Ethiopia eyes bond trading in cautious capital markets opening
Prime Minister Hailemariam Invited to G7 Summit
The premier, along with other African heads of state and governments including presidents of Liberia, Nigeria, Senegal and Tunisia, is expected to attend the G7 outreach meeting.
The outreach meeting is aimed to create a platform for G7 to support African countries in their reform efforts and thereby strengthen peace and security, growth and sustainable development in Africa.
It also serves the two sides to engage in dialogue on the common challenges they face.
The 41st G7 summit will focus on the global economy as well as on key issues regarding foreign, security and development policies.
The Group of Seven (G7, formerly G8) is a governmental forum of leading advanced economies in the world.
Canada, France, Germany, Italy, Japan, United Kingdom and United States are the current members of the G7 after the suspension of Russia in 2014.
Ethiopia’s Hot, Nigeria’s Not, for Investors Eyeing Africa
Africa has a hot new investment destination and it’s not Nigeria.
The buzz at the World Economic Forum on Africa, an annual summit of the continent’s rich and powerful, is all about Ethiopia, where the economy is flourishing and the government is embracing select foreign capital. Executives from General Electric Co., Dow Chemical Co., Standard Bank Group Ltd. and MasterCard Inc. attending the June 3-5 gathering in Cape Town all singled out the East African nation as a market with strong potential.
Ethiopia was Africa’s eighth-largest recipient of foreign direct investment last year, up from 14th position in 2013, a report released by accounting firm EY on June 2 showed. The number of projects in Ethiopia surged 88 percent, the most of all countries ranked, while those in Nigeria slumped 17 percent.
“It’s got a government that is managing economic development in a very deliberate, cautious manner,” Ross McLean, Dow’s president for sub-Saharan Africa, said in an interview on Thursday. “It’s the second-most populous country in Africa. It hasn’t urbanized like other African countries, but it’s going to. It’s a very exciting place.”
Ethiopia’s economy is expected to expand 8.6 percent this year and 8.5 percent in 2016, compared with 10.3 percent growth last year, the International Monetary Fund said in its World Economic Outlook released on April 14. Nigeria, which has Africa’s largest economy and is grappling with energy shortages and the fallout of an oil price slump, is forecast to grow 4.8 percent this year and 5 percent next year.
Ethiopia’s capital, Addis Ababa, shows all the signs of a construction boom. Private developers are erecting scores of office blocks and luxury housing estates, while the government is clearing slums to build low-cost apartments. Radisson Hotels International Inc. and Marriott International Inc. are among global chains that have opened hotels to cater for an influx of business travelers.
A Chinese-built railway line that snakes alongside the capital’s main roads is part of a nationwide infrastructure development program that’s helping entice investors. In April, Chinese company Huajian Group began work on a $400 million shoe-manufacturing park on Addis Ababa’s southwestern outskirts, while companies including Taiwan’s George Shoe Corp. have opened plants in an industrial zone in the Bole Lemi district.
On Thursday, Dangote Group, the Nigerian company controlled by Aliko Dangote, Africa’s richest man, said it will spend $500 million expanding its cement plant in Ethiopia, adding to $600 million already invested.
“We will leave no stone unturned to make this country a suitable destination for foreign investment,” Prime Minister Hailemariam Desalegn said at the opening of the plant at Mugher, about 80 kilometers (50 miles) west of Addis Ababa.
The country was assigned its first credit ratings in May. Moody’s Investors Service rates it a non-investment grade B1 with a stable outlook, while Standard & Poor’s and Fitch Ratings awarded the country a B, one grade lower.
Yields on the nation’s debut $1 billion Eurobond have climbed to 6.77 percent from 6.625 percent when they were sold on December 4.
“We’ve done quite a lot of Ethiopian business,” said David Munro, head of corporate and investment banking in Standard Bank, which has applied for a license for a representative office. “We see it as a prospective place to grow our business. There’s the possibility of significant resources and it’s within an economically significant zone, the east African trade area.”
Obstacles to doing business in Ethiopia remain. The Ethiopian Peoples’ Revolutionary Democratic Front has ruled the country for the past two decades and the state continues to dominate the financial services, telecommunications and transport industries. Foreign exchange is in short supply, because the government uses inflows to finance its infrastructure program and exports remain meager.
Razia Khan, Standard Chartered Plc’s head of Africa macroeconomic research, said Ethiopia’s economy has a “hollow” structure because it doesn’t have a big enough middle class to enhance economic growth.
Only 18 percent of Ethiopia’s 94.1 million people are urbanized and the economy is worth just $48.9 billion, according to the Abidjan, Ivory Coast-based African Development Bank. About 30 percent of the population live in poverty, according to 2010 data from the World Bank, down from 46 percent in 1995.
Pan-African lender Ecobank Transnational Inc. has a representative office in Ethiopia. Equity Group Holdings Ltd., owner of Kenya’s second-biggest bank, will prioritize its Ethiopian business as part of an expansion into nine other African nations, Chief Executive Officer James Mwangi said in an interview in Cape Town.
Dow doubled its sales in Ethiopia last year and sees more growth to come.
“There are some significant challenges,” said McLean. “We manage them. We think we are in at the right time.”
Power Africa Initiative Coordinator Says Corbetti Project Testimony to Ethiopia’s Priority for Energy Sector
During a televised conference he held with journalists from sub-Saharan Africa countries, Andrew Herscowitz said the Power Africa Initiative has been exerting efforts to discharge the electric energy demand of the countries by carrying out various projects with private investors.
The Power Africa Initiative will also create favorable condition for investors to engage in the energy sector through undertaking feasibility studies, identifying opportunities for energy and creating strong relationship among government and investors, he added.
According to him, Corbetti Geothermal Project is expected to generate 500 MW and play vital role in the endeavor of Ethiopia to have enough access to energy in the country.
The government of Ethiopia has reached an agreement with Reykjavik Geothermal and power Africa is striving to provide technical and consultancy assistance so that the companies will engage in the sector.
The US had allocated over one billion USD to increase power supply in sub-Saharan Africa countries with the cooperation of 40 companies. In addition to Corbetti Geothermal Project, which is under construction in Ethiopia, similar projects are underway in Tanzania and Nigeria, it was indicated.
The Corbetti project is part of the Power Africa Initiative announced by President Obama in 2013 which seeks to add more than 10,000 megawatts of cleaner, more efficient electricity in six priority countries in sub-Saharan Africa.
A key thrust of the Power Africa strategy is to accelerate the development of the vast and renewable geothermal potential in the Rift Valley which extends through both Ethiopia and Kenya.