uk-ethiopia trade & investment forum 2015 · in this regard, the uk-ethiopia trade &...

UK-ETHIOPIATRADE &

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UK-ETHIOPIA TRADE & INVESTMENT FORUM 2015 01

© Developing Markets Associates Ltd

Contents02

FOREWORDS

04 ECONOMIC OVERVIEW

13 ECONOMIC INDICATORS

18 AGRICULTURE

23 ENERGY & MINING

26 INFRASTRUCTURE

32 TOURISM

34 OUR PARTNERS

Publisher: Chris GerrardContributors: Moin Siddiqi, Brian Naughton, Phil Clough, Pete Naughton, Embassy of Ethiopia, WAFAArt Director: Steven JonesConference Team: Rebecca Isaacs, Chris Hindle, Jamie Brunsdon, Natalia Debczak-Debski, James McKay, James MartinConference Directors: Atam Sandhu, Leon Isaacs, Roger Martin, Henry Bellingham, Peter Hain

CorrespondenceDeveloping Markets Associates Ltd (DMA), 150 Tooley Street, London, SE1 2TU email: [email protected] | web: www.developingmarkets.com | www.sendmoneypacific.org | www.sendmoneyasia.org

DMA acknowledges the assistance of all the individuals and organisations who have contributed to this publication. The views expressed herein are the opinions of the authors, and do not necessarily represent the Government of Ethiopia, Embassy of Ethiopia or DMA. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the written permission of the publisher.

Published by Developing Markets Associates Ltd (DMA) Printed by Woodrow Press Picture credits: Government of Ethiopia, WAFA Marketing & Promotion PLC, istockphoto.com

02 UK-ETHIOPIA TRADE & INVESTMENT FORUM 2015

ETHIOPIA’S MULTI-FACETED DEVELOPMENT agenda is registering remarkable results in various fields of endeavour. The high growth rate momentum we have experienced for

over a decade is set to continue, making the country the fastest growing non-oil economy in Africa and one of the fastest growing in the world.

Encouraged by the results achieved by the first Growth and Transformation Plan (GTPI), Ethiopia has just embarked upon the implementation of GTPII, which envisions the materialisation of even higher development goals than the first one. During the second GTP period, industrial expansion will be given priority and huge infrastructure projects, such as the Grand Ethiopian Renaissance Dam (GERD), will come to fruition. Substantial achievements are also expected in the agriculture and service sectors.

Clearly, the implementation of such a large-scale development effort requires substantial investment and financing. It requires technology and skills. The country’s products need access to international markets. This explains why foreign direct investment is so critical to Ethiopia’s development agenda. This year, we expect FDI into Ethiopia to reach US$1.5 billion marking a significantly upward trend, which we intend to strengthen even further through aggressive investment promotion activities and through providing support to investors.

It is also worth mentioning that our development agenda intends to achieve middle-income status and a carbon-neutral economy by the year 2023, through our Climate Resilient Green Economic Strategy, which is fully integrated in our national development plan.

This UK-Ethiopia Investment Forum, one of the many events that is being organised to encourage investors

to see the benefits of investing in a fast growing economy with many attractive features such as friendly people, a peaceful and secure political environment, a stable macroeconomic environment, attractive incentive packages, a relatively low level of corruption, excellent and diverse climatic conditions, rapidly improving infrastructure, the availability of an excellent air transport network, to mention just a few.

Ethiopia is therefore waiting to receive investors with open arms. The sooner they come, the better their chances of success.

May I wish you all a highly successful forum.

Hon Dr Tedros Adhanom Ghebreyesus Minister of Foreign Affairs Government of Ethiopia

ForewordBY HON DR TEDROS ADHANOM GHEBREYESUS

MINISTER OF FOREIGN AFFAIRS, GOVERNMENT OF ETHIOPIA

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Welcome

DEAR PARTICIPANTS OF THE UK-ETHIOPIA Trade & Investment Forum. First of all, I would like to congratulate and thank you all for being part of this great initiative.

As part of its many and varied endeavours, the Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA) has been striving to improve the competitiveness of local products and services in the global business arena. It has also been playing a key role in the transfer of appropriate knowledge and technology, commensurate with Ethiopia’s transformation agenda.

ECCSA has also been promoting trade and investment, both locally and abroad, by organising business-to-business meetings and one-to-one networking arrangements in priority areas of investment, which align with the country’s development policies and strategies.

It is ECCSA’s conviction that the dynamics of the Ethiopian economy can continue to accelerate by creating investment opportunities for both local and foreign investors in key strategic areas, such as agro-processing, mining, tourism, construction, pharmaceuticals, among others.

At the same time, it is also crucial to build up the knowledge and skills base of domestic investors through exposing them to the dynamics of modern business undertakings. In this regard, the UK-Ethiopia Trade & Investment Forum is an opportunity to benefit from international experiences and create market linkages for Ethiopia’s products and services, and at the same time promote our country’s immense investment opportunities.

ECCSA’s commitment both to the private sector and to the country goes beyond such business arrangements. It has been striving to simplify the process of doing business in Ethiopia and facilitating customs and logistics, trade licensing & registration and taxation. It encourages corporate social responsibility that ensures societal and environmental welfare.

ECCSA is fully aware that the trade and investment relations between Ethiopia and the UK have registered significant growth. The main imports from the United Kingdom to Ethiopia are petroleum, motor vehicles,

cigarettes, generators, fertilizers, alcoholic beverages, printed books and coins of legal tender.

Ethiopia’s exports to the United Kingdom are mainly dominated by agricultural products such as coffee, leather and leather products, beans and lentils, and cut flowers. It is evident from the data that the balance of trade remains in favour of the United Kingdom because of the huge amount of imports of manufactured and semi-manufactured goods from the UK.

We are witnessing a meaningful flow of investment from the UK in the food and beverages, leather, energy, pharmaceutical and mining sectors. We believe that this forum can create a more conducive environment to help boost trade and investment links.

We are here with more than 60 delegates from the Ethiopian business community, who earnestly believe that we can create more opportunities for the business communities of both countries. Hence, it is vital to encourage the UK business community to work in partnership with their Ethiopian counterparts for their mutual benefit.

Once again, I would like to congratulate you all and wish you all the best in your fruitful deliberations.

Solomon Afework President of the Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA)

A MESSAGE FROM THE PRESIDENT OF THE ETHIOPIAN CHAMBER OF COMMERCE AND SECTORAL ASSOCIATIONS

(ECCSA), SOLOMON AFEWORK


ETHIOPIA, ONE OF THE WORLD’S OLDEST civilisations, is a fine example of how sub-Saharan Africa has changed in the last two decades, both in the political and economic

spheres and where good governance is nurturing a new era of prosperity. The successive liberalisation of trade and investment regimes undertaken in the last 23 years, has resulted in marked increases in economic growth rates, human development indicators and infrastructure improvements, including capacity building at national and local levels. Those policies have been instrumental in attracting foreign direct investments (FDI).

Ethiopia is projected to rank third among the world’s fastest-growing economies and first in the African

continent over the medium-term. It is a nation with tremendous untapped mineral wealth, fertile land, a huge, young population (14th largest on earth), whose median age is around 20, vast water resources, and Africa’s largest bovine population. Ethiopia’s strategic location in the Horn of Africa and its concessional trade agreements also make it an ideal base for re-exports to buoyant consumer markets in the Gulf Cooperation Council (GCC), particularly Saudi Arabia and Asia. It also has preferential market access to the USA and European Union markets through the AGOA and EBA arrangements. The country’s foreign policy of economic diplomacy plays a key role in promoting trade and investment from advanced (OECD) and emerging economies.

Economic OverviewDISCOVER AND INVEST IN AFRICA’S NEWEST LION ECONOMY

By Moin Siddiqi, Economist

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Ethiopia and Britain enjoy strong bilateral ties – the UK is both a major development co-operation partner and investor. Today, opportunities for British companies to invest either individually or as a consortium in Ethiopia abound in areas such as dam construction and hydropower plants, agro-based industries and light manufacturing, mineral extraction, railway/road construction and airport infrastructure, chemical and pharmaceuticals, as well as higher education and industrial training, hotel services, architectural and engineering works.

The Seeds of Growth

The economy has grown at a robust pace in the past decade, averaging 10.8% per year during 2005-2014 (comparable with China) – and exceeding the sub-Saharan Africa average of 5.7%, according to the International Monetary Fund (IMF). The expansion of infrastructure, services and agricultural sectors accounted for most of this growth; while the manufacturing sector performance was relatively modest. Private consumption and public investment fuelled domestic demand with the latter assuming an increasingly pivotal role in recent years.

Agricultural and industrial production, investment (including domestic and foreign) and exports have grown steadily over recent years both in terms of variety and volume. This achievement is the highest among non-oil producing sub-Saharan African economies. The basis for accelerated industrialisation is being laid, reflected in higher educational attainment, improved health services, and a quantum leap in infrastructure capacity in terms of access to power, transportation, and telecommunications. Ethiopia’s economic structure is gradually shifting from agriculture to industry and services, which bodes well for future growth.

Ethiopia’s growth ‘miracle’ is mainly the product of shrewd national planning and an ambitious development strategy to address structural problems in measurable and meaningful ways by creating hard and soft infrastructures that will facilitate job and wealth creation, by tapping into the country’s comparative advantages in natural resources and trade, and by ensuring progress towards achieving the Millennium Development Goals (MDGs). As a result, Africa’s second most populous nation (after Nigeria) has witnessed consistent double-digit broad based growth and poverty-reduction.

With the most dramatic expansion of infrastructure ever seen on the African continent, Ethiopians are poised to enjoy universal access to public services in the coming years. “Over the past decade, the public-sector led development strategy, with its focus on heavy investment in infrastructure, has underpinned the country’s strong economic growth. This high rate of growth has been inclusive, spanning different economic sectors and benefiting both urban and rural communities. Growth has been inclusive and widespread and a large number of

new jobs have been created in both the public and private sectors, particularly through a boom in construction (covering infrastructure, housing and commercial developments),” stated the African Development Bank (AfDB), a major multilateral partner.

A Maiden Bond

The country presents a low risk of debt distress. The stock of government debt in 2015 at 22% of GDP falls below the sub-Saharan average of 32%. In May 2015, Ethiopia was, for the second time, rated by the major risk-assessment companies Moody’s, Standard & Poor and Fitch as an investment and trade-friendly country. In terms of economy size Ethiopia is fourth in sub-Saharan Africa, and is expected to become the third largest within the coming three years, according to the latest studies by Ernst Young.

In December 2014, Ethiopia issued a debut US$1bn 10-year Eurobond priced at 6.625%, which received US$2.6bn in total orders – hence indicating strategic investors’ [positive] appetite for the Ethiopian-risk. Around half of the Eurobond was bought by US fund managers, one-third from the UK and 15% from the rest of Europe. The proceeds were used to finance projects in healthcare, education, and energy sectors, as well as the development of economic zones for attracting FDI.

A successful debut indicates the strength of a vibrant economy, which enables investors to diversify from heavy exposures to oil-based countries. Fitch Ratings noted: “The falling oil price may actually be beneficial for Ethiopia as 20% of the country’s imports of goods is purely spent on fuel – quite a substantial amount. Lower oil prices may help to plug the current account deficit.” Further bond issuances could be expected in 2016/17.

Ethiopia has significant infrastructure needs that require FDIs and financing in particular. “The government has acknowledged that in order to sustain the high growth rate level that they’ve seen over the last 10 years, they’re going to have to start allowing private investors to come in. Over the last five years, we’ve seen them [Ethiopia] gradually opening up the investment space,” observed Rand Merchant Bank (South Africa).

Meeting Infrastructure Goals

Ethiopia has the largest public investments in Africa (and the sixth largest in the world), relative to GDP. The country is in the midst of a mega development programme, which has already resulted in the large expansion of installed electricity capacity (more than three-fold over 2004-14) and distribution, road length, water and sanitation supply, and telecoms services. Improved access to water and water storage facilities has also been achieved by implementing a range of solutions, from rainwater harvesting to hand-dug wells to large-scale irrigation schemes in rural areas. By 2014, the proportion of the rural population with access


to potable water rose to 75.5% from 46% in 2006. The government aims to reach a 98.5% national target for access to potable water by 2015. The construction of a 5,000km long railway network is now being undertaken by the Ethiopian Railways Corporation. The transformation of Addis Ababa into a regional hub for air transportation, through the upgrading of Bole International Airport and expansion of Ethiopian Airlines represent national achievements. The construction of a second larger international airport, with the capacity of handling 20 million passengers a year, will be completed by 2018.

“In recent years, Ethiopia has made significant progress in infrastructure, and its infrastructure indicators compare relatively well with its low-income country peers. The country developed Ethiopia Airlines (now the biggest African airline) and associated regional air transport hubs. It has launched an ambitious investment programme to upgrade its network of trunk roads and is establishing a modern funding mechanism for road maintenance. Access to water and sanitation is expanding rapidly (from a very low base) thanks to judicious concentration on intermediate options such as traditional latrines, wells, boreholes and stand posts,” commented the World Bank in its Africa Infrastructure Country Diagnostic report.

The tangible gains over the last 15 years, in terms of hard and soft infrastructures, have contributed to improved productivity and an enabling environment for businesses – whether domestically-owned or foreign -– to thrive and prosper. This programme is still in progress, and current/future investments are designed to stimulate further growth, thus underpinning business opportunities. Ethiopia needs to invest an average of US$5.1bn per year in infrastructure alone for an entire decade in order to overcome existing constraints to socio-economic development.

