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Ethiopia signed a contract Friday worth nearly $1 billion with a Chinese energy company to build two transmission lines linking the country’s largest dam to the country’s central power grid.
The Ethiopian Electric Power Corporation (EEPCo.) signed the deal with China Electric Power Equipment and Technology Company (CET) in the Ethiopian capital.
The three-year project, which will be fully funded by the Export-Import Bank of China, will start immediately.
EEPCo.’s CEO said the deal was a major step for Ethiopia’s energy sector.
“This is another milestone in (realising) Ethiopia’s development objective,” Miheret Debebe told reporters.
The two transmission lines, with a combined capacity of nearly 1000 kilovolts, will run over 700 kilometres to link the Grand Renaissance Dam to the main power grid near the country’s capital Addis Ababa.
Miheret urged CET to adhere to the timeline set out in the contract for the project’s completion, and admitted that securing funding for the large-scale project was a “challenge.”
As part of its ambitious Growth and Transformation Plan (GTP), Ethiopia is developing its energy production sector with the aim of exporting power to neighbouring countries.
With a capacity of 6,000 MW, the Renaissance Dam on the Nile River is the largest of Ethiopia’s dams, most of which are still under construction.
Hydropower is set to be the largest energy provider, but wind, geothermal and solar projects are also underway.
The country has the capacity to produce 45,000 MW of power, more than the total amount currently consumed in all of sub-Saharan Africa, according to official figures.
The GTP seeks to boost economic growth in order to transform Ethiopia into a carbon-neutral, middle income country by 2025.
China is a major player in the Horn of Africa nation, heavily invested in manufacturing, energy, and transport industries.
Copyright © 2013 AFP
By William Davison
Ethiopia, the world’s fourth-largest sesame grower, may see earnings from exports of pulses, oil seeds and spices rise by a third to more than $900 million this year.
Africa’s largest coffee producer and second-most populous nation is providing free land for processing and warehouses, as well as waiving related import and export duties, Haile Berhe, president of the 110-member Ethiopian Pulses, Oil Seeds and Spices Processors-Exporters Association said.
“The government is helping exporters through many incentives for each company,” he said in an interview in the capital, Addis Ababa, yesterday. “If the supply side is there, I am sure we can export that amount” in the year through July 7, 2013.
If the trends continue, Ethiopia may earn $2 billion a year from seeds, spices and pulses by the end of a five-year government growth plan in mid-2015, Haile said. Ethiopia’s government is working to attract foreign investment into agricultural processing to help it diversify an economy that relied on coffee for about a fourth of the $3.2 billion it earned from exports last year.
Sesame seeds accounted for around $460 million of last year’s revenue of $660 million from oil seeds, pulses and spices, Haile said. Ethiopia is the biggest sesame grower in Africa, and largest after India, Myanmar and China, according to the United Nations Food and Agriculture Association.
Chinalight General Merchandise Import & Export Corp., Qingdao Kerry Vegetable Oils Co. Ltd., and China National Chemical Fiber Corp. are major Chinese buyers of Ethiopian sesame, said Haile, who is also marketing manager for Guna Trading House Plc, part of the ruling party-linked Endowment Fund for the Rehabilitation of Tigray group.
Sesame seeds are used as in cuisines around the world, from candies in India and the Caribbean, to a hamburger-bun topping in the U.S. and as both a cooking-oil and ingredient in East Asian meals.
China buys about 60 percent of Ethiopia’s sesame, and foreign currency earned from those are legally required to be deposited at the state-owned Commercial Bank of Ethiopia, the country’s largest lender, he said.
“This money is then put into an escrow account with theExport-Import Bank of China and used to secure at least one of the construction loans obtained from that bank,” Deborah Brautigam, professor and director of the International Development Program at Johns Hopkins University in Baltimore, said in an e-mailed response to questions Nov. 29.
That is the collateral for credit “that Ethiopia couldn’t otherwise secure on global credit markets,” she said. Commercial Bank of Ethiopia took a $300 million credit line from the Chinese trade bank in December 2011.
