Labelling the country’s recent export performance as the worst in a decade, the recent update on the Ethiopian Economy released by the World Bank Group pinpointed a consistent over valuation of the country’s real exchange rate (RER) over the past two decades has significantly contributed to the lower export performance.
All things being equal, a 10pc devaluation of the country’s RER could lead to annual growth of five percent in its exports, suggests the report. Nonetheless, in the presence of macroeconomic trade-offs, the government has to weigh in other factors in using the exchange rate as a policy tool. This includes considering its impact on inflation, as well as on the import cost of capital and consumer goods, cautions the author of the report, the World Bank Group.
Suggesting increased productivity and product quality as the core drivers in making Ethiopia’s exports perform better in the long run, the report also finds that Ethiopia could enjoy an improved economic growth of two percentage points with a 10pc devaluation of its RER.
The predominance of basic export commodities in the country, which tend to compete more on price than on quality, plays a role in the stronger impact of the exchange rate level of the country’s currency in the performance of its exports.
The real exchange rate of the country was overvalued by around 30pc in 2009/10 and 2010/11, according to the report. This has affected the export performance of the country, as an “undervalued RER is associated with higher real export and output growth”. This has been true across all countries and throughout history. On average, for each additional 10pc in RER undervaluation, the country’s exports go up by 0.6pc points, and its output growth goes up by 0.88pc points a year, the economic updates says.
The overvaluation of the exchange rate hurts exports and favours imports, it says.
“Therefore, monetary and fiscal policy should aim to keep inflation low and the exchange rate policy should support a nominal exchange rate that is competitive,” the group suggests. “The macro policy mix should take into account that a faster pace of nominal currency depreciation would potentially induce inflation.”
The country is described as an example of “self discovery” by encouragingly creating and nurturing a high value horticulture industry and a booming air services, which have helped its rise in exports. This has contributed to the remarkable economic growth over the last decade, while creating more jobs and enabling the nation to earn “much needed” foreign currency.
Nonetheless, the type of the nations export items, which is primarily dominated by “unprocessed and undifferentiated” agricultural products, made it susceptible to the fluctuations of the prices of these commodities in the international market.
In fact, ever since the government disclosed its five year Growth & Transformation Plan (GTP), which is a year ahead of its conclusion, no sector has been more disappointing than the exports sector. There has been a sizable gap throughout the past four years of the GTP between the level of achievement and the four billion dollar annual earnings target. The problem seems to have been worsened by the recent price fluctuations, predominantly in the prime export commodities of the country.
When compared to the previous budget year, the export performance of coffee in the first ten months of this budget year has showed a decline of 8.7pc and 15pc, in the amount exported and revenue generated, respectively. The prime export commodity of the nation – coffee – has seen a year-on-year decline of 38.4pc, whereas spices, cotton and eucalyptus have seen a drop of 7.4pc, 66.2pc and 29.5pc, respectively. Indeed, the export regime of the nation is under distress, to say the least.
The overall export performance saw the country earn 2.6 billion dollars during the ten months of the budget year, registering a growth of 4.8 per cent from the last year.
It was in reference to this that the World Bank Group warned the nation that there exists underlying vulnerability in the country’s export structure and recommended measures towards strengthening competitiveness. Such measures included the macro policy mix that enables the devaluation of its currency by at least 10pc – though it has been long overvalued by 30pc.
Increasing value addition, quality and branding of exports is the prime measure on the list of policy recommendations the group has made in its latest economic update. It also needs to avert constraints related to reliable power supply, credit and foreign exchange and redress the long overdue bottlenecks in the logistics sector, which still continue to be the least recommendations the nation has to consider. In its endeavour to thrive in the staggering exports sector, which has in fact contributed in many aspects of the economy, it has, however, expanded its efforts with the establishment of industrial zones in conformity with the international standard.
Ethiopian Aviation Academy, the largest aviation academy in Africa, has joined IATA’s global training partner network as an IATA Authorized Training Center.
In a statement sent to The Reporter yesterday, Ethiopian said the Academy attained the recognition following the evaluation of its successful application to become an IATA Authorized Training Center by the IATA Training and Development Institute and the IATA Regional Office. This authorization allows Ethiopian Aviation Academy to deliver additional training programs: IATA International Travel & Tourism Training Program and Foundation in Travel & Tourism.
The CEO of Ethiopian Airlines Group, Tewolde Gebremariam, said, “The Academy is the foundation of our success by enabling us to be self-sufficient in critical aviation areas and by supporting our Vision 2025 fast, profitable and sustainable growth strategy. This recognition is the result of the continuous heavy investment we are making on human resource development, a critical pillar of our Vision 2025 strategy. In the last four years alone, we have invested more than 80 million dollars to expand both the scope of the training and the in-take capacity of the Academy. Today, our Academy receives over 1,000 students a year to train pilots, aircraft technicians, cabin crew, marketing and finance personnel, customer service agents as well as aviation leaders. Going forward, we plan to increase this in-take capacity to 4,000 by 2025, so as to cater for the growing training need in the continent.”
The African Airlines Association recently voted Ethiopian Aviation Academy as “Airline Training Services Provider of the Year”. The Academy is certified by the Ethiopian Civil Aviation Authority, the US Federal Aviation Administration, the European Aviation Safety Agency, and IOSA (IATA Safety Audit).
