Ethiopia, China sign industrial expansion agreement
Sufian Ahmed, Minister of Finance and Economic Development, has signed an agreement with the Chinese National Reform and Development Commission to expand Ethiopia’s industrial capacity building.
The agreement was signed last week on May 19 in Beijing on the basis of Ethiopia and China’s inclusive strategic partnership.
The agreement focuses on industrial development in light manufacturing as Chinese companies are increasingly looking into the benefits of investing abroad.
Higher labor costs and other causes have begun to erode the competitiveness of light manufacturing companies involved in textile, leather and similar areas of production in China.
The agreement, in addition to covering light industry, also looks at the opportunities of planning and working jointly in the areas of energy, railway and roads infrastructure construction, natural resources development, chemical and steel engineering, production of household electrical equipment production and other areas.
Tigray gets 1st fertilizer blending plant
The fertilizer blending plant was funded by the World Bank in partnership with the Ministry of Agriculture and the ATA and the Enderta Union.
Enderta, represents 20 Primary Cooperatives and 42,120 farmers and supplies inputs in southern Tigray.
Every year, the Union sells on average 19,000 MT of fertilizer to area farmers. Thanks to the new plant, Enderta expects the demand for blended fertilizer to exceed 100,000 MT and benefit hundreds of thousands of smallholder farmers.
At full capacity, the plant can produce 400 MT of blended fertilizer per day, each fertilizer customized with different levels of nutrients depending on soil types, deficiencies and agro-ecologies.
AGP-AMDe activities will provide technical support to farmers using blended fertilizer in Southern Tigray on over 20,000 hectares of wheat.
The Government of Ethiopia, World Bank and USAID have collaborated to erect five such factories in Ethiopia, each in a strategic location serving a large population of farmers in Tigray, Amhara, Oromia and South Ethiopia Peoples’ states.
In addition, the Government of Ethiopia has plans to expand the fertilizer blending operation to 12 more sites over several years.
For years farmers have relied on traditional fertilizers like DAP and urea. Results from soil fertility tests show Ethiopia’s soil is deficient in sulfur, boron, potassium, zinc and copper, hence a need for blended fertilizer.
Since 2012, Enderta, with USAID support, has conducted 36 multi-nutrient fertilizer demonstrations and 20 fertilizer popularization campaigns among wheat and sesame farmer cooperatives in Tigray.
The results of these trials and 120 soil samples data from 40 sites has been collected and shared with Tigray’s Bureau of Agriculture, regional research institutions and the AGP coordination office.
Since 2013, the Agriculture Transformation Agency, under the Ministry of Agriculture, has sent over 45,000 soils samples to certified soil laboratories in Europe to once and for all map Ethiopia’s soil needs.
The campaign to better understand the country’s soil is a critical component of the fertilizer campaign.
African countries asked to address security threats by investing in holistic development
The panelists at the session on “Development and Security – Dealing with New Threats”, at the ongoing 50th Annual Meetings of the African Development Bank (AfDB) in Abidjan, Côte d’Ivoire, agreed that some of the factors leading to the formation of fundamentalist and armed groups on the continent include, among others, underdevelopment, unemployment, exclusion in government and poverty.
Making his contributions, former Nigerian President Olusegun Obasanjo said there are new security threats on the continent, “apart from terrorism, there is Ebola,” he said, “issues of immigration that are leading to xenophobia; human trafficking and drug trafficking are security threats,” he added.
Nkosazana Dlamini Zuma, Chair of the African Union, adding her voice to the discussions reiterated that human and drug trafficking are security threats on the continent, noting that, “scarcity in the Sahel, weak institutions and weak governance” are all factors contributing to insecurity in some countries.
But she pointed out that issues that are threats to security on the continent should be seen as global threats. “These should not only be seen as threats to Africa, they are global threats,” she said.
To address the issues, she suggested that African countries should pay more attention to development and invest in holistic development.”
She urged African countries to trade among themselves and industrializes to create jobs for their people.
President Felipe Nyusi of Mozambique, for his part, identified exclusion in the process of governance and maritime piracy as factors of security threats and argued that, while it is necessary to invest in military training and equipment, it is equally important to invest in health and education of citizens.
President Obasanjo agreed that African countries should invest in education in direct response to the security threats facing the continent.
Global Credit Research – 29 May 2015
Ethiopia’s (B1 Stable) government bond rating is supported by its strong growth prospects, prudent fiscal management and large and stable donor inflows, Moody’s Investors Service says in its latest credit analysis of the country today. However, Ethiopia’s relatively small economy, low per capita income and weak institutional strength all constrain the rating.
The report is now available on http://www.moodys.com. Moody’s subscribers can access this report via the link at the end of this press release. The research is an update to the markets and does not constitute a rating action.
