potential opportunities for investors in mikelle, ethiopia

7/30/2019 Potential opportunities for investors in Mikelle, Ethiopia

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Mekelle, EthiopiaPotential opportunities or investors

June 2010

KPMG INTERNATIONAL


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Terms o reerence

This report has been prepared by KPMG in Russia, a partnership registered in Russia and a member rm o KPMG International, a

Swiss cooperative. The inormation contained herein is o a general nature and is not intended to address the circumstances o any

particular individual or entity. Although we endeavour to provide accurate and timely inormation, there can be no guarantee that such

inormation is accurate as at the date it is received or that it will continue to be accurate in the uture.

In preparing this document we have relied upon and assumed, without independent verication, the accuracy and completeness o

various sources o inormation, including public sources.

Details o the sources we have used are given in our report. KPMG in Russia accepts no responsibility or liability to any party in

connection with such inormation or views.

Our core eldwork and research were perormed between September 2009 and December 2009. We have not undertaken to update

our report or events or circumstances arising ater that date.

Appropriate proessional advice should be sought to undertake a more specic examination o the particular circumstances applicable

to a potential investor. The contact details o KPMG proessionals who can assist in this regard are given at the end o this report.

Acknowledgments

KPMG in Russia would like to thank the Millennium Cities Initiative (MCI) or the opportunity to prepare this report to support its

valuable project. We would also like to thank the numerous enterprises and organisations which participated and acknowledge their

contribution to the preparation o this report (please see Appendix 1 or more details).

2010 KPMG International Cooperative (KPMG International), a Swiss entity. Member rms o the KPMG network o independent rms are aliated with KPMG International. KPMGInternational provides no client services. No member rm has any authority to obligate or bind KPMG International or any other member rm vis--vis third parties, nor does KPMGInternational have any such authority to obligate or bind any member rm. All rights reserved.


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Mekelle, Ethiopia: Potential Opportunities or Investment

ForewordAs part o KPMGs Global Development

Initiative, which ocuses KPMG member

rms skills and resources on achieving

the United Nations Millennium

Development Goals (MDGs), KPMG in

Russia was asked by the Millennium

Cities Initiative (MCI) to undertake this

report in relation to potential investment

opportunities in Mekelle, Ethiopia.

The MCI is an urban counterpart to the

Millennium Villages Project and was set

up in association with the UN Millennium

Project by the Earth Institute at Columbia

University. The initiative is ocused

on helping a number o cities across

sub-Saharan Arica to achieve the MDGs

through economic development.This

report, which explores the investment

potential in Mekelle, is one o several

being produced by KPMGs Transaction

Services practice.

In our opinion, this report is an excellent

example o how KPMG member rms

and their people are committed to

making a dierence to the people in

sub-Saharan Arica.

Mekelle, the commercial hub in the

north o Ethiopia, is a good choice or

investment. The area is endowed with

natural resources ranging rom avourable

climatic conditions or honey production

to untapped mineral resources. Access

to export markets gives Mekelle an

advantage over other cities in Ethiopia.

Additionally, the expected rapid

economic growth and highly supportive

regional government has created an

investor-riendly environment with

immense potential or rapid growth in

new investments.

To this extent, we hope that this work

will lead to the sustainable eradication

o poverty and secure the uture o

many hundreds o people through work

and enterprise.

Lord Hastings of Scarisbrick CBE;

KPMG, International Global Head of

Citizenship and Diversity

Professor Jeffrey D. Sachs,

Director ofThe Earth Institute at

Columbia University

The Millennium Cities Initiative (MCI) is a project o the Earth Institute at Columbia University.Launched by the Institutes Director, Proessor Jerey D. Sachs in 2006. The MCI seeks toassist, through research and policy analysis, selected mid-sized cities across sub-SaharanArica to achieve the Millennium Development Goals. Guided by its Co-directors, Dr. SusanBlaustein and Dr. Karl P. Sauvant, the MCI, more specically, helps the cities involved to arriveat integrated City Development Strategies. Part o this eort is to demonstrate that moreinvestment, including oreign direct investment, can be attracted to these cities, with theresulting employment and economic growth eects.

The sta responsible or working with KPMG Russia and KPMG International on this report

were Karl P. Sauvant, Co-director o the MCI and Executive Director o the Vale ColumbiaCenter on Sustainable International Investment; and Jerg Simon, Senior Investment Advisoro the MCI.

http://mci.ei.columbia.edu/



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Executive summaryMekelle: An optimistic outlook



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The Mekelle region presents attractive opportunities or

export-oriented investors.

The improving business

climate in Ethiopia provides

attractive opportunities or

investors capable o bringing

nancing, technologies andprocess management as well

as creating employment.

Ethiopia has showed impressive

economic growth and investment infow

in recent years, driven by political stability,

the low cost environment and supportive

state policies.

The government has established a

particularly investor-riendly environment

or export-oriented industries through

specic initiatives and administrative

procedures, such as exemptions rom

prot tax or two to ve years, carrying

orward o losses and duty ree import

o capital goods or up to 15 percent o

the value o capital goods imported or

investment purposes.

Financing, a qualied labour orce and

inrastructure remain the key constraints

aced by business in Ethiopia. However,

these constraints are partly manageable

in the short term by bringing own

nancing, technology and process

management to Ethiopia in order to

transer knowledge processes to the local

workorce. Inrastructure constraints are

not prohibitive in most cases and can be

managed through proper site selection.

The Mekelle region is

currently one o the most

encouraging investment

destinations in Ethiopia, driven

by the highly supportiveregional government,

abundant untapped natural

resources and good access to

export markets.

Due to its proximity to a ormer military

zone, Tigray State where Mekelle is

located, has historically underperormed

compared to other Ethiopian states in

terms o economic growth and infow o

private investments.

However, the military confict with Eritrea

ended in 2000 and is unlikely to be

repeated in the uture.

Supportive regional government policies,

the development o inrastructure and the

availability o land make the Mekelle region

an attractive investment destination.

Access to the Eritrean sea port may

establish an even stronger competitive

advantage or Mekelle but no evidence

was provided that this port would be

accessible in the immediate uture.

Power supply standards were signicantly

improved in 2009.

The Mekelle region presents

potentially advantageous

possibilities or investors

in export-oriented agro

processing, mining andtourism industries.

Favourable agro-climatic conditions, the

availability o appropriate land plots and

the proximity to export markets provide an

attractive opportunity or growing selected

varieties o ruit and vegetables or the

Middle East and European markets.

The Mekelle region provides a good

opportunity to export meat and leather

goods, driven by a large, high-quality

livestock population.

Abundant mineral resources in the

Mekelle region provide attractive

opportunities in relation to stones

and industrial minerals.