Ethiopia’s infrastructure ambitions are even greater. They include: a quintupling of power generation capacity; a major expansion of the trunk roads network; constructing a total of 2,395km of rail network to increase connectivity both within national and cross borders; expanding nation-wide telecommunications service delivery; and further water supply expansion in rural areas. The overarching aims are to develop trade routes to neighbouring countries and boost electricity supply in order to improve competitiveness. Public-private partnerships (PPP) are being encouraged. Currently, the most important transport projects are new heavy-duty, high speed rail links to Djibouti (Ethiopia’s main export-import corridor) and Lamu Port in Kenya. The Addis Ababa-Djibouti line – being constructed by China Civil Engineering Construction Corp; and China Railway Engineering Corp (costing US$1.2bn) will help foreign trade and reduce the present high cost of international freight.

Massive renewable energy investments are underway to reach power generating capacity of 10,000

megawatts (MW) over the medium-term. Ethiopia will soon start generating electricity from its current biggest hydropower dam, the 1,879MW capacity ‘Gilgel Gibe III’ on the Omo River and eventually 6,000MW from the Grand Ethiopian Renaissance Dam, under construction on the Blue Nile River. The dam will be the largest hydropower plant in Africa and the world’s 11th largest upon completion by 2017. The construction of wind-energy plants, to produce 500MW of electricity, is also under construction. The development of power infrastructure will underpin Ethiopia’s industrialisation programme (by ensuring cheap energy) and earn considerable foreign currency by exporting electricity to neighbouring Kenya, Sudan and Djibouti. Energy costs are already amongst the lowest on the continent. Ethiopia’s 25-year energy strategy envisages investing US$100bn to generate a total of 37,000MW by 2037, according to the Foreign Ministry.

Heavy construction sectors, including cement and steel, are the ancillary beneficiaries of ongoing infrastructural development.

A Strong Social Agenda

Ethiopia is one of the most equal nations in the developing world, and has remained so during the period of global economic slowdown. The pace of poverty alleviation has been impressive, especially when compared with peer countries, thanks to a very high share of national budget devoted to ‘pro-poor’ programmes. The budget allocation for 2014/15 for priority areas (healthcare, education, agriculture, rural roads, water and decentralisation) comprised 40% of total public spending – among the highest in sub-Saharan Africa.

Real GDP per capita growth (factoring a rising population) has averaged 8.3% per year during 2005-14 – an indicator of improving living standards. “Ethiopia is often unfairly seen as emblematic of poverty and deprivation – but the progress it has seen over the past decade should help change that,” stated Ana Revenga, Senior Director for Poverty at the World Bank. She added: “If this progress continues over the next decade, Ethiopia can propel itself and most importantly, its people into a new era of prosperity.” Over the past 20 years, there has been noticeable progress on several human development indicators: primary school enrolments have quadrupled, the child mortality rate has been halved, and the number of people with access to clean water has more than doubled. These gains, together with more recent moves to strengthen the fight against malaria and HIV/AIDS, provide evidence of improved wellbeing in Ethiopia. The incidence of poverty fell from 45.5% in 1995/96 to estimated 24% in 2014. Since 2005, agricultural growth has been instrumental in eradicating poverty by 4% per year. “Although Ethiopia started from a low base, its investment in pro-poor sectors and agriculture have paid off and led to tremendous achievements in economic growth and poverty reduction, which in

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turn have helped improve the economic prospects of its citizens,” observes Guang Zhe Chen, World Bank Country Director for Ethiopia.

Why Invest in Ethiopia?

This Horn of Africa nation is fast becoming a springboard for new investors’ entrance into sub-Saharan Africa. “Ethiopia is closer to foreign direct investment than other parts of Africa,” remarked Bruno Casella of Geneva-based United Nations Conference on Trade & Development (UNCTAD). So far, Ethiopia remains a largely unexploited market with huge long-term potentials.

Sustained, robust growth, an expanding middle class (with rising incomes), growing urbanisation coupled with significant land mass (five-times the size of Britain) and the availability of young, trainable, and inexpensive workforce as well as low investment costs and attractive fiscal incentives are gaining the attention of transactional corporations (TNCs). The government has revised several times in recent years the investment code to make it more transparent and competitive – in tune with global norms. Moreover, Ethiopia has a

track record of socio-political stability, creating a good environment for doing business. UK-based frontier market investment firm Silk Invest agrees: “People are looking to improve their cost efficiencies, to live near their manufacturing base. It’s a very stable place, a very welcoming place.”

Centrally located in East Africa, Ethiopia enjoys an advantageous geographic position to access global value chains (GVCs) given transportation infrastructure and trade logistics improvements. Addis Ababa is already the air cargo hub of Africa, within non-stop reach of major Group of Seven and (BRICSA) economies – Brazil, Russia, India, China and South Africa. Beyond the domestic market, Ethiopia also enjoys preferential market access to 26 member-states of the Common Market for Eastern and Southern Africa (COMESA) with a total population of 625 million and a GDP of US$1.2 trillion – the equivalent to almost three-fifths of Africa’s economy.

Getachew Regassa, Secretary General of Addis Ababa Chamber of Commerce & Sectoral Associations (AACCSA) put it succinctly: “Our country offers a number of advantages, such as an immense


area of arable land, a large population compared to the neighbouring countries, the infrastructural development and economic growth that is happening here as well as the fact that Ethiopia is a political hub of African countries and also geographically it is close to the Middle East and Europe.” Gerard Hounkponou, Head of UN Conference Centre added: “We believe that the amount of interest for investment as well as partnerships in Ethiopia is indeed growing.”

Ethiopia provides an attractive FDI regime protecting private property, whilst assuring full repatriation of capital and profit. The government has varying customs duty exemptions provided to investors, both domestic and foreign. These include amongst others, new enterprises or expansion projects such as manufacturing, agriculture, agro-industries, power sector, information & communication technology (ICT), hotels and tourism. A few sectors such as transmission/distribution of electricity through the national grid, postal, air transport, banking and telecoms services are off-limit to foreign investors.

A Growing Investor Base

FDI inflows will reach a record US$1.5bn in 2015, according to Fitsum Arega, Director General of the Ethiopian Investment Agency (EIA). Only seven years ago, Ethiopia drew only US$109mn in inward investment. But now inflows are growing at double-digit rates, thanks to increased relocation of factories – induced by low wages, cheap power and business-friendly policies. Inward FDI stock has grown considerably in the past decade. Agribusiness, horticulture, tobacco, textiles/apparel, leather goods, ICT and automotive, as well as mining activities are the major sector beneficiaries of FDI projects. Agricultural renting also brings in foreign investors – especially from the Gulf (GCC) region. Nearly 43% of capital invested into Ethiopia went into manufacturing activities, according to an Ernst & Young Report. Ethiopia’s FDI sources are remarkably diversified. The United Arab Emirates (UAE), the US, India, China, Saudi Arabia, Germany, Italy, Britain, Turkey and Australia are all key investors. According to the World Investment Report 2014, Ethiopia was a destination for Greenfield investment projects worth US$4.5bn in 2013, a steep hike from US$441mn in the previous year.

Meanwhile, the volume of trade between Britain and Ethiopia has increased sizably from a low base. There are opportunities to expand trade further in the areas of manufactured and capital goods. The UK’s FDI into Ethiopia is also increasing. In 2012, Diageo acquired Meta Brewery at a cost of US$225mn – one of the biggest deals in Africa involving a British firm. Pittards is actively engaged in the production of finished leather, leather garments for export to the EU and the US. Unilever and Tesco (the UK’s largest retailer) are also investing in Ethiopia. The UK and Ethiopia have signed bilateral investment protection and avoidance of Double Taxation Treaties.

Ethiopia’s industrial strategy is attracting Asian capital to develop its light industry base. In 2013, Huanjin Group (China) opened its first factory for shoe production, with a view to establishing a US$2bn hub for manufacturing. Chinese investments are mostly in automotive Original Equipment Manufacturers (OEM) market and garments. Commercial ties with India have grown in recent years – the volume of bilateral trade reached over US$500mn in 2013 – India’s FDI targets textiles and food processing and automotive OEM.

The UAE’s capital flows chiefly into real estate construction, whilst Saudi investors focus on mining and agriculture. Saudi Arabian-Ethiopian business magnate Sheikh Mohammed Hussein Ali Al Amoudi – the largest single foreign investor in Ethiopia – plans to invest US$3.4bn over the next five years. Turkey is also a prominent investor in the textile/apparel sector. Some 350 Turkish companies have invested US$3bn in Ethiopia, half of Turkey’s African investment. The US’s capital is directed mainly towards resource extraction. The EU has strong and expanding commercial relations with Ethiopia. There are around 300 EU companies currently active, collectively constituting a major source of FDI. Europe also remains one of the country’s most important trading partners.

The country has signed Bilateral Investment Promotion & Protection Treaties with over 30 countries, of which 11 are with individual EU member-states and Double Taxation Avoidance Treaties with 18 jurisdictions for facilitating the inflow of FDI as well as technological transfers to Ethiopia. Investments also benefit from Multilateral Investment Guarantee Agency (MIGA) guarantees against non-commercial risk of investing in developing countries. The EIA

“TODAY, OPPORTUNITIES FOR BRITISH COMPANIES TO INVEST EITHER INDIVIDUALLY OR AS A CONSORTIUM IN ETHIOPIA ABOUND IN AREAS LIKE DAM CONSTRUCTION AND HYDROPOWER PLANTS, AGRO-BASED INDUSTRIES AND LIGHT MANUFACTURING, MINERAL EXTRACTION, RAILWAY/ROAD CONSTRUCTION AND AIRPORT INFRASTRUCTURE, CHEMICAL AND PHARMACEUTICALS, AS WELL AS HIGHER EDUCATION AND INDUSTRIAL TRAINING, HOTEL SERVICES, ARCHITECTURAL AND ENGINEERING WORKS”

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was recently upgraded to become the Ethiopian Investment Commission, supervised by a Board chaired by the Prime Minister.

A Window of Sectoral Opportunities

Renewable Energy

Ethiopia’s energy resources are among the most diversified in Africa. The total estimated potential of renewable and non-renewable resources is about 100,000–to-120,000MW, of which economically feasible hydropower capacity is assessed at 45,000MW, the second-largest after the DRC. Nine of Ethiopia’s major rivers are suitable for hydroelectric generation. It has large potential for wind (30,000MW); solar (more than 40,000MW + utility scale installed capacity of 5.5KWh/m2/day solar radiation); and geothermal (7,000MW) power generation.

Many energy-related projects are under-construction. Salini Impregilio - Italy’s largest contractors specialising in building hydropower plants – was awarded the main engineering, procurement and construction (EPC) contract for the Grand Renaissance Dam. The mega-dam, scheduled for completion by July 2017, will be 1,800 metres (m) long and 170m high, with an overall RCC volume of 10 million cubic metres. The Group has been involved in building several dams such as Gilgel Gibe II, Tana Beles and Tekeze, and is presently under commissioning the Gilgel Gibe III – a 246m high roller-compacted concrete dam. China’s Dongfang Electric Corporation was awarded the hydro-mechanical and electro-mechanical part of the project.

Ethiopia has signed a Power Purchase Agreement with Corbetti Geothermal Company, a US-Icelandic firm, to build a 1,000MW geothermal plant; Africa’s largest, in the volcanically active Rift Valley (costing US$4bn). When completed, it will be Ethiopia’s first independent power project and biggest single foreign investment. CGC believes accessible geothermal resources could be nearer 7,000MW. Vergnet, a French wind turbine company, has built the 120MW Ashegoda Wind Farm in the Rift Valley northern part of Ethiopia, and in a similar way Hydrochina has built a 204MW wind farm in Adama I & II, 90km south of Addis Ababa.

The optimal development of Ethiopia’s largely untapped renewable energy sources can transform the country into sub-Saharan Africa’s second-largest electricity producer (after South Africa) and No.1 regional energy exporter. HE Prime Minister Hailemariam Desalegn, stated: “My vision is that over the next 30 years, we will need to harness as much as 80,000MW of hydro, geothermal, wind and solar power, not just for Ethiopia, but for our neighbouring countries as well … we will need to partner with the private sector to bring in significant private investment going forward. From that perspective, this 1,000MW project with RG is not that large – but it’s a great start. What Africa needs now is not just aid, but trade and investment.”

Foreign and local private investors can participate in power generation from Renewable Energy sources and without any capacity limit. Transmission and supply of electricity through the integrated national grid system is, however, exclusively reserved for the government. But, private investors are allowed to operate an ‘off-grid’ distribution of electricity.

Mining & Petroleum

According to the Ministry of Mines, Ethiopia is endowed with substantial deposits of gold, silver, tantalum, platinum, gemstones and base metals (copper, lead, nickel and zinc). Construction and industrial minerals include marble, granite, limestone, clay, gypsum, iron ore, coal, potassium, silica, diatomite and soda ash. Half of the land area has yet to be evaluated for mineral deposits. A total of 137 companies are now operating in the sector, including 66 foreign firms, 36 joint-venture partnerships and 35 local companies. The sector (led by gold) is the second largest foreign exchange earner after agriculture, and is projected to earn US$2bn by 2016. Saudi-owned Midroc Gold is the largest bullion producer. The last decade has seen intensifying interest from multinational miners such as Vale, BHP Billiton and AngloGold Ashanti, thanks to attractive terms for royalty rates and security of tenure.