“We expect public sector investment to continue to drive economic expansion in the near-term, with growth averaging around 10% in real terms over the next two years,” said Rita Babihuga, Assistant Vice President — Analyst and co-author of the report. “Risks to this outlook stem from external shocks, such as an economic slowdown in major export partners, constraints to the financing of Ethiopia’s investment projects, or a protracted slump in commodity export prices.”
Ethiopia’s credit profile would be strengthened if business conditions improve, leading to more foreign direct investment and boosting economic diversification. Conversely, negative factors for the rating include any acceleration of external debt accumulation that does not support growth and difficulties in securing concessional external financing which would put downward pressure on the country’s already low international reserves.
Prudent government spending controls and efforts to mobilise domestic revenues have led to low and stable deficits. A five-year plan has focused on rebalancing the economy and improving agriculture, rural development and infrastructure. About 60% of government spending is directed towards public investment projects in sectors such as health, education, agriculture and transport.
Ethiopia’s federal government budget execution has been tight over the last decade and current spending is closely monitored to ensure that it grows below the pace of revenues. However, weak tax collection means Ethiopia’s revenue share is well below its regional peers, standing around just 14% of GDP, compared to a B-rated regional average of 23%. The government’s capacity for expanding the revenue base will rest on its ability to implement effective revenue-enhancing measures.
Debt servicing costs have risen slightly, from a low of 1.9% of government revenues in 2012 to 2.4% of government revenue in 2014. However, these costs are still low compared to peers. Debt relief has also helped the government’s financial profile by keeping its debt burden and servicing costs low. Ethiopia is the biggest recipient of aid in Africa.
The report says Ethiopia’s institutional strength is very low, although it has been improving in recent years.
Susceptibility to event risk stems mainly from the country’s geographic location in the Horn of Africa, which is prone to instability and geopolitical risk.
The Credit Analysis examines Ethiopia’s credit profile in terms of economic strength, institutional strength, fiscal strength and susceptibility to event risk, which are the four main analytic factors in Moody’s Sovereign Bond Rating Methodology.
Ethiopia’s Economy Getting Transformed into Service-led Economy
Addis Ababa – May 29/2015
Ethiopia is making a healthy transformation from an agriculture-led economy to service economy, according to the Ministry of Agriculture.
The share of the service sector and the industrial sector has been growing steadily during the last 10 years, it was indicated.
The data obtained from the ministry show that the service sector has been growing by 18 percent whereas agriculture and industry sectors grew by 7 and 9.5 percent respectively in the past five years.
State Minister of Agriculture, Wondyirad Mandefero told ENA that the industry and service sectors play a leading role in the developed countries. The structural transformation Ethiopia has been making is therefore healthy could help it join the developed countries, he noted.
According to him, it requires an integrated effort to strengthen the share of the industry to the economy and enhance the transformation of the economy.
Ethiopian Agricultural Transformation Agency Climate Change and Sustainable Environmental Development Director, Wegayehu Bekele said the huge motivation of the farmer to use technology has made possible the transformation of agriculture and accelerate the structural change of the economy.
It is not ‘culturally proper’ to call the situation a famine, says Tesfa Ghebrabe, a local Ethiopian agricultural investor, but there is definitely a shortage of animal feed in Ethiopia and the rest of East Africa. Growing populations and incomes continue to drive livestock demand, which could grow as high as 50 percent in certain cities, particularly in Tanzania’s capital Dar es Salaam and Ethiopia’s Addis Ababa.
With increased production of livestock products and urbanization, there is a growing deficit of animal feed across the region. Maize – the favored input for animal feed – accounts for an average of one third of the daily caloric intake for East Africans. Humans generally win competing battles over food with animals, says Tesfa, with the low quality maize usually left to produce animal feed. The greatest imbalance is found in Ethiopia, where food supply struggles to meet the current and rapidly growing demand of an increasing population. Available arable land in the region provides farmers an opportunity to boost maize production, but growing urbanization in the region is eating into available land. “We benefit as an industry because of urbanization and the accompanying demand,” says Tesfa, “but it is a catch-22 if the population eats into this land resource.” As urbanization approaches the projected 35 to 40 percent in certain countries, especially in Kenya and Tanzania, human influence on animal feed quality and quantity will be exacerbated unless urgently addressed.
Animal feed pricing in the region further complicates the story. Low maize prices benefit livestock farmers in Uganda, but the low quality of the maize refutes those same benefits. Higher maize costs and low quality have forced livestock farmers in Tanzania and Ethiopia to consider a multitude of different ingredients for animal feed. Ethiopian farmers, for example, use a mix of potato products, wheat products, oil seed products and household wastes like coffee residue. The potential of these potato and wheat by-products is undercut by the rising caloric value found in Ethiopian food. Tanzanian and Kenyan farmers argue that the local caloric intake of such products has already climbed to a level that makes such products hard to use in animal feed. Oil seed products have the greatest potential, with the highest quality and amount of animal feed coming from seed processing excess. Yet, while the region exports a great amount of seed and nut products, its processing capability remains very low. Experts estimate that Ethiopia could see the greatest growth. Processing could double in the next 3 to 5 years through investment in the sector. Kenya and Tanzania could also see immense growth but have not attracted similar investor interest.