The Mekelle region provides potentially

good prospects or producing high-quality

honey to supply Sudan, Middle East, US

and European markets. The honey supply

shortage, currently the key constraint, is

likely to be overcome in the mid-term.

The variety o historic and natural sites

in Tigray State has attracted a growing

number o local and international tourists.

The lack o high-standard hotels on

major tourist routes creates the potential

or investment in quality lodges in the

Mekelle region.



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Investment opportunitiesNine investment opportunities were

evaluated or investment purposes

against criteria such as domestic and

export demand, production and supply,

competition pricing and margin prole,

and regulatory barriers.

The opportunities are summarised

below. Tourism, meat production, honey

and leather processing, horticulture

and mining were ound to be the most

attractive or investment, and are

examined in greater detail in this report.

Industry

Tourism

Favourable factors

Moderate, dry climate

Easy access to the most interesting historic, religious and natural beauty sites

o Tigray and Aar States

Lack o adequate tourist acilities

Meat production

Large, good-quality livestock population

Special ox breed (Raya) which is more protable than other breeds due to its bigger size,

and more tender and tasty meat

Honey processing

Moderate climate avourable or honey production

Large bee population

Famous high-quality white honey with low moisture content

Leather processing

Largest livestock production in Arica

Special quality leather Cabretta and Bati

Horticulture

Favourable agro-climatic conditions

Availability o appropriate land plots

Proximity to export markets

Mining Abundant mineral resources provide attractive opportunities in relation to

dimensional stones and industrial minerals

Animal feed Large resource base

Milk processing

Large livestock population

Favourable climate or high-yield animal breeds

Floriculture

Availability o appropriate land plots with suitable water resources

Proximity to Europe, one o the largest foriculture markets globally

Tigray is one o the Ethiopian states suitable or growing the rare Rose Damascena,

due to appropriate climatic conditions and soil composition

Source: Tigray Investment Oce, 2009

KPMG in Ethiopia interview programme, 2009



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Key

Extremely attractive

Highly attractive

Moderately attractive

Signicant challenges

Not attractive

Challenges

Lack o well-trained workorce

Insucient marketing o region

Poor image o the North o Ethiopia due to the war with Eritrea

Insucient tourism inrastructure

Attractiveness

Instability o live animal supply

Meat quality certication required or export

Instability o demand in export markets

Honey supply shortage in the short term

Irregularity o supply

Quality o raw materials needs to be improved

Poor road and airport inrastructure

Deposits can be dicult to access

Quality o roads

Low crop productivity

Lack o demand or processed animal eed

Shortage o eed

Lack o exotic and crossbred dairy cows

High seasonal fuctuations in milk consumption caused by asting

No operational international airport

Road inrastructure is poor or the majority o foriculture land plots

around Mekelle

The absence o foriculture arms in Tigray State makes small to medium scale fower

production a high risk undertaking



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8 Mekelle, Ethiopia: Potential Opportunities or Investment

Contents

IntroductiontoMCI 09

Politicalclimate 10

InvestmentclimateinEthiopia 11

Economic outlook 1

Investment trends 1

Key inhibitors 1

Mekelle,potentialopportunitiesorinvestment 1

Introduction to Mekelle 1

Investment climate 18

Infrastructure 1

SelectopportunitiesinMekelle

High quality lodge in the Mekelle environs

Meat production for export

High quality honey processing for export

Processed leather and leather goods for export 0

Out of season fruit grown for export

Dimensional stones and industrial minerals 8

Appendices

KPMG in Ethiopia interview programme

Secondary research



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Mekelle, Ethiopia: Potential Opportunities or Investment 9

Introduction to MCIAiming at sustainable growth

The Millennium Cities

Initiative (MCI) aims

to acilitate Arican

countries in reaching

the MillenniumDevelopment Goals

(MDGs) by, among

other things, attracting

more oreign

direct investment.

The initiative is ocused on the capitals

o the regions where the Millennium

Villages Project (MVP) is enabling

armers to transition rom subsistence

arming to commercial agricultural and

non-agricultural activities.

The MCI aims to engender a climate in

which investment, especially oreign

direct investment, can thrive, thereby

creating employment, stimulating

enterprise development and ostering

economic growth.

As such, the MCI intends to accelerate the

attainment o some o the MDGs within

selected cities in sub-Saharan Arica.

The experience gained in attracting

investment and developing business in the

Millennium Cities is complementing needs

assessments carried out in a wide array o

social sectors. As a result o these eorts,

the Millennium Cities will be enabled to

generate Integrated City Development

Strategies that are explicitly predicated on

achieving the MDGs.

Korare the MVP located close to

Mekelle has already made considerable

progress in the area o agriculture

development. The MVP is exploring

dairy collection as an area or increased

commercialisation and interaction with

urban markets. It is also in the process

o instituting a large-scale honey and wax

production system across its 11 villages.

The ocus o the project is to incentivise

armers to consistently improve their yield

on agriculture production to generate

sustainable income or the village, thereby

making it a sel-sustaining economic unit.

The ollowing KPMG Investment guides

and publications eaturing the millennium

cities have been produced:

Investment guide: Kisumu, Kenya

Investment guide: Kumasi, Ghana

Working paper: Bamboo bicycles

in Kumasi, Ghana

Investment guide: Ondo state, Nigeria

Investment guide: Blantyre, Malawi

Working paper: Sugar in Kisumu, Kenya

For these reports and more inormation

on MCI please visit:

www.mci.ei.columbia.edu/


TheAricanMillenniumCities

NigeriaGhana

MaliEthiopiaKenya

Tanzania

Senegal

BlantyreTabora

Kisumu

AkureKaduna

Accra

BamakoSegou

Mekelle

KumasiLouga

Malawi

Source: Millennium Cities Initiative Report, October 2009


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Political climate

Ethiopia is the largest country in East Arica. As a landlocked country,

Ethiopia shares boundaries with Eritrea to the north, Kenya to the

south, Somalia and Djibouti to the east and Sudan to the west. Its

growing population o nearly 74 million (2007) makes it the second

most populous country in Arica.The majority o the population

(85 percent) is rural and engaged in agricultural production.

Historically, Ethiopia has been isolated

politically and culturally rom its East

Arican neighbours. This has changed

in recent years as the government has

committed itsel to supporting regional

trade and broadening interactions among

Arican countries. Ethiopia is now a

member o the Common Market or

Eastern and Southern Arica (COMESA)

and home to the Arica Union.

Ethiopia is a ederal republic, which is

ruled by President Girma Woldegiorgis.

In 1995, Ethiopia adopted a new

constitution that ostered a multi-party

democracy and peaceul elections.

A two-and-a-hal-year border war with

Eritrea ended with the signing o a peace

treaty on 12 December 2000.