The emergence of a world-class extractives industry in Ethiopia offers opportunities not only for exploitation activities, but also for suppliers and downstream users of mined resource products, including industrial manufacturers who can take advantage of the raw material supply, inexpensive labour, and cheap energy supplies. The government, however, is addressing the mining companies’ main concerns – transportation logistics and lack of trained personnel – by developing supporting infrastructure and the private sector is contributing by, for example, establishing an undergraduate mining engineering programme at Unity University. Developing the extractive industry is not without its challenges. “If well managed and well supported, the Ethiopian mineral sector has the potential to make a difference in the economic development of Ethiopia and to contribute to the poverty reduction agenda,” said the World Bank. Ethiopia was admitted as a candidate country to the Global Extractive Industries Transparency Initiative (EITI) in March 2014.

With regard to fossil fuels, there are opportunities for oil and natural gas exploration and development in the major sedimentary basins, namely the Ogaden, the Gambella, the Blue Nile and the Southern Rift Valley. Proven gas reserves are estimated at 12.6 trillion cubic feet. In 2013, Warburg Pincus, one of Wall Street’s largest private equity funds, committed US$600mn for hydrocarbons investments in East Africa, including in Ethiopia.

Manufacturing

Ethiopia is well placed to attract ‘vertical’ or ‘asset-seeking’ FDI that entails relocating production facilities


to low-cost locations and where output is exported to regional and/or international markets. Its advantages lie in the combination of natural resources that serve as inputs for light manufacturing (e.g., cattle for the leather industry, forests for the furniture industry, cotton for the garment industry and a large agricultural base for agro-processing); abundant young/trainable labour, which gives it a comparative edge in less-skilled, labour-intensive light manufacturing; and cheap hydroelectric power. The World Bank noted that Ethiopia has the second largest dairy herd in Africa, offering potential for large-scale downstream processing; as well as having potential in several subsectors: textile/apparel, leather products, agribusiness, wood and metal fabricated products.

Ethiopia’s manufacturing capacity can be advanced by producing medium-tech to high-tech products. Mobile phone assembly has already started in Ethiopia for domestic and regional markets; for example, locally based Tana Communications (since 2011) is assembling mobile phones based on components provided by China’s ZTE – the multinational telecommunications equipment and systems company; whilst Hong Kong-based Tecno has also been assembling smart phones since 2011.

Foreign manufacturers can take advantages of easy access to the EU and US markets under the Everything-But-Arms (EBA) Initiative and the US African Growth and Opportunity Act (AGOA) as well as China’s Zero Tariff and India’s Duty Free and Quota Free (DFQF) privileges. Furthermore, a broad range of manufactured goods from Ethiopia are entitled to preferential access under the Generalized System of Preference (GSP) in the USA, most EU and other developed countries. No quota restrictions are placed on Ethiopian exports falling under the 4,800 products currently eligible for GSP treatment.

Commercial Farming

Ethiopia – with over 513 million hectares of arable land – boasts vast potential in attracting investment in its agricultural sector. However, much of its arable land lies underutilised. According to the country’s Central Statistical Agency, 80% of Ethiopia’s arable land is currently not being cultivated. The sector (the backbone of the economy) provides significant and wide-ranging opportunities in terms of commercial production of agricultural commodities, input supplies and downstream agro-processing. Ethiopia has attracted

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FDI in both upstream production from diverse sources, notably China, India, the UAE and Saudi Arabia, as well as downstream food/beverage processing and marketing sectors. Given the growing number of commercial large-scale agribusiness operations, outlets for ancillary/supporting service businesses and joint ventures, are multiplying. Subsectors with possibilities for new investment include:

Cash crops (such as tea, rice and tobacco, in addition to coffee);

Production and processing of oilseeds, sugar cane, spices and cotton;

Horticulture and floriculture (fresh fruits, vegetables and cut flowers);

Livestock and poultry (Ethiopia’s livestock resources are the largest in Africa and tenth largest worldwide);

Forestry/forest by-products and fish farming.

Singapore-based Shultze Global Investments, which launched a US$100mn equity fund in 2012 to invest in Ethiopia, including in the agriculture sector,

remarked: “Ethiopia offers significant opportunities for investors. Anything grows in Ethiopia with the various climate and soil diversities. That also follows through to the agriculture value-added chain with processing and exports.”

Tourism

In terms of cultural tourism, Ethiopia features one of the richest historical and archaeological heritages in Africa – boasting wonders such as the Axumite Kingdom and the castles of Gondar; it is also the birthplace of coffee. Indeed, Ethiopia has the most World Heritage sites across Africa (10). Natural attractions are equally varied: the source of the Blue Nile; the Rift Valley with its volcanoes, lakes, and exotic wildlife; and a topography ranging from rugged mountains to lowland savannahs for adventure tourism. Health tourism, thanks to cooler climate and numerous hot springs, is another tourism subsector with unexploited potential.

Private investments are needed in the hospitality sector, as most top hotels are operating at very high capacity and there is limited capacity near tourist hotspots. Enormous openings exist for investment in star-designated eco-tourism and specialised

international restaurants as well in the construction of star-designated hotels and resort hotels all over the country. Tour operators have reported considerable growth in recent years; tourist arrivals reached 588,000 in 2014 compared to 330,000 in 2008 – based on World Travel & Tourism Council estimates. Ethiopia’s tourism revenues could surge fourfold in the next 10 years and also create more jobs, according to the World Bank.

Banking & Finance

“Private investors lurk around banks in Ethiopia, eager to jump into a sector not yet available to them. For now, all they can do is dream about the potential of almost 90 million-plus people, one of Africa’s biggest economies, and high GDP growth means opportunity for financial services,” noted Standard Bank (South Africa), “plus don’t forget the huge unbanked population.” Experts estimate that Ethiopia’s unbanked population could be as much as 85-90%. As the economy transitions to the international stage, financial infrastructure will have to facilitate access to the various under-served communities. The introduction of mobile banking and related products is a step towards providing more efficient services.

Telecommunications

Telecommunications is another potentially lucrative sector in Ethiopia. Estimated mobile penetration rate at end-2014 was 34%. Internet penetration is low – largely due to poor infrastructure and very high prices. Telecom services would surely be high on an investor’s list of targets if the sector were open to foreign operators. As one insider said, “[Telecommunications] is just starting to move in the country. Just wait and see.”

The broadband market is set for growth following recent improvements in international bandwidth, national fibre backbone infrastructure and 3G mobile broadband services. Over 10,000-km of Fibre Optics have already been constructed. Every year there is the addition of millions of mobile and internet users – Ethiopia is one of Africa’s fastest expanding mobile markets, albeit from a low base. Vodacom (UK) and MTS India, among others, are positioning themselves in anticipation of market liberalisation in the future.

Future Challenges

The government has formulated a new five-year Growth and Transformation Plan (GTP II) to carry forward the important strategic directions needed for Ethiopia to become a vibrant middle-income economy by 2025. The plan focuses on private sector-led growth through attractive tax holidays and duty free incentives for investors, scaled-up public investments in basic infrastructure and a strong commitment to agriculture through allocation of more than 10% of total national budget and human capital development, through

“ETHIOPIA IS PROJECTED TO RANK THIRD AMONG THE WORLD’S FASTEST-GROWING ECONOMIES AND FIRST IN THE AFRICAN CONTINENT OVER THE MEDIUM-TERM”


Benign Prospects

The Ethiopian story is not just about growth, it is about transformation: investing in basic infrastructure, diversification of production, improving the business climate and in the era of climate change – becoming a true green economy. The ‘big push’ in public investment is helping to foster self-sustaining growth – with the private sector ultimately becoming an engine of the nation’s prosperity.

The country’s integration into the global economy is deepening and accelerating, thus giving credentials to its status as Africa’s newest ‘Lion Economy’ and a powerhouse for boosting intra-regional trade and investment in East Africa. Ethiopia is reaching out to the world and the world is coming to Ethiopia. A report by HSBC Bank listed Ethiopia as one of the 26 economies projected to record the fastest growth between 2012 and 2050.

Continuous public and private funded productivity enhancing investments in social, infrastructure and industrial development should help underpin robust output expansion in the years to come. There are not that many countries in the developing world with such good fundamentals as Ethiopia.

secondary/higher education and technical/vocational training. Between two and 2.5 million young people enter the labour market every year.

Ethiopia could potentially reach middle-income status by 2025 if more focus is placed on increasing domestic savings rates, private sector development and improving the trade logistics, according to the World Bank. The GTP II (2015-2020) places greater emphasis on improving the productivity and modernisation of the agricultural sector, and boosting the technological sophistication and economic input of the industrial sector. It has also identified the development of micro, small and medium enterprises (MSMEs) as a key industrial policy direction for creating job opportunities for millions of Ethiopians by improving private sector’s access to finance. “By increasing the capacity of the financial sector to properly serve the segment of small enterprises with adequate financial products, we hope to address lack of access to finance which is a key obstacle that is currently preventing small enterprises from fully playing their role in the industrialisation process of Ethiopia and in contributing to the job creation agenda as envisaged in the GTP I and GTP II,” explained the Ministry of Urban Development Housing and Construction.

Ethiopia has the strong potential to rapidly transform its economy, link increasingly into regional and global value chains and become the African manufacturer of the future. However, the challenge for Ethiopia is to further diversify its economy and invest in medium-to-high technology intensive manufacturing activities, with a view to boosting exports of high-tech products such as computers, televisions and smart-phones. The IMF urged that industrial sector development is a prerequisite for reaching middle-income status. “Structural change, shifting resources – especially labour – from agriculture to industry, which is a success indicator for economic development, cannot be achieved without harnessing entrepreneurs’ ingenuity, opportunity perception and new product creation capabilities. This would require some opening up of the economy to broaden business opportunities for the private sector,” advised the IMF. The Fund has also recommended that foreigners should gain access to telecoms and banking sectors. That, in turn, could attract new investment; improve efficiency and delivery of services.

The government believes that it is too early to liberalise the banking and telecoms sectors, although indigenous investors are allowed and have established 17 highly profitable private banks – notably Awash International Bank, Wegagen Bank and Dashen Bank, which offer strong competition to state-owned banks. Strategic assets such as Ethiopian Airlines, Commercial Bank of Ethiopia (the country’s No.1 lender) and Ethio Telecom will remain under state control for the foreseeable future. The national carrier is, in fact, Ethiopia’s largest foreign exchange earner – three times as big as Arabica coffee.

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Projections2013 2014 2015 2016 2017 2018

DOMESTIC ECONOMYNominal Gross Domestic Product (GDP) (Billions of Birr at current prices)

853 995 1,181 1,397 1,650 1,952

Nominal GDP growth (annual % chg.) 15.4 16.5 18.7 18.3 18.1 18.3Total GDP (Millions of U.S. Dollars) 46,000 49,707 55,150 60,984 67,287 74,408Real GDP growth (%) 10.5 10.3 9.5 10.5 9.5 10.0Consumer Prices (annual Avg, % chg.) 8.1 7.4 6.8 6.0 6.0 6.0Real Per Capita GDP Growth (%) 7.7 7.8 6.2 6.2Total Domestic Investment * 35.8 34.2 34.6 33.4Gross National Savings * 28.3 25.2 28.0 27.1

PUBLIC FINANCES Government Revenue, excluding Grants * 14.3 14.0 14.4 14.6 16.3 16.8Government Expenditure * 17.8 17.7 19.1 19.1 19.7 19.9Budget Balance, including Grants * -1.9 -2.6 -2.9 -2.8 -2.3 -2.1Aid Flows (Millions of U.S. dollars) # 2,400 2,300 2,900 3,100 3,300 3,500of which: Grants 1,200 1,300 2,000 2,100 2,300 2,500Gross Domestic Government Debt * 21.6 22.0 21.7 21.8 23.9 24.5

TABLE 1 KEY MACRO-ECONOMIC INDICATORS

Data pertain to Ethiopian FY July 8 to July 7. *Percent of GDP. # Grants, debt relief & soft loans.

SOURCES: Ethiopian authorities; IMF, World Bank & African Development Bank estimates & projections.

AREA (SQ KM): 1.14mn. CAPITAL: Addis Ababa. POPULATION (2014): 96.5mn. LABOUR FORCE (2013): 45.1mn. CURRENCY: The Ethiopian Birr. GDP IN [PURCHASING POWER PARITY] TERMS: US$129.6bn (2013). SOVEREIGN CREDIT RATING: Moody’s Investors Service [B1]; Standard & Poor’s [B]; Fitch [B].

SOURCE: UNCTAD World Investment Reports.

1/ FDI represents net inflows of investment to acquire a lasting management interest (10% or more of voting stock) in an enterprise operating in an economy other than that of the investor. It is the sum of equity capital, reinvestment of earnings, other long-term capital, and short-term capital as shown in the balance of payments. 2/ FDI stock represents the value of the share of affiliate enterprise at book value or historical cost, reflecting prices at the time when the investment was made and reserves (including retained profits) attributable to the parent firm, plus net debt of affiliate to parent co.