To meet the ever increasing demand for aviation professionals, Ethiopian is undertaking an expansion project in its aviation academy at a cost of 55 million dollars.
The airline built multipurpose buildings used for classrooms, dormitories, a library, IT center and cafeterias at the premises of the headquarters of the airline. The aviation academy trains pilots, aircraft maintenance technicians, cabin crew and marketing professionals.
Due to the ever-increasing demand for its basic and recurrent training programs from domestic and international customers, the Ethiopian Aviation Academy is currently undergoing a massive transformation by heavily investing to equip itself with modern training aircraft, computer based trainings, simulators, and other ultra-modern facilities.
Source,Reporter newslatter 09 August 2014 Written by Kaleyesus Bekele
Irish Aid in collaboration with USAID announced it will provide 10 million birr in funding to assist the development and adaptation of technologies and business models required to transform the dairy sector in Ethiopia.
At the announcement event held on Wednesday July 9th, it was stated that the Dairy Innovation Fund will be used for the design, demonstration and field testing of technologies and business models that can demonstrate high potential for increased commercialization of milk products.
“Milk is an important product as it contains numerous nutrients that make a significant contribution to meeting the body’s needs. According to the Food and Agriculture Organization, there are positive associations between milk consumption and growth in preschool children. Therefore, it is imperative that young Ethiopians drink plenty of milk in their growing years to reduce the nations stunting rate,” said U.S Ambassador to Ethiopia Patricia Haslach who was present at the event.
With the largest number of milking cows in Africa, Ethiopia’s potential for dairy development is considerable. However, productivity and consumption remains low. Ethiopians currently consume 19 liters of milk per year; this is just 10 percent of Sudan’s consumption and 20 percent that of Kenya.
Among some of the challenges holding the sector back, feed supply availability, lack of genetic improvement of native dairy cows and low milk consumption are mentioned as the main ones.
“The fact that 98.8 percent of the female cattle herds in Ethiopia are indigenous, meaning a low-yield breed, which produces an average of 1.5 to 2 liters of milk per day, is a major constraints. In addition, quality feed is not accessible and extremely expensive,” stated Gebreegziabher G/ Yohaness, state minster of Agriculture.
He also said that the cost of feed can currently account up to 70 percent of the cost of production. The result of that is that the price of processed milk is high and unaffordable for the majority of the people in the country.
Demand is affected by, seasonal fluctuations in milk consumption during fasting periods when many abstain from consuming all kinds of animal food according to a statement made at the event. During such periods, smallholder produces are finding ways to convert the milk into long shelf life dairy products using local technologies.
Some processors are also using relatively advanced technologies to convert the products into cheese and butter. But still more innovation and strategic interventions are needed to create a more robust market demand with enough incentives to entice more smallholder farmers’ participation in the collection and processing of milk business.
If milk consumption in Ethiopia were to approach Kenya’s per capita level by the year 2020 for example, the market would need to supply over 10 billion liters of milk a year. This can be a major opportunity for job creation and economic development for the nation as well as a lucrative business opportunity for investors.
The Irish Aid contribution of 10 million Birr will be provided through USAID’s Ethiopia Sustainable Agribusiness Incubator activity implemented by Precise Consult International and part of the U.S Feed the Future Initiative. The activity’s goal is to transform Ethiopian agriculture sector by sector by enhancing the competitiveness in the dairy, honey and sesame value chains.
Source The Capital Newsletter By Eskedar Kifle Monday, 14 July 2014 06:07
US based footwear producer, Brown Shoe Company, will establish an office in Ethiopia to buy domestic footwear products for its international market.
Recently large shoe makers have seen Ethiopia’s potential and invested in the country and there are some international garment companies like H&M but this is the first time a global shoe company has entered the Ethiopian market.
Wendu Legesse, Director General of the Leather Industry Development Institute (LIDI), told Capital that the company is expected to open its office in the coming fiscal year which starts next week.
Wendu said Brown Shoe mainly exports to China but now is encouraging Chinese firms to produce footwear in Ethiopia.
Leather industry experts are hopeful this will bring more leather technology and experience into Ethiopia.
“This is a good example of how international producers can contribute to Ethiopia,” Wendu added.
According to LIDI’s head, the Brown Shoe’s investment will not only increase production but will also bring international knowledge and standards.
He said that the company will not only open an office here, but will also provide laboratory service and capacity building.
“Brown Shoe has provided scholarships for seven experts who worked at LIDI and four of them are already taking the training,” the director general said. LIDI is the government institution responsible for overseeing the leather industry. It also has a training center that provides higher education in leather technology.
The government’s goal is to bring in half a billion dollars from leather exports by the end of the Growth and Transformation Plan (GTP). Currently that target is not on track to be met because experts explain that the number of companies expected to invest in Ethiopian leather has been less than expected.
Even though the GTP ends in a year government officials are hoping that as more large companies enter the market they will still be able to meet the leather earnings target. The government is not only encouraging footwear producers to invest in the country, but companies who have the potential to export the products.
For example international footwear companies like Huajian Shoe Company, and Gorge Shoe Corporation are coming to Ethiopia and joining the sector and they have the potential to produce a large amount of leather products.