As one o only two countries in Arica

that have never been colonised (Liberia

being the other), Ethiopia maintains

a unique role in Aricas history. It has

long been looked to as a source o

pan-Arican culture and leadership. When

the Organisation o Arican Unity (OAU)

was established in 1963, Addis Ababa

was chosen as its headquarters. Addis

Ababa is also home to the United Nations

Economic Commission or Arica (ECA)

and is a major hub o Non Governmental

Organisation activity on the continent.

MapoEthiopiawithneighbouringcountries

Ethiopia

Kenya

Somalia

EritreaSudan

Egypt

Saudi Arabia

Yemen

Mekelle

Addis Abada


Source: Millennium Cities Initiative Report, 2009

Notes: One international airport Bole located in Addis Ababa

No sea ports


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Investment climate

in Ethiopia



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Economic outlook

The improving business climate in Ethiopia provides attractive

opportunities or investors capable o bringing own nancing,

technologies and process management in order to transer

knowledge to the local labour orce.

The relative political stability o

recent years, cheap labour and

supportive state policies have already

led to impressive growth in new

investments and corresponding

economic growth o Ethiopia.

Ethiopian GDP growth signicantly

outperormed the world average and

sub-Saharan Aricas average rom 2007

until 2009, and is likely to continue in

20102011.

RealGDPgrowthpercentage00011

percent

14%12%10%8%6%4%2%0%-2%-4%

Actual

11.6%11.1%

2007 2008 2009

Forecast

2010 2011

6.8%

4.5%

2.8%

5.0%

3.2%

3.2%

-1.2%

-1.6%

3.4%

4.5%

6.8% 7.0%

8.0%

KeyEthiopia

Sub-Saharan AfricaWorld

Source: Ethiopia: Economic Structure, Economist Intelligence Unit, 2009

GDPdistributionbysector0000

47%

15%06%

06%05%04%

17%

Agriculture

Trade, hotels and restaurnets

Transport and communicationsConstruction

Manfacturing

Government services

Other



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Investmenttrends

The government

leads an investor-

riendly environment

or export-oriented

industries.

Gross capital

ormation and FDI

infows demonstrated

signicant growth in

2006 and 2008.

Unlike many other countries in

sub-Saharan Arica, Ethiopia now

shows relatively low military, criminal

and terror risks.

Ethiopiaisarelativelypeaceul

country.Itsdangeroustogooutin

thedarkinsomeAricancountriesand

youhavetoorderanofcialcar.Here

youcanpickupataxiinthenightand

shouldnotbearaidorlieandhealth.

An investor from Israel

Gotoalocalnightclubandyou

willunderstandeverything.Itsa

verystrongindicatorothecriminal

situationinthecountry.Many

Europeansvisitourdiscosand

theyaresuretheywillbesae.

Ministry of Industry andTrade

Ethiopia possesses a

relatively cheap and

educated labour orce.

Thelabourorceisverycheaphere.

Localpeoplehaveapropereducational

basisanditwasnotaproblemorus

toteachthembasicskillsrequiredor

ourbusiness.

Dutch investor in horticulture industry

According to the Doing business report

2010by the World Bank, Ethiopia has

a strong position in the areas o tax

administration and legal practice. This

saves investors in Ethiopia signicant time

and money compared to other countries

in sub-Saharan Arica. On average, it takes

around 30 percent less time to deal with

tax procedures, and the eective tax

rate as a percentage o prot in Ethiopia

is hal that o the sub-Saharan Arica

average. The average cost o enorcing

contracts is only 15 percent o the claim in

Ethiopia, vs. 2279 percent in comparable

countries in Arica.

The Ethiopian government takes specic

measures to urther acilitate new

investments. Since it was rst adopted

in 1992, the Investment Act has been

revised several times to remove obstacles

to oreign direct investment in Ethiopia.



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Privatisation has been ongoing since

the Republics ounding in 1995, and the

government has sold many mismanaged

and poorly perorming companies to

private investors.

The avourable climate or oreign

investment created by the overall

economic conditions o the country is

urther augmented by specic initiatives

and administrative procedures to

encourage investments. In common

with other developing countries, the

most important incentives consist o tax

concessions. These include:

Exemption rom prot tax or a

minimum period o two years, and

up to ve years depending on the

type and location o investment, with

provision or an additional exemption

o two to three years or investment in

existing enterprises.

The carrying orward o losses an

investor who has incurred loss within

the period o income tax exemption

shall be allowed to carry orward

his loss or hal o the income tax

exemption period ater the expiry o

such period.

Duty ree import o capital goods

an investor eligible or duty ree

importation o capital goods pursuant

to these regulation shall be given the

same privilege or spare parts whose

value is not greater than 15 percent o

the total value o the capital goods to

be imported.

FDIdistributioninEthiopiabysector,00009

Total number of

investment projects867 1488 1767 1203618

100

90 0.9

80

70

29.8

54.6

0.360

24.1

33.9

0.9

Birr.

billion

8.5

42.7

50

40

1.230

10.5

14.2

20 1.1

6.2

4.910

0

Key

SocialAgro-processingManfucaturing2005 2006 2007 2008 2009

Source: Foreign investment projects, July 92September 2009, Ethiopian Investment Oce

DoingbusinessinEthiopiaranking,010

KeyStarting a business Egypt, Arab Republic

Protecting investors

Ethiopia

India

Kenya

Paying taxes Getting credit

Source: Doing business, The World Bank Group, 2009

Note: The urther rom the centre the coloured line crosses the axis, the better perormance the country shows



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Key inhibitors

Financing, technologies and process management are limited locally

and should be brought by new investors.

Financing, a qualied

labour orce and

inrastructure remain

the key constraintsaced by business

in Ethiopia.

However, these constraints are partly

manageable by bringing nancing,

technology and process management

to start up, then transerring skills and

knowledge to the local workorce.

Inrastructure constraints are not

prohibitive in most cases and can be

managed by proper site selection.

The Ethiopian Government continues to

make progress in relation to inrastructure

improvements, particularly with respect

to building roads and developing

hydropower. With the completion o

several high prole energy projects in

20112012, Ethiopia is expected to begin

exporting electricity to Sudan, Djibouti,

and Kenya.

Local businesses

require the

import o modern

technologies andprocess management

in order to improve

the eciency o

local personnel.

Foreign investments in the nancial sector

are still restricted by the government,

while local capabilities are limited.

Thelabourorceefciencyis

quitelow.Althoughthesalaryo

thelocalstaislowerthanin

China,Chinesestaneedless

timeorsewing.

Owner of a textile business with

distribution in Europe

Bureaucracy and

administrative

constraints can be

managed throughutilising local

experience.

Thelevelobureaucracyinthe

countryisnothigh.Ocourse,thereare

someproblemsconnectedwithdelays

inregistration,theunclearsystemo

localcooperationbetweendierent

authorities,butthelocalpartner

undertookalltheresponsibilities.

