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ETHIOPIA 01 Sunday 26th May 2013
Nurturing growth
Industrialising
Motivating
Agriculture is ripe for a technological boost
Adding value to raw materials is a key priority
Skills and social reforms are mobilising the population
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ETHIOPIA The resource-rich nation is building a dynamic and sustainable economy. Written by Niki Thornton
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An Ethiopian Renaissance A country that has seen growth average 11.5% in the last eight years, Ethiopia is one of Africa’s most celebrated success stories.
O
ne of the fastest-growing economies in the world, the East African country has become a beacon for stability, democracy and economic integration for the region, with the legacy of its highly-regarded former leader Meles Zenawi, who died suddenly last August after 21 years in power, being carried on by his 47-year-old successor Hailemariam Desalegn. With an able and dynamic new man at the helm, a sophisticated and open investment climate and a geographical landscape that is brimming with lucrative natural resources that include coffee, cotton, sugar, water and livestock, Ethiopia is forging a path that will see its star rise higher. Situated at a strategic point between Europe, the Middle East and Asia, the country enjoys preferential access to the E.U. and U.S. markets and, with its population of 91.2 million, one of the largest domestic markets in Africa. Its membership of the Common Market for Eastern and Southern Africa (COMESA), a trading bloc made up of 19 countries, gives businesses access to 400 million potential clients. The ambitious Growth and Transformation Plan (GTP), launched by Meles Zenawi in 2010, has seen the country embark on the largest economic and social reform in its history. Officials are keen for the world to see that Ethiopia is not a wilderness of famine and drought, but a vibrant country with a huge amount to offer the world. With inclusive growth and poverty reduction at its core, the GTP aims to create a new Ethiopia and the country is currently in the midst of modernisation and infrastructure developments that will stand it in good stead for its re-emergence on the world stage.
Only through big plans can we achieve our goal of becoming a middle-income nation by 2020. Hailemariam Desalegn, Prime Minister
According to Guang Zhe Chen, the World Bank’s Country Director for Ethiopia, two and a half million people were lifted out of poverty between 2004/5 and 2010/11, and the government’s target to reduce poverty to 22% by 2015 is “ambitious but attainable.” Inflation fell from 22% in 2011 to 15.8% last year and continues to go down. As part of his commitment to inclusive growth opportunities, including widespread job creation, new Premier Hailemariam Desalegn has committed to carrying on with reforms that he hopes will take Ethiopia to middle-income status within ten years. “We will preserve Meles’s legacy without any change,” he says. “We are implementing big transformations in the country. Only through big plans can we achieve our goal of becoming a middle-income nation by 2020. “We have focused on transforming the industrial sector. Building an industrial and manufacturing base is paramount to achieving our goals,” he says. “Ethiopia is an agrarian economy. Agriculture is our main engine of growth but we need to change this and create a stronger industrial sector. Our growth should be inclusive and
sustainable, and we want to see double-digit growth over the coming decade so that we achieve this goal.” The challenge is a significant one. Although agriculture currently employs 85% of the population, it is mainly in small-scale farming. The government is, however, determined to meet its goals. “It is going to be hard to achieve, but we can do it,” Prime Minister Desalegn explains. “First, we need to focus on human development. We are looking into educational training and enterprise skills development and are going to be strict in tackling corruption and mismanagement. The private sector should be the engine of growth through the implementation of both domestic and foreign direct investment. Our ambition is to have a skilled, well-educated and productive workforce. “With this in mind, we are establishing key investment areas for international investors. We are not going to just focus on labour-intensive industries, but are keeping in mind that we are transforming Ethiopia into a more advanced industrial nation. Opportunities exist mainly in agriculture, energy, construction and commodities, and we want to work with corporations that are willing to get into the green developments and renewable energy sector.” It could not be better news for the U.K. Bilateral trade between the two countries is booming, with U.K. exports to Ethiopia having doubled between 2010 and 2011. As part of the U.K.´s G8 presidency this year, Deputy Prime Minister Nick Clegg visited Ethiopia in March to reaffirm a commitment to helping trade, tax and transparency in African countries, meeting local business owners and U.K. businesses working there, as well as government officials. In his official statement, the Deputy Prime Minister said: “Our emphasis on tax, trade and transparency comes from the devastating effect that a loss of revenue can have, particularly on developing countries. When developing nations lose revenues, their health and education systems are undermined, along with their stability, and that carries a global cost. The U.K. government has already done some work in this area, through the Department for International Development’s Ethiopia flagship governance programme, which raised its tax collection from 8.2 billion Birr (£0.3 billion) in 2002, to 55 billion Birr (£2 billion) in 2011.” There have been other official visits. The U.K.’s Minister of State for Climate Change, Gregory Barker, visited Ethiopia last October to find out more about energy opportunities, while Dr. Tedros Adhanom, Ethiopia’s Foreign Minister and Chairman of the African Union Executive Council, addressed the African Jubilee Business Forum in London in a two-day visit last month. “Our greatest competitive advantage is our young and cheap labour-force,” Prime Minister Desalegn says. “We also have the lowest energy tariffs in Africa. We have packages available that allow all capital goods to come in without any custom charges. We have tax holidays for the most important sectors, especially if they contribute to substitute imports. On top of all this, Ethiopia is the safest place in Africa. It is the political capital of the continent and a diplomatic centre, with more than 100 embassies, as well as the headquarters of the African Union. As a least-developed country, investors can secure duty-free and quota-free exports to European markets.” According to the Ethiopian leader, British investors have started to invest in leather and leather products, which is labour-intensive, agriculture and raw materials.