(%) chg2010 2011 2012 2013 2014 2010-14

Foreign Direct Investment 1 288 627 279 953 1,200 316.7Total FDI Stock 2 4,100 4,833 5,114 6,043 7,264 77.2 As (%) of GDP 11.6 15.5 12.0 13.1 14.6

TABLE 2 TRENDS IN FDI INFLOWS TO ETHIOPIA, (US$MN)

GLOBAL INVESTORS BY SUBSECTORS

RENEWABLE ENERGY: Reykjavik Geothermal (US-Iceland); US-based solar power companies, Global Trade & Development Consulting (GTDC) & Energy Ventures; Vergnet, French wind turbine Co. OIL & GAS: Tullow Oil (UK); Falcon Petroleum Ltd (Nigeria); CAL Valley Petroleum Inc. (Canada); SouthWest Energy (Ethiopia). MINING: National Mining Corp; (Saudi Arabia); Australian miners, NYOTA Minerals Ltd & Stratex; Canada-based Tigray Resources & Allana Potash; BHP Billiton (Angola-Australian major); Midroc Gold (Saudi Arabia); Israeli Chemicals Limited (ICL); UK-based Altus Strategies Ltd. LIGHT MANUFACTURING: Pittards, UK leather Co; China-based Jiangsu Lianfa Textile Co; & Huajian Group (shoemaker); Bangladesh BDL Group; Turkish textile companies: MNS Manufacturing PLC & AYKA; Angel’s Cotton & Etur Textile Plc; Hiroki Co. Ltd (Japan); Ara AG (German footware manufacturer). FOOD & DRINKS: HEINEKEN (Dutch); DIAGEO (UK); SAB Miller (South Africa); BGI Castel (France); Coco-Cola (US); Karuturi Global Ltd (India). CONSUMER GOODS: IKEA (Sweden); Nestle (Switzerland); Unilever (UK); Hennes & Mauritz (Swedish fashion retailer). INFRASTRUCTURE: China Civil Engineering Construction Corp; Salini Construttori (Italy); Alstom (France); General Electricity (US); China Road & Bridge Corp; China Railway Engineering Corp; ZTE Corp; (China) – leading global provider of telecoms equipment and network solutions; Tecno (Hong Kong). HOTEL CHAINS: Intercontinental; Sheraton; Hilton.


SOURCES: World Bank; IMF; & Ethiopian authorities.

1/ Major export products: gold, coffee, oil seeds, flowers, livestock, pulses, leather & leather products, meat & meat products, chat & vegetables. 2/ Major imports: Petroleum, iron & steel, chemicals, fertilisers, capital goods & consumer durables, transport vehicles, automobile components & parts and pharmaceuticals. 3/ Perennial trade deficit is attributed to heavyimport requirements of the major infrastructure projects under Ethiopia’s “Growth and Transformation Plan” (GTP). 4/ The majority of services export is attributed to Ethiopian Airlines (No.1 export earner) - three times as big as coffee. 5/ The current-account deficit is financed by FDI and loans (including non-concessional inflows). 6/ Include remittanceswhich averaged about US$3.7bn in last three fiscal years. 7/ Gross forex reserves in months of imports of goods & services. 8/ Includes both public & private sector external debt.

MAIN EXPORT DESTINATIONS (% OF TOTAL 2014): China 17.1%; Germany 7.6%; United States 7.2%; Saudi Arabia 6.75; & Belgium 6.7%. MAIN SOURCE OF IMPORTS (% OF TOTAL 2014): China 19.3%; United States 11.5%; Saudi Arabia 6.7%; India 5.0%; Italy 2.3%; Turkey 2.2%; Germany 2%. TOTAL NET OFFICIAL DEVELOPMENT ASSISTANCE (ODA): US$1,976mn (2013). MAJOR DONORS: United States US$619.4mn; UK US$515mn; Japan US$150mn; EU institutions US$121mn.

Projections2014 2015 2016 2017 2018 2019

Exports (f.o.b) 1 3,351 3,852 4,488 5,173 5,904 6,744Imports (f.o.b) 2 12,921 15,117 16,560 17,796 19,765 21,692Trade Balance 3 -9,570 -11,265 -12,072 -12,623 -13,861 -14,948

Net Balance on Services 942 1,249 1,702 2,195 2,778 3,369Exports 4 3,314 3,821 4,558 5,280 6,111 7,153Imports 2,372 2,572 2,856 3,085 3,333 3,784

Current Account Balance -3,534 -4,037 -4,071 -3,927 -4,101 4,048 As % of GDP 5 -7.1 -7.3 -6.7 -5.8 -5.5 -5.0

Private Transfers (net) 6 3,916 4,293 4,519 4,641 4,963 5,385Official Transfers (net) 1,321 1,973 2,145 2,320 2,519 2,677

Foreign Direct Investment (net) 1,355 1,833 2,853 2,752 3,089 4,263

Overall Balance of Payments -57 300 400 535 697 995

Gross Official Reserves 2,761 3,061 3,461 3,996 4,693 5,688Import-Coverage 7 1.9 1.9 2.0 2.1 2.2 2.6Gross External Debt 8 11,234 14,615 17,685 20,186 21,429 22,648Total Debt Stock (%) of GDP 22.6 26.5 29.0 30.0 28.8 27.7Debt Service-to-Export Ratio (%) 11.4 13.1 13.0 12.8 12.4 12.4

Total Gross Financing Needs 2,800 2,900 2,000 2,000 1,900 2,200

TABLE 3 BALANCE OF PAYMENTS, 2014-19 (US$MN, UNLESS OTHERWISE INDICATED)

*Active projects (as of July 2013) are categorised into three phases: 1. Conceptual to feasibility; 2. Financial closure to early implementation; 3. In progress and near completion.

SOURCE: Africa Project Access; Ernst & Young (EY) analysis.

Project number Capital value US$Mn

Railway 4 4,368Power plants & Transmission grids 6 3,827Industrial construction 2 751Roads & Bridges 2 194Commercial construction 5 147Airports 2 133

TABLE 4 ETHIOPIA’S ACTIVE* INFRASTRUCTURE PROJECTS

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SOURCE: World Bank Doing Business 2015 report.

Ethiopia Sub-Saharan Africa

OECD Average

Starting a BusinessProcedures (number) 9.0 7.8 4.8Duration (days) 15.0 27.9 9.2Cost (% of income per capita) 89.3 56.2 3.4Paid-in-Capital (% of income per capita) 164.4 95.6 8.8

Dealing with Construction PermitsProcedures (number) 7.0 13.5 11.9Duration (days) 125.0 157.7 149.5Cost (% of warehouse value) 3.2 6.2 1.7

Registering PropertyProcedures (number) 10.0 6.3 4.7Duration (days) 41.0 57.2 24.0Cost (% of property value) 2.1 9.1 4.2

Paying TaxesPayments (number per year) 30.0 38.2 11.8Time (hours per year) 306.0 310.8 175.4Profit tax (%) 26.2 17.6 16.4Other taxes (%) 0.8 14.7 1.9Total tax rate (% profit) 31.8 46.2 41.3

Trading Across BordersDocuments for exports (number) 8.0 8.0 4.0Time for exports (days) 44.0 30.5 10.5Cost to export (US$ per container) 2,380.0 2,200.7 1,080.3Documents for import (number) 11.0 9.0 4.0Time for import (days) 44.0 37.6 9.6Cost to import (US$ per container) 2,960.0 2,930.9 1,100.4

Enforcing ContractsProcedures (number) 38.0 39.2 31.5Duration (days) 530.0 650.4 539.5Cost to enforce; in (%) of claim 15.2 45.1 21.4

Protecting InvestorsExtent of disclosure index (0-10) 3.0 5.3 6.6Strength of minority investor protection index (0-10) 4.2 4.6 6.3

Getting CreditStrength of legal rights index (0-12) 3.0 5.0 6.0Depth of credit information index (0-8) 0.0 2.0 7.0Credit bureau coverage (% adults) 0.0 5.8 67.0

Getting ElectricityProcedures (number) 4.0 5.5 4.7Duration (days) 95.0 138.3 76.8Cost (% of income per capita) 1676.6 4348.5 73.2

Resolving InsolvencyTime (year) 1.8 3.1 1.7Cost (% of estate) 14.5 23.3 8.8Recovery rate (cents on the dollar) 38.3 24.1 71.9

TABLE 5 ETHIOPIA’S BUSINESS DATA


ETHIOPIA’S GREENFIELD INVESTMENTS BY SECTORS*

18.0%

13.0%

10.0%

7.0%6.0%

46.0%

Food & Tobacco

Financial services

Textiles

Automotive OEM

Metals

Others

% Share

* TOTAL projects 69 reported period (2007-12)

SOURCE: Fdi Markets and Ernst & Young.

GDP BY SECTOR (2014)

42.3%

1.0%4.2%

0.8%9.4%

14.1%

4.6%4.7%

9.0%

4.1%5.8%

Agriculture & Forestry

Mining

Manufacturing

Public Utilities

Construction

Wholesale & Retail Trade

Hospitality

Transport & Communications

Finance, Real Estate & Business Services

Public Administration & Defence

Other Services

% Share

SOURCE: AfDB, African Economic Outlook 2015.

ETHIOPIA’S INVESTMENTS INTO TOP SECTORS (BY MOST CAPITAL INVESTED)*

30.0%

16.0%8.0%

8.0%

28.0%

12.0%

Real Estate

Food & Tobacco

Coal, Oil & Natural Gas

Communications

Textiles

Others #

% Share

*TOTAL US$4,833mn invested over 2007-12 period.# Include automotive, professional services & manufacturing.

SOURCE: Fdi Markets and Ernst & Young.

SOURCES OF FDI TO ETHIOPIA, 2012

24.0%

22.0%

21.0%

19.0%

11.0%3.0%

Europe

Asia

Middle East

North America

Africa

Others

% Share

SOURCE: Ethiopia Investment Agency.

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INDI

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SOURCE: Africa Project Access.

THE SURGE IN INWARD FDI STOCK TO ETHIOPIA

SOURCE: UNCTAD, World Investment Reports.

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

US$Mn

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

INFRASTRUCTURE’S (%) CONTRIBUTION BY NUMBER OF PROJECTS & CAPITAL VALUE (AS OF JULY 2013)

50

40

30

20

10

0

Logistics

sectors

Constructio

n

sectors

Power genera

tion &

Transmissi

on

Projects Value

ETHIOPIA’S OUTPUT GROWTH VS GLOBAL & REGIONAL PEERS

SOURCE: Global Economic Prospects 2015, World Bank.

12

10

8

6

4

22015 2016

ForecastEthiopia Vietnam EgyptMexico GhanaBangladesh Kenya


TO SAY THAT AGRICULTURE IS THE mainstay of the Ethiopian economy is something of an understatement. It employs 73% of the working population and contributes 46%

of GDP and 80% of exports. As the country’s Prime Minister has stated: “As agriculture goes, so goes the overall economy.” As such, the transformation of the sector is pivotal to Ethiopia’s drive to reach middle-income country status by 2025, and current signs are encouraging: double-figure annual growth for the last decade and more has been led by Ethiopia’s staple cereal crops, with yields up by more than 15% in the last year alone. And in areas where the introduction of modern irrigation and fertilising techniques have been most prevalent, gains have been much higher. It’s a case of unlocking the nation’s vast land resources.

Assets and Potential

Ethiopia’s population is now around 93 million, of whom 85% are based in rural areas. The total area of the country is about 111.5 million hectares (ha), of which about 80 million ha is suitable for farming of some kind. Around 20 million ha is currently cultivated. Irrigation is expanding, but there is still huge room for development in this area and it is the focus of several ongoing initiatives.

The country’s lowland regions account for 55% of the total land mass, with highland and mid-highland areas making up the rest. Ethiopia is endowed with a great diversity of environments, with altitudes ranging from 4,600 metres (m) above sea level to 148m below;

AgricultureA NATION WITH VAST LAND RESOURCES

By Phil Clough

AGRI

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providing the right conditions for a plethora of crops and livestock.

Production Now

Around 150 different crop types are currently grown, with the main cereal groups including barley, wheat, maize, sorghum and Ethiopia’s ancient native crop, teff. Other major cash crops include coffee, tea, cotton, spices and pulses. Oil crops include sesame, Niger seed, groundnut, rape and linseed.

Horticulture has become a significant export market, with cut flowers proving particularly successful, alongside fruits and vegetables.

In terms of livestock resources, Ethiopia stands first in Africa and tenth in the world, and with more than 10 million bee colonies, the country is also Africa’s largest producer of honey.

Policy Initiatives

The government’s Agriculture Development Led Industrialization (ADLI) has focused on advancing the country’s vast farming potential, which has also paved the way for an impressive expansion of agro-processing in recent years. This has, amongst other things, resulted in the current double-digit annual growth of the economy for the whole of the last decade.

The five-year Growth and Transformation Plan (GTP), which began in 2010, contained key strategies to sustain broad-based and equitable economic growth. Its success reveals a vibrant agriculture sector.

The introduction of better seeds and specialised fertilisers, now produced within Ethiopia, has seen many farms double and even triple production. Farmers and private investors are being encouraged to produce high value-added products. And with a view to attracting investment, infrastructure improvements are being pursued in areas where land is available for commercial agriculture, which is evident in new road, energy and irrigation schemes.

There is an increasing emphasis on the need for Ethiopia’s seven million smallholder farmers to increase efficiency and productivity using modern technology. With this in mind, the Household Irrigation Helpline, piloted in 2013, now offers tailored advice via phone and SMS messages to even the most remote communities. And schemes like TIRR (Teff, Improved Seed Variety, Row Planting and Reduced Seed Rate) have shown how some really significant yield increases can be attained from relatively simple methods.