Dutch investor in horticulture industry



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Mekelle, potential opportunitiesor investment



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Introduction to Mekelle

The Mekelle region is currently one o the

most attractive investment destinations inEthiopia, driven by a highly supportive regional

government, abundant untapped natural

resources and good access to export markets.

Tigray State is the northernmost o the

nine ethnic regions (Kililoch) o Ethiopia,

with a population o 4.5 million in 2008.

Eighty percent o the population is rural

and 20 percent is urban.

Mekelle is the sixth largest city in Ethiopia

and the capital o Tigray State. It is located

approximately 780 km rom the capital,

Addis Ababa, in the Ethiopian highlands.

The Mekelle region enjoys a mild highland

climate with an average temperature o

25C. The rainy season in the Mekelle

region is rom June to September,

while the dry season is rom October

to May.The average annual rainall is

approximately 579mm.

The total population in the city o Mekelle

was estimated at 215,546 in 2008.

The annual population growth rate is

approximately 2.6 percent.

LocationoMekelle

MekelleMekelle region: 100 km around Mekelle

Ethiopia

Tigray

Addis Abada

Source: Millennium Cities Initiative Report, 2009



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Investment climate

Due to its proximity

to a ormer military

zone, Tigray State has

underperormed in

terms o economic

growth and infow o

private investments

and is thereore ripe

or investment.

Ethiopia suered rom lack o investment

rom 1998 as it was at war with Eritrea.

The war took place rom May 1998 to

June 2000.

As we can see rom the graph o FDI

distribution, historically Tigray state

underperormed against most Ethiopian

regions in attracting FDI.

On 18 June 2000, the countries agreed to

a comprehensive peace agreement and

binding arbitration o their disputes under

the Algiers Agreement.

A 25-kilometre-wide Temporary Security

Zone was established within Eritrea,

patrolled by United Nations peacekeeping

orces. On 12 December 2000, a

peace agreement was signed by the

two governments.

The relationship between Ethiopia and

Eritrea is no longer antagonistic and

the political environment is peaceul.

Interview eedback indicates that there

are no premises or impairment o the

situation, although the border is unlikely to

be opened in the short term.

FDIbystate,00008

Birr, bn

8.00

6.00

4.00

2.001.87

2.28

1.61

0.870.330.09 0.18

0.00

7.08

4.74

2.04

1.23 1.02

3.82

0.950.53 0.56 0.46

1.26

2.55

2005/2006 2006/2007 2007/2008

0.520.40

Key

Oromia

Addis Ababa

Multi-regional projects

Amhara

SNNPRTigray

Others

Source: National Bank o Ethiopia, Annual Report, 2008



19/56


Supportive state

government policies,

inrastructure

development

and availability o

land makes the

Mekelle region an

attractive investment

destination.

Investment

promotion bodies

TheTigrayInvestmentOfce(TIO)

This operates as the ocial licensing

body or all domestic investment and

assists oreign investors once the

Federal Ethiopian Investment

Commission has issued an investment

licence. The investment oce acts as a

one-stop shop, providing both pre- and

post-approval investment services.

The oce provides inormation

required by investors, receives

investment applications, approves and

issues investment permits, provides

trade registration services and issues

business licences to newly incorporated

businesses. The oce has 18 branches

around Tigray State.

The main oce in Tigray State is in

Mekelle and was ound to be very helpul

and knowledgeable.

TheTigrayAgriculturalMarketing

PromotionAgency(TAMPA)

This was established in 2004. Its main

objective is to provide a rural development

strategy to increase crop volumes

and improve the eciency o arms

throughout the state. TAMPA is comprised

o three departments: Market Research

and Inormation; Market Inrastructure

and Promotion; and Contract Farming and

Farming Coordination.

TheTigrayBureauoRural

DevelopmentandAgriculture

This oversees cereal crop production,

livestock, and irrigation. It also maintains

a Natural Resource Development

Department that ocuses on soil

conservation and orestry, and an

Agriculture Input and Marketing

Department that supplies modern inputs

to promote urban-rural linkages and

agriculture-based cooperatives.

TheTigrayBureauoTrade

andIndustrySmallBusiness

InvestmentPromotion

This places an emphasis on improving

governance, service delivery and

inrastructure. It maintains 40 SME branch

oces throughout Tigray State.

The Trade and Industry oce also

provides loan acilitation that utilises

DECSI, a large Ethiopian micro-nance

bank, to administer ederal loans. These

loans are provided at an interest rate

that is three percent lower than or the

average private loan. Loans are approved

on the basis o submitted project proles.

TheTigrayDevelopmentAssociation

The association does not work primarily

in investment promotion, but coordinates

with an extensive network o Ethiopian

Diaspora members. While Diaspora

members are typically registered as

domestic investors, they are able to

access oreign capital and serve as an

important bridge to oreign communities.

http://www.tdaint.org/

TheMekelleChamberoCommerce

This is another conduit or investment

promotion. The Chamber receives support

rom the Friedrich Ebert Foundation, a

German development organisation. One

o the agencys major objectives is to

develop independent and standardised

review mechanisms or accessing credit

rom local banks.

The ollowing website has contact details

or many o the above organisations which

may be useul to prospective investors:

www.tigraionline.com/business.html



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Incentives permitted

at state level

Tigray State has established industrial

zones supplied with basic inrastructure

at nine major towns, namely Mekelle,

Adigat, Adwa, Axum, Endaslasie, Alamata,

Maichew, Wukro and Humera. This

enables investors to obtain land at a lower

xed lease price per square metre or

each town.

For some strategic projects (livestock

production, dairy arming, manuacturing,

construction), land is provided at a

negotiable price within and adjacent to

industrial zones.

Rental o arming land is possible rom the

government and/or individual armers or

up to 50 and 20 years respectively. Based

on the type o project and investment

capital, a grace period o one to seven

years related to land lease is provided to

any company leasing urban land. A lease

price discount is awarded or real estate

developers, depending on the number o

housing units this can be anything rom

ve to 45 percent.

Labour orce

There is an abundant, easily trainable and

inexpensive labour orce in Tigray State.

The average salary is around USD20

per month.

Wepayabout0dollarspermonth,

whichismorethantheaveragesalary

intheregionanditmakesthesta

moremotivated.Ouremployeesdont

wanttolosetheirjob,notonlybecause

othesalary,butalsoduetosome

additionalbeneftswhichtheygetlike

Englishlessons,paidsickleaveetc.

Gheralta Lodge Hotel Manager



21/56


Inrastructure

The Mekelle region is already well connected

via road to other Ethiopian regions and key

export hubs; the quality o other inrastructure

is rapidly improving.

Road transport

The upgrading o the existing main road

that connects Mekelle with the port o

Djibouti, Addis Ababa and other regions is

underway. The government plans to nish

the construction by 2012.

