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Eritrea
Virgin Territory
As well as being positioned on one of the world’s busiest trade routes, the East African nation has a wealth of precious resources and untapped potential.
W
ith all of the above in its favor, Eritrea should have it made. However, a long and difficult conflict with Ethiopia over independence and, more recently, border issues over Badme, one of its principal towns, have stunted growth in what could be one of the region’s most promising economies. Although Ethiopia still refuses to implement an agreement signed in 2002, which saw Badme awarded to Eritrea by a specially appointed boundary commission, Eritrea today is a fiercely proud nation, optimistic that abundant potential in mining, tourism and financial opportunities will soon yield the returns needed to raise the standard of living for its people. Since coming to power in 1993, President Isaias Afwerki has managed to generate a sense of unity among the 4.7 million population of various religious and ethnic groups. “The war imposed upon us was a lost opportunity for two generations,” he states. “Because we inherited a devastated country and economy, we had to start from zero. In the last 15 years, then, our role has been to create a conducive environment for development and investment and we have done our best to create the infrastructure needed to move forward.”
With his interests lying firmly in the east, Afwerki notes: “China has become one of the dynamic forces in globalization, and its march Isaias Afwerki, President
forward is inspiring. China’s investment is going to be a driving force to enable Africa to work in partnership and grow. In the coming ten years, much of our trade transactions will be directed with them.” In the meantime, governmental priorities are focused on better health and education provision, road-building schemes and irrigation projects. Minister of Finance Berhane Abrehe says: “Next, we are opening up the country by introducing export-oriented policies because we know that to have sustainable growth, we need to reach the international market. We believe free zones will be the engine of growth, a tool to mobilize foreign resources and generate foreign exchange. We want to be as self-reliant as we can be.”
Bank on a safe investment with Bank of Eritrea S
ince it began in 1993, at the time of Eritrea’s independence from Ethiopia, the Bank of Eritrea has been committed to establishing a modern framework for business and investment. A series of important reforms have been implemented to establish the Bank of Eritrea as a strong, regulatory body, one that will instil confidence as it allows investors to make the most of their money. Investors are now entitled to full repatriation of all profits made, for example, and they can also be sure of good relations with the country’s commercial banks. Acting governor Kibreab Weldermariam speaks of the bank’s, and the country’s, new-found stability. “Since the war that ended in 2000, we have been applying a crisis management approach, but our financial initiatives are back in force and the country is well on the way to coming out of its economic crisis.” For this reason, the Bank of Eritrea now welcomes applications from all foreign banks, as Weldermariam believes they would benefit
from having branches in this small African gatepost so rich in opportunity. “Eritrea is a young country, bursting with minerals and natural resources, with a coastline of 1,100 km. We are perfectly positioned between east and west,” he says. “I therefore invite investors to come and see for themselves what areas suit their needs. The regulation of the country is very clear and attractive. Resources invested here will be as safe and protected as in any stable country. We are one of the safest countries in the region, and investors need to take this into account.” The past decade may have been a difficult one, but the bank is determined to become competitive and efficient as a financial regulator. Weldermariam says: “We need to develop our human resources and I.T. systems, revise our rules and regulations and adjust them to what other countries are doing. We want to be at the same level as any other central bank in the world. That is our immediate challenge for the future.”
Bank of Eritrea PO box 849, Asmara, ERITREA, Tel: +291 1 123033 36 Fax: +291 1 123162
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Massawa Free Zone. www.eritreafza.co
Having already invested in various manufacturing and construction projects, China could very well be tempted in other areas. The Minister says: “Today, we are looking into agricultural technology, and for the future, mining, construction, the free zones, trade and tourism— we have over 1,000 kms of virgin Red Sea coastline for example. China can come in in joint ventures with local investors or with their own capital.” As the single major shareholder in around 20 companies, the ruling People’s Front for Democracy and Justice (PFDJ) Party undertakes most of the country’s procurements, mainly from China, and is the driving force of the economy. The PFDJ’s head of economic affairs, Hagos Ghebrehiwet, says: “We already have excellent relations with the Chinese government, because there are no political affairs, no conditions and almost no strings attached. China is here, it has the interest, it wants to make money, and it is helping us develop while it does so.”