Investment Opportunities

With such a huge and diverse agricultural sector, the possibilities for investors are fairly eclectic. But the area where fresh finance would be most welcome – and

which probably offers the greatest scope for growth – is agro-processing. Because, despite Ethiopia’s successful growth in production, there is still huge untapped potential on the added-value side. A great deal of produce still goes into local markets unprocessed, which can lead to high levels of waste.

In subsectors such as textiles, leather and certain foodstuffs, strategic processing industries have existed for more than 60 years, but even here there remains plenty of room for expansion and improvement. There are also opportunities in the provision of all-round support services, such as maintenance, cold storage, transport and marketing. Across the board the government offers some juicy investment incentives too, including customs duty privileges for certain capital goods and tax holidays of between two and seven years. Export based agro-processing industries also enjoy loans extended by the relevant banks of Ethiopia.

Coffee

Coffee originated in Ethiopia at least 1,000 years ago, with the legendary figure of Kaldi the goat herder given the credit for discovering its stimulating properties. So the story goes, Kaldi noticed that his goats wouldn’t sleep if they had nibbled on the red berries of a certain native bush. So he tried it himself and discovered the joys of caffeine. Today, Ethiopia remains one of the world’s major coffee producers and the largest in Africa. The crop represents its single biggest export in cash terms and the country has garnered a reputation for producing some of the finest Arabica beans in the world.

Most Ethiopian coffee is produced in forest or semi-forest conditions, where the soil of the forest floor is enriched from falling leaves, making fertilisers unnecessary. In these areas the high degree of genetic diversity has created a balance between pests and parasites, making chemical pesticides largely redundant. At present, the coffee crop covers 600,000 ha under cultivation, mainly spread across the southern and southwestern highlands of the country. It is on the processing side where investment would be most welcomed, such as roasting and packaging the beans for export.

Tea

Although not on the same scale as its coffee crop, Ethiopia’s tea business is a substantial export sub-sector. Currently around 10,000 ha is under tea, but the government has stated that half a million ha could potentially be cultivated. The conditions exist to grow most strains of tea plant, but black tea dominates with annual production in the region of 10,000 tons. Domestic demand accounts for half of that.

Tea is grown in the highland dense forest regions of the country where the land is fertile and need for fertilisers is minimal. Moreover, the availability of


abundant and cheap labour in the countryside has made manual weeding an option, and this largely organic cultivation means Ethiopian tea is highly sought after by the discerning sipper. This was confirmed by an ‘International Gold Star’ that was awarded for quality by BDI Research in Madrid, Spain, to one of the major Ethiopian tea exporters – Tea Production And Marketing Enterprises.

Cereals

The main arable crops are the familiar staples of maize, wheat and barley, plus Ethiopia’s own ancient native crop teff.

Maize (corn) is grown in the mid highland areas, although most regions provide suitable conditions for maize farming and 1.8 million ha are currently under cultivation.

Wheat and barley are grown mostly by small-holder farmers in the highland and mid-highland areas, such as Oromia and parts of Amhara. The total area under wheat and barley today is around 2.5 million ha.

Oilseeds and Pulses

Ethiopian oilseeds and pulses are highly valued for their flavour and nutritional value because they are mostly produced organically. For instance, the Ethiopian white sesame seed is used as a reference for grading in international markets.

Major exports in this sector include sesame, sunflower and rape seeds, plus their associated oils. Sesame oil in particular is increasingly in demand globally, which has seen production rise rapidly as the crop has become a vital export earner for Ethiopia.

Other staples that are in demand domestically, as well as for export, include chickpeas, groundnuts, haricot beans and lentils.

Horticulture

With a favourable climate, abundant labour, land and water resources, most regions of Ethiopia are suitable for the production of a wide range of tropical and sub-tropical fruits and vegetables.

The multitude of vegetable exports includes potatoes, green beans, okra, onions, cabbages, leeks, beetroots, carrots, tomatoes, lettuces and chillis.

On the fruit side, the country ships a lot of oranges, grapefruits, melons, mangoes, guavas, lemons and limes.

Forestry and Related Activities

An estimated 3.5 million ha of natural forest presently remains in 58 designated National Forest Priority Areas. Thirteen of these NFPAs are managed under integrated forest management systems, with about 80,000 ha of industrial forest having been established for limited sustainable exploitation.

The development of a sound forest development programme, with the help of private investors, has become imperative to reversing decades of deforestation in Ethiopia. It follows that opportunities have arisen in the production and marketing of gum and incense, large-scale plantations for timber, paper and chipboard, plus the establishment of rubber plantations.

Rubber

In fact, rubber could offer some of the most interesting long-term projects for investors. Small-scale pilot projects, which were begun in the mid 1990s, have shown that rubber of good commercial quality can be produced in Ethiopia and the government has allocated 85,000 ha in the south west of the country as potential areas for plantations

Spices

Ethiopia is a diverse landscape with certain areas that are highly suited to growing valuable spices, but it hadn’t established it self as a significant international supplier until recently.

Annual spice production of around 350,000 tons now covers an area under farming of nearly 125,000 ha, rising to a potential of 200,000 ha in the lowlands alone. The main spice crops include ginger, hot pepper, fenugreek, turmeric, coriander, cumin, cardamom and black pepper. There has been a noticeable improvement of the quality of Ethiopian spices being exported from year

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TEFF

Less recognisable outside the region is teff, which has proved a major success in recent years. It is gluten-free and high in proteins, calcium and iron, which has brought it under the spotlight as a ‘super grain’ and suddenly increased demand among the chattering classes of London and New York. But within Ethiopia itself teff is the basic foodstuff, so a production push has been underway that has seen yields double and even triple by introducing row-planting methods, rather than the traditional hand scattering. An export ban on raw teff was introduced in 2006 to protect domestic supplies, but this is currently being lifted by the government to allow the sale of the now sought-after teff flour to overseas markets.

FLORICULTURE

One of the country’s biggest success stories in recent years has been in the cut-flowers business, where technical advances and some well-targeted investment have helped to make Ethiopia the second biggest producer in Africa, behind only Kenya. The flower industry has now become a very significant subsector, attracting traditional growers from the Netherlands, India and Israel, as well as domestic companies. The boom means that annual exports are expected to top US$550mn next year, with 100,000 new jobs created by the floriculture industry in the last five years.


to year, aided by government-backed policy incentives that have brought in modern processing techniques and machinery.

Cotton

Ethiopia’s textile and clothing industry is undergoing massive development which is helped by the presence of an affordable, skilled and highly motivated workforce.

Huge potential exists for large-scale cotton farming under irrigation in the Awash Valley and other areas. Much-needed infrastructure is being built and Ethiopia already has a substantial industry of textile and garment factories.

Quoted in The Economist, Fassil Tadesse, CEO of Kebire Enterprises, says: “The textile tradition in Ethiopia goes back a long way, but the industry has only started to develop in the last three to four years. Investment flow is very good… and is still rising. We have big brands like H&M coming here with their suppliers and asking the suppliers to invest in Ethiopia. There is good, strong momentum in the industry at the moment – we hope

to keep it up. Over the next five years I am expecting Ethiopia to become the epicentre of the textile and garments industry in Africa.”

Fisheries

Fresh water fishery development and production is a growing subsector that offers viable investment opportunities. Most of Ethiopia’s fish-producing lakes are located close to urban areas, and the construction of aquaculture is a good investment opportunity. The potential annual yield is estimated at about 45,000 tons, of which only around 20% is exploited at present.

Livestock

Around 13 million Ethiopian households are engaged in some form of livestock production, but it remains relatively basic in commercial terms. Thus, huge investment opportunities exist for the rearing and breeding of livestock, with ample potential for dairy farming in particular, targeting the growing demand of the local and export markets.


Investment in cattle rearing is also an area of opportunity as there is a big demand for live animals from neighbouring countries and the Middle East.

The government’s recently launched Livestock Master Plan intends to apply a value-chain and geographically-focused approach to enhance production and

processing of priority animal products. Such products include red meat (beef, sheep and goat), white meat (chicken), milk (cow, goat, sheep and camel), as well as eggs and livestock feed.

Leather

The country’s leather industry has witnessed tremendous growth since 2005, which is mostly due to large-scale private investment as the government encourages a value-added policy of encouraging the local processing of raw hides. A Leather Products Technology Institute (LLPTI) was established in 2004

to expand technical capabilities in the sector and improve competitiveness.

Ethiopia is home to the largest population of cattle in Africa and the 10th largest in the world. The total number of all livestock breeds has more than doubled in the last 10 years and the livestock sector in general makes up 16.5% of GDP. Every year, the country produces about 2.7 million hides, 8.1 million sheepskins and 7.5 million goat skins. Moreover, with 26 million hair sheep, Ethiopia has the largest flock of this sought-after type in the world. Hair sheep skin has a particularly fine and tight grain, making it highly valuable for quality ladies’ gloves and other luxury items.

The government intends to “fully utilise our resources through value addition and thereby create more jobs within the country, as well as boosting export revenues.” Ethiopian leather products are already exported to markets in Europe (especially Italy and the UK), as well as the US, Canada, China, Japan and the Middle East.

Apiculture

Ethiopia is the largest honey-producing country in Africa and the fourth largest beeswax producer in the world. There are around 10 million bee colonies and more than 800 honey source plants in the country. Annual honey and beeswax production are estimated at 24,700 tons and 3,200 tons respectively. More than 90% of the honey produced is used in-country for domestic consumption. Studies show that, under modern management, the traditional yield per hive can be improved by between 200 and 300%. Apiculture in general is relatively underdeveloped and has the potential for commercial exploitation, especially in terms of exports to Middle East markets.

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“THE GOVERNMENT’S ADLI STRATEGY (AGRICULTURE DEVELOPMENT LED INDUSTRIALIZATION) HAS FOCUSED ON ADVANCING THE COUNTRY’S VAST FARMING POTENTIAL, WHICH HAS ALSO PAVED THE WAY FOR AN IMPRESSIVE EXPANSION OF AGRO-PROCESSING IN RECENT YEARS”


Overview

Over the last 10 years, Ethiopia’s GDP growth rate has averaged at 10%, making the populous, stable, famously diverse Horn of Africa nation one of the world’s fastest-growing economies.

Encouraged by a more outward-looking approach from the country’s government foreign investment has also been growing exponentially, with the number of investment-funded projects surging by 88% in 2014, making Ethiopia the eighth-largest recipient of foreign direct investment (FDI) in Africa last year.

Thanks to a combination of Ethiopia’s rich, largely-untapped natural resources, its rapidly expanding economy, and its government’s commitment to boosting investment in certain key areas, both the mining and energy sectors exhibit particularly exciting potential for growth.

Mining

Ethiopia is the tenth largest country in Africa, with a landmass of some 11 million square kilometres (five times the area of the UK); and contains substantial deposits of gold, silver, tantalum, platinum, gemstones and base metals (copper, lead, nickel and zinc), as well as industrial minerals ranging from marble and granite through to iron ore and potash.

The mineral sector was opened up to private investors in 1991, and was given a further legislative support by the Mining Operations Law of 2010, which shored up investors’ rights of tenure, instigated generous income tax breaks for new projects, provided exemption from custom duties and taxes on mining equipment, and laid a framework for dispute settlement through negotiation and arbitration.

Energy & MiningETHIOPIA’S UNTAPPED NATURAL RESOURCES

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The Ethiopian government rightly views the development of the mining sector as key to the expansion and modernisation of Ethiopia’s economy, and has stated a goal of mining reaching 10% of GDP by 2025 – up from 1% of GDP this year. While this may prove to be an overly optimistic target, it is clear that mineral extraction is set to dramatically increase in Ethiopia, with continued governmental support – and that the country represents an attractive mid-to-long-term proposition for investors looking beyond established sub-Saharan markets such as South Africa, Nigeria and Kenya.

In the view of the World Bank’s 2014 Strategic Assessment of the Ethiopian Mining Sector, mining – in a probable scenario – could generate up to US$1.5bn by 2024; and has the potential for generating as much as a US$5bn annually, given the right level of investment.

Gold, which has been artisanally mined for over two thousand years in Ethiopia, is the country’s primary mineral export, and the most popular market for new investors. The metal is found in alluvial form in large swathes of the Proterozoic terrains in the south, west and north of the country. So far, the Lega Dembi mine in the south of the country, which is co-owned by the Saudi Arabian company Midroc (98%) and the Ethiopian state (2%), is the only large-scale gold mine to become operational; but others are in the pipeline, with the Ethiopian-owned Ezana Mining having recently been granted a large-scale gold mining licence, and the Australian-based company Nyota Minerals working on an advanced project at Tulu Kapi, in the west-central area of the country.

In terms of raw figures, annual gold exports rose more than a hundredfold from US$5mn in 2001 to a high of US$602mn in 2012. Due to a fall in the price of gold, revenue decreased to US$456mn in 2014 (of which US$194mn was earned by Midroc and the remaining US$262mn from smaller-scale artisanal miners), even as production scaled up. The government estimates that, given sufficient investment, the annual gold mining

capacity could more than double from the current figure of 12.35 tons to 30 tons.