InTigray State there is a total o 5,900 km

o roads, o which 1,420 km are Ethiopian

Road Authority administered ederal

roads, 1,130 km are Tigray State Road

Authority administered rural roads and

the remaining 3,350 km are dry weather

community roads. The road density is

47 km per 1,000 km o land. The average

road density in Ethiopia is 27 km per

1,000 km o land. Mekelle has 263 km

o roadways, o which 40 km are asphalt

roads, 63 km are gravel roads and the

remaining 160 km are unclassied dirt

roads. An additional 88 km o asphalt

roads are planned.

Djibouti port is the most convenient or

exporters due to its proximity to Mekelle.

Massawa port in Eritrea is currently

inaccessible or Ethiopian business.

There is a railway that connects Addis

Ababa to the port o Djibouti which plays

an important role in the transport o

goods to and rom the capital. Currently,

the railway is in a bad condition and

has limited accessibility although it is

undergoing repairs.

MaporoadconnectionsromMekelleto

mainports

Asab

Port Sudan

MassawaAsmara

Eritrea

Sudan

Ethiopia

Djibouti

Djibouti

Somalia

Dese

WeldiaMile

KombelchaAli Sabien

Mekelle




22/56


The number o dams in the Mekelle region

is increasing, providing better conditions

or agriculture.

RoadinrastructureinTigrayState

To Asmara To Asmara

To Gonder

To GonderTo Sokota

Alamata

Korem

Maychew

Adi Gudom

Adigat

AbiadiWukro

Adwa

Axum

Indasilassie

Humera Sheraro

Mekelle

To Addis Abada


Numberodamswithin100kmoMekelle

350300250200150100500

2010 2011

143

300



DistanceromEastAricanportstoMekelle

Hotel Port Sudan Massawa Assab Djibouti Berbera

Mekelle 1,339 km 1,579 km 391 km via 899 km 940 km via 837 km via 708 km via 680 km 1736 km

via Kasala, via Kasala, Asmara, via Eli Dar, Kombolcha, Mile, Chira, Semera, via Serdo, via Addis,

Humera Gedari, Adigrat Kombolcha, Weldia Alewha Yallo, Adera, Kombolcha,

(under Humera, (closed) Weldia (hal under Mekonni Shiket (under Weldia

construction) Shire-Enda (closed) construction) (under construction) (under

Slase (under construction) construction)

construction)

Addis Ababa 1,881 km via 1163 km via 869 km via 910 km via Gelaf 847 km via Dire Dawa 964 km via

Metema, Mekelle, Kombolcha Dire Dawa

Azezo, Weldia,

Anjibara Kombolcha





23/56


Mekelle airport

Mekelle airport

(Alula Aba Nega)

has been upgraded

recently to comply

with international

standards. It connects

Mekelle with otherEthiopian destinations

(Addis Ababa (two to

three fights per day),

Bahir Dar, Aksum,

Lalibela and Shire).

Flights are operated

solely by Ethiopian

Airlines.

The Ethiopian government has a vision

or turning Mekelle airport into an

international airport in order to support

export rom the region.

Ethiopian Airlines supports export

activities, even at a loss. As an example,

one major local meat producer negotiated

with Ethiopian Airlines ree delivery rom

Mekelle to Addis Ababa or meat destined

or export to the Middle East.The nal

airreight rate is similar to that or Addis

Ababa exporters.

The Director o Ethiopian Cargo (a branch

o Ethiopian Airlines) stated that similar

arrangements are possible in the uture

with any export-oriented company o

sucient scale.

Direct cargo fights rom Mekelle to the

Middle East or the EU can be started

when there are at least 30-40 tonnes

o export cargo available per fight.

This would be available or any industry

and allows exports rom Mekelle to

be competitive.

Weaimatsettingacommonrateor

MekelleandAddis-Ababaexporters;

however,wewillhavehighercostsor

deliveringgoodsromMekelle.

Gebremichael Biwota, Director of

Ethiopian Cargo

Cooling terminal

The cooling terminal at Mekelle airport is

planned to be completed in early 2011.

The total planned capacity is over 400

tonnes: 50 tonnes or fowers, 150 tonnes

or ruit and vegetables and more than

200 tonnes or meat.



24/56


Select opportunities or

investment in Mekelle



25/56


High quality lodge in Mekelle region

There is an opportunity to build a high-quality lodge in the Mekelle

region. A well located, appropriately priced and equipped lodge in the

Hawzein or Asbi areas (within 60100 km rom Mekelle) could be an

attractive and immediate investment opportunity.

NumberotouristvisitorstoTigrayState

(000008)

Key

60,000Domestic visitors

Foreign visitors50,000

40,000

30,000

20,000

10,000

0

2002 2003 2004 2005 2006 2007 2008

37.1

20.3

15.7

13.9

20.5

17.7

18.6

15.7

12.6

13.97.87.8

14.1

10.0


The Mekelle region

has high potential as

a hub or ecotourism

due to pleasant

natural conditions,

easy access to the

most interesting

historic, religious and

natural beauty sites oTigray and Aar States.

The Mekelle region has a very convenient

climate, nature conditions and landscape

or the development o ecotourism.

Tigray State is home to Axum, a world-

amous UNESCO World Heritage Natural

Site, which is located 240 km rom

Mekelle. Mekelle and Axum have very

good asphalted road connections.

The rock-hewn churches are a distinctive

eature o Tigray State. They are similar to

the world-amous churches o Lalibela,

but predate them (711 Century in Tigray

versus 1116 Century in Lalibela). Most o

the churches are concentrated within

80150 km rom Mekelle.

Facilities or ecotourism in the Mekelle

area are underdeveloped; there is only

one high-quality lodge in the area.

Successulecotourismdevelopment

intheMekelleregionisnotpossible

withoutasufcientlodgechainwithin

thisarea.Wearereadytorecommend

ourguestsotherlodgesontheir

routesacrossTigray,butonlyon

conditionthattheselodgesareothe

properquality

Manager, high-quality lodge

in the Mekelle region



26/56


The number o visitorstoTigray state has

grown at an annual

rate o 24 percent per

annum over the period

2002 to 2008 and there

is signicant potential

or a urther increase.1

Tigray State received approximately

15,600 tourists in 2002 and 57,500 tourists

in 2008. Total receipts rom oreign visitors

reached 467 million Birr in 2007 (about

USD50 million).

Although Axum still accounts or the

majority o tourists coming to Tigray State,

there has been an increase in the average

number o days spent by oreign visitors

in Tigray (rom 1.7 days in 1994 to our

days in 2007) which indicates that tourists

include other Tigray attractions in their

trips particularly the world amous

rock-hewn churches.

