting their efforts in putting this new strategy into practice.”



Media rating to commence in GTP II


By Neamin Ashenafi and Wudineh Zenebe


imagesCA47C31RIn a bid to revolutionize the country’s media and advertisement industry, the Government of Ethiopia is going to start audience measurement system a.k.a. rating for television, radio and print media and their content.

Government Communications Affairs Office Minister, Redwan Hussein, told The Reporter in an exclusive interview that the second phase of the Growth and Transformation Plan (GTP II) includes the introduction and implementation of an audience measurement system.

“The private sector has its own way of selecting mediums to advertise products and services. Still, they have to be informed about the types of media that are out there,” Redwan said.

According to the minister, the criteria for rating will center around circulation of newspapers and magazines, issues covered by the various mediums and popularity of the medias, their programs and shows, which includes both print and electronic.

“The purpose of having this rating system is to assist the private sector [select the medium to advertise] and this is one area we plan to implement in the next GTP,” Redwan told The Reporter.

In its broader sense, audience measurement is a system that measures audience size and composition, usually in relation to radio listenership and television viewership, but also in relation to newspaper and magazine readership and, increasingly, web traffic on websites.

According to literatures, the aim of audience measurement is to help broadcasters and advertisers determine who is the audience rather than just how many people are listening or watching. In some parts of the world, the resulting relative numbers are referred to as audience share, while in other places the broader term market share is used. For print media, circulation is the main criteria used to rate newspapers and magazines; however, the instrument used for broadcast media is to a large extent different.

The most familiar audience measurement system in the world is “Nielsen Rating” which is conducted by the US-based Nielsen Holdings NV.

Nielsen Rating has become the de facto national measurement service for the television industry in the United States and Canada. Nielsen measures the number of people watching television shows and makes its data available to the television and cable networks, advertisers and the media. Nielsen uses a technique called statistical sampling to rate the shows. Nielsen creates a “sample audience” and then counts how many in that audience view each program. It then extrapolates from the sample and estimates the number of viewers in the entire population watching the show.

Nielsen relies mainly on information collected from TV set meters that it installs, and then combines this information with huge databases of the programs that appear on each TV station and cable channel. This information is also collected on a daily basis. Advertisers pay to air their commercials on TV programs using rates that are based on Nielsen’s data. Advertisement prices may vary depending on the ratings of the shows and programs. Programmers also use Nielsen’s data to decide which shows to keep and which to cancel. To ensure reasonably accurate results, the company uses audits and quality checks and regularly compares the ratings it gets from different samples and measurement methods.

In Ethiopia, the Ethiopian Broadcasting Authority, last year, conducted a sample research to rate media content based on circulation and listenership.



MIDROC Ethiopia to invest 8 billion Birr on business expansion projects

MIDROC Ethiopia to invest 8 billion Birr on business expansion projectsAddis Ababa: May 7, 2015  –
MIDROC Ethiopia Technology Group today announced its plan to invest 8 billion Birr on business expansion projects.

The Group’s owner and President Sheikh Mohammed Hussein Ali Al-Amoudi announced the plan. The projects include a three phase investment in mining, poultry and an integrated dairy and beef development.

The project will employ 3,000 people and is expected to be completed between three to five years. The project is expected to boost the company’s profits and increase the country’s exports. The government is expected to cash in 880 million Birr annually from taxes after the expansion.

MIDROC Ethiopia is a private investment company with about 70 group and affiliate companies that are engaged in multifaceted business sectors across the country.


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