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Ethiopia could become a textile and garment hub, due to the competitive costs of its cotton and energy, he says, but it is is in need of partners to help it add value, in the form of shoes and leather belts, for example. “Agro-processing is one of the areas in which we are looking to attract investment,” the Premier says. “We have more than 4.6 million hectares of land ready for use. There is potential for large-scale agriculture, and expansion in areas such as floriculture and horticulture, that provide an important value-addition to the economy and are highly demanded by European markets. We want to achieve a green and sustainable economy. I have met professionals and investors from the U.K. to talk about renewable energy as we have huge potential here in terms of hydropower and solar energy. We have a potential of more than 60,000 megawatts in hydropower production and more than a million MW potential from renewable energies. We also have geothermal energy from one of the Earth’s largest rifts. Ethiopia can export energy to other countries and use the revenues to build more infrastructure. “In Ethiopia, we think big and plan big. That is why we have achieved such a high and constant level of growth. If we continue to grow at this rate for the next ten years, we will come out of poverty and make history.”
Revitalising an age-old industry When the late Prime Minister Meles Zenawi masterminded his Growth and Transformation Plan, agriculture was one of the sectors he identified. A staple of the Ethiopian economy, it accounts for 45% of the nation’s GDP and 80% of its exports and is key to creating jobs and generating revenues for the country mainly through coffee and meat. Ethiopia has the potential to become the breadbasket of Africa—it is already a leading exporter of fruits and vegetables and has the largest number of livestock in Africa. With more than 80 million hectares of arable land, and only 16% of it under cultivation, the possibilities are huge in the agricultural sector. Ethiopia’s soils and climate lend themselves to the cultivation of numerous varieties of crops. The challenge, however, is to move the country from a smallholdings base to a leading export base. While the government has implemented programmes that promote a market-oriented system, investment is sorely needed if the country is to generate its target of
ETHIOPIA 03
$6.58 billion in export revenues. Whatever the product: coffee, tea, oil seeds and pulses, livestock, fruit, vegetables or flowers, the general consensus on Ethiopian products is that it is of high nutritional value and quality. As Minister of Agriculture, Tefera Derbew explains: “In the last seven years, productivity has grown only 8% a year. About 11.7 million smallholding families account for approximately 95% of agricultural GDP, so the need to transform is immeasurable. This government has allocated more than 10% of its total budget to this end. Our competitive advantages are not just the climate and the resources but our location of market proximity. Using these potentials, we can become a benchmark for Africa.”
In 20 years, we will have three million or more hectares of land and enough factories to process our product. Abay Tsehaye, Director General, Ethiopian Sugar Corporation
Sugar has enjoyed a long and varied history in Ethiopia. The first factory in Adama was established almost 60 years ago and the country had one of the world’s highest productivity rates before the political instability of the Red Terror years (1977/78) caused the industry to collapse. Now the time has come for Ethiopia’s sugar industry to rise again. The global requirement for sugar is rising due to the increasing income of the emerging economies, so it will not be only Europe and the U.S. that buy this sugar. The whole world can be Ethiopia’s market. Ethiopia’s sugar is well known for its quality and organic qualities as Abay Tsehaye, director general of the Ethiopian Sugar Corporation, says: “Our sugar is already branded. We used to export to European countries. Now, we are trying to create a partnership with those who can take us to international markets to sell our sugar. We have the ideal climate and soil for sugar. We also have vast amounts of available
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PHOTOS: ARIADNA BASTART
land and rich water resources that we can use for the irrigation of large-scale sugarcane plantations.” The Ethiopian government plans to increase sugar production ten-fold in order to become one of the world’s largest exporters. “Sugar development will be one of our growth pillars and will allow us to earn the foreign currency we need for our development,” Tsehaye says. “Sugar Corp. will be key in transforming Ethiopia into one of the world’s greatest sugar producers.” The company plans to achieve this goal by creating its own team of professionals to work at each stage of the process; introducing the necessary management systems, having benchmarked the best practices of Brazil, India and Mauritius; implementing state-of-the-art technology from the best sugar-producing countries by partnering with Metal and Engineering Corporation; and developing the necessary infrastructure. To fund the ambitious development, Sugar Corp. will need to obtain loans from both local and foreign banks. Sugar factories have an almost immediate return on investment, however, allowing the company to be self-sustainable within five years of production. Sugar Corp. is also looking to develop sugar-related sub-products like ethanol, that could be used for blending and reducing the import expense. “In 20 years, we will have three million or more hectares of land and enough factories to process our product. There will be new towns and a completely transformed rural landscape,” Tsehaye says. “I invite British investors to do their research and invest in sugar.” Meanwhile, FAFFA Food Share Company has become a reference in the food processing industry. Set up more than 50 years ago to feed the malnourished children of Ethiopia, it was the first company in the country to produce full cream milk powder, cornflakes and soya bean milk and supply food under the U.N. food programme. Privatised three years ago, the company is a strong ambassador for Ethiopian quality and is currently diversifying its product line in order to curb the number of food imports and achieve food security. “Most of the food in Ethiopian supermarkets is imported, so our first priority is to change that situation,” says Zeco Ebro, FAFFA’s director general. “If we produce the food here, we don’t have to invest our dollars. Our products are obviously cheaper than the imports and that increases the nation’s purchasing power. We use the latest technology to reduce the costs and maintain our quality. The farmers know they have a demanding customer in us.” Ethiopia has been involved in the processing and production of leather and leather products for more than 80 years, but the industry has really taken off in recent years. Flanked by this experience, and having one of the largest livestock populations in Africa, the government is expanding this lucrative commodity to achieve $500 million in exports before 2020. Ethiopia’s cattle hides are internationally re-
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nowned for their fine grain pattern and good fibre structure, while its sheepskins have also proven to make excellent leather goods. The Leather Industry Development Institute (LIDI) has been tasked with the transformation of the industry, making it more competitive, creating jobs and training the next generation while facilitating technology transfers—steps that will allow Ethiopia to develop into a global leather hub. “Until four years ago, we were selling only semi-processed products,” Wondu Legesse, LIDI’s director general explains. “Some manufacturers were buying it and producing it under their name, which means no one knew where the raw material was coming from. Now we want people to know Ethiopian products. They need to know where the leather is from. The strength and physical properties of our sheepskin, for example, have been scientifically proved. Some 80% of the world’s golfing gloves are made with Ethiopian sheepskin, yet it is not well known. “We are building the capacity of local firms and using external expertise to improve the quality and efficiency. British investors have acquired a tannery here and are now producing on their own, and expanding. This is a great achievement for us and we support them any way we can.”