Despite its high potential and ast

growth, the tourism industry in Tigray

State is underdeveloped. In 2007, the

state accounted or only seven percent

o the total number o oreign tourists

visiting Ethiopia2.

Customer prole

There are two main groups o oreign

tourists coming to Mekelle or

non-business purposes.

RetiredpeopleromEurope(mainly

German,ItalianandFrench)coming

withthepurposeoculturaltourism.

This group o visitors is very price

sensitive; the main purchasing criteria or

them are moderate accommodation cost

and high level o services provided.

Expatriatepopulationcomingrom

AddisAbabaorweekendorshort

vacations.The main purchasing

criteria or this customer group is an

appropriate level o services provided

and a wide range o additional services

at a reasonable price (car rental, guard

services, etc.).

There is potential demand rom

young visitors interested in adventure

tourism withinTigray State and the Aar

depression area. This group o tourists

demands low cost accommodation with

easy access to natural attractions.

Lack o quality lodgeaccommodation

There is only one high-quality lodge run

by an Italian investor currently operating

in Tigray State (Gheralta Lodge in

Hawzien). The lodge has 100 percent

occupancy in the high season (some o

the rooms are booked several months

in advance) which indicates a supply

shortage o quality lodge accommodation

in the Mekelle region.

There are a number o motel-style lodges

in the Mekelle region but the services

they provide are not in line with the

ecotourism concept. One investor rom

the UK has started preparatory work or

construction o a lodge in the Hawzien

area.TheTigray Investment Oce has

stated it has been contacted by our other

investors expressing interest in lodge

development in the Mekelle region.

There are plans or the construction o

ve tent lodges within the Millennium

Villages Ecotourism project aimed at

the development o community-based

ecotourism in Tigray State. The total

expected investments in the project

amount to USD1.5 million. Possible

activities at the sites include horse

riding, rock climbing, trekking and

cultural tourism3.

Source: 1. KPMG in Ethiopia interview programme, 2009

2. Tigray Investment Oce, 2009

3. Arica News, March 19, 2008



27/56

To Addis Abada


TouristattractionsintheMekelleregion

Mekelle

Abiadi

Axum

Adwa

Adi Gudom

Maychew

Korem

Alamata

To AsmaraSimien National Park To Asmara

SheraroHumera

AdigatIndasilassie

Wukro

To Sokota

Afar State

To Gonder

To Gonder

Simien National Park (UNESCO World Heritage Natural Site), which hasone of the most spectacular landscapes in the world, lies in northern Ethiopia,

740 km from Mekelle.

More than 120 rock-hewn churches and monasteries are located within80150 km of Mekelle. Most of them are almost a thousand years old but still

underexplored because they were only opened to the public in the 1960s.

The Afar Depression is the lowest point in Ethiopia (more than 100 metresbelow sea level). Several natural attractions are available in this area, such as

salt lakes and waterfalls. Visitors can also observe camel, mule and donkey

caravans. This area is populated with nomadic people.

Al Negashi mosque, the most important site for Islam in Africa, is locatedwithin 60 km of Mekelle.

The ancient city of Axum (UNESCO World Heritage Site) is situated about150 km from Mekelle. Axum is famous for its stella and ruins of palaces, and is

the spiritual centre of Orthodox Christianity in Ethiopia.





28/56


AreasidentifedbytheTigrayInvestment

Ofceorlodgedevelopment

Areas identified by theTigray Investment Officeas attractive for

lodge development

Axum

Mekelle

Wukro

Afar

State1

2



1

2

Hawzien area

Potentialactivities: Religious and cultural

tourism, hiking, climbing and horse riding.

Majorattractions: About 100 rock-

hewn churches; Gheralta mountains with

stunning panoramic views.

Roadavailability:High-quality asphalted

road rom Mekelle to Wukro (47 km), then

unpaved road rom Wukro to Hawzien

environs (50-80 km).

Utilities:Electricity is available in

this area; a water supply check should

be perormed beore starting land

plot development.

One lodge is already in operation in

Hawzien (Gheralta Lodge).

Asbi area

Potentialactivities:Adventure tourism;

religious and cultural tourism.

Majorattractions: Depression area o Aar

State (including salt lakes; salt-loaded camel

caravans; volcano; our amous rock-hewn

churches (Mikael Imba, Mikael Debreselam,

Mikael Barka, Ghergos Agebo).

Roadavailability: High-quality asphalted

road rom Mekelle to Wukro (47 km),

then unpaved road rom Wukro to Atsbi

environs (2330 km).

Utilities:Electricity is available in

this area; a water supply check should

be perormed beore starting land

plot development.



29/56


There are a number o actors restraining the

development o tourism inTigray state, and

Mekelle region in particular.

The lack o a well-

trained workorce

is identied as the

main reason or thelack o services in the

tourism industry in

Tigray State.

There is no educational institution

providing training in tourism inTigray State.

The primary educational institution or the

tourism industry in Ethiopia is situated

in Amhara State, an average o only 15

students romTigray State are sent to this

institution per year. Most hotels overcome

this problem by running their own training

programmes or their employees.

Insucient marketing

o the state,

particularly at the

international level.

In 2009 the Tigray Investment Oce only

participated in one exhibition abroad.

According to representatives o the oce

this is not sucient; participation in at

least three oreign tourism exhibitions per

year is required or sucient promotion o

the state.

The poor image o

the north o Ethiopia,

primarily due to the

struggle with Eritreain the late 1990s.

Nevertheless, as the political situation has

improved, more overseas tour operators

are including this region in their tours

across Ethiopia and East Arica.

Insucient tourism

inrastructure.Although the quality o roads has been

improved signicantly in recent years,

the majority o roads to main tourist

attractions near Mekelle remain unpaved

(our-wheel drive vehicles required). There

are only ve tour operators in Mekelle

providing our-wheel drive car rental

services. Due to the shortage o transport

acilities in the area, these operators can

charge a high price or their cars (about

USD100120 per day).

Underdeveloped air

connectivity.

The absence o direct international fights

to Mekelle currently restricts the number

o oreign tourists.There is an international

standard airport in Mekelle, but currently it

only serves domestic fights. International

visitors can currently only reach Mekelle

by air via Addis Ababa, which increases

time and cost or potential tourists.



30/56


Government policy

is directed at helping

investors overcome

current constraints.On the ederal level, the government

supports the international promotion o

the country (supplies marketing materials,

assists with international exhibitions,

covers the cost o the Ethiopian stand,

assists in obtaining visas and air ticket

discounts or tour operators participating

in exhibitions, etc.)

The state government is responsible

or promotion o the region. Regional

authorities are entitled to dene

land policy in the region, allowing

them to be fexible in relation to land

price depending on the specics o

the relevant investment project.

