The changing face of Ethiopia
An assertive nation flexes its economic muscle
Authority collects 97 billion Birr from tariffs and non-taxable revenues in 10 months
Presenting its 10 months performance report to the House of People’s Representatives, the Authority’s Director Beker Shale said 98% of their objective have been met in the 10 months.
The collected revenue has increased by 34% compared with the same period last year, with a 24.8 billion Birr rise.
The House evaluated the Authority’s increasing capacity to collect revenue as a positive and urged for more work in combating corruption.
H&M’s Ethiopian Supplier Invests in Factory to Boost Revenue
Ethiopia’s Almeda Textiles, which sells clothes to Swedish fashion chain Hennes & Mauritz AB, plans to increase revenue by 50 percent to $30 million a year by 2018 by upgrading factory equipment and training staff.
The company will invest in its only plant near the city of Adwa, in Ethiopia’s northern Tigray region, Almeda’s General Manager Libelo Gebreselassie said in an interview on Monday. He declined to say how much will be spent. The company, which began operations in 1998, could supply Stockholm-based H&M with more than 4,000 t-shirts a day next year if productivity improves, he said.
“We’re upgrading our internal capacity,” Libelo said at Almeda’s offices in the capital, Addis Ababa. If the company can boost capacity and reliability at the plant, H&M may increase its orders, he said.
H&M can’t comment on its relationship with Almeda for “competitive reasons,” spokeswoman Anna Eriksson said by e-mail on Tuesday. The vendor of $9.95 beach dresses said Thursday that the rising dollar drove second-quarter profitability to the lowest level in nine years.
Ethiopia’s government plans to invest about $1 billion a year in export-focused industrial parks that will contain textile factories among other manufacturing sites, Arkebe Oqubay, a special adviser to Prime Minister Hailemariam Desalegn, said last month. While Africa’s second most-populous nation has a target to earn $1 billion this year from textiles and clothing exports, it shipped only $70 million worth in the nine months through March, according to the Trade Ministry.
About 90 percent of Almeda’s dyed fabrics and garments are sold in Ethiopia, with large orders from the army and police force for uniforms, Libelo said. The company’s sales will probably be $20 million in the fiscal year ending July 7, up from annual revenue of about $15 million in the two previous years, he said.
Saudi investor’s Ethiopian farms to raise coffee, tea output
Horizon Plantations and Ethio Agri-CEFT plans to more than double its coffee production and expand tea output.
Horizon Plantations is part of the MIDROC umbrella group of companies, majority owned by Saudi Arabian investor Mohammed Hussein Al Amoudi. Forbes magazine estimated his net worth at $10.8 billion.
“In the coming five years, we have a plan to raise our coffee produce to 25,000 tonnes,” Jemal Ahmed, managing director of the firms, said in an interview.
“One hundred percent of our coffee could be exported once we attained the quality we need,” he said, adding the group planned to set up an instant coffee processing plant soon.
The firm, which trades its premium coffee through the Neumann Kaffee Gruppe and counts Starbucks, Munich-based Dallmayr, Germany’s second largest roaster Tchibo, and Seattle-based Caffe Vita among its buyers.
It produces more than 10,000 tonnes of coffee from its 25,000 hectare plantations in southern Ethiopia’s, of which 70 percent is exported.
Ethiopia, Africa’s biggest producer of the bean – anticipates record-high exports by the end of the fiscal year ending July. Drought and disease has hit rival crops in Latin America.
Total coffee production in Ethiopia amounted to 450,000 tonnes over the 2013/14 period, according to official figures. Officials expect a similar amount this season.
It exported around 190,000 tonnes in 2013/14, earning $841 million, down from the record high of 193,000 tonnes the year before.
The son of a Saudi Arabian father and an Ethiopian mother, Al Amoudi has invested heavily in Ethiopian construction, agriculture and mining.
He plans to invest $5 billion more in Ethiopia’s agriculture and agro-processing over the 2016-2021 period, said Jemal, who is also managing director of Saudi Star – another subsidiary which grows food crops in 15,000 hectares in Ethiopia’s Gambela region.