Gemstone mining, while considerably less developed than gold mining, also shows strong potential for growth. Ethiopian opals, which occur in considerable quantities in the Amhara highlands, have become highly prized on the international market; but their mining remains an artisanal industry, hampered by a lack of resources and skilled workers. One major problem facing the industry is that, given the scarcity of trained Ethiopian faceters – specialists who can curve and polish rough stones – the mines are forced to sell unprocessed stones into the international market for a much lower rate. At a 2014 symposium, Tewodros Sintayehu, Managing Director of Orbit Ethiopia PLC, put this into financial perspective, explaining that in 2012 Ethiopia exported 16,500 kilograms of gemstones, mainly opal, and earned only seven million dollars. “Had this been processed we could have earned more than 100 million dollars and created more than 1,000 jobs for Ethiopian citizens,” he said. To this end, the Ministry of Mines is actively seeking foreign investors who can engage in processing gemstones in Ethiopia; as well as granting exploration and mining licenses to a handful of foreign gemstone companies.

Unlike the gold and gemstone sectors – which don’t require large quantities of material to be transported away from mines – heavy industrial mining is currently limited by Ethiopia’s landlocked position and developing transport infrastructure. In the absence of both an extensive rail system and a seaport, goods have to be transported by HGV on a fairly basic road network that is in the early stages of a US$4bn, 10-year development programme. In the words of the World Bank’s report, “With regards to industrial minerals, the value to bulk ratio is often small, and therefore the potential for export is limited as the international transportation costs will often outweigh the value of the material itself ”.

Nevertheless, there are already a number of large-scale investment projects in the industrial mining sector, suggesting that certain areas can still be profitable; and

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that the outlook will get brighter as infrastructure improves. Potash Mining, in particular, has attracted significant big-ticket investment, with Allana Potash’s US$642mn project in the Danakil depression due to begin production in the next two to three years; while the Norwegian fertiliser giant Yara is currently seeking equity partners for an even larger, US$740mn mine in the same area. Given the rising local and continental demand for fertiliser, and the fact that the Danakil depression contains huge reserves of raw materials, it seems likely that these will be the first of many such investment opportunities.

Energy

Over the last decade, Ethiopia’s energy sector has grown faster than almost every other area of the economy. Power generation capacity shot up by 230% (1,359 megawatts (MW)) between 2008 and 2012, during which time demand for electricity also grew in double-digit percentages; with projections suggesting that the country may soon reach a 20% year-on-year rise in demand.

The vast majority of Ethiopia’s current 2,261MW generation capacity comes from renewables – primarily hydropower dams – with fossil fuels accounting for just 3.7% of power generation. The government has laid out a 25-year, US$100bn plan for the country to become a renewable energy hub for East Africa, and aims to have a total installed generation capacity of 37,000MW by 2037 – much of which would be available for export.

Nevertheless, such levels of growth, and laudably ambitious plans, have to be understood within the context of a developing nation. A recent US Aid report estimated that just 23% of the population currently have access to the national grid – a figure that falls to 8% in rural areas; while tariffs for those who are connected are heavily subsided by the government, with domestic users currently paying around US3cents/kWh (this compared to an average of US19.8cents/kWh in the UK, for example). Moving forward, the government will have to tread a delicate path between recouping the costs of investment in the energy sector, and keeping tariffs affordable for a user base who are unlikely to be able to afford large price hikes. If it manages to do this, and makes good on its plans to increase energy exports to neighbouring countries (Kenya, Sudan, South Sudan, Djibouti), then the future for energy generation in Ethiopia looks bright.

Crucially, the country is endowed with abundant renewable energy resources, including 45,000MW in additional hydropower potential, more than 10,000 MW from untapped geothermal resources, and significant wind and solar generation opportunities throughout the Rift Valley.

In terms of market split, the hydropower sector is by far the largest, with 15 operational dams currently

generating nearly 90% of the country’s power, whilst construction on another – the giant Grand Renaissance Dam on the Blue Nile is due to finish in 2018. Prospective investors here will need to weigh up the pros of Ethiopia’s huge hydropower resources and proven track-record with dam construction, against the risks posed to the hydro sector by climate change and drought, and the environmental impact that dams can have on nearby ecosystems and communities.

Given that Ethiopia’s dry season is also its windy season, wind power is a logical counterpart to the country’s hydropower plants. However, in spite of flagship projects such as the Chinese-built Adama II wind-farm – which, with an output of 153MW,is currently Africa’s second largest wind farm – the sector remains relatively underdeveloped, producing just 8% of the country’s total energy, and should be seen as a serious point of interest for green-tech investors.

After India, Bangladesh and Nigeria, the Stiftung Solar Energy Foundation rates Ethiopia as the fourth-largest market for off-grid solar power in the world, with a potential value of US$9bn. Efforts are already being made to bring solar power to the country’s rural population (some 68.8 million people), with a state-of-the-art solar technology plant – STM Solar Technologies Manufacturing – recently having opened in Addis Abba, and a number of trial projects rolling out across the country. On a larger, on-grid scale, the Ethiopian government also signed a memorandum of understanding with the US-based Green Technology Africa in March of 2015, paving the way for construction of solar power plants in the cities of Dire Dawa, Kombolcha and Desse, totalling 300MW.

Geothermal power came to larger attention in Ethiopia in 2013, with the signing of a preliminary agreement on a US$4bn public-private partnership between the government and the US-Icelandic firm Reykjavik Geothermal. The deal followed a state visit by US President Barack Obama, whose Power Africa initiative aims to facilitate new and cleaner energy generation across the continent; and bodes well for future public private partnership (PPP) engagement in the field. The first geothermal station, named Corbetti, is located in the volcanically active Rift Valley and should generate 500MWs of power by 2018, rising to 1,000MW in 2021.

Looking beyond power generation alone, there is a great deal of work being done in Ethiopia to improve and expand power distribution – both within the country and into key export markets abroad. To give one major example, financing was recently put in place for the construction of a 500KV transmission link to Kenya as part of a larger East African Electricity Highway project funded by the World Bank and the African Development Bank. Expanded transmission links to Sudan and Djibouti – and new lines to Tanzania and Egypt – could be viable in the near future, as Ethiopian energy production increases.


Introduction

Whilst still regarded by the likes of KPMG as “a textbook example of an undeveloped country with enormous potential” – it is nevertheless not an especially well kept secret that Ethiopia, the second most populous country in Africa, the largest landlocked country in the world and home to the headquarters of the increasingly influential African Union (AU), has been a star performing economy in recent years. It is one of the fastest growing economies in the world, and one of only a handful of so-called ‘African Lions’ deemed to have played a pivotal role in helping Africa’s economy triple in size since 2000.

Enormous potential it still has but it is fair to say much more of that raw potential is now in the process of being realised. In October 2015, as I write, it is hardly a stereotypical example of an undeveloped country any longer; after more than a decade of straight GDP growth breaking in and out of double digits (averaging an astonishing 10.8% per annum between 2003/4 and 2013/14); coupled to a host of ambitious, game changing infrastructure projects in the pipeline aimed at propelling the country into the 21st Century (as well gaining an indirect boon from infrastructure development projects coming online in Kenya, Djibouti and elsewhere in the region); one can sense the resulting international shift in perception that has accompanied

InfrastructureETHIOPIAN INFRASTRUCTURE:

AN AFRICAN LION BEGINS TO ROARBy Brian Naughton

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this country’s recent meteoric economic rise. And that change in perception is with good reason: Ethiopia now sits poised to be a key player on a continent that has, in less than 20 years, completely reinvented itself, with more than a little help from the forces of globalisation and the flow of overseas investment looking for a productive home in the emerging markets.

Currently, Ethiopia’s economy is largely based on agriculture, accounting for 42.9% GDP, 90% of foreign currency earnings and 85% of total employment. The opportunities for agricultural development abound (for example Ethiopia produces some of the finest coffee in the world) so the government’s focus has been on laying down an infrastructure backbone capable of supporting the rapid development of the agriculture

sector by opening it up to investment. Recent developments appear to be bearing fruit: according to the World Bank’s Poverty Assessment report, the steady growth of and improvements made in the agricultural sector are the main reasons behind the reduction of poverty in Ethiopia by well over 30% since the turn of the millennium. It is worth remembering at this stage just how far Ethiopia has come since the devastating famines and political upheavals it suffered from in the 1980s.

Change is in the Air

It is fair to say that the need to change with the times and to provide for a new set of circumstances has not escaped the incumbent Ethiopian government: a raft of changes are already underway to support a new private sector dynamic, consolidating the leaps forward it has made as a country over the course of the last decade, whilst laying down the foundations to exploit the new opportunities being presented as a result of its explosive growth, as well as that of the region. This has spurred Ethiopia on to embark upon a programme of economic and regulatory reform, including the privatisation of multiple state enterprises and an over-haul of government regulation. Whilst the work is evidently ongoing, recent changes have already begun to filter through in terms of attracting fresh investment. The risk/reward dynamic has shifted and a tipping point of sorts has been reached. As one business journalist recently wrote: “Sitting in the Sheraton Hotel in Addis Ababa, it is hard not to

notice the number of private investors from London to Nairobi to Johannesburg passing through and talking about the changing environment and potential of investment in Ethiopia”.

On the ground, which is ultimately where it matters, the changes are certainly showing signs of making a tangible difference, especially in Ethiopia’s capital Addis Ababa, where a new private sector ‘can do’ ethos is taking hold, fuelling a development boom that is transforming the city’s skyline. A recent New York Times article commenting on the pace of change in Addis Ababa put it thus: “It sometimes seems that everything here in the capital is under construction. Head out on one road in the morning and you might find it blocked off for a development project by evening. The thumping of jackhammers, the sight of men in orange vests, and the comments of Ethiopians who are at once infuriated by the inconvenience and impressed with their country’s transformation are constant”. So, things are definitely on the move, and the economic ‘multiplier effect’ of new infrastructure development programmes is beginning to create a momentum of its own -- as it has in so many other African countries. Ethiopia is developing a sense of economic self-confidence.

It is a story you find across the region: East Africa is currently the fastest growing sub-region on the continent. Average East African GDP growth of 5.6% is expected this year – well above the projected southern African average of 3.1%. Of course, that’s in no small part due to Ethiopia’s stellar rise. Sustained growth has led investors to feel increasingly bullish as things begin to show signs of really taking off. Consulting firm Deloitte reports that the region recorded more than 50 infrastructure projects in 2014, valued at an estimated US$60bn (although large projects are still in the planning phase – i.e. those that have not reached financial closure – have not been included in these numbers).

Regardless of the heightened activity, in real terms, East Africa still suffers from being one of the least developed parts of the continent with regards to infrastructure –- and this is beginning to create significant developmental bottlenecks, threatening to put the skids on the long spell of seemingly unbridled regional economic growth. This presents significant potential opportunities for the shrewd investor, however, as demand outstrips supply and the necessary infrastructure to support further growth becomes an increasing priority for governments – as they look outside their borders for sources of capital to bridge the current investment and infrastructure deficits. In Ethiopia’s case, this means – at least if it doesn’t want to become over-reliant on Chinese money and expertise – steadily opening up its economy to compete with the likes of Kenya for much-needed FDI.

Infrastructure Highlights

Ethiopia can already lay claim to some of the most ambitious infrastructure projects currently in progress

“IT IS HARD NOT TO NOTICE THE NUMBER OF PRIVATE INVESTORS FROM LONDON TO NAIROBI TO JOHANNESBURG PASSING THROUGH AND TALKING ABOUT THE CHANGING ENVIRONMENT AND POTENTIAL OF INVESTMENT IN ETHIOPIA”


on the continent. The boldest of all is the country’s flagship project, the Grand Ethiopian Renaissance Dam. When it comes online in 2017, it will generate up to 6,000 megawatts (MW) of electricity, establishing the country as a leading exporter of hydroelectric power. In addition to helping to provide energy for its own economic revolution, the World Bank estimates that this hydropower facility once operational will earn Ethiopia more than USD$1bn per annum from regional export markets. The dam, with a budget of around US$5bn, is funded entirely through the Ethiopian government, with 80% coming directly from tax revenues and the balance being made up through a public offering of project-specific bonds to private investors, enabling individuals to invest in the future of Ethiopian energy. This is perhaps an exceptional case in the financing of such a major infrastructure project -- on a continent largely dominated by FDI and international loans from the likes of China.

In terms of infrastructure investment opportunities, the renewables sector is likely to be a strong contender for the most interesting future market. Black Rhino, a Blackstone Portfolio Company notes: “A recently completed project connected the Ethiopians’ national grid to neighbouring Kenya, Somalia, and Djibouti. It’s reckoned that there exists some 45GW of hydropower capacity alone in Ethiopia, and the country is already home to what was, until December, Africa’s largest wind farm. The United States’ development agency, USAID, is explicitly supporting Ethiopia’s goal to become a regional hub for renewable energy through its Power Africa initiative.”

With the help of outside investment, Ethiopia has the capacity to become a major ‘renewables’ player on the continent, which will likely provide its economy with a serious boost in the years to come.

Ethiopia’s capital city, Addis Ababa, is now home to Africa’s first electrified rail network (the Light Rail Transit). Funded by China’s Exim Bank, which provided 85% of the US$475mn required for its construction, it transports over one million inhabitants around the city daily and has played a significant role in easing congestion, thus greasing the wheels of the local economy.

At the macro-level, a five-year Growth and Transformation Plan (GTP) came to an end in June 2015. Its strategic objectives were based on:

Encouraging large-scale foreign investment opportunities, primarily in the agricultural and industrial sectors;

Completing Ethiopia’s membership in the WTO and improving the country’s commercial regulatory framework;

Providing basic infrastructure in four industrial cluster zones;

Renewing focus on natural resource and raw material industries such as gold, oil, gas, potash, and gemstones;

Increasing road networks by 10,000 miles throughout the country;

Building a 1,500 mile-long standard gauge rail network and creating manufacturing plants for locomotive engines and railway signaling systems;

Quadrupling power generation from 2,000 to 10,000MW, building 82,500 miles of new power distribution lines, and rehabilitating 4,800 miles of existing power transmission lines;

Seeking investment in renewable energy projects involving hydro, wind, geothermal, and bio fuels to take advantage of the global focus on renewable energy;

Increasing mobile telephone subscribers from 7 to 40 million and Internet service subscribers from less than 200,000 to 3.7 million.