According to Wendu, another global footwear producer, Stella, which makes 52 million pairs of shoes every year has demonstrated an interest in investing in Ethiopia.
“Stella paid two visits to the country and is interested in investing here. We are also encouraging synthetic leather shoe producers, who produce sneakers and sports footwear, to invest in the country,” he added.
Brown Shoe Company, based in Missouri, is a USD 2.6 billion footwear company with worldwide operations. It owns the 1,100-store Famous Footwear chain, 100 specialty retail stores in the United States, Canada and China under the Naturalizer name, as well as Shoes.com, the Company’s e-commerce subsidiary. Brown Shoe’s wholesale divisions own and market leading footwear brands including Naturalizer, LifeStride, Via Spiga and Sam Edelman. The company also markets licensed brands including Franco Sarto, Etienne Aigner, Dr. Scholl’s, Carlos by Carlos Santana, Fergie Footwear and Vince branded footwear.
Source The Capital newsletter Muluken Yewondwossen esday, 08 July 2014 05:20
Seven financial institutions along with the Ministry of Finance and Economy Development (MoFED) and the Ethiopian Railway Corporation (ERC) are going to sign a loan agreement to construct the railway project that has been awarded to a Turkish company.
The signing ceremony was consecutively postponed, though it has been set to be held here in Addis Ababa in the presence of top government officials.
The signing ceremony will take place in the beginning of the coming budget year that will start on July 8. It will enable the Turkish construction giant, Yapi Merkezi to commence the 400 km railway project connecting Awash to the northern town of Weldya (Hara Gebeya), a section of the larger railway network running from Mekele via Weldya and Semera, to Port Tadjourah in Djibouti.
The Turkish EXIM Bank already has approved USD 300 million for the railway. It is the largest ever amount the bank has provided for one project in a country. “It is the first time one project has received this big a loan in Ethiopia from the side of Turkish and European financial firms,” Emre Aykar, chairman of Yapi Merkezi, told Capital at his head office in Istanbul.
The total amount that will come from Europe for the stated project is USD 1.4 billion.
He said that his company has created a link between European financial institutions and Ethiopia.
“We have managed to convince different European financial sources like SACE Group, Italy, EKF (Eksport Kredit Fonden), Denmark and others from Sweden, Austria and two from Switzerland,” Aykar said.
He said that during the current rainy season the company will focus on the establishment of camps, soil investigation and other related works and the ground work will commence in September.
The company has signed a USD 1.7 billion contract with the corporation to undertake the project.
The loan agreement ceremony was expected to take place in May, but some procedures with the banks and MoFED contributed to the delay, the chairman said.
Yapi Merkezi has handled big projects in places like Dubai, Saudi Arabia, Morocco, Algeria and Sudan.
The company officials stated that the current railway project in Ethiopia is a breakthrough for the company as they hope to expand their activity. “We have big interest to be part of the country’s development,” Aykar said. The project is expected to end within 40 months.
The China Communication and Construction Corporation (CCCC) will build the Mekele to Weldya part of the rail line. The estimated USD 1.5 billion cost is financed by the Chinese EXIM bank and covers some 260kms.
The section that stretches from Mekele to the Port of Tadjourah, Djibouti, covers a total distance of 675kms, and is expected to link the northern part of the country. The Indian EXIM Bank has also pledged USD 300 million for the Asayita to Port of Tadjourah segment of the Mekele-Port of Tadjourah railway line.
The Chinese contractors, China Railway Engineering Corporation (CREC) and China Civil Engineering Construction Corporation (CCECC) are currently constructing the Sebeta-Mei’so-Dewele railway line. For the 657km project, the Chinese Export Import (EXIM) Bank has provided the majority of the USD 2.3 billion needed.
Africa’s low budget allocation for agriculture does not seem to recognize that most of its citizens are farmers, says a new report by Action Aid. The report looked at a number of countries and their regular practices regarding agriculture and it stated that most countries did not meet the 10 percent budget target for the agriculture sector.
The report places Ethiopia among only seven countries that have managed to reach the 10 percent budget target constantly.
African public spending on agriculture per worker declined from USD152 in 1980-89 to just USD45 in 2005-07. By contrast, every other region of the world witnessed increases in such spending over the same period.
The ‘Walk the talk’ report suggests that African countries’ governments can get the finance that is needed for their agriculture sectors through several measures such as reducing military spending as well as abolishing massive tax exemptions given to companies.
According to recent research done by Action Aid, four East African countries Kenya, Uganda, Tanzania and Rwanda lose up to USD 2.8 billion every year from tax incentives and exemptions their governments provide. Clamping down on the illicit financial flows, mainly through tax evasion, which cost Africa an average of USD 60 billion a year during 2005 to 2010, is also another suggestion the report provides.
Source The Capital Newsletter Ethiopia
Follow the link to read more....
http://capitalethiopia.com/index.php?option=com_content&view=article&id=3869:more-money-needed-for-africas-agriculture-sector&catid=35:capital&Itemid=27
Ethiopia is becoming the leading country in East Africa in attracting Foreign Direct Investment (FDI), the Ethiopian Investment Agency said.
According to the public relations head with the Agency, Getahun Negash the nation has managed to attract close to 3,000 investment projects with an aggregate capital of 11.5 billion Birr during the past years of the growth and transformation plan (GTP) period.