Among the sectors that will see an expansion include tea production. MIDROC’s Ethio Agric-CEFT produces a total of 5,700 tonnes of tea leaves annually from the 1,249-hectare Wush Wush plantation and the 860-hectare Gumaro, and expects production to rise to 7,000 tonnes in the next few years.
The firm is set to export 1,300 tonnes by the end of the 2014-2015. Its buyers include Unilever’s Lipton.
“Ethiopia is one of the very few countries which has opportunities to invest in virgin land. For us, (tea) was just a startup but the next step will be big,” Jemal said.
Africans able to drive economic integration, growth – CBN
By Naomi Uzor
The Central Bank of Nigeria (CBN), has said that Africans have the capacity to drive the continent’s economic integration, growth and development rather than relying entirely on foreign investors.
Commenting on the Dangote’s 2.5 million metric tonnes cement plant established recently in Ethiopia, the Governor of CBN, Godwin Emefiele, said the recent expansion drive of Alhaji Aliko Dangote confirms that Africans have the capacity to drive the continent’s economy.
He also said that the drive embodies integration, growth and development. He said this is the ideal, rather than depend almost entirely on foreign investors, especially at a time when the regional economy of sub-Saharan Africa and the economy of many of the constituent countries seem to be slowing down due to the impact of global shocks.
“I must commend Dangote cement for its expansion projects. The trust of the event is undeniably momentous for the entire Africa continent particularly as it underscores the importance of fostering intra Africa investments. Africa must first and foremost invest in Africa. We need to promote a symbolic and mutually beneficial flow of direct investment within the continent” he said.
He noted that the plant was undertaken at a cost of about $600 million and it is arguably the single largest investment in Ethiopia by an African entrepreneur, adding that, he believes that the investment will booster intra-regional trade, deepen financial market, create wealth, reduce poverty and unemployment and ultimately engender gross domestic product in Ethiopia with particular effects throughout the sub region.
For this, he said, Nigerians are very proud of Alhaji Dangote, an entrepreneur who is a patriotic African and a true ambassador of Nigeria. The President/ Chief Executive, Dangote Group, Aliko Dangote, said the company’s decision to set up the multimillion dollar plant in Ethiopia was informed by the enabling environment the government of Ethiopia had in place for investors and that this favorable investment makes Ethiopia attractive to foreign investors.
“The government has made remarkable progress and has superintended a period of significant and inclusive economic growth that has seen official Gross Domestic Product (GDP) growth rates of Ethiopia surpassing 10 per cent, over the past decade, with a projection of 10.6 per cent in 2015.”
“This makes Ethiopia the largest economy by GDP in East and Central Africa. The government is also investing massively in several large-scale infrastructure projects, including construction of the continent’s largest hydropower dam. All these make Ethiopia a beautiful bride to investors” he said.
He said he believes that manufacturing, and not trading, is the best way to grow an economy, and that apart from cement production, they are also investing substantially in other sectors of the economy such as agriculture, oil and gas refinery, fertilizer and petrochemicals and in all, they have 13 subsidiaries in Nigeria and are investing about $16 billion between now and 2018, in new projects and existing plants.
130 railway wagons assembled in Ethiopia
Norinco, an international company won the contract to build the railway wagons and it subcontracted the Metals and Engineering Corporation to build 530 wagons.
PR Head at the Corporation Michael Desta noted that they have so far built half of the wagons as indicated in the subcontract. Norinco has already completed the construction of 100 trains.
The Ethiopian Railway Corporation said completed trains are being transported to Dire Dawa. The railway wagons will be tested on newly laid tracks and handed over to the ERC on September.
The transfer of knowledge is expected to build local capacity to build trains and cargos in the country.
The under-construction Sebeta-Meiso-Dewele-Durale rail will utilize 1100 railway wagons to transport cargo. Laying of tracks in both Ethiopia and Djibouti has been completed. Currently, electro-mechanical tasks are underway. The project is currently at 85% completion rate.