Currently a number o projects are being

implemented in the tourism industry:

EthiopianSustainableTourism

DevelopmentProject aimed at

boosting the countrys tourism.

A grant o USD35 million was provided

by the World Bank, USD2.4 million

o which is allocated to Axum or

rehabilitation o the heritage site,

enhancement o basic inrastructure

and attraction o visitors1.

ArtisanalCratsDevelopment

Project aimed at re-establishment

o ancient handcrat traditions

at Axum.

HarnessingDiversityorSustainable

DevelopmentandSocialChange

Project aimed at establishment

o ancient handcrat traditions in

Tigray (except Axum), setting-

up o crat centres, help in design

and marketing o crat products.

Source: 1. Ministry o Culture and Tourism, 2009

Process o acquiring

a licence or a lodge

inTigray State.

The investor completes a registration

orm in the Tigray Investment Oce.

The investor receives a

recommendation letter rom the

Tigray Investment Oce or

submission to the local authorities.

The investor identies a suitable

land plot with the assistance o

the local authorities.

The investor provides the Tigray

Investment Oce with the

investment project proposal.

The Tigray Investment Oce

supplies the investor with a

Temporary Investment Licence

(the type o licence depends on

the specic project).

Ater completion o construction

work, the investor applies to the

Trade and Industry Bureau or a

Permanent Investment Licence.

The Trade and Industry Bureau

inspects the compliance o the

lodge with the required standards

and provides the investor with a

Permanent Investment Licence.

Case study:

Gheralta Lodge

Opportunity

Opened in 2006 by an Italian investor,

the Gheralta Lodge oers several

comortable, well designed cottages

with terric views, built in the local

style and to high specications.

The average room price varies rom

USD35 70 per night.

The land plot was provided to

the investor or ree or 17 years.

The investor covered the cost

o resettling local people rom

this area.

During the rst year the lodge hosted

about 3,000 guests; in the last year

more than 4,000 people have visited

the lodge. On average guests stay in

the lodge or 1 2 days. The occupancy

rate varies rom around 100 percent

in high season (September March)

to about 30 percent in low season

(June July).

Challenges

Skill level o local labour orce (lack

o technical skills required or hotel

service, basic English).

Access to water.

Lack o construction skills available.

Meetingthechallenges

The lodge is run by highly experienced

management.

There is a strong selection process or

the local labour orce.

All lodge employees receive

intensive training.

Special remuneration schemes

are applied (bonus or learning o

English, pension scheme, sick leave

compensation, etc.). The salary o

lodge employees is 3 4 times higher

than the average salary in the area.

Two wells were drilled on the land plot

(one or drinking water, one or water

used or other purposes).

The local construction labour orce

worked under the supervision o

an Italian architect and experienced

supervisors hired in Addis Ababa.



31/56




32/56


Meat production or export

Mekelle presents an attractive opportunity or investment into the

export o Ethiopian meat, primarily to the Middle East and North Arica.

Indicativemarketsizeormeatandedible

meatoal,00

Mainly sheep and goat meat

Middle EastUSD2,737m

Regional

Mainly beef

USD550m

Source: 1. UN Comtrade, 20082. KPMG in Ethiopia interview programme, 2009

Note: a. Market size is based on import gures or

resh, chilled or rozen meat

b. Middle East market includes UAE, Saudi

Arabia, Yemen, Oman, Kuwait, Qatar, and

Jordan. Regional market includes Djibouti,

Sudan, Egypt, Tunisia, Morocco and Kenya

Mekelle provides

opportunities in

relation to meat

production due

to large livestock

resources available in

the area, the potential

or meat export to the

Middle East and

North Arica, and

weak competition.

The livestock population in Tigray State

accounts or seven percent o the total

livestock population in Ethiopia, which

is the largest in Arica.

Tigray is well known or its special ox

breed (Raya), which is more protable

than breeds rom other regions due to

its bigger size and more tender and

tasty meat.

There are only ve slaughterhouses

in Ethiopia exporting meat to

other countries. Up to three more

slaughterhouses are under construction.

As o December 2009, there were no

slaughterhouses inTigray State.The rst

modern export-oriented slaughterhouse

(Abergelle) will start operations in 2010.



33/56


Tradevalueoexportsomeatandedible

meatoalromEthiopia

30US$m

2520151050

28.20

8.29

2004 2008Source: 1. UN Comtrade, 2004, 2008

There are limited

opportunities or

the sale o meat in

the local market but

signicant potential

in the Middle Eastmarkets.

The local meat market is highly saturated.

Meat sold in the local market does not

require certication, entry barriers are

very low, and a lot o companies are

operating in this market.The price or raw

meat in the local market is approximately

15 percent lower than in export markets.

There are only ve companies in

Ethiopia which produce meat or

export (who thereore own cooling and

reezing acilities, and hold licences and

certication). All o these companies

are situated around Addis Ababa.These

companies exclusively serve export

markets, as oreign and local markets

require dierent types o meat.

Source: 1. UN Comtrade, 2004, 2008

2. Ministry o Agriculture

and Rural Development,

Agricultural Investment

Potential o Ethiopia,

March 2009

Ethiopian meat and

edible meat oal

export increased more

than three times in

the last ve years.

Currently, 98 percent o Ethiopian

meat exports are shipped to United

Arab Emirates (UAE) and Saudi Arabia.

Nevertheless, the share o Ethiopia in the

total import o meat into these countries

is insignicant (less than one percent)1.

These markets appear to have a high

potential or Ethiopian sheep and goat

meat, mainly due to the ast growth o

the expatriate population rom Asian and

Arican countries. These customers do

not seek top quality meat, their major

purchasing criteria is a reasonable price.

There are signicant opportunities or

Ethiopian meat in other Middle Eastern

countries such as Jordan, Oman, Qatar

and others, as well as in Northern Arica,

especially in Egypt, Tunisia and Morocco,

which remain under-explored.

Ethiopian meat is not permitted or sale

on European markets due to animal

health, which is not in compliance with

European quality standard requirements.

Livestock population in Tigray2

Number o

animals

Cattle

2,622,166

Sheep

813,546

Goats

2,399,808

Horses

1,894

Donkeys

387,389

Mules

7,901

Camels

32,777



34/56


Meatproductionvaluechain,008


Live animals Fresh, chilled or frozen meat Processed meat

Price in the local market US$0.60.8 per kg US$3 per kg US$4.5 per kg

0 KTVolume of import 0 KT 0 KT

US$44.5 per kgPrice in the export market US$1.2 per kg US$3.5 per kg

Volume of export 43.4 KT 8 KT0 KT

The large amount ofinformal cross-border

trade considerably

hampers the legalmarket.

Export of chilled orfrozen meat yieldssignificantly higher

prices than live animals.Analysis of the valuechain indicates that

Low competitiveness inforeign markets due tohigher production costs

and lack of requiredlabour skills.