These projects employed over 31,000 individuals.
According to him, 561 of the projects are licensed during the first three quarters of this budget year, of which 166 have already started production.
More than half of the projects (272) are in the manufacturing sector, a priority area for the country.
Capital flow, technology transfer and increasing competitiveness are the major advantages the country hopes to obtain from FDI flow.
Chinese, Indian, Sudanese, American, UK and Israeli companies are investing in various areas in the country.
(ENA)
Large international corporations are becoming more interested in investing in Ethiopia as the likes of H&M and TESCO have started to establish their presence in the country.
“TESCO opened its office in Ethiopia very recently and when companies like that start getting involved, others will follow. That is what we are seeing now,” said Melaku Taye, Ministry of Industry PR office head.
Currently TESCO is reportedly buying products from five textile companies and it plans to buy GBP 15 million worth of merchandize with in the coming two years.
TESCO is British multinational grocery and general merchandise retailer headquartered in Cheshunt, Hertfordshire, England. It is the second-largest retailer in the world next to Wal-Mart when measured by profits.
“These big companies did not just decide to open offices and get involved in the industry; it took them over three years of study to determine if the market was viable and if it would be profitable for them,” Melaku said.
During a meeting regarding the textile and leather sector, held at the United Nations Economic Commission for Africa, speakers reported that currently there are 60 garment factories and 15 textile mills in Ethiopia.
Presenters at the conference also pointed out that in order for the government to achieve it’s ambitious plan to get USD one billion from textile and half a billion dollars from the leather sector, it would require a collaborative effort with all stakeholders including the public, along with private and development partners.
According to Tadesse Haile, State Minister of Industry, there are some challenges to the industry sector including the lack of raw materials, high taxations on machineries and affordable human power, which hampers the sector’s growth.
Source The reporter. By Eskedar Kifle
Tuesday, 28 January 2014 14:32
Follow the linke to read more..... http://www.capitalethiopia.com/index.php?option=com_content&view=article&id=3966:international-companies-eye-ethiopias-textiles&catid=35:capital&Itemid=27
KEFI Minerals (LON:KEFI) has announced it is acquiring the 25% of the Tulu Kapi licence in Ethiopia it doesn’t already own from Nyota Minerals (LON:NYO) for £1.5mln in cash and shares.
The deal follows the initial purchase of its majority stake last year for £4.5mln. Kefi also announced plans for a share placing at 1.5p a share to raise just over £2.1mln.
The proceeds will be used to fund the £750,000 cash component of the deal as well as pay for the revised feasibility study and to reactivate the mining licence application.
Managing director Jeff Rayner said: "We have taken the opportunity to take full control over the Tulu Kapi Project and funding flexibility.
“This is important as our work since the acquisition of our controlling 75% interest indicates that the project will be bigger and last longer than had initially been assumed.
"The team greatly appreciates the support of our new institutional shareholders in facilitating these transactions.
“We also appreciate Nyota's agreement to distribute its KEFI shareholding to its own shareholders.”
Nyota said it agreed the deal as it would be difficult to fund the ongoing work.
It will use the cash it receives to carry out exploration on its Northern Block Licences in Ethiopia, “including the potential for near term cash flow from mechanised alluvial mining”.
Its holding in KEFI, which will stand at 14.6% worth £2.29mln, will be distributed to its investors.
Shares in Nyota crept up 2% to 0.27p, although its market capitalisation is still less than the value of its holding in KEFI.
KEFI, meanwhile, advanced 2.4% to 1.59p, giving investors who participated in the share placing a modest profit.
Still analysts would argue current KEFI share price fails to recognise the potential of Tulu Kapi, or the progress made to date developing the project.
Last month it raised the estimate of the amount of gold to be produced during the open pit stage of the mine by 50%.
The new estimate followed a scoping level review of the definitive feasibility study (DFS) carried out by previous owner Nyota Minerals (LON:NYO).
KEFI now expects the Ethiopia-based operation to produce 1.2mln ounces during the open pit stage, against an estimate of 830,000 ounces just before it took over the project last year.
There is no change in the estimated all-in cost of US$700 per ounce, while the mine plan will be refined further after completion of a current programme of drilling and trenching.
Information from this will be integrated into an updated definitive feasibility study that will take into account work undertaken by KEFI on metallurgical testing, engineering, cost verification and economic optimisation.
KEFI said the new open target is still based on processing 1.2Mtpa tonnes of ore per year, but the total rise to 17mt from 12Mt previously.
According to IATA, Ethiopian now ranks first in Africa and 37th in the world in terms of revenue and first in Africa and 18th in the world in terms of operating profit.
Ethiopian Airlines, the fastest growing and most profitable African airline, has become the largest African carrier by revenue and profit according to the International Air Transport Association’s (IATA) latest airline ranking – published in the 58th edition of World Air Transport Statistics (WATS). With revenue topping $2.3 billion in 2013, this is the first time Ethiopian Airlines has achieved such a ranking in its 69-year operating history.
According to IATA, Ethiopian now ranks first in Africa and 37th in the world in terms of revenue and first in Africa and 18th in the world in terms of operating profit. The historical ranking achieved by Ethiopian in 2013 is a testimony to the confidence of its passengers; the soundness of its 15 year strategic roadmap of fast, profitable and sustainable growth, Vision 2025; the strategic guidance and support of the airline’s Board of Directors and the Government of Ethiopia; the dedication and competence of its management; and the commitment, skill and hard work of its employees. Follow the link to read more...