The government in turn has guaranteed 80 percent of eachbank loan made to the oil seed, spice and pulse industry, said Elias Genet, general manager of Agro Prom International Plc, an Addis Ababa-based exporter.
“The investment environment is better than it ever has been,” he said in a Nov. 29 interview. Growers have been given advice by the government and helped with seeds, fertilizers, pesticides to help boost production, he said.
Around 90 percent of sesame seeds and all white pea beans are bought by exporters on the state-owned Ethiopia Commodity Exchange, Elias said. There is potential for increased production of niger seed, linseed, soybeans, groundnuts, chickpeas and fava beans, he said.
To contact the editor responsible for this story: Antony Sguazzin at email@example.com
Ethiopia is one of the few remaining African countries to introduce mobile banking. With the booming economy and a population of 80 million this country could be the next gold mine for mobile banking companies.
Mobile banking has proved to be a lucrative venture in the developing world, where large parts of the population belong to the so-called “unbanked.” In Africa, only Ethiopia and Zimbabwe do not provide mobile money services. That will change soon for Ethiopia.
BelCash and M-Birr are mobile banking technology providers that have been in Ethiopia for the last three years to set up mobile banking and mobile money services.
Dutch company BelCash is focused on mobile banking, working in partnership with banks to provide easier access to finance through bank accounts. Ireland-based M-Birr is a mobile money service that works with micro finance institutions where no registration at a bank is needed.
The companies will face several challenges in Ethiopia. Half of the population is said to be illiterate, and the telecom coverage in the country is far from perfect. The pressure on the telecom network will increase as the number of Ethiopians owning a mobile phone increases.
In the last four years, the number grew from three million to 17 million users. And Ethiopia’s telecom provider, Ethio Telecom, expects that number to grow to 40 million in the next three years.
BelCash founder Vince Diop does not believe a limited network or high illiteracy rate will be a barrier for introducing mobile banking.
“We have multiple channels that people can use, like sms, ivr, so that if one channel is not working properly than still they have other options,” Diop said.
The government regulates Ethiopia’s telecommunications market, meaning that there is only one telecom provider and others are not allowed. Both BelCash and M-birr are strictly technology providers. M-Birr General Manager Thierry Artaud sees the regulated market as a benefit.
“If you look at your neighbors, Kenya, Tanzania Uganda, they all have multiple mobile operators and they all have mobile money services and even multiple mobile money services,” said Artaud. “If the country was deregulated, the big operators like Vodafone, MTN would come to Ethiopia and launch a mobile money service. Because its not deregulated we are protected.”
Ethiopia has looked at other developing countries to learn from their experiences with mobile banking. The National Bank of Ethiopia visited Kenya, Pakistan and Brazil.
Frezer Ayalew is the director of micro-finance supervision of the National Bank of Ethiopia. He says mobile banking services could be a positive development for Ethiopia.
“Financial service accessibility is very necessary in order to smoothen consumption, built household assets. And it’s critical for people to have access to finance,” said Ayalew. “For the economy it has great contribution in terms of mobilizing domestic savings with these services.”
Ethiopia also strongly regulates its financial institutions. The National Bank of Ethiopia just finished a draft directive on how mobile banking services should be regulated as more companies have shown interest in starting mobile banking services.
Frezer says the directive is needed to face possible challenges.
“The overall purpose of the directive is to make sure that the financial institutions are providing the service in a prudent and safe manner so that the stability of financial system is maintained,” said Frezer.
Artaud says that until the directive has been finalized, M-Birr is allowed to start a pilot.
“People will be able to start registering for real, with real money and transferring money throughout the country,” said Artaud. “The only limitation will be where the branches are, because we are talking about roughly thirty points of sales for the pilot.”
The National Bank of Ethiopia expects that the directive will be approved in the coming months.
By Aaron Maasho
(Reuters) – Ethiopia’s economy is expected to maintain a growth rate of 11 percent in 2012/2013, newly-appointed premier Hailemariam Desalegn said on Tuesday, predicting a slump in crippling inflation rates that have plagued the country in recent years.