Financial services underpins development Ethiopia’s financial services industry is growing at a staggering pace, having risen by 43% last year. It is a key proponent of the GTP, providing the credit SMEs and national companies need to fund investment projects. The country is, however, seriously under-banked—there is only one bank per 83,000 Ethiopians, and many entrepreneurs lack the collateral needed to obtain a bank loan. The sector is currently closed to foreign participation and there are no capital markets. The banks that do exist are, however, working with the government to establish an accessible, efficient and competitive financial system. The Development Bank of Ethiopia (DBE) is a specialised bank with the remit to support the national development agenda. It is focused on providing customer-focused lending to viable projects in line with government priorities. For now, the aim is to focus on projects engaged in agriculture, agro-processing, and manufacturing. It hopes to achieve 100% success in all financed projects by 2020. “The GTP outlines what types of investments should be made in different sectors in order to meet the expectations,” says Esayas Bahre, the bank’s president. “DBE is performing the necessary actions, for example, bank investment, to reach the expected output and we plan how much has to be invested in each sector in a given period so we can reach our objectives.” Dashen Bank is Ethiopia’s leading bank, rising to the top of the tree since it was established in 1995. Voted “Bank of the Year for Ethiopia” for 10 consecutive years,
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Dashen has created banking history in Ethiopia. It was the first to implement the CORE system in 2003, a payment card service in 2006 and the Visa, Mastercard and Unionpay credit cards, and continues to be at the cutting edge of technological development. Berhanu W/Selassie, the bank’s recently appointed president, is implementing a strategic plan that will see the bank expand and develop. “The National Bank of Ethiopia is providing us with the support and regulatory measures needed to create a growth environment,” he says. “Our intention is to expand more and cover the rural areas. We have taken great measures to expand our outreach areas and are opening an average of 20 banks a year. “We want to transform our services. We are going to implement highly advanced technology to support new products and services and work on mobilising our resources. We have an international banking department that is focused on the import-export business; we facilitate trade for different companies and maintain correspondent accounts with the world’s major banks. The banking system in this country is far behind the rest of the world; I believe we could learn a lot from London’s banks and financial system.” Things are moving fast within the sector. Since it was created three years ago, Abay Bank S.C. has become one of the most highly capitalised banks in the nation by partnering with the private sector and putting the journey to development at the core of its activities. Dynamic, customer-driven and innovative, Abay is booming. “We are profitable because we have supported so many people with loans and technical support,” says the bank’s president Mesenbet Shenkute. “These people create job opportunities, which means more customers for us. When we started, we had 845 shareholders; today we have more than 2,000. The farmers are our biggest shareholders. Most of the population is between 20 and 30 years old, and they have creative ideas: we are one institution that will help them move forward.” The Cooperative Bank of Oromia (CBO), arguably the most agriculturally oriented private bank in the country, is also helping farmers to grow, creating better access to funds for what it terms “Ethiopia’s missing middle.” Playing a crucial role in the socioeconomic transformation of Oromia, Ethiopia’s largest state in terms of both population and area and a prime coffee producer, CBO has created access to banking for farmers and cooperatives. “Most of our branches are in the rural areas; out of 67, only nine are in Addis,” says the bank’s president Wondimagegnehu Negera. “The development of technology and telecommunications has allowed us to reach people that were previously left behind. Most of our clients are cooperatives; we have more than 3,000 primary co-ops and unions. As well as bank accounts and services, we provide them with a consultancy service to help in areas of marketing, governance, management, operations and related facilities.
ETHIOPIA 05
“We have collaborated with the Bill Gates Foundation, and help clients get organised with training for leadership and capacity building. Those who pass those processes get help with financing and are able to export to the world market. We have a clear strategy and an excellent team. The number of account holders doubled last year and continues to grow.” The leading commercial bank in Ethiopia, Nib International Bank aims to become a pinnacle of excellence in the country. Already the strongest private bank, with a net profit of 246.4 million Birr (£8.7 million), the bank has made a huge impact on the financial services landscape since it was established in 1999 and plays a leading role in all major economic sectors to enhance the country’s development.