The five-year programme has been largely successful. Not all benchmarks have been met but the gap between the GTP’s goals and the present-day reality is, according to many, reassuringly small. Much has been done in relation to achieving the 2015 Millennium Development Goals and industrialisation in the country is now poised to happen at a large scale. Further investment into vital infrastructure that will unlock the business-driven development of the country’s key sectors – such as agribusiness - is likely to remain a high priority for the Ethiopian government. As one commentator puts it, “Absent the government’s current and continued focus on infrastructure, the development story of Ethiopia would hit a wall.” And in continuation on its development agenda the government had now launched the GTP II – which is designed to enable the economy to grow at an average of 11% a year, to enable structural transformation of the economy. One central element of GTP II is the concentration on development of manufacturing, to ensure the necessary transformational change in the economy.

The blueprint for Ethiopia’s modernisation is based on two main elements: an increase in agricultural output to earn export revenue and to prevent a recurrence of the famines of the 1980s; and the construction of modern power and transport systems. Thankfully, perhaps for everyone, a continued focus on the development of such vital infrastructure components seems a racing certainty at this point.

Rail

Significant progress has recently been made on the transport infrastructure front. A modern rail network is rapidly being rolled out. As previously mentioned, the Light Rail Transit system – which carries a million

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people in and around Addis Ababa everyday – is already operating.

In pure economic terms, perhaps the most important project is the Addis Ababa to Djibouti standard gauge railway. For nearly a century, Ethiopia has been heavily reliant on a single, metre-gague link between its capital Addis Ababa and the port of Djibouti. Completed by the French in the early 1900s, it has all the deficiencies of a poorly maintained, Victorian-era railway and has not done spectacularly well (it’s fair to say) at being the principal route for goods flowing in and out of landlocked Ethiopia’s bustling capital. During recent decades, unreliable diesel locomotives ran the line – which itself had a poor load bearing capacity – but were only capable of transporting 240,000 tons of freight per annum. In anybody’s language, Ethiopia has now grown well beyond that kind of bandwidth.

The new standard gauge railway, which as of May 2015 is 80% complete and is expected to go into operation in early 2016, will provide a significant boost in trade and investment terms, since sectors such as agribusiness – for which Ethiopia is naturally suited and eager to develop – become inherently more feasible once modern transport infrastructure is in place. As is so often the case in recent years, it is the Chinese who are providing the muscle and the long-term thinking: the prime contractors are China Railway Group and the China Civil Engineering Construction Corporation; whilst financing for the new line is provided by the Exim Bank of China, the China Development Bank and the Industrial and Commercial Bank of China.

Whilst not all contracts may be in place, Ethiopia is also in the race to become the second sub-Saharan African country (after South Africa) to complete an electrified rail network – once again with the help of Chinese construction and financing. The network will link its major towns and cities. Global Construction Review explains:

“In the first decade of the 20th century, the principal aim of the Ethiopian government was simply to rehabilitate this [Addis Ababa to Djibouti] line. Although aid was forthcoming from the European Union, and operators from as far afield as Turkey, South Africa, Italy and Kuwait were hired to build the upgraded line, there was never enough money or enough commitment to make a difference. The catalyst that allowed the expansion in vision from the upgrading of a single line to the construction of a modern national network was, inevitably, the intervention of Chinese contractors backed by Chinese money.”

Roads

Given the lack of rail infrastructure until very recently, roads have historically played a vital role in transporting goods and people in Ethiopia. Cognisant of this fact, the government has made the road sector an infrastructure priority in terms of public investment. Remarkable progress has already been made in expanding the network across the country. Addis Ababa is a regional and international transport hub. The road network radiates from Addis Ababa to other regions, linking it with cities, towns and other economically active parts


of the country. International highways also link the capital and other key nodes with neighbouring countries such as Kenya, Djibouti, Eritrea, Somalia, South Sudan and Sudan. Over the last seven years – under the Road Sector Development Programme (RSDP) – the government has allocated billions to build, upgrade and repair roads.

But there is still a lot to be done. According to a recent article published by the World Bank: “The limited size and poor quality of roads has been a major constraint to economic growth and poverty reduction in Ethiopia. To address this challenge, the government of Ethiopia, with support from several development partners including the World Bank launched the Road Sector Development Program (RSDP) in 1997. Under RSDP, Ethiopia’s road network has more than tripled from 26,550km to 99,522km today, and 70% is now in good or fair condition compared with 22% at the start of the program. Despite these achievements, the road network has not kept up with the needs of Ethiopia’s fast growth and economic transformation.”

The new Expressway Development Support Project, is designed to help Ethiopia overcome some of these challenges. Specifically, the project will support the construction of the 57km Batu/Zeway-Arsi Negele portion of the Modjo-Hawassa new high capacity highway, connecting the southern region to central, northern Ethiopia and the Djibouti port, the country’s main trade route, while the corridor forms an essential part of the Trans East African Highway that connects Ethiopia to Kenya and southern Africa.

The development of the 203km Modjo-Hawassa expressway is a collaborative effort among the government of Ethiopia and several development partners, and sets a positive example of harmonisation and cooperation among traditional and non-traditional development partners. The African Development Bank (AfDB) is financing the construction of 57km, the Korea EXIM Bank 37km, and the remaining 52km will be financed by the China EXIM Bank.

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The project will also set the framework for expressway development through the preparation of a strategic master plan and the provision of institutional capacity building. In addition, it will provide road safety and institutional development support to the Ministry of Transport.”

Air Transport

Air transport is an important part of Ethiopia’s transport network. State-owned Ethiopian Airlines has gained a good reputation internationally in its 68 years of active service, with an outstanding safety record and one of only a few profitable airlines on the continent. Ethiopian services include passenger and cargo transport, as well as training, repair, maintenance and over-haul services for more than a dozen other African and Middle Eastern airlines. Domestic services are operated to 17 destinations across the country. Ethiopia links with over 60 destinations worldwide, including Brussels, Frankfurt, London, Paris, Rome, Stockholm, Washington DC, Bahrain, Bangkok, Beijing, Dubai, Hong Kong, Mumbai, Delhi, Riyadh and Tel Aviv (amongst many others); as well as operating routes between a host of major African cities, including Lagos, Johannesburg, Lusaka, Nairobi, Accra and Dakar. 40 cargo destinations spread across Africa, Europe, Asia and the Middle East are linked via logistics hubs in Addis Ababa and Liege. In addition to Ethiopian Airlines, other major players have flight schedules to and from Addis Ababa, including Emirates, KLM and Lufthansa.

Power

Ethiopia has historically suffered from relatively poor power infrastructure, with low coverage rates and power outages being the norm – one of the reasons why the government has been keen to invest in industrial trade zones to support emerging sectors such as agribusiness and manufacturing, through the concentration of infrastructure in certain designated areas. As mentioned previously, however, Ethiopia has enormous latent potential for hydropower and geothermal power, as well as other sources of clean energy, such as solar and wind power. Hydropower is by far the most plentiful source of investible energy, as evidenced by the aforementioned flagship Grand Ethiopian Renaissance Dam, scheduled for completion in 2017, which has been funded entirely through the Ethiopian government.

According to USAID: “Ethiopia, under its Growth and Transformation Plan (GTP), envisions becoming a regional renewable energy hub in East Africa. Ethiopia has roughly 2,300MW of installed generation capacity to serve its population of around 90 million people and has little prior experience with private sector-led energy projects. Energy constraints limit growth in key areas of Ethiopia’s economy, including the agricultural and industrial sectors.

At the same time, Ethiopia is endowed with abundant renewable energy resources, including 45,000MW in additional hydropower potential, more than 10,000MW from untapped geothermal resources… and significant

wind and solar generation opportunities throughout the Rift Valley. By 2037, Ethiopia aspires to have a total installed generation capacity of 37,000MW and become a major power exporter. Private sector investment will be critical to supporting this development vision.

The government of Ethiopia is committed to increasing private sector energy participation, expanding transmission and distribution networks to deliver additional power to customers, maintaining a creditworthy off-taker, reforming tariffs to allow for full-cost recovery, and reducing inefficiency in the sector.”

So, in terms of Ethiopia’s long-term development – as well as in terms of the most significant opportunities for private sector infrastructure investment – the renewables sector (especially hydropower) is likely to feature heavily in the coming decades.

Telecommunications

The state-owned Ethio Telecom is currently the sole telecommunications service provider in the country. It provides national and international telecommunication services using satellite, DRMAS, VSAT, UHF, VHF, Long Line and HF Radio. All regional towns and cities are connected by direct microwave links and have automatic telephone and cellular phone services. International links are maintained via satellite earth stations and fibre optics, providing telephone, telex, fax, Internet, television, digital data transmission and other cellular services. Furthermore, Ethio Telecom is currently engaged in a series of Next Generation Network (NGN) projects designed at providing world-class ICT infrastructure in the coming years to facilitate Ethiopia’s rapid development curve.

There is a fair way to go, however, before Ethiopia has a communications infrastructure to compete with the likes of South Africa or even Kenya, as is pointed out by a recent independent statistical analysis paper on the communications landscape finds:

With a population of almost 90 million, Ethiopia is Africa’s second most populous country. Although a number of major contracts have been signed with Chinese vendors since into 2013, the country’s mobile penetration remains one of the lowest in the world. Nevertheless, growth is strong and enormous growth potential remains. Albeit from a low base, mobile penetration is rising and the sector continues to benefit from the poor fixed-line infrastructure which has promoted mobile alternatives as the only viable, or robust, telecoms option in many areas.

The country’s broadband market is also set for a boom following massive improvements in international bandwidth, national fibre backbone infrastructure and 3G mobile broadband services. After years of low uptake due to prohibitive pricing, retail prices are now comparable to other markets in the region that are already more developed.”


ETHIOPIA IS A UNIQUE COUNTRY in Africa that is getting increased recognition as an amazing tourism destination by leading travel guides and the international media.

The quality and diversity of Ethiopia’s natural and cultural attractions, together with strong government support, the improvements in transport infrastructure, tourism accommodation and tourism services has resulted in a growing trend in the number of international arrivals that had reached almost 800,000 in 2014.

Ethiopia is a land of dramatic landscapes of extraordinary contrasts. Traveling across her great heights and plummeting depths unfolding at every awe-inspiring turn you will experience breath-taking beauty and astounding achievements. For this is a land of origins. It is the cradle of humanity, where our ancestors

first walked on two legs. It is also the source of the Blue Nile, the great river whose power and fertility nurtured the origin of civilization itself. And it is the origin of one of life’s great pleasures – coffee, our gift to the world.

Ethiopia is truly a wondrous land. It is hard to believe how old it is, and yet how new. Though its history stretches back to a time when fact and fable intermingle, there is much that is still tangible. Here you will find a wealth of archaeological sites and treasures; the oldest tools in the world, the remains of great ancient civilizations and powerful kingdoms; as well as a living culture that has preserved many centuries’ old traditions. This rich heritage has been recognised by the UNESCO, which has eight World Heritage Sites registered in Ethiopia. In more recent times Ethiopia is the only country in Africa that has never been colonised and was independent as

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it entered the 20th century, giving her people a legacy of dignity and self-confidence.

Today Ethiopia is a living kaleidoscope of peoples drawn from many different ethnic backgrounds and speaking 80 different languages, united in mutual respect for each other and a genuine warmth towards guests in the land of which they are so proud.

Ethiopia’s mysterious ancient cities contrast with lively Addis Ababa whose name means ‘New Flower’. Founded in 1887 by Emperor Menelik II, it is today a vibrant political and business capital home to the headquarters of the African Union and the diplomatic capital of Africa.

10 Travel Experiences Only in Ethiopia

Meet your ancient ancestor, the 3.2 million year old hominoid skeleton ‘Lucy’ at the National Museum. Ethiopia is where humankind first walked upright.

Marvel at the mystical 12th century churches of Lalibela, hand-hewn from rock to create the ‘Jerusalem of Africa’.

Find out where the biblical Ark of the Covenant is kept in Aksum and walk in the footsteps of the Queen of Sheba from where she ruled over her vast trade empire.

Visit the 17th century fairytale castles of Gondar, unique in Africa, and go back to a time of powerful kings ruling from the intersection of three cultural and trade caravan routes.

Discover the astonishing mix of dozens of ethnic groups in Southern Ethiopia to learn about their traditional ways of living – the traditional costumes, body art, henna-dyed dreadlocks, and daring initiation ceremonies.

Wander in colourful Harar, the old walled city of 82 mosques, the fourth most holy site in Islam. This welcoming city with its unique ‘city houses’, was founded in the 10th century and exudes an aura of cultural and architectural authenticity.

Trek the Simien Mountains, the ‘Roof of Africa’ with its endless vistas and endemic wildlife, or hike and climb in Gheralta to experience the spirituality of centuries-old churches dotted among steep pink cliffs.

Explore the out-of-this-world lavascapes and salt-flats of the Danakil Depression, the lowest and hottest place on Earth situated under sea level, and climb the Erta Ale volcano, the world’s oldest lava lake from which fountains of molten rock spur high in the sky.