The Livestock Conundrum
Livestock farmers also face a pricing problem. Demand for their products, especially poultry, are skyrocketing. On average, chicken in East Africa – particularly in Tanzania and Ethiopia – costs nearly 25 percent more than fish, 45 percent more than beef, and 300 percent more than beans. Price sensitivity still wins out for East Africans against their desire for higher protein intake. Investors constantly seek ways to boost poultry production at a cheaper cost, but livestock farmers cannot drop prices because the most essential input in the quality and quantity of raising animals is animal feed. On average, poultry feed accounts for 65 percent of total production costs. In countries, such as Rwanda and Burundi, where the animal feed industry is in its infancy stage, farmers complain of facing animal feed costs above 70 percent of total production costs.
Such constraints invite creativity from governments and investors. Ethiopia and Kenya have aggressively sought to grow their livestock farming in rural areas to avoid the effects of urbanization. Local producers have also engaged international agencies and advisers on how to enhance poor animal feeds through protein and other nutritional additives. Small-scale projects are showing the potential of such efforts, but the Tanzania Animal Feed Manufacturers Association (TAFMA) says greater success requires greater knowledge. According to TAFMA, most farmers currently struggle to understand their feed inputs and associated costs, making it tricky to find the balance between lowering costs and maintaining quality.
“Mineral and vitamin inputs can confuse even the most astute farmer”, says Hector, a Tanzanian farmer, “especially those operating in a low technology setting”. Very few of Hector’s Tanzanian counterparts employ technology in their processing. As a result, biotechnology in feed production wrestles with a reluctant industry. Information and communication technology upgrades – whether computers or mobile phones – could tremendously help the industry overall. Such upgrades could better facilitate the industry’s ability to record data, summarize information, and transfer knowledge.
Commercialization, The Future of Livestock Farming?
What is likely to happen is a trend similar to other regions of Africa. Eventually livestock farmers will eventually develop in-house animal feed processing capabilities, but in the short-term, the likelihood of seeing this trend overtake the region is low. Thus animal feed producers have the potential to more than double their profits in the next few years with greater volume production and lower prices.
Uganda and Ethiopia could benefit the most from investment in the animal feed processing sector. Kenyan processing companies already import the raw materials from both countries. Uganda’s animal feed processing sector has failed to capitalize on its inherent advantage of low maize prices and transport costs. Ethiopia’s sector could instantly improve through better interaction between seed and nut processing companies. For instance most food processing companies in that country still toss potential feed out as waste even though livestock farmers have indicated a growing interest in buying the waste, even waiting at the gate and transporting it themselves. Such missed opportunities and efficiencies currently give Kenya an advantage in the region. Greater partnership between investors and government agencies could change the outlook for the future. But until then, the animal feed sector, and subsequently the livestock sector, will continue to underperform.
Ethiopia: The Corporation Aims to Produce Over 6 Million Quintals of Sugar
Director General of the Corporation, under a Ministerial Portfolio, Shiferaw Jarso while speaking to participants of the Corporation celebrating the 24th anniversary of May 28 (Ginbot 20) said that when the construction of all sugar factories finalized and start to produce sugar, the corporation will export sugar and add foreign currency apart from satisfying the local sugar demand.
Complicated features of the factories together with financial problems are the main challenges faced by the sector he said, adding that in the Second Growth and Transformation period all the challenges will be resolved he hopes.
Sugar factories are benefiting hot lowland dwellers in owning infrastructures; it was also noted that the factories created job opportunities for over 300,000 citizens.
The day was celebrated colorfully with discussions and briefings.
Agency Secures 20 Billion Birr from Privatized Public-Owned Enterprises
The agency celebrated today the 24th anniversary of May 28 by discussing a research paper entitled “The Fruits of May 28”.
Agency Director-General Beyene Gebremeskel said out of the stated revenue, close to 15 billion birr was collected.
The enterprises have created jobs for 40,000 citizens and the expansion of enterprises has again created additional 6,000 jobs, according to Beyene.
The enterprises are engaged in textile, leather, construction, metal, hotel and tourism, agriculture, and trade sectors.
The Director-General said the government has been supporting and monitoring the enterprises so as to make them competitive and healthy.
Over the past 20 years close to 370 public enterprises have been privatized through joint venture, lease and management arrangements, Beyene said, adding that close to 87 percent of those enterprises were transferred to local investors.