Our main objective is to avail abundant supplies of cement to the market. Haile Assegide, Executive Director of Major Investment Projects, Derba Cement
“We need to effectively implement our second five-year strategic plan and motivate our employees to render efficient banking services,” says Amerga Kassa, the bank’s former president. “We need to expand our branch network and open new branches in the areas where development projects are being envisaged, such as sugar factories, railways and new road routes and towns. We also believe in giving back a portion of our profits to society—we contribute to the Children’s Heart Fund of Ethiopia, the Addis Ababa Pensioners’ Association and the Eye Bank of Ethiopia.” Meanwhile, with more than 11,200 shareholders and a profit-increase of 54.7% in 2011/12, Bunna International Bank S.C. is thriving after just three years in the business. Eshetu Fantaye, the bank’s president says: “Banks are tremendously important in fulfilling the government’s GTP, mostly in assisting the growth of domestic selling, which is still very low compared to that of other sub-Saharan countries. “The banking sector needs to reinforce that and increase the sales power at home. Secondly, banks play a crucial role in financing production sectors, especially agriculture and SMEs. Helping out manufacturing sectors is of great importance to a bank’s activities. “We have entered the market with unique products, both on the assets and the liabilities sides of our balance sheet. We intend to expand aggressively with up to 35 branches this year and become the most accessible bank in the country.”
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Moving at a rapid pace With Ethiopia’s future growth dependent on diversification, it is the industrial sector that will transform the economy.
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ith so much fertile land and natural resources to offer, Ethiopia’s future seems assured, and the government is well aware that it is the private sector, and the production of value-added goods, that will set the nation on the path to prosperity. For Mekonnen Manyazewal, Minister of Industry, the priority is to create the right conditions for rapid industrial development and harness the potential for trade and investment. “Our vision is to build a competitive economy and industries that are leading the structural change,” he says. “We are depending on agriculture, so the structure should change from subsistent, low-productivity agriculture, to high value addition, technology transfer, job creation and a diversification of imports. This is the fundamental pillar in the growth and transformation plan.
The government is creating the right conditions for private sector investment. Mekonnen Manyazewal, Minister of Industry
“We need to mobilise private sector investment and the government is there to facilitate and create the right conditions through massive public investment in infrastructure, such as power, roads and railways. We are also investing heavily in our human resources; industry needs strong and capable public institutions that deliver services to support it. “We are focusing on those industries that are labour-intensive and use natural resources, like agriculture. The metal and manufacturing industries are essential for construction, and the chemical industries are critical for agriculture, leather and textiles. Pharmaceuticals is another area earmarked for growth: we import most of
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our medicines now, but could easily substitute that expert technology, set up factories and generate employment. The sugar industry is also a massive programme.” Ethiopia has grown, Minister Mekonnen says, not because of minerals or oil, but because of good policies and a committed leadership. “The leadership, along with the state, is committed to the country’s transformation. This is what really makes a difference.” The mindset of the companies behind this development is also impressive. Part of the MIDROC Ethiopia Group of Companies, a conglomerate headed by Sheikh Mohammed Hussein Ali Al-Amoudi and known for its commitment to Ethiopia, Derba Group is setting up a state-of-the-art cement works that is expected to reach a 37% market share in its first year of operation. The $351 million (£233 million) plant, situated approximately 46 miles from Addis Ababa, has the capacity to produce 80,000 tonnes of cement a day, and earn an estimated $115.9 million a year. Derba Cement entered the market last year with an aggressive sales and marketing drive that not only saw prices fall astronomically, but also offered a 60-day credit gap for buyers paying 50% of the purchase-price upfront. They deliver to sites within a 370-mile radius via a 1,000-strong fleet of specially-imported Volvos. The company plans to invest $3.4 billion in Ethiopia over the next five years, leading to the creation of 370,000 jobs and the implementation of the latest technology into the national industry. It is literally helping build the nation. Haile Assegide, Derba Cement’s executive director of major investment projects, explains more about this dynamic strategy: “Our main objective is to avail abundant supplies of cement to the market, and bring down the factory price,” he says. “It is a good indication when there is a supply, as our objective is to stop these imports to make Ethiopia self-sufficient in our sector. We want to be the cost leader. Meanwhile, our delivery service has built trust. Previously, people were driving to Addis to buy cement, but now we can send the trucks to the project sites. Our customers get their receipts and are confident they will get their cement. We are expecting to reach 82% of our capacity this year.”
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As Assegide says, the ambitious group works hand in hand with Ethiopia’s development and wants to participate in all areas of the economy. “Our investor, Sheikh Al-Amoudi, wants to change the image of Ethiopia and develop its people. This is no longer a country of poverty and famine, but we can only change that image by continuing with our development.” For Steely RMI, a private company involved in the steel and metal industry, a highquality product and service will help it become one of the leading firms in Ethiopia. With excellent manufacturing facilities and cutting-edge technology, the 56-yearold company is diversifying in order to participate fully in the country’s growth. “We are mainly engaged in manufacturing,” says managing director, Mesfin Mengesha. “We have the steel industry and the wire processing side and supply all the local manufacturers. We aim to produce 100% of local consumption and focus on exports, as we have the technology and expertise. We are also planning to expand our activities and our value chain by investing in the mining and agricultural sectors.” As Tefera Lemma, the firm’s general manager of policy and operation, adds: “We have put in place a great management system because this company has to be one of the leading firms in Africa in the next 30 years. We have the vision to be one of the strongest and most dynamic industrial companies on the continent. Our competitive advantages are that we are investing heavily in our technology which ensures higher productivity, and we also have a highly productive labour force.”