Nyota Minerals (ASX:NYO) has entered into a conditional agreement to sell its remaining 25% stake in the Tulu Kapi Gold Project in Ethiopia to KEFI Minerals for £750,000 (A$1.34 million) in cash and 50 million KEFI shares.
Proceeds from the sale will be used to further evaluate the Northern Block Licences, including the potential for near term cash flow from mechanised alluvial mining, and on other opportunities in Ethiopia.
The company noted that KEFI had completed a new mineral resource estimation in March and it would have been required to contribute to Tulu Kapi pro-rata to its shareholding, or suffer dilution of its shareholding.
Financing options were insufficient to fund Nyota’s 25% of the new budget, or £325,492, its evaluation of the Northern Blocks as well as working capital requirements.
This led to the decision to sell its interest in Tulu Kapi.
VENTURES AFRICA – New-York based global private equity company; KKR & Co. has expressed interest in buying a percentage of leading Ethiopian flower company, Afriflora which grows about 730 million flowers for export yearly.
According to reports, KKR intends to invest about $200 million of its $6.2 billion European fund in the deal that will be its first investment foray into Africa. The deal will in turn help to fund Afriflora expansion plans.
“We see Africa as a long-term attractive investment destination… the potential is astounding. But the work to get there is going to be considerable,” said Head of KKR’s African operations Kayode Akinola.
KKR is known for its leveraged buyout (LBO) of RJR Nabisco of RJR Nabisco in 1988, a deal presumed the subject of the book: “Barbarians at the Gate” authored by investigative journalists Bryan Burrough and John Helyar.
KKR’s investment is coming in at a time when private equity investment on the continent is on the rise and the continent is deemed one of the fastest growing economic regions after Asia.
According to the Emerging Markets Private Equity Association report, private-equity investment in sub-Saharan Africa is about $1.6 billion in 2013, a 43 percent increase over the previous year. An African Development Bank (AfDB) report also predicts an $84.3 billion foreign investment inflow this year.
Akinola, who will join Afriflora’s board alongside KKR executive Matteo Bozzo hopes that KKR’s maiden investment in Africa will benefit both Ethiopia and the company’s investor at the long run.
He said KKR plans to develop the farm by adding 200 hectares to the existing 310 hectares the company already cultivates. The new investment will add more than 5,000 jobs.
“We have found a business that is attractive and is also having a positive impact,” Akinola added .
Afriflora currently has about 8,700 employees, 80 percent of whom are women. Its flowers which include sweetheart roses are harvested three times daily and flown to Europe for sale.
Ethiopia is a major rose exporter to Europe. In 2012, the country’s rose flower export to the region increased from €62 million ($84.6 million) in 2008 to €131 million ($178.7 million) in 2012
VENTURES AFRICA – New-York based global private equity company; KKR & Co. has expressed interest in buying a percentage of leading Ethiopian flower company, Afriflora which grows about 730 million flowers for export yearly.
According to reports, KKR intends to invest about $200 million of its $6.2 billion European fund in the deal that will be its first investment foray into Africa. The deal will in turn help to fund Afriflora expansion plans.
“We see Africa as a long-term attractive investment destination… the potential is astounding. But the work to get there is going to be considerable,” said Head of KKR’s African operations Kayode Akinola.
KKR is known for its leveraged buyout (LBO) of RJR Nabisco of RJR Nabisco in 1988, a deal presumed the subject of the book: “Barbarians at the Gate” authored by investigative journalists Bryan Burrough and John Helyar.
KKR’s investment is coming in at a time when private equity investment on the continent is on the rise and the continent is deemed one of the fastest growing economic regions after Asia.
According to the Emerging Markets Private Equity Association report, private-equity investment in sub-Saharan Africa is about $1.6 billion in 2013, a 43 percent increase over the previous year. An African Development Bank (AfDB) report also predicts an $84.3 billion foreign investment inflow this year.
Akinola, who will join Afriflora’s board alongside KKR executive Matteo Bozzo hopes that KKR’s maiden investment in Africa will benefit both Ethiopia and the company’s investor at the long run.
He said KKR plans to develop the farm by adding 200 hectares to the existing 310 hectares the company already cultivates. The new investment will add more than 5,000 jobs.
“We have found a business that is attractive and is also having a positive impact,” Akinola added .
Afriflora currently has about 8,700 employees, 80 percent of whom are women. Its flowers which include sweetheart roses are harvested three times daily and flown to Europe for sale.
Ethiopia is a major rose exporter to Europe. In 2012, the country’s rose flower export to the region increased from €62 million ($84.6 million) in 2008 to €131 million ($178.7 million) in 2012
May 30, 2014: Ethiopian Prime Minister Hailemariam Desalegn has said TUSKON has contributed positively to his country's development over the last 10 years and that it is an honor to work with the organization's membership.
Speaking at the opening session of the “Ethiopia-Turkey Trade and Investment Forum” in Addis Ababa, Desalegn said his government will support all investments to the extent that it is able. “A lot of Turkish companies have become promoters of Ethiopia over the last decade. We want to progress and go much further with a well-structured market. Follow the link to read more.