Mining the country’s potential With gold, potash, zinc, copper and salt as its natural resources, Eritrea is sitting on a wealth of investment potential, while the prospect of oil and gas reserves has everyone excited. A handful of Australian and Canadian companies are reporting promising mining results, and the country is keen to offer a similar welcome to interested Chinese parties, the National Geological and Mining Corporation of China being expressly mentioned. A license will soon be granted to Nevsun to mine the Bisha field, which has set a precedent for the industry and marked the first step in the production phase. However with overall access of the population to modern energy services among the lowest in the world, biomass still remains the source for 95% of Eritrea households’ energy requirements. Minister of Energy and Mines, Tesfai Ghebreselassie, says: “Per capita electricity consumption is still among the lowest in the world. By 2015, we aim to triple output so that at least 50% of the population has access to electricity. It is a big challenge and will require huge investments.” Sunridge Gold Corp. is a junior exploration and mining company based out of Vancouver, Canada, that has been exploring for gold and
Emba Derho VMS deposit, Sunridge Gold Corp: www.sunridgegold.com
base metals in Eritrea since 2003. In April, the company was granted 100% ownership of the Asmara Project exploration license. Michael Hopley, president and CEO, says: “This is a very important milestone for us. We thank the Eritrean Ministry of Energy and Mines for their support of Sunridge Gold. It has been extremely easy for us to do business here and we would encourage Chinese companies to come and do the same.” Berhane Abrehe, Minister of Finance
To date, Sunridge Gold has spent more than U.S.$10.8 million on the Asmara Project, which has resulted in the discovery or development of four deposits, including zinc, copper and gold. Several more targets are to be drill tested within 30 kilometers of the capital city of Asmara— an area with excellent infrastructure, which will allow for two or more mining projects to be developed at the same time. The company has 52.5 million fully diluted shares outstanding and trades on the TSX Venture Exchange under “SGC”.
A growing financial sector The banking sector is also in its infancy, with the state-owned Commercial Bank of Eritrea owning nearly 80% of all banking sector assets. The Eritrean Development and Investment Bank (EDIB), another state-owned entity, was created in 1996 from the ashes of the Agricultural and Industrial Development Bank. It is a small bank where credit represents 100% of its business. Goytom Wolde-Mariam, general manager, says: “Our objective is to work towards the country’s economic development by providing finance to viable development oriented projects, especially within the agricultural, industrial and tourism sectors.” The Housing and Commerce Bank of Eritrea (HCBE) was established in 1994 and started its commercial activities two years later. Dynamic pricing techniques have enabled HCBE, whose major
Eritrea, Three Seasons in two hours Ministry of Tourism, PO box 1010 Asmara, Eritrea Tel:+291 1 126997 Fax:+291 1 126949 eritreantourism@tse.com.er www.eritreantourism.com.er
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SPECIAL ADVERTISING SECTION shareholder is the PFDJ Party, to work towards optimization of deposits and lending, while its customer-driven range of banking services has seen its customer base grow 263% since 1998. Hagos Ghebrehiwet, Head of Economic Affairs of PFDJ
Berhane Hiwet Ghebre, general manager, says: “Our strategy is to be the top bank locally before going regional. If we have good I.T., a good relationship with the correspondent banks and a good relationship internally, then we can go for the larger market.” The bank is currently optimizing its lending system through technology with a view to introducing new services, such as ATM and debit cards within the next two to three years. Hiwet Ghebre says: “The banking sector is getting stronger as the country grows. HCBE has a more universal approach to the market because we have a combination of commercial services and mortgage loans. Around 67% of our funds are aimed at the real estate sector. We are optimizing our lending systems in order to find good customers with good intentions where we research their projects and help them with the funding and utilities they need.” HCBE is aiming for a correspondent relationship with Bank of China. Hiwet Ghebre says: “Three years ago, most of our business was with Europe, so we already have relationships with banks there, but today, most of our transactions come from China.” Competition from foreign banks has been slow to emerge. As Hiwet Ghebre says: “The financial sector depends on so many things; technology, investments and the market itself. From 1998 to 2003, because of the conflict with Ethiopia, both the sector and the country suffered a setback. Right now, however, we are reviving again and the sector is getting stronger as the country continues to grow.” Meanwhile, the National Insurance Corporation of Eritrea (NICE) welcomes foreign companies into the insurance sector. Zeru Woldemichael, general manager, says: “We have spent the last 16 years making people aware of the need for insurance, but being the only player is not good for business. There is no comparison, no benchmarks. You need something to be compared to.” Forty per cent of the company was privatized in 2004, with the remainder being owned by the Eritrean government. More than half of
NICE’s portfolio is generated from motor insurance, 20% from marine insurance, and another 20% comes from fire and accident. Woldemichael says: “Life assurance products contribute to less than 3% of the gross premium income. With the exception of the Southern African markets, life insurance has not developed in most African countries. We have to develop relevant products that will attract the need of the large rural population in our country. Medical, agriculture and forestry, and livestock insurances are some of the products that we are intending to introduce in the near future. “We have been a very profitable company since our establishment in 1991; we have also secured good credit ratings from financial agencies. Our long term plan is to involve in writing risks beyond our territorial boundaries. Human resources development has remained our main objective in securing highly professional insurance personnel. As a result we are closely associated with the Chartered Insurance Institute of London. Our target is to secure two chartered insurers before the end of this year, five in 2015 and another five in 2020.”
Miles of tourism potential With almost 1,000 kms of Red Sea coastline and 305 mostly virgin islands, tourism is expected to become an important pillar of Eritrea’s economy in the coming years. At present, the sector is in its infancy,
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At HCBE we provide a wide range of banking products and international services for both businesses and individual customers. We also offer tailor-made loans for purchasing, building or renovating real estate properties. HCBE - a bank you can trust.