The company of the people Known as the industrial group of the nation, and led by Ethiopia’s former First Lady, Azeb Mesfin, the EFFORT Group has established manufacturing and services industries to foster the economic and social development principally in the Tigray region of the country. A leading example of social investment, EFFORT has been at the forefront of opening new sectors for private enterprises, with the growth being ploughed back into the nation. Committed to sustainable development, EFFORT and its subsidiaries are embracing the changing business environment. The group is the perfect partner for investment, with its vertical and horizontal integration offering a multitude of opportunities to exploit local business synergies. It is also keen to empower women. Azeb Mesfin speaks for a continent of women when discussing the impact they have on 21st Century Africa. “Without the participation of women, Africa wouldn’t be successful,” she says. “I’ve learnt from personal experience that our participation is fundamental, because whenever we believe in something, we are determined to achieve it. Besides that, we are mothers. The feeling you have for your family and children is the same that you have for your job. It’s a natural gift.
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ETHIOPIA 07
“Education was missing for women in Africa. However, whenever women get their chance, development is achieved. To be a democratic and developed society, a society based on love and integrity, we need to achieve our goal of universal education for African women.” The growth and transformation plan, set in motion by Mesfin’s late husband Meles Zenawi, will need the people’s involvement at every turn, Mesfin says. “The plan is built on the capacity of our people, not just our natural resources. It depends on our hearts and minds,” she explains. “It is social mobilisation for development that depends on change in every household. That is why people are motivated to
Without the participation of women, Africa wouldn’t be successful. Azeb Mesfin, CEO, EFFORT
do something. The GTP has a special area focused on farmers, with irrigation and technology projects, and a package to help them protect their land, for example. The government is hiring experts to train the farmers to use their lands in a productive way, but it is their motivation that will make this happen. “We have also created a special package for mother and child care—society demanded it and our health system should be proactive and focused on prevention, like malaria vaccines or post-natal vaccinations. We are creating the infrastructure to support healthcare awareness, such as clinics in rural areas. In each of these villages, most of the workers are women that are collaborating with the local communities. They go door to door, checking on the population’s health. “If you are a hard worker and you have a good understanding of the benefits of work, you can change your life. A farmer can have a tractor and a small car…we can create the necessary infrastructure to connect every village in Ethiopia.” EFFORT’s contribution to the economy is extremely high, Mesfin explains. “We are one of the highest taxpayers in the nation, a very accountable and transparent company. One of our subsidiaries spends millions of Birr on training. Our company has trained most of its professionals and they now work in different parts of the country. Our contribution is fundamental to creating a positive work environment and a culture of accountability. You need to give back to society, so we build schools and support our people.”
Addis Ababa ON THE WAY TO TRANSFORMATION
The City Government of Addis Ababa Addis Ababa (Ethiopia) www.addisababacity.gov.et
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With its sights set on becoming an international company, the group is focused on making its subsidiaries more competitive internationally. Spanning a range of industries, the companies within EFFORT hold the same values and are dedicated to opening up profitable business lines to do so. In construction, Messebo Building Materials Production P.L.C. produces the highest quality cement in Ethiopiain line with European and U.S. standards, while SUR Construction P.L.C. has become one of Ethiopia’s leading construction firms, being involved in the necessary infrastructural development of the country.
We want to be able to manage modern projects better and would call on the U.K. to help us. Atakilt Teka, CEO, Water Works Construction Enterprise
Mesfin Industrial Engineering P.L.C makes metal and steel products and machinery for the manufacturing of construction, agricultural, mining, energy and transport sectors for domestic and export markets. With dreams of producing Ethiopia’s first car brand, the company is at the forefront of innovation, importing all the latest technology.
The “Made in Ethiopia” brand Other EFFORT subsidiaries have become global ambassadors for Ethiopian-made products. Almeda Textile Factory P.L.C. is the biggest textile manufacturing company in Ethiopia, with a 100 million Birr (£3.5 million) sales volume. The company is ISO 9001, KEA and QSAE-certified. Sheba Tannery P.L.C. produces semi-finished and finished leather products and is renowned for its partnerships with some of the world’s top shoe and leather product brands, while Addis Pharmaceutical Factory P.L.C. contributes to the development of the pharmaceutical sector by producing safe, effective and good quality drugs and other pharma products. Other subsidaries include: Ezana Mining Development P.L.C., Saba Dimensional Stones P.L.C., Express Transit Services P.L.C., Trans Ethiopia P.L.C., Hiwot Agricultural Mechanization P.L.C, Guna Trading House P.L.C. and Experience Ethiopia Travel. “The more I work for EFFORT, the more I feel I am defeating poverty, the biggest enemy of my nation,” Mesfin says. “This is a feeling shared by every single member of our organisation and it motivates us to become internationally competitive. EFFORT is easy to brand and we are trusted by the people. We could be a major
player in Eastern Africa. We are changing our management style and will start looking to big international companies for inspiration. We have no problem working with multinational companies that may be interested in investing in the country. We are, for example, looking for partners for our mining company, as without them, we cannot move forward in that sector. “I am thankful for the times the world supported us in our hour of need, but it shouldn’t be our current image. The famine and the drought are gone: we need to be branded in a completely different way and move to the next level.”