In recent years there has been an increasing trend of western multinational companies turning to Chinese partners to seek investment. This is particularly evident in the capital constrained mining industry where partnerships have provided western firms with access to Chinese project finance.
However such partnerships have also led to lengthy delays and may present reputational risks. This article highlights why West Africa has been a particularly fertile home for these relationships and some of the key partnerships have fared. Based on the experiences of these firms their chief concern should be getting to know their partner before it is too late... Follow the link to read more.
The Chinese premiere’s visit to Ethiopia brings along China’s first attempt outside of China to develop Special Economic Zones (SEZs). The businesses located in such zones will get special treatment not available to businesses outside.
A Memorandum of Understanding (MoU) was signed at the Sheraton Addis Hotel on Tuesday March 6, 2014, between Sisay Gemechu, state minister for Industry, and representatives of four Chinese companies that will be involved in the endeavour. These include the China Civil Engineering Construction Corporation (CCECC), China Railway Engineering Corporation (CREC), China Communications Construction Company (CCCC) and China to Overseas Construction Group Co (CGCOC).
This agreement is an extension of one of the 16 agreements that Ethiopia and China signed during Prime Minister Li Keqiang’s visit to Ethiopia. The specific agreement about cooperation in special economic zones was signed by Sufian Ahmed, Minister for Finance & Economic Development (MoFED), and Gao Huncheng, China’s Minister of Commerce, following the discussion on Sunday May 4, 2014, between Li Keqiang and the Ethiopian Prime Minster Hailemariam Desalegn.
The four companies will undertake the development of the SEZ’s in Kombolcha, Hawassa, Dire Dawa and selected areas of Addis Abeba. The government prepared 1,100ha at Kombolcha and 1,000ha each at Hawassa and Dire Dawa two years ago.
A Chinese company is conducting a feasibility study of the proposed sites and, as soon as the study is finalised, the Ministry will sign a construction contract with the companies, according to Seleshi Zegeye, deputy director of Public Relations at the Ministry of Industry (MoI).
“The Ministry’s approach shifted from the establishment of industrial zones to the establishment of fully fledged special economic zones, due to our estimations of the success of special economic zones in China,” said Seleshi.
The Chinese earlier developed the 200ha Eastern Industrial Zone in Dukem, 37km southeast of Addis Abeba. Eleven companies are already involved in the manufacture of leather and leather products, textile and garment and car assembly at this zone.
At the Bole Lemi Industrial Zone, five sheds were constructed by the Ethiopian government, worth 2.5 billion Br, and given to investors. The remaining 15 shades are under construction through a loan, which the government has obtained from the World Bank (WB). The Ministry is expecting an additional loan from the WB for the development of the Legetafo Industrial Zone.
There are also three other industrial zones, in Akaki Kaliti, Sendafa and Mekanisa Lebu, where the government lets plots to various investors.
The government is drafting a special law for the SEZ’s, but Sisog declined to give further information on that.
In China, the official state policy from the mid-1970s, according to the political economist D.K.Y Chu, has been to use the zones as free trade zones and laboratories to absorb western technology and innovation and to adapt it to state capitalism, while reducing any unwanted affects. This is a policy that has been termed ‘Territorial Containment.’
BY FASIKA TADESSE
FORTUNE STAFF WRITER
PUBLISHED ON MAY 11, 2014 [VOL14,NO732]
SVP Textiles Plc, an Indian Company, has started construction of a 10-billion Br textile plant on a 50ha plot in the Kombolcha Industrial Zone, Kombolcha town, in the Amhara region.
The company will invest 70pc of the total cost to acquire high-end machinery, with which it could process up to 280 tonnes of cotton a day at full capacity, said Ketan Jani, general manager of SVP, speaking at a press conference at the Hilton Hotel on Thursday, May 1, 2014.
Owned and operated by the Shrivallabh Group of India, SVP’s Ethiopia project is supported by a 23 million dollar loan from the Development Bank of Ethiopia in its first phase, which will cost it 45 million dollars, said Vinod Pittie, Chairman of SVP Textiles.
The primary product of SVP will be cotton yarns of variable specifications depending on the end user demand, Jani said.
The Indian Company selected Kombolcha because of its proximity to Metema (897 km from Addis Abeba in the North Gondar Zone of the Amhara Region) and Humera (977 km from Addis Abeba, on the border between North Gondar and Western Tigray), where cotton is grown in significant quantities.
A promise by the government that the Industrial Zone will be provided with around-the-clock electricity services and ready installed facilities, such as water, coupled with the availability of cheap labour, convinced SVP to invest in Kombolcha, Pittie said. The factory could employ 3,000 people.
Despite problems of power cuts in the month of April, the government has been rectifying the situation to avail an uninterrupted flow of electricity, says Abere Abera, mayor of Kombolcha town.
“For a textile plant like SVP, power is the most important ingredient,” says Pittie. “With the government’s promise, we have decided to be located in Kombolcha.”
The company looks forward to exporting its yarn to Germany, Italy, Sweden, Turkey and the USA, particularly eager to benefit from the exemption for Ethiopia of 17 to 18pc anti-dumping duty in Turkey.