“Our economy has grown by a growth rate of over 11 percent in the past few years and we estimate this rate to be maintained this fiscal year,” he told lawmakers on Tuesday during his first appearance in parliament as the country’s leader.
The International Monetary Fund in June raised its economic growth forecast for Ethiopia to 7 percent from 5.5 percent owing to slowing inflation.
Official estimates have tended to be generally higher than the Washington-based body’s growth projections.
Hailemariam was sworn in last month after his long-standing predecessor Meles Zenawi died from illness in August.
Under Meles, the Horn of Africa nation embarked on ambitious infrastructure projects to improve its economic competitiveness, including a multi-billion dollar plan to scale up energy generation.
Inflation, however, soared during his last four years in power, peaking at 64 percent in July 2008.
The rate slowed to 19 percent last month from 20.2 percent in August, helped by a slowdown in the rate of food price rises.
“We have managed to lower inflation by subsidising oil and wheat. We will work to raise agricultural productivity, subsidies and savings to reduce the inflation rate to single-digits this year,” Hailemariam said.
The IMF has said tight monetary and fiscal policies have contributed to declining inflation, through the termination of central bank financing of the budget and significant sales of foreign exchange.
The body warned Ethiopia last year that excessive monetary growth was the principal cause of its rising inflation, while private bank lending restrictions and a tricky business environment would slow economic growth.
High coffee earnings in the past few years have also boosted the economy of Africa’s biggest coffee producer, as have rising gold, oil seed and livestock exports.
Ethiopia is the world’s fourth-largest sesame exporter after China, India and Myanmar. (Editing by Yara Bayoumy)
The Bank approved a four-year country aid strategy which aims to improve the service delivery within the state institutions. This was endorsed by the World Bank’s Board of Executive Directors in New York, US.
The latest loan facility accounts for nearly a third of Ethiopia’s annual aid package of US$ 4 billion a year.
“The new Country Partnership Strategy (CPS) for Ethiopia seeks to build on the development progress over the last five years of its previous strategy and to help its government and communities go further to enhance growth, more jobs, better health and education, and significantly less poverty,” the Bank said in a statement.
The interest-free credits would support key services to poor people across the country. The Bank said the funds would help to further develop road networks to help promote better regional trade and internal travel.
Bank officials said following the approval, it agreed to mobilize US$ 600 million in development financing for the third phase of the Promoting Basic Services (PBS III) programme, which serves nearly 84 million people in Ethiopia.
Guang Zhe Chen, Bank’s Country Director for Ethiopia, said the anti-poverty plan will continue to contribute to Ethiopia’s rapid progress towards achieving most of the Millennium Development Goals, by providing funding for crucial staff to help to improve key services such as education, health, food production, water and sanitation.
“Promoting improved access to quality, decentralized basic services is also central to the core elements of Ethiopia’s new CPS,” the Bank official added.
The plan is co-financed by the Government of Ethiopia, the European Union, the UK Department for International Development, the African Development Bank, Italy and Austria.
Launched in 2006, the programme has helped hire over 100,000 new primary school teachers at the district level; more than 38,000 health extension workers nationwide; and some 45,000 agricultural extension workers.
The programme has also promoted transparency and citizen engagement by posting its budgets and performance score-cards in 84% of its operating districts and encouraging greater social accountability.
Donors praise Ethiopia for its ability to help reduce its under-5 mortality rate from 123 per 1,000 live births in 2005 to 88 per 1,000 live births in 2010.
The Bank said it would support the Government’s impressive progress in expanding the road network; the Ethiopia Transport Sector Project will invest US$ 415 million to upgrade five main roads that will play an important role in supporting economic growth in Ethiopia over the medium to long term.
The roads project will help provide better access for industrial, agricultural and tourism developments, and will also provide improve access for beneficiaries in the project areas to essential services.
Source World Bank
Ethiopia’s year-on-year inflation fell for the forth consecutive month to 20.9 percent in June from 25.5 percent a month before due to slowing food prices, the statistics office said on Monday.
The Central Statistics Agency said food inflation dropped to 21.5 percent from 29.2 percent in May, while non-food inflation rose slightly to 19.8 percent from 19.6 percent.