Housing and Commerce Bank of Eritrea PO box 235 Asmara, ERITREA Tel: +291 1 120350 Fax: +291 1 120401 www.hcbe.com.er www.hcber.com
Massawa Free Zone The perfect location for your business • Easy access to global markets • Tax and duty exemptions • International trade affiliation Eritrea Free Zones Authority PO box 9150, Asmara, Eritrea, Tel:+291 1 200812 / 201521 Fax:+291 1 202778 erifreezone@tse.com.er www.eritreafza.co
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with no large-scale tourism infrastructure or services available to promote the range of activities, but Minister of Tourism, Amina Nurhussien is hoping Chinese investment can change this. She says: “We have set up attractive incentives. An investor can come and invest wherever they like, on the islands or on the mainland. Besides this, they can have 100% ownership on equity. “As a country, we have historical and archaeological sites, and we have rich architecture which has been influenced by our
capital into the economy. The first free zone opened in 2003 in Massawa. It includes the ports of Massawa and Assab and an airport, and is, according to Araia Tseggai, CEO of the Eritrea Free Zones Authority, particularly attractive to Chinese investors. He says: “Between 30 and 40,000 ships pass by every year, including almost every ship going from China into Europe. What’s more, business rates are the cheapest in the region. We therefore want to bring and keep companies here—we have to give them reasons to stay. In addition, we are members of
liberated, the organization took responsibility for supplying the market immediately. Tekie says: “We filled the gaps that businesses could not supply and would always concentrate on basic commodities in large amounts to provide low costs and supply the masses. If there is a shortage of something, we would only add a very small margin of profit.” Although the company imports from all over the world, 70% of imports are from China. Tekie says: “We have established a bigger office in China where our commercial attachments are stronger and we import
“We have set up a number of attractive incentives. An investor can come and invest wherever they like, on the islands or on the mainland. They can have 100% ownership on equity.” Amina Nurhussien, Minister of Tourism history of Turkish, Italian and Egyptian settlers. We also have multiple landscapes and different climates. “Our people are our greatest asset, there is almost no crime here, so visitors can walk freely with no problems. “We have done extensive research on the areas we want to focus on. Right now, of course, the Red Sea coast is a priority and we are going to develop it through resorts and hotels. There is tremendous scope for different accommodations, plus water-related sports and recreational activities. We are also going to develop eco-tourism, agro-tourism, urban tourism and rural tourism. “We want to increase our relationship with China not only through investments but also through cultural exchange. China is a very rich country in terms of culture and we can learn a lot from them. We also anticipate many Chinese visitors because they like to come to Africa. So we are focusing on the Far East, especially China and Japan, and the Middle East, as well as Europe and America.”
A window to the world Eritrea has a long history as a trading nation and its excellent location is what initially attracted the Italians two centuries ago. To capitalize more on its geography, the government began a free zone project five years ago that would open up the country, promote its port facilities and inject foreign
COMESA, an association of more than 20 countries in Africa, so a Chinese company locating itself in Eritrea would have access to all those markets, with products that are as cheap to produce here as they are to produce in China.” The free zone is, according to Tseggai, “a window to link Eritrea to the world. We are not interested in how much an investor is going to pay us as an authority, but what kind of company it is—what impact it will have on the people working there in terms of technology. What kind of products will it put into our markets? How can we provide them with our own resources for raw materials for example? Eritrea has a privileged location en route between the east and Europe which can be exploited to serve those markets and Africa as well.” Gaim Tekie, general manager of the Red Sea Trading Corporation, agrees. He says: “If someone looked at Eritrea from the outside, they would see four million people with limited purchasing power. However, we have access to the African hinterland. We could be an excellent access point for their investment.” The Red Sea Trading Corporation is Eritrea’s main importer and active in food stock and building materials. “We buy and distribute the products through eight major branches nationwide. Our corporate image is positive because we take our social role very seriously.” Indeed, as soon as the country was
directly from there as it is cheaper. Now we have the economies of scale that enable us to buy large quantities of the products we need. Nowadays, we are also exporting sesame seeds to China, plus gum Arabic, a very precious commodity used in the glass industry. There is also potential for salt. China is not our biggest market yet, but it is growing and its approach is very cooperative.” The Red Sea Trading Corporation is now seeking a supply partner to serve as an exclusive agent for the region. With so much potential on offer, it seems Eritrea’s time might now have come. Business Focus www.businessfocus.org.uk
Eritrean Development & Investment Bank P.O. Box 1266, Asmara, Eritrea Tel:+291 1 123787 / 1 126777 Fax:+291 1 201976 edib@gemel.com.er
Exporting Eritrean quality to the world
SESAME SEEDS
GUM ARABIC
GROUND NUTS
SALT
Red Sea Trading Corporation PO box 332, Asmara, Eritrea. Tel:+291 1 127846 / 124353 Fax:+291 1 124353
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