Chinese diplomat calls for collaboration in exploring business opportunities in Ethiopia
Chinese Ambassador to Ethiopia, La Yifan, has called on foreign diplomats and business leaders in the country to work together to explore and exploit the business opportunities in the East African state.
Speaking later Tuesday at a dinner reception organized on the premises of the Chinese Embassy in Ethiopia’s capital Addis Ababa, the Ambassador noted that diplomacy plays important role in helping investors conduct successful businesses in overseas markets.
The event has attracted foreign diplomats, foreign investors and business leaders in Ethiopia.
Reiterating that Ethiopia has been registering fast economic growth with success also in achieving the millennium development goals (MDGs), La emphasized on the need to have collaboration among diplomats and investors of different countries towards exploring and making use of the ample investment opportunities being created in the country.
Exemplifying his remarks, particularly with a Turkish textile factory in Ethiopia, which imports raw material from and exports its finished products to different countries, the Ambassador presented situations whereby countries could cooperate on foreign businesses in a single country.
He also stated that the Addis Ababa-Djibouti modern electrified railway being built by Chinese companies plays significant role in import and export of business goods for foreign investors operating in Ethiopia.
La has also stated that foreign investments create tremendous job opportunities for the local people while transferring technology and sharing expertise in the country.
As different countries could contribute to industrialization in Ethiopia, the Ambassador expressed China’s keen interest to relocate industrial capacities to Ethiopia bringing technology as well as technical and managerial expertise in the industrial sector.
Stating that the country is hosting foreign investors from different parts of the world, Dewano Kedir, Ethiopia’s State Minister of Foreign Affairs, hailed the contribution of foreign investments in Ethiopia to the growth and transformation being witnessed in the country.
Appreciating the informal event of the diplomats and investors for dialogue on investment climate and opportunity in Ethiopia, the State Minister noted that all should work together towards successful businesses and addressing challenges to avoid failures.
Dewano expressed his country’s commitment to working closely with and providing the necessary support to foreign investors towards success of businesses, which he said is also the success of the country.
Ethiopia and Brazil sign avoidance of double taxation agreement
H.E Ambassador Sinknesh Ejigu, Special Envoy, Ambassador Extra ordinary and plenipotentiary of the Federal Democratic Republic of Ethiopian (FDRE) has signed the agreement On behalf of the Government of Ethiopia with the Secretary of the Federal Revenue of Brazil Mr. Jorge Rashid..
Ethiopian Airline which has started its flight to Brazil two years ago will be benefited from this agreement. The Agreement shall enter into force on the date of its signature, June 22, 2015 and its provisions shall have effect immediately.
Ethiopia, Ghana Agree to Establish Joint Ministerial Commission
Foreign Minister Dr. Tedros Adhanom and Ghanaian Minister for Foreign Affairs and Regional Integration, Hanna Serwaa Tetteh, signed the agreement yesterday in Addis Ababa.
The countries have also agreed to cooperate in culture and tourism, communications, information and mass media.
Dr. Tedros said the commission which would follow-up the implementation of the agreements comprises of the main sectors which include trade, economy and social sectors.
The commission would focus on boosting the trade and investment of the countries, he added.
The annual trade exchange of Ethiopia and Ghana has reportedly never exceeded five million USD.
“Although Ethiopian Airlines flies daily to Accra, we have not yet utilized it for boosting the trade and investment ties of the countries”, he stressed.
Chambers of Commerce of the two countries are expected to reach an agreement to work together, according to the foreign minister.
Ghanaian Foreign Affairs and Regional Integration Minister, Hanna Serwaa Tetteh on her part said the agreement reached would help realize the agreements concluded earlier by the countries.
The agreement in culture and tourism will have great merit in strengthening the people-to-people relationship of the two countries in addition to consolidating government to government relationship, she noted.
The two ministers had signed Memoranda of Understanding in agriculture, infrastructure, education, science, technology, trade, energy and other sectors in January 2014 in Accra, the capital of Ghana.