Towards a high-powered future Fundamental to the success of the GTP, Ethiopia’s energy sector has stratospheric potential in the country that boasts masses of unharnessed hydropower from the Blue Nile and other rivers and waterways. The government has embarked on an ambitious dam building programme that will see electricity capacity rise to around 15 GW over the next decade that it will use to grow domestically but also export to neighbouring countries. The sector is wide open for investment, particularly in renewable energy development. “My personal outlook regarding fossil fuel is that it is the reason for climate change,” says Alemayehu Tegenu, Minister of Water and Energy. “Anybody who wants to hand over the planet to the next generation should focus on clean energy development, as Ethiopia is doing. Without energy, nothing is possible: you cannot move an inch. We therefore have a 9,000 MW energy project under construction, that will contribute to the 15 GW goal. We have already earmarked the sites we will build on. “Preparation has started. Construction does however require a lot of money. There are many ways to mobilise these funds and that also needs preparation. We are confident we will achieve it without any obstacles. We have enough natural resources in Ethiopia. We have the potential for 45,000 MW of hydropower, 3 GW of wind power, and endless geothermal energy supplies.” Currently under construction, the Great Renaissance Dam was Meles’s final legacy, and is expected to contribute 6,000 MW to the country’s energy capacity on completion. But it is not enough. “Our population is 80 million and there are a lot of manufacturing industries coming on stream,” Minister Tegenu says. “Their power demand will be high. The Renaissance Dam is just the beginning. Ethiopia has set three pillars for growth: one is renewable energy, two is biofuels and three is a forestation programme for carbon storage. I am sure we can share some experiences in those areas with the U.K.” The Water Works Construction Enterprise (WWCE) is central to the country’s water-related developments, working on sewage, drainage and irrigation systems and larger dam and road projects in the country. Since it was established in 1994, it has made a huge impact on development and changed the face of the country;
Ethiopia’s economic engine TOURISM
AGRICULTURE
SOCIAL
INVESTMENT
Standing proudly at the heart of Ethiopian’s fast-growing tourism, trade and investment sectors, the beautiful region of Oromiya is setting the benchmark for economic growth and diversification. As Ethiopia’s business, trade and political hub, Oromiya is the country’s investment hotspot.
The Oromiya National Regional Government Office of the President, Addis Ababa Tel: +251 11 5510 455 | Fax: +251 11 5513 642 www.oromiyaa.com
An independent supplement distributed in The Observer on behalf of Business Focus who take sole responsibility for its content
the Alwero Dam has a reservoir capacity of 75 million m3, and it has carried out large and complicated intake structures in two of Ethiopia’s main towns, Jimma and Dire Dawa. It has completed a hydropower plant at Dembi, a large-scale drainage network for Amibara Irrigation Project and spends around 140 million Birr (£4.9 million) a year on new projects. Now, with the government’s goal of universal access to water and 100% sanitation coverage, WWCE is bracing itself to expand its market share by 5% each year, increase profits by 10-15% each year and construct four large-scale multipurpose dams. Atakilt Teka, CEO of the Addis Ababa-based enterprise, explains more about the role of the company. “Water is Ethiopia’s third resource, after labour and land,” he says. “We have already started on 10 projects that include the Renaissance Dam. Without water, there can be no agriculture! Previously, our country was running the agriculture by rainfall, because the irrigation system was not developed, but as the GTP explains, we have to use every resource, including underground supplies. “WWCE has had a great impact on the management of water resources in the country. We can take care of the dams we are building; the Tendaho Dam for example, can irrigate 60,000 hectares of land. Dams are not the only thing we are building; we are also constructing water supplies for big cities. We want to expand into the region, and also become a global company. “Our biggest challenge is technology; not just the materials but the science itself. We want to know how we can manage modern projects better and we would call on the U.K. to help us do that. We don’t need the capital, just the know-how.” Indeed, no sector would be anywhere without efficient technology, and in Ethiopia’s ICT sector, there are monumental developments under way. An accelerator of growth, ICT is vital to a smooth-running economy, as Minister of Communication and IT, Debretsion G/Michael notes.