“This will be a big plus for the industry and will significantly contribute to the government’s plan to double the export revenue in the coming budget year,” Tadesse Haile, state minister of Industry, said.
The 50ha plot was given to SVP back in August, 2012 – a month after it had applied.
The government expects to meet its annual export revenue target of 500 million dollars from the industry. Despite expecting 219 million dollars from the export of textiles over the last nine months, the government actually collected 85 million dollars – 38.7pc of its plan.
The revenue for the first quarter of 2012/13 was 19 million dollars; that year, the annual total revenue of 99 million dollars was significantly short of the 357 million dollars the government had targeted.
BY HIWOT SEYOUM
FORTUNE STAFF WRITER
PUBLISHED ON MAY 4, 2014 [VOL14,NO731]
MIDROC Pharmaceuticals Ltd and Hikma Pharmaceuticals Plc, a Jordanian company, signed a formal agreement at the Ethiopian Investment Agency (EIA) on Tuesday April 8, 2014, to form HikmaCure Pharmaceutical S.C., pending approval of their agreement and the issue ofan investment license.
The agreement for the establishment of the Company was inked between Hani Qoto, Hikma’s representativeand Abinet G. Meskel representing MIDROC Pharmaceuticals Ltd and was submitted to the agency as part of the application requirements.
“The process to acquire an investment license is now underway and will be finalized by next week,” said an official from MIDROC, who talked to Fortune on the condition of remaining anonymous.
A source at Hikma, who likewise demanded anonymity, agrees with the official at MIDROC but declined to reveal details about the newly formed company, citing that he needs confirmation from the mother company.
Ahmednur Yusuf, Licensing& Registration Director, attended the signing ceremony on Tuesday, according to sources at the two companies, but he stressed that the two companies had not been to the Agency to sign any agreement.
Hikma and MIDROC signed a 50 – 50 joint venture (JV) agreement to establish a local pharmaceutical manufacturing company in Ethiopia back in September 2013.
The two accordingly agreed to invest in HikmaCure, the new venture, in equal proportions. While an initial investment of 50 million dollars was agreed, according to a joint press statement issued in September, the two companies had also agreed that HikmaCure would commence operations in Ethiopia by marketing and distributing close to 50 Hikma products.
The fund will be invested over an extended period of time and will be used to build and fit out a local manufacturing and distribution facility in Ethiopia and to provide working capital support for the operations of HikmaCure, Hikma Group said in its website.
The facility is expected to begin commercial production in 2017, according to Hikma’s website.
Founded in Amman, Jordan in 1978 by Samih Darwazah, Hikma Pharmaceuticals Ltd is listed on the London Stock Market. The Company is engaged in manufacturing and distributing branded pharmaceutical products to the global market.
Ethiopia’s pharmaceutical industry consists of 15 pharmaceutical and medical material production factories and only 5 of these are currently producing important items such as syringes, absorbent cottons and lab equipment.
As such the industry can at present serve only a small portion of the domestic market, with imports covering the rest of demand. In 2012, about 300 million dollars worth of drugs were imported, according to the Ethiopian Revenues & Customs Authority (ERCA), by 112 importers and wholesalers registered in the country.
BY FASIKA TADESSE
FORTUNE STAFF WRITER
PUBLISHED ON APRIL 13, 2014 [VOL14,NO728]
South African based Rand Merchant Bank (RMB) has recently released its 2013/14 ‘Where to Invest in Africa’ report, which ranks African countries according to their attractiveness for corporate investment.
The top 10 most attractive destinations remain the same as last year: South Africa, Nigeria, Egypt, Ghana, Morocco, Tunisia, Libya, Ethiopia, Tanzania and Kenya.
To compile the rankings, RMB looked at the market size, market growth and the business environment of each country.
RMB has however, highlighted four countries that continue to surprise, both on the up and downside.
Ghana: The report notes that for a small country, Ghana continues to perform well. It is ranked fourth in Africa and 47th in the world. “This ranking is just shy of the much larger and well known emerging markets of Vietnam and the Philippines, and is three places higher than Italy,” notes the report.
Ghana started with offshore oil production in 2011, and the industry has been responsible for much of the country’s rapid economic growth over the past two years.
Ethiopia: Although many still associate Ethiopia (ranked in eighth position) with poverty and famine, the country is experiencing exceptional rates of economic growth. It also has a relatively large economy which is a result of its sizeable population of over 85m people.
Rwanda: RMB says continued reforms in Rwanda have created a favourable operating environment and spurred economic growth. Rwanda has made great strides since its tragic 1994 genocide.
In 2011, Charles Robertson, global chief economist at Renaissance Capital, wrote that a visit to Rwanda was the greatest positive shock of his professional career. He stated that Rwanda is implementing many of the same economic reforms that Singapore introduced since the 1960s to transform itself into one of the world’s foremost financial centres.
RMB notes that Rwanda’s ranking (14th) is being held back by its relatively small market size of about 10m.
Angola: While the first three countries were highlighted for outperforming expectations, Angola is not delivering on the growth people anticipated a few years ago.
Angola is placed 20th in RMB’s rankings. “This is down from the third position it held in 2006 and 2007 if we apply our methodology over a longer period. The decline is mainly from the slowdown in growth: back in 2006-07 GDP was growing and was expected to keep growing at 15% per annum. Growth expectations are now 6% – still very attractive but far from what they were. There has also been a deterioration in the operating environment,” says the report.