Ambassador Urges Australia, Ethiopia to Expand Ties to Trade and Investment
Ambassador Mark Sawers said the existing diplomatic relation between the two countries should expand to trade and investment.
Even if the diplomatic relation of the countries is over five decades, the trade relation between the countries is low, he added.
However efforts are underway to bring more Australian investors that engage in agriculture, mine and spice investment in Ethiopia, the ambassador pointed out.
Australia is ready to share its best experiences in mine extracting and agriculture, and provide training for stakeholders engaged in the sector, Ambassador Sawers stated.
The countries would also further strengthen their cooperation in areas of higher education, vocational education, health, and forestry among others, according to the ambassador.
Australian Scientific International Agricultural Research would closely work with Ethiopian Agricultural Research Institute in order to foster the county’s potential in the sector, he said.
Commenting on GTP-2 which will start in 2016, Ambassador Sawers stated that “GTP-2 is a commitment to building the private sector, and it therefore represents opportunity for us”.
The private sector is central to achieving national development objectives, the ambassador said, adding that his country is ready to attract more investors to Ethiopia in the GTP period.
On the other hand, Ambassador Sawers appreciated the role Ethiopia is playing in fighting terrorism and stabilizing the East African region in general.
Terrorism “needs cooperation and the (Australian) government is looking for a possibility of exchanging intelligence, experience and successful policy measure with different countries in order to curb terrorism in the continent,” he indicated.
The 50th anniversary of Australia’s diplomatic relations with Ethiopia will be marked next month.
ICL completes Allana Potash acquisition, gains strong position in Ethiopia
The closing on Monday followed approval by Allana’s security holders and Ontario’s Supreme Court of Justice of ICL’s offer for 83.78% of Allana’s outstanding shares that it did not already own.
In 2014, ICL acquired 16.22% of Allana for C$25-million. Allana held a concession to mine potash at the Danakhil mine, in Ethiopia’s Afar National Regional State, as well as the knowledge that had been accumulated in recent years. The project was estimated to yield up to one-million tonnes of muriate of potash (MOP) a year for 25 years, based on a feasibility study conducted by Allana and completed in February 2013.
ICL said owning Allana would enable it to accelerate the development of the Danakhil mining project and it would now start a process to assess the technical and operational feasibility of the project, including logistics, infrastructure and production needs, the optimal process for developing the Danakhil deposit, increasing the potential of the concession area and securing project financing. ICL was considering expanding the scope of the project’s production capacity and evaluating the possibility of producing sulphate of phosphate as well as MOP.
According to ICL, the Ethiopian government recognised the long-term infrastructure, agricultural and economic benefits that would result from developing a large-scale mining operation in the country, including its contribution to the country’s overall gross domestic product, foreign currency inflow and tax base, and, specifically, the creation of direct and indirect employment in the Afar region.
During the past year, ICL had deepened its efforts to create a market for potash in Africa, mainly by sponsoring a potash awareness programme – Potash for Growth – in conjunction with Ethiopia’s Ministry of Agriculture and its Agriculture Transformation Agency. The programme included creating hundreds of potash demonstration plots in Ethiopia.
Ethiopia, Chinese Company Sign $119m Deal for Transmission Lines to Kenya
– The export of surplus electricity earns foreign currency but local outages are of concern
Ethiopia signed a 119 million dollar deal for power transmission lines to Kenya to export the extra power.
“It is mandatory to export the energy that is leftover as we cannot keep it, because our existing electric transmission lines are working beyond their capacity and they cannot transmit the entire amount of energy we are producing,” according to Azeb Asnake (Eng.), chief executive officer (CEO) of Ethiopia Electric Power (EEP).
The multimillion dollar deal which went to the China Electric Power Equipment & Technology (CEP), was concluded on June 19, 2015 at the Sheraton Addis Hotel at a ceremony attended by Alemayehu Tegenu, minister of Water, Irrigation & Energy; Sufian Ahmed, minister of Finance & Economic Development; La Yifang, ambassador of the Republic of China; Josephine Ngure, resident representative of the African Development Bank (AfDB); Chen Wei, vice president of CEP, as well as representatives of the World Bank (WB) and the French Development Agency (AFD).