We were the first telco to deliver a good, affordable service to all segments of the population. Bruno Duthoit, CEO, Ethio Telecom
“ICT has an impact on our political, business and personal lives. The development of ICT is the development of the whole country,” he says. “Our goal, therefore, is to support every single Ethiopian. In doing that, we support the development of the country and by that we reduce poverty. However, we need proper infrastructure. Our services need to be easily accessible. IT is not only an instrument for business, it is also the gateway for business and exports.” Ethiopia has made impressive strides in telecommunications in recent years. Between 2010 and 2012, the number of mobile users increased by 14 million and the sector is looking to attract external resources in the shape of technology and investment to reach new targets. “We need investment, service providers and partners to achieve our mission. France Telecom helped us build infrastructure and capacity, and this is a strong base for development,” Debretsion says. Ethio Telecom has been a key player in the sector’s advancement. Since it was established in 2010 to replace the unwieldy Ethiopian Telecommunications Corporation, it has helped millions of Ethiopians flourish in their work and personal
FAFFA Food
ETHIOPIA 09
www.faffafood.com
lives. Although fully owned by the state, Ethio Telecom’s management has been outsourced to France Telecom, with chief executive Bruno Duthoit, a veteran of the industry, drafted in to turn the company around. Within three years, the company has developed new products and tariffs and expanded its customer base by around 20 million. It is currently engaging vendors in negotiations for an expansion of the telecoms infrastructure and a general improvement in service. “The penetration rate of mobile and internet as well as fixed-lines is low, but it is growing extremely fast,” Duthoit says. “Between 2010 and 2012, the number of mobile customers tripled, which is astonishing. That shows why Ethiopia has been one of the top-20 fastest-growing telecoms markets in the world for the last few years. “ If we continue with that growth, using external technology and financing, we will be one of the top telcos in Africa. I don’t say that as a target by itself—the target is to satisfy our customers—but as a consequence, we will have raised the position of the company. “Our short-term aim is to improve the quality of services. We are still weak in some types of services. The sole priority is to develop telecom services, mainly mobile and internet, to satisfy the rapidly growing demand. Around 83% of the population are rural-dwellers, so we need to find a way to provide telecom services that are as affordable to them as the urban community. Achieving that will allow us to go regional. We are very efficient: we have just 85,000 staff providing telecom solutions to around 20-million customers. We are very strong in terms of the distribution network and internal management.” The company also takes its social role seriously. “We are a big governmental company and we were also the first telco to deliver a good, affordable telecoms service to all segments of the population. We need to satisfy all customers: small companies, big companies and individuals. It is a big market, and big responsibility for us. We provide different services and applications to all kinds of people. We feel like we are changing their lives.” With his contract due to expire imminently, Duthoit is reflective and optimistic. “My biggest challenge is to leave the company in good shape so it can easily accommodate new strategies and follow up on growth,” he says. “I want to hand Ethio Telecom to the existing Ethiopian management with the notion that I did my best. I believe in the commitment of my staff and I know they will do a good job.”
We keep the water flowing In one of the driest regions of the world, the drive, skills, investment and determination of the WWCE ensures water keeps flowing to ensure Ethiopia’s socioeconomic development keeps growing. Key activities include substantial investment in new dams, irrigation and drainage networks, water supplies, sewerage systems and hydro-electric plants.
Water Works Construction Enterprise Addis Ababa | Tel: +251 11 645 91 66 | Fax: +251 11 645 91 61 wwcezz@gmail.com
10 ETHIOPIA
PHOTOS: ARIADNA BASTART
Strong in the face of change People power, strategy and a shared vision have set the wheels in motion for Ethiopia’s exciting new chapter.
A
s well as being a haven for business, Ethiopia has proved itself a hotspot for tourism. In 2012, travel and tourism in the country gave a total contribution of 12.3% of GDP and accounted for 2.6 million jobs, according to the World Travel and Tourism Council, and is expected to attract 631,000 visitors this year. With a unique cultural heritage, stunning landscapes, and hospitable, friendly people, the vibrant land of a thousand smiles has plenty to captivate the visitor. From the stunning views and endemic wildlife at Simien Mountains National Park, to the breathtaking architecture of the ancient city of Lalibela and the Queen of Sheba’s Bath, Ethiopia offers centuries of history and unspoiled nature. More than any other sector, it is tourism that has the potential to be the catalyst for inclusive growth for the isolated communities, and now is the time to capitalise. The Ministry for Culture and Tourism has announced plans to turn Ethiopia into one of Africa’s top-five destinations by 2020, with the aim of attracting a million tourists. It is keen to work with private investors to expand the allure and quality of its many attractions to achieve these aims. Openings exist for star-rated hotels, lodges and resorts, international and specialist restaurants, and tour operators. Some of the major hotel groups have already set up lodges and resorts around major tourist attractions, but more are needed to cater for the growing demand. As the seat of a number of international organisations, including the African Union, the U.N. Economic Commission for Africa, and more than 100 embassies, Ethiopia caters to the rapidly developing conference and business travel market.
Growing the Oromia region The home of Addis Ababa and a hub of economic activity, Ethiopia’s Oromia region is the largest contributor to the national GDP and the largest recipient of foreign direct investment in the country. In the process of expansion and diversification, the region is keen to become the political capital of Africa, and Africa’s business
hub, although it has set social development at the core of its activity. Abdulaziz Mohammed, vice president and bureau head of civil service and good governance at the Oromia Regional Government, explains how he believes the 21st Century will unfold for Ethiopia and for Africa. “In the last two decades, our path has changed considerably. The first springboard was a new constitution; it is the most modern in Africa and recognises the human and democratic rights of all of Ethiopia’s 83 cultures. That was crucial for our development. We also have clear policies and strategies for the way ahead, and the government is taking a leading role in our development. Communities are being mobilised and participating in the growth.” At a local level, there is a lot going on too. “Oromia is situated in the heart of the country and has a population of around 30 million, a third of the country,” Mohammed says. “We contribute almost half of the country’s crops, and almost 70% of Ethiopia’s coffee international exports comes from here. “In line with the GTP, we are planning to develop our agricultural industry by 2015, and supply water to all our people. We are also planning to provide universal primary education. It is an ambitious plan, but we work hard. Out of the 72,000 kilometres (45,000 miles) of road that is being built in the country, Oromia is responsible for 42,000 kilometres (26,000 miles.)” As well as good access to road networks, investors in Oromia will find reliable telecoms services, electricity and a modern international airport. Land can be leased from the government at affordable rates and for as long as 80 years. The climate is conducive for all kinds of investment, but particularly horticultural crops, flowers and vegetables. “If you want to use the domestic market, Addis is close by, and if you want to export, we are close to the big markets of the Middle East and countries that are not agricultural producers,” Mohammed says. “The U.K. has been our main development partner and has assisted us in a number of programmes, most recently a peace and security fund. The capacity-building aspect is a continuous process, so I
We ended 2012 with positive results, which demonstrates that all the difficulties are behind us. Brahim Hajji, CEO, Banque de l’Habitat
In the Tunisia report distributed with The Observer on Sunday 3 February 2013, Business Focus inadvertently included the wrong photo for Mr Brahim Hajji, CEO, Banque de l’Habitat. We sincerely apologise to Mr Hajji for this error.