The governments priorityis to increase thevalue-added chain in themeat industry and shiftexport of livestockproducts from liveanimals to value-addedmeat products.

slaughtered animalspurchased from farmersor cooperatives atUS$0.8 per kg areexported at aboutUS$3.5 per kg.

Stiff competition fromother countries, such asAustralia, Brazil, Indiaand Pakistan.

Source: KPMG in Ethiopia interview prog

Note: KT thousand tonnes

Challenges

The instability o

live animal supply,

especially during the

rainy season (June

and July), is themajor constraint or

meat production.

The majority o households are situated

in remote areas connected with unpaved

roads which are washed away during the

rainy season, making it very dicult or

animal collectors to reach these areas.

In addition, private households have a

lot o eed available or their animals in

the rainy season and are less likely to

sell them as they are aware that a well-ed,

attened animal will etch a higher price.


35/56


Meat quality

certication is a

pressing problem

when exporting to

other countries.

The low meat quality caused by poor

eed and animal diseases results in many

rejections o Ethiopian meat by export

markets. Ethiopian meat has been banned

rom Arabian countries several times. The

last ban lasted around three months rom

March 2009. Currently, producers do not

have the required certication to export to

Europe, but i implemented, the lucrative

market would be opened up.

The government has taken a number o

steps towards improving animal health,

such as setting up veterinary services

across the country.

Some market players, or example

the Abergelle Slaughterhouse, have

established European standard check

systems within their production lines to

control the quality o meat during the

production stage.

Investment overview

The indicative costs or setting up

a medium-sized slaughterhouse

are estimated in the range o

USD1.51.7 million1.

Investors should consider this

investment within the next 1.5 to 2 years.


Instability o demand

in export markets

poses a challenge or

meat exporters.

As the majority o consumers o Ethiopian

meat in the Middle East markets are

expatriates rom Asia and Arica, demand

or meat decreases by up to 2030

percent when this population returns to

their native countries or holidays. Market

participants could smooth the demand

volatility through market diversication.

Although there are

currently no direct

fights rom Mekelle

to target export

markets Ethiopian

Airlines has said they

would schedule direct

fights i there was

sucient demand.

Ethiopian Airlines has said that or smaller

export quantities they would consider

setting up an arrangement where they fy

exports via Addis Ababa and not charge

or the Mekelle to Addis Ababa leg.

Case study: Abergelle Slaughterhouse

Opportunity

The rst export oriented slaughterhouse in Tigray State is planned to start

operations in 2010. The slaughterhouse will produce meat exclusively or the

export market (mainly bee due to the large supply o oxen in the region). Target

export markets: Middle East and North Arica (primarily Egypt).

Challenges

The absence o direct fights rom Mekelle to target export markets has been

identied as the main constraint or the company. The volume projected or export

is not sucient to start direct fights abroad.

Meetingthechallenges

The slaughterhouse negotiated with Ethiopian Airlines ree cargo transportation

rom Mekelle to Addis Ababa or meat which is destined or export abroad. As a

result, the nal airreight rate or Abergelle will be similar to that or Addis Ababa

exporters. This arrangement is available or other exporters.



36/56


High-quality honey processingor export

The Mekelle region provides attractive opportunities or producing

high-quality honey or supply to Sudan, Middle East, and European

markets. The honey supply shortage, which is currently the key

constraint, is likely to be overcome in the mid term.

Indicativemarketsizeorhoney,00

Europe

US$353m

Regional

Middle East

US$52m

US$7m

Source: 1. UN Comtrade, 2008Note: a. Market size is based on import gures or

natural honey

b. Middle East market includes UAE, Saudi

Arabia, Yemen, Oman, Kuwait, Qatar, and

Jordan. Regional market includes Djibouti,

Sudan, Egypt,Tunisia, Morocco and Kenya

The large bee

population, superior

quality oTigray

honey and promising

opportunities or

export make honeyprocessing attractive

or investment.

Tigray has a moderate climate due to its

highland position, which is avourable or

honey production.

The Mekelle region has a large bee

population (about 37 thousand bee

colonies; 20 percent o the Tigray total).

Tigray is amous or its high-quality white

honey (made rom pollen rom white

fowers) with low moisture content, which

can enjoy a price premium. Tigray honey

has a special aroma that would provide a

competitive advantage in niche markets.

Compound Annual Growth Rate (CAGR) of

honey import for selected markets1

Country

United Kingdom

CAGR (20042008)

%

10

Yemen 28

Israel 37

UAE 9

France 15




37/56


There is high potential

or supply o Tigray

honey to Europe and

the Middle East.

In spite o its avourable natural conditions

and large bee population, up until 2007,

Ethiopia was a negligible supplier o

honey to international markets. Almost

the entire honey volume produced was

consumed locally (mainly or production

as a local wine). A very small amount o

honey was exported to Sudan and Middle

East markets.

Until 2008, the European market was

closed or Ethiopian honey producers.

As indicated in an interview with a

representative o the Honey and Beeswax

Producers and Exporters Association,

Ethiopia became an accredited country or

supplying honey to the EU in 2008.

In 2008, revenues rom honey export

rom Ethiopia to the EU amounted to

USD120 thousand (98 percent o which

was exported to the UK).

The EU, Yemen, Israel and UAE can be

considered as the major potential target

markets or Ethiopian honey.The import

o honey into these markets has been

increasing steadily over the last ve years

and is expected to continue to increase

within the next two to three years.

Beeswax production

and export can be

considered as a

potential opportunity

in the short term,

but does not appear

attractive in the mid

and long term.

Although Ethiopia is currently one o the

largest beeswax exporters in the world,

beeswax opportunities in Tigray State

appear to be limited in the mid and long

term due to the ongoing replacement o

traditional with modern hives.

Despite the act that modern hives can

produce 510 times more honey than

traditional ones, the wax yield rom modern

hives is 0.52 percent compared to 810

percent or traditional hives.

The local market or

honey also shows

signicant potential

or investors.

However, the

domestic market is

not as attractive or

processed honey as

oreign markets.

Local demand is mainly or raw honey,

not the value-add processed honey which

commands a higher price.

The majority o honey or local consumption

is distributed through traditional markets.

Ethiopianhoneyexportdynamicsandstructure,(00008)

400USD0.04m USD0.54m

Sudan

72%

15%12%1%

EU

Middle East

350

300

387

196

Other

250

KT

200

150

100

50

0

2005 2006 2007 2008

10

53

Source: 1. UN Comtrade, 20045-2008



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Case study: Millennium Villages Honey Project

Opportunity

The Millennium Villages Project (MVP) is implementing a large scale honey and

beeswax production system across its 11 villages in Tigray State. The major goal

o the projec

potential opportunities for investors in mikelle, ethiopia

Documents