The power line, to be constructed on the Ethiopian side of the project will be 433Km long from Wolayta Sodo through Konso to the border of Kenya.
CEP is a subsidiary company of State Grid Corporation of China, which is engaged in the construction of international power, energy and power transmission lines. It is the company that provided electricity grids for substations in the Addis Abeba light rail transit (LRT) power project.
The construction contract signed with CEP is part of the five lots of the Ethiopia-Kenya electric system interconnection project, which has a total length of 1,045Km and a transmission capacity of 500Kv. The remaining 612Km is going to be constructed by Kenya.
The construction costs, including the consultancy service of the Ethiopian lot, is wholly and exclusively financed by the AfDB while financing of the whole interconnection is shared between the developmental partners of WB, AfDB and AFD, at total cost of 1.26 billion dollars.
The project, which started in 2015, nine years after of signing a Memorandum of Understanding (MoU) in 2006, is now on a schedule to be completed after two years and two months.
The project was delayed because of a lengthy bidding process, environmental and technical assessments, said the EEP CEO, speaking to journalists after the signing of the contract. She added that the construction project was to be undertaken considering the existing and ongoing power projects.
“It is a misconception for those who thought the country could not export power in a scenario where there is power shortage within,” she said, “but in any case, we are not going to export without identifying the leftover energy and without meeting the local demand,” Azeb noted in response to the question of how exporting power was even possible in the presence of power interruptions within the country.
With the diversification of developmental partners, there were different policies and preconditions, which should have been settled and during the last nine years, there were challenging times when non-governmental organisations were lobbying against the financing of the project, Meheret Debeb, advisor of Energy Strategy & International Affairs and former chief executive officer of the then Ethiopian Electric Power Corporation (EEPCo), told Fortune.
The country currently plans to export 400Mw of power annually. According to AfDB, once the entire project is completed, Ethiopia will earn annual export revenue of 500 million dollars and 870,000 Kenyan households will reap the benefits.
Other than the Ethiopia-Kenya power Interconnection project, there are similar projects including the 283Km and 230Kv Ethiopia-Djibouti power transmission line, which was inaugurated in October 2011. That project, which was also financed by the AfDB, was planned to earn Ethiopia 1.5 million dollars per month and provide 60Mw of electricity to Djibouti.
A 321Km Ethio-Sudan Power Systems Interconnection was also inaugurated in December 2013 at 35 million dollars, having a capacity of 100Mw and was planned to bring in 150 million dollars in foreign currency to the country.
Ethiopia Boosts Spending by 20% to Improve Education, Roads
Ethiopia’s government will boost spending by 20 percent in the budget year that begins next month to expand infrastructure in one of Africa’s fastest-growing economies, State Finance Minister Abraham Tekeste said.
Spending will increase to 223.4 billion birr ($11 billion), with more than half of the 84.3 billion birr set aside for capital expenditure to be spent on roads and higher education, Abraham said in a June 18 interview in the capital, Addis Ababa. The state will also provide 12 billion birr to regional states to support business development and 3 billion birr for manufacturing parks.
“These are critical for sustaining the rapid economic growth registered over the last decade,” Abraham said.
Growth in Ethiopia has surpassed every other sub-Saharan country over the past decade and is forecast by the International Monetary Fund to exceed an annual rate of 8 percent over the next two years. The state-planned economy may be opening up to foreign investors following its sale of $1 billion of Eurobonds last year and plans to start an equities and secondary debt market, London-based Exotix, which has a buy rating on the Eurobonds, said last month.
While a state-led model has boosted growth and reduced poverty, private industry needs to play an increasing role to sustain growth, the IMF said June 19.
The domestic budget deficit is 27.6 billion birr, or 1.8 percent of gross domestic product, and will be financed mainly by selling Treasury bills and loans from the central bank, Abraham said.