Discover the lakes and national parks along the Great Rift Valley – the world’s most visible physical feature to astronauts in space – where spectacular birdlife is impossible to miss.

Take a boat trip on the mesmerising Lake Tana, a Biosphre Reserve and the source of the mighty Blue Nile. Ethiopia’s largest lake is loved for its balmy climate, excellent amenities, atmospheric medieval monasteries and the spectacular 45 metre high Blue Nile Falls.

Tourism: A National Priority

The Growth and Transformation Plan 2010/11-2014/15 prepared and approved by the Federal Government of Ethiopia considered tourism together with culture as cross cutting sectors and set-up as strategic directions to enhance the role tourism and culture play in socio-economic and political development initiatives. Considering the pace of growth of tourism arrivals and investment in tourism as well as the potential for further development, the new Growth and Transformation Plan for 2015/16-2019/20 has recognised tourism as one of the top five strategic economic sectors in Ethiopia.

A New Framework to Transform Tourism In Ethiopia

In 2013, the Government of Ethiopia proclaimed Federal Regulation 294/2013, which established the Tourism Transformation Council, the Ethiopian Tourism Organization (ETO) and the Tourism Board.

The Tourism Transformation Council is chaired by the Prime Minister. Its role is to provide leadership and set directions for tourism development and marketing, remove major impediments, foster institutional collaboration and ensure implementation;

The ETO whose mandate is to enhance the benefits of tourism in a sustainable and competitive manner by mobilising and providing leadership to the tourism sector and stakeholders towards tourism destination development and marketing;

The Tourism Board oversees the ETOs activities, provides guidance, reviews and approves work programmes and budgets and evaluates the performance of the ETO.

“THIS IS A LAND OF ORIGINS. IT IS THE CRADLE OF HUMANITY, WHERE OUR ANCESTORS FIRST WALKED ON TWO LEGS. IT IS ALSO THE SOURCE OF THE BLUE NILE, THE GREAT RIVER WHOSE POWER AND FERTILITY NURTURED THE ORIGIN OF CIVILIZATION ITSELF”


Our Partners

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INTL FCStone Ltd INTL FCStone Ltd [IFL] is a financial services firm, providing advisory, execution and clearing services to commercial clients seeking to mitigate exposures to FX, metals, energy and soft commodities. IFL is a Category 1 ring dealing member of the London Metal Exchange, a full clearing member of ICE Clear Europe, CMECE, and LCH EnClear, and offers clearing services on a host of global exchanges through group affiliates.

INTL FCStone Ltd (IFL) provides a customised foreign exchange and treasury service to organisations in more than 140 currencies. Our goal is to provide our clients with a single solution for their local currency needs worldwide. We have been a specialist provider of cross-border payments since 1986. Our service gives clients the advantage of partnering with an FX solutions provider whose products and services are competitive in terms of price, security and delivery. By contracting with IFL, clients can make payments in local currency all over the world, giving them more ultimate control and enabling them to obtain the greatest value possible. Engaging with IFL gives clients access to our global network of over 325 correspondent banks, thereby ensuring highly competitive exchange rates in local markets.

INTL FCStone Inc. is a public company listed on the NASDAQ stock exchange. INTL FCStone Ltd, a company registered in England and Wales and a wholly-owned subsidiary of INTL FCStone Inc., is authorised and regulated by the Financial Conduct Authority [FRN: 446717]

New Age New Age (African Global Energy) Limited is a privately held oil and gas company with a portfolio of quality assets in seven countries, mostly in sub-Saharan Africa, a highly experienced board and a strong group of shareholders. Since the company was founded in 2007, we have drilled 12 successful exploration and appraisal wells and built a portfolio comprising six oil fields and five gas fields. Five development projects have been sanctioned and we have already started producing from two of these fields.

Our capability covers the full industry cycle and numerous world-scale developments. We have extensive experience of emerging oil and gas plays, particularly in developing countries. Our current activities cover exploration, appraisal and development, with first production achieved from Congo Brazzaville and Kurdistan in 2014.

Our operational portfolio is the outcome of a focused strategy to acquire high quality assets in Africa and the Middle East, through early entry into emerging regions with potential for significant discoveries. Our strategy is to build a portfolio of high-quality oil and gas assets in emerging, under-valued regions with limited historical exploration. We then commercialise or monetise these to achieve maximum return for our shareholders, business partners and host governments.

We have been investing in Ethiopia since 2009 through our exploration programmes for oil and gas and successfully delineated a gas discovery in 2014 in the southern part of the country. We have further plans over the next few years and are actively exploring in the Adigala region, adjacent to Ethiopia’s second city Dire Dawa. We value good relationships with local communities in the areas where we work and make appropriate investments in community infrastructure where appropriate.

Circum Minerals Ltd – Company DescriptionCircum Minerals Ltd is a private company developing a world class potash deposit in the Danakil Basin of Northeastern Ethiopia. The Danakil Potash Project is a significant stand-alone deposit with a mineral resource of 4.9 billion tons of potash salts within an overall estimated 11 to 13 billion tons of total geologic endowment of potash rich mineral salts located within its project area. Circum Minerals is targeting annual production of 2 million tons of muriate of potash, the most common form of potash fertilizer, and 750,000 tons of sulfate of potash, the premium fertilizer product that doesn’t contain chloride. The Company recently completed a definitive feasibility study on the Danakil Project, which showed the Project to have robust economics due to its low capital intensity. In addition, the Project is expected to deliver the lowest cost potash production in the world.

Circum Minerals is committed to supporting Ethiopia’s economic growth. The development of the Danakil Project will bring new employment opportunities to the surrounding area. In addition, Circum Minerals is committed to giving back to the communities in which it operates and has provided assistance with local water supplies and medical facilities.


Clarke EnergyClarke Energy is a multinational specialist in the engineering, installation and maintenance of reciprocating engine based power plants and gas engine compression stations. Our offering ranges from the supply of an engine, through to the turn-key installation of a multi-engine power plant. Our facilities deliver fuel efficiency and help reduce carbon emissions. Applications include combined heat and power with natural gas, biogas, landfill gas and coal gas or high efficiency diesel-fuelled power generation. We are the largest authorised distributor and service provider for GE’s reciprocating engine business.

The company’s focus is on delivering quality installations, backed up with reliable, accountable after-sales support. Clarke Energy has a dedicated, highly-trained team of sales, engineering, project management, commissioning and maintenance staff deployed around the world.

VasariVasari is an operationally led investment group focussed on the fast moving consumer goods sector & associated value chain. Led by Vivian Imerman, Vasari has significant experience in both developed and emerging markets with a strong heritage spanning over 30 years throughout Africa. Vasari only invests in businesses where it believes it can add value through a blend of entrepreneurial acumen and the installation of procedures and disciplines in line with the best practices of multinational organisations.

Ethiopia is a core market for Vasari and its commitment to the market is highlighted by two permanent in-country representatives who have a wealth of experience across numerous spheres of the Ethiopian economy. With regard to current businesses Vasari has investments in:

• Dashen Brewery – Dashen is one of the largest brewers in the country and with our local partner, TIRET, we continue to grow the business and are currently completing a new brewery at Debre Berhan;

• Ahadukes Food Products – Ahadukes is a partnership with an Ethiopian entrepreneur which has recently completed a new manufacturing facility in the Oromia region from which it will shortly be launching its range of biscuits for the domestic market to be followed by other food products;

• Rorank Business – Rorank is a relatively young domestic distilling and blending spirits business based in Chacha. In conjunction with the founder we are now expanding the business across all facets of its operation.

KEFI MineralsKEFI Minerals plc is a mining exploration and development company focused on the highly prospective Arabian-Nubian Shield. Its current major projects, with an attributable 1.93Moz Au Mineral resources (JORC 2012), are located in Ethiopia and Saudi Arabia, complemented by an exploration portfolio of over 1,550km2.

The most significant asset is the Tulu Kapi gold project in Western Ethiopia. Following the grant of the Mining Licence in April 2015, Tulu Kapi is rapidly progressing towards development and is scheduled to commence production in 2017, with an output of 1mnoz over 13 years and all-in sustaining costs of c. US$760/oz. At the start of production, the asset is expected to have an NPV of US$180mn. The project has received significant support from the government of Ethiopia, which intends to fund infrastructure including the new public road and electricity connections.

KEFI is traded on the AIM of the London Stock Exchange (AIM: KEFI). For more information, please visit www.kefi-minerals.com.

Pittards plc Pittards plc is a leather and leather goods company founded in 1826 and listed on the Aim section of the London Stock Exchange. Its headquarters are based in Yeovil, Somerset, which was the centre for one of its original raw materials, UK domestic sheepskin, used to make the gloving leathers for which it is famous. This factory now also processes hides for footwear and leather goods leathers, as well as making premium leather goods under the Pittards England and Daines & Hathaway brands.

We have been buying sheepskin in Ethiopia for around 100 years, which led to our managing then purchasing the Ethiopia Share Tannery Company in 2009, where we make fine quality leather destined for brands such as FootJoy, leaders in the golf sector, and key US and European brands within the dress glove sector. Our involvement in Ethiopia has progressed with the set up of four factories in Addis Ababa, where we manufacture leather work gloves for the US market and increasingly dress gloves for both our own brand and third parties. We have also launched our Made in Ethiopia Q’oda collection of leather-based accessories in recent months.

We employ around 200 people in the UK and 1500 in Ethiopia, half in the tannery and half in the glove factories. We are constantly training and up-skilling our workforce to meet the growing demands for our products.


IC PublicationsIC Publications has over 50 years’ experience in publishing magazines, country supplements, industry reports and market intelligence on Africa. Among the Group’s bestselling magazines are New African, African Business, African Banker and New African Woman magazine.

The Group combines experience, quality journalism and an unrivalled distribution network at key strategic points such as international airlines, conferences and events to reach the widest audience of any pan-African or international title in Africa. Reaching over 2.6 million loyal readers in more than 100 countries, our magazines are the region’s undisputed market leaders.

We partner with the world’s most influential organisations and the most important stakeholders in Africa. This includes the World Economic Forum, the United Nations, the World Bank, the African Union, the African Development Bank, the Commonwealth Secretariat and the Corporate Council on Africa among others.

WAFA Marketing and Promotion PLCWAFA Marketing and Promotion PLC (WAFA) was established in October 2008 with the core and focal objective of providing quality, satisfactory, and up-to-date service in investment promotion and investor relations, brand development, organising local events, and creatively making advertisement production. These services, on which the company acquired expertise, have been provided to the private, government, and non-governmental organisations.

As part of its vision to promote Ethiopia’s investment potential and to contribute its share to the envisioned steady, fast paced growth of the economy, WAFA in partnership with the Ministry of Foreign Affairs, its diplomatic missions in the event hosting countries, and the Ethiopian Chamber of Commerce and Sectoral Associations has vehemently organised a series of 13 international business and investment forums in nine countries.

Your Reliable Gateway to Ethiopian & East African Markets!

Oxford Business GroupOxford Business Group (OBG) is a global publishing, research and consultancy firm, which publishes economic intelligence on the markets of Asia, the Middle East, Africa, Latin America and the Caribbean.

OBG offers comprehensive analysis of macroeconomic and sectoral developments, including banking, capital markets, energy, infrastructure, industry and insurance.

OBG’s acclaimed economic and business reports are a leading source of local and regional intelligence, while OBG’s online economic briefings provide up-to-date in-depth analysis. OBG’s consultancy arm offers tailor-made market intelligence and advice to firms operating in these markets and those looking to enter them.

Cluff GeothermalCluff Geothermal is a UK-based geothermal development company focussed on developing geothermal resources to generate electricity and heat. Founded in 2010 by Managing Director George Percy, the company is established as a leader in the rapidly growing East African geothermal sector. Through participation in exploration, production and drilling, by integrating drilling management and rig ownership into our business, and by funding exploration drilling, Cluff is helping to drive geothermal development across the region.

In Kenya our Atlas Copco ‘Predator’ drilling rig is engaged in a multi-borehole drilling contract at the Menengai steam field, with a view to significantly reducing the cost and time to deliver deep geothermal wells.

In Ethiopia Cluff Geothermal hold the exploration licence for the outstanding geothermal prospect at Fantale, around 200km east of Addis Ababa. Early estimates suggest that Fantale could have a geothermal resource capacity of up to 750MWe. We have had a presence in the country since 2011, and we are now well established with full time staff and an office in the capital. We will shortly begin surface exploration works at Fantale, having been among the first successful bidders to the geothermal risk mitigation fund provided by the German Development Bank, KfW.

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54 Capital 54 Capital is an asset management firm based in London and dedicated to the African continent.

Since inception in 2013, 54 Capital has invested in Education and Fast Moving Consumer Goods, in Morocco and Ethiopia respectively.

In Ethiopia, 54 Capital has capitalised seven businesses in the Fast Moving Consumer Goods sector (including manufacturing of pasta, edible oil, confectionary and personal & household care) with c. US$40 million. These investments have led to substantial asset and product quality improvement, expertise transfer, as well as wealth and job creation.

More recently, 54 Capital has committed US$42 million into the largest pharmaceutical company in Ethiopia, and is in the process of closing the transaction. This, with the US$90 million investment in Dashen Brewery led by 54 Capital’s founder and CIO Saad Aouad in 2012, will take the total investment amount brought into Ethiopia by 54 Capital’s team to US$180 million.