An independent supplement distributed in The Observer on behalf of Business Focus who take sole responsibility for its content
hope the U.K. will continue to support us in this. Our leaders are definitely taking responsibility. When I see people coming out of poverty, getting access to water and health services, children going to school and people providing for their families, it inspires me. Investing money is not enough, we have to mobilise our people. Last year, we got eight million people involved in a huge conservation campaign. This is the result of leadership and shows that the trust is there.”
Flower of the nation In recent years, the bustling city of Addis Ababa has established itself as a dynamic, cosmopolitan capital in the heart of Eastern Africa, epitomising the face of a changing nation that is looking forward to the future. The hub for business in Africa, Addis Ababa is in vogue having been hailed one of the world’s top ten cities to visit this year. Addis is positioning itself to be at the centre of both the business world and the country’s economy, and undertaking a strategic programme in micro and smallscale enterprises that will underpin the industrialisation. “Our economy is agriculturally led, but the next growth and transformation plan will be an industry-led one,” says Mayor of Addis Ababa, Kuma Demeksa, who came to power in 2008. “We are trying to get experience from Europe and the U.S. on how to use modern technologies. We have also given more attention to maintaining peace and security so that both the city and the country are strong. “Without strategies and plans, it is difficult to transform a city. We plan to fulfil the transformation within 10 years, but we also have a five year plan and our top priority in that is capacity building,” he says. “We are training civil servants to focus on change and the reorganisation of institutions. We are trying to undertake different problems through various civil service and reform programmes, and it is improving. “The second priority is infrastructure. We have plans for both economic and social developments. The third programme is about housing. In the past four years, we have built more than 40,000 homes and have a further 100,000 under construction. We are also committed to developing more micro and small-scale enterprises, and from those enterprises, we’ll take the contractors for house-building. We are creating jobs and easing the investment process. “We’re trying to create a model city; we’re building beautiful apartment blocks and implementing green areas. It is up to us to show people that we can transform areas of the city and make them beautiful. “Addis will be the heart of Ethiopia’s business and economy. I sent Boris Johnson an invitation to our 125th anniversary last July. We need London’s experience on
All the positive elements are extremely encouraging for the future of the country.
ETHIOPIA 11
how to manage the problems of a city. We need experience, knowledge and technology in areas like economic development, water, sewerage systems and solid waste management.” Today’s Ethiopia is undoubtedly a country on the move, with a clear mandate, a clear direction and national unity. It is a world away from the famine-torn wilderness of the 1980s and early 1990s. In only two decades, the nation has turned its fortunes around to become internationally-focused, motivated and increasingly self-sufficient. The Addis Ababa mayor believes the country’s success boils down to three factors: “The first is a visionary leadership,” he says. “Twenty-one years ago, the EPRDF seriously analysed and prioritised the problems of our country. The critical problems were peace and security, lack of democracy and poverty. For us, it was fundamental to bring peace and security because without those, you cannot have development.
The U.K. is our main partner and has assisted us in a number of programmes. Abdulaziz Mohammed,Vice President, Oromia Regional Govt.
“The second factor is democracy. Ethiopia has more than 80 nationalities but they didn’t have the right to exercise their languages or their history, and they certainly didn’t have a large enough share of power at local, regional and country levels. The issue of democracy was, and still is, critical. The right to self-determination is very important in our country. “The third point is the issue of mass participation. We adopted the final constitution in 1994, and are now trying to mobilise the whole nation and country to fight poverty. We are trying to convince the public on the problems and the solutions. The public is active; the people want to change.”
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Mohamed Ridha Trabelsi, General Manager, SPLT
In the Tunisia report distributed with The Observer on 3 February 2013, Business Focus inadvertently included the wrong quote for Mr Mohamed Ridha Trabelsi, General Manager of the Société de Promotion du Lac de Tunis. We sincerely apologise to Mr Trabelsi for this error.
Bunna International Bank Tel: +251 11 158 0827 Fax: +251 11 158 0832/76 SWIFT: BUNAETAA bibibd@bunnabanksc.com www.bunnabanksc.com
Development Bank of Ethiopia Addis Ababa Tel: +251 11 551 1188/89 Fax: +251 11 551 1606 www.dbe.com.et
12 ETHIOPIA
The company of the people is open to investment Achieving sustainable development can be a challenging task, however anything is possible with EFFORT. The dynamic investment corporation works in harmony with the region’s changing commercial environment and social, political and economic situation to ensure the welfare of the people and the growth of profitable business lines, such as textiles, construction, engineering, manufacturing, leather processing and pharmaceuticals.
EFFORT INVESTMENT CENTER Mega Building, Bole Road, Addis Ababa | +251 115 54 57 94, +251 115 54 02 63 | Fax: +251 115 52 96 69 www.effortgroup.org