Source:
Turkey is preparing to create a Turkish industrial zone in Ethiopia’s capital, Addis Ababa, as part of its African policy which started in 2005 and has been showing marked development of its business assets.
Speaking at the opening of the African Strategies Sectoral Evaluation Meeting in Ankara on Monday, Turkish Foreign Minister Ahmet Davutoğlu said that the Ethiopian prime minister had proposed the assignment of some land to establish a Turkish industrial zone in Addis Ababa, and that Turkey hopes to implement this plan.
“They [the Ethiopians] know that we don’t go to Ethiopia with a passing fancy and calculations of temporary profits. We also know that they don’t only offer a business opportunity but that they opened their hearts,” Davutoğlu said, stressing that between Turkey and Ethiopia there are not only economic relations but there are also thriving social relations as well.
Commenting on the new diplomatic steps, Davutoğlu stated that Turkey has come a long way in the last ten years. Davutoğlu explained that a Turkish firm invested $50 million in Ethiopia in 2005 while there are now 341 Turkish companies with a total investment of $3 billion in the country.
The Turkish foreign minister also mentioned the results of the Turkish government’s public diplomacy in Africa. “The amount of Turkish aid to the African continent, particularly to Somalia, has reached $750 million. If we hadn’t spent billions dollars of in public diplomacy and activity, we wouldn’t have the positive image and perception that we got from our humanitarian aid in Somalia,” Davutoğlu said, reiterating that Turkey is reaping the rewards of its humanitarian foreign policy.
Saying that Turkish companies can take advantage of numerous opportunities in fields such as construction and trade, the foreign minister also drew attention to important attempts in the business sector by the African Union, which ranks as one of the most active international organizations in the world.
In the African continent, there are 30 offices of the Turkish Cooperation and Development Agency (TİKA) and 25 trade offices of the Undersecretariat for Foreign Trade, aiming to strengthen economic and bilateral relations between the two countries. The number of Turkish ambassadors in Africa has risen to 34 from 12 in 2005.
Turkey has a Free Trade Agreement (FTA) with four African countries, as well as agreements to prevent double taxation and support mutual investments, and Turkey has also established a business council with 17 African countries. Turkish Airlines (THY) has flights to 35 African destinations to improve links between Turkey and African countries as part of the African policy.
Source:
Ethiopia has invited South Korean companies to take advantage of its fast growing economy, large population, substantial market opportunities, air transport network and a conducive investment regime with a wide array of incentives for new investments.
Ethiopia’s Foreign Affairs Minister, Dr. Tedros Adhanom, told visiting president of South Korea International Cooperation Agency (KOICA), Mr. Young-Mok Kim, to encourage Korean firms to turn their eyes to the East African country since it appreciates the existing bilateral development cooperation.
KOICA’s major activity in Ethiopia centres on increasing industrial capacity through vocational training, but Mr. Kim, who visited a KOICA model village in Oromia Regional State, said the agency would expand its activities in rural development.
In a statement Tuesday, the Ministry of Foreign Affairs here quoted Dr. Adhanom as saying that he appreciated the development cooperation between South Korea and Ethiopia and expressed the hope that the historic ties between the two countries would grow through increased investment and cooperation.
The minister noted that his visit to South Korea this year enabled him to appreciate the growing interest of big companies such as SamSung to invest in Ethiopia.
He said that Ethiopia offered huge opportunities to South Korean investors interested in floriculture, a discipline of horticulture concerned with the cultivation of flowering and ornamental plants for gardens.
Source:
The Privatisation and Public Enterprises Agency (PPESA) plans to auction 20 companies this fiscal year, three companies making their debut on the auction block. A tender for five of the companies was floated last week with the bid closing date set for October 22, 2013.
In this first batch, the Agency has offered those enterprises that failed to attract any offers the previous year. These are - Ghion Hotel Addis, Agricultural Mechanization Services Enterprise, Transport Construction Design SC., Artistic Printing Enterprise and Weyra Transport S.C.
The three companies to be newly-offered for privatisation this year are Langano Resort, Ethiopian Pharmaceutical Manufacturing S.C. and Natural Gum Production and Marketing Enterprise.
Full story on Fortune Sunday, Auguest 25, 2013 Issue.
The Ministry of Trade finalized a regulation that will govern the marketing of livestock and is expected to be approved by the parliament in their session that will start in early October.
People working in the livestock trade have in the past criticized the exisiting marketing scheme for lack of harmonization.
In a bid to accelerate the pace of development in the sector, the marketing scheme previously led by the Ministry of Agriculture will be taken over by MoT.
Full story at Capital Suday Auguest 25, 2013 Issue
The Ethiopian government is to estabilish a new agency to handle the running of new industry zones. The ministry of Industry (MoI) has developed a draft bill proposing the formation of the new corporation, to be called the Industry Zone Development Corporation (IZDC). "The draft bill will be sent to the Concil of Ministers for approval," said Melaku Taye, public relations head at MoI.
He said the new corporation will follow the development, operation and management of the industry zones in the country, while it is early stage to explain in detail. "In addition, the corporation will also consult on the industry zones that are constructed by private firms," he said.
Full story at Capital Suday Auguest 25, 2013 Issue