Foreign loans and grants are expected to fund about 38.7 billion birr of spending. The government plans to collect 141.2 billion birr in taxes after efforts to improve the country’s tax take raised it to 13 percent of total output, Abraham said. The World Bank estimates revenue was about 9.2 percent of GDP in 2011.
The $1 billion raised from the debut Eurobond sale in December will be invested by state-owned enterprises in manufacturing parks and energy projects, Abraham said. The Eurobond sale contributed to an overall public debt figure of $30.1 billion in 2014, according to Finance Ministry data.
“The debt we have is sustainable,” he said. The size of Ethiopia’s economy was about $50 billion in 2014, according to Moody’s Investors Services.
Foreign investment is expected to increase to almost $2 billion this fiscal year from $1.5 billion last year, he said. 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.
Focus on urban agriculture and agro processing to ensure food security and economic stability
The Director noted the sector will remain a critical focus during the second Growth and Transformation period.
The Agency in collaboration with Fana Broadcasting Corporate organized a seminar where the sector’s opportunities, challenges and solutions were discussed with stakeholders.
Urban agriculture and agro processing accounts for 16% of all jobs created in the sector. High demands in egg, honey, milk make the sector very profitable, participants noted.
Knowledge gap, shortage of chicken feed, problems of technological transfer and shortage of improved seeds are among the challenges the sector faces. The Agency stated that it is working to address the problem and urged all to solve perception problems.
Sher Ethiopia Plc to Inaugurate Expansion, Increase Flower Production
– The cut flower company will ultimately employ 6,000 people in Adami Tulu
Sher Ethiopia Plc, which is implementing an expansion project in Adami Tulu, 170Km south of Addis Abeba in the Oromia Regional State on a 203ha plot of land, has so far, completed expansion ON 50 ha of the total plot.
Only 160ha of land will be used for development of a new greenhouse whereas the remaining land will be used for building offices, pack house, grading hall, cold room and other facilities.
“So far, we are developing one hectare of land per week,” said Gerrit Barnhoorn, managing director of Sher, refraining from mentioning any details in terms of the amount of investment spent on the expansion project.
The minimum amount of investment per 10ha is in the floriculture sector is estimated to be 50 million Br, according to Berhanu Lodamo, Promotion & Information department head at Ethiopian Horticulture Producer & Exporter Association.
This project is expected to increase the flower production and export level in Adami Tulu alone from 400,000 stems per day to 1.5 million stems per day, raising the total from all three farms, including Ziway and Koka, to 3.5 million stems per day.
Similarly, the number of employees in Adami Tulu is also expected to rise to 6,000 from 1,400.
Sher Ethiopia, headquartered in Ziway, Oromia, 163Km south of Addis Abeba, has now increased its farm size to 703ha. The company entered the Ethiopian flower industry in 2005, and it has become one of the largest companies exporting flowers. The company had previously engaged in horticulture in Kenya for over 15 years.
The company mainly exports its flowers to Holland, from where they are distributed to the rest of Europe, according to Gerrit.
The major challenge for the company now, is the fluctuation of the euro, whose exchange rate has decreased, Gerrit told Fortune. The exchange rate of the Euro against the Birr has decreased from 26Br in May 2014 to 23 Br now.
“This is affecting our income,” emphasised Gerrit.
During the 2013/14 fiscal year, the horticulture sector in general had gained 245 million dollars, according to Ethiopian Horticulture Development Agency (EHDA).
Even though there is 0.42pc for 11 months of the current fiscal year, the rate of growth compared to last year which was 6.4pc, had decreased, said Alem Woldegrima, director general of EHDA.
The agency has been assisting actors in the sector to diversify their market into more destinations in addition to Europe such as Japan and African countries, stated Alem.
There are now around 120 foreign and local flower companies operating in Ethiopia. Out of the 120 investors, 73 invested through Foreign Direct Investment (FDI), while 11 are joint ventures and 36 are local companies.
The grand inauguration of the expansion project is scheduled for November 21, 2015.