Month-on-month, prices did not change, compared with a rise of 0.9 percent in the previous month, the agency said.
Although the Horn of African country has registered one of the highest economic growth rates in the world for the last few years, the International Monetary Fund says the biggest challenge facing its policymakers is the high rate of inflation.
Surges in global oil prices and poor harvests drove inflation into double digits in several African countries in the past year, including some of the poorest in the Horn.
Ethiopia’s economy has been boosted in the past few years by rising coffee earnings as the country is Africa’s biggest coffee producer, as well as surging gold, oil seed and livestock exports.
Officials expect a gross domestic product growth of 11 percent for 2011/2012 which ended in March, thanks to rising agricultural output, the seventh consecutive fiscal year of growth.
Source: ADDIS ABABA (Reuters
By Prince Ofori-Atta
Ethiopian Prime Minister, Meles Zenawi has forecast that the economy will grow by 11 per cent, although this will be blighted by a high inflation rate expected to average 32 percent.
Presenting his six month report to parliament Wednesday, Zenawi said the country had grown by 11.4 per cent and for the fifth year in a row, Ethiopia’s growth would be above the 10 per cent target set by the government.
However, the World Bank and the International Monetary Fund (IMF) have been less optimistic of the Horn of Africa country’s growth forecast, projecting that growth would be around 7 per cent.
The IMF warned that the high inflation rate was likely to impact negatively on growth prospects. Meles told legislators that the government was doing its best to bring the current inflation rate to a single digit figure at year end. “The government has totally stopped borrowing money from the national bank, which was among others things aggravating inflation,” he said. Meles said the country’s industry sector, which he expects to be the backbone of the economy, had shown great improvement, registering 12.5 percent growth.
He indicated that the government tax collection potential is on the rise. Even Somalia is collecting more tax than us In the past six months the government was able to collect around US$2 billion from various taxes and non-tax services showing around 40 percent growth compared to previous years. Meles, however, said the country’s tax collection was still below African standards, which stand at 18 percent. “Even Somalia is collecting more tax than us. Now we approach 10 percent of tax collection, which is still low compared to others countries on the continent,” he said.
The prime minister also indicated that during the period under review there was a budget deficit of more than US$400 million, which many say will remain the challenge for the government in curbing rampant inflation. Meles indicated that his government was undertaking studies to invite more foreign investors into the country in various fields. However, the premier did not elaborate to which sectors the government was inviting foreign investors. “We are currently assessing the advantages and disadvantages of the sectors which we are going to let foreign investors in,” said Meles.
Foreign banks, insurance firms and telecommunication companies are barred from operating in Ethiopia. There are 14 banks in the country but experts warn that the country is under banked and there is need for 40 more financial institutions.
Source The Africa Report
By William Davison
Jan. 6 (Bloomberg) — Ethiopia’s central bank loosened its monetary policy in a move economists said is aimed at increasing the amount of cash that banks have available for lending.
The National Bank of Ethiopia cut the minimum ratio of deposits to be held in reserve to 10 percent from 15 percent with effect from Jan. 2, according to a directive issued by the Addis Ababa-based central bank and obtained by Bloomberg. The document was confirmed by Alemayehu Kebede, director of the bank’s communication directorate. The amount of “liquid assets” to be held as a proportion of deposits was also reduced to 20 percent from 25 percent, it said.
Lending to exporters and other businesses declined after the central bank issued a directive in April ordering banks to each month buy government securities equivalent to 27 percent of their total loans to help fund infrastructure projects, said Eyob Tesfaye, an independent economist who previously worked for the Ethiopian government. A slowdown in deposits also curbed banks’ ability to lend, he said in a phone interview today.
The central bank’s directive is “the right decision,” Eyob said. “You cannot strangle your export sector”.
Ethiopia is Africa’s second-biggest coffee exporter, according to data from the International Coffee Organization, and ships other commodities including gold, oil seeds and qhat, a narcotic leaf.
The International Monetary Fund and the World Bank said in August that restrictions on lending to private industry may constrain growth in Africa’s second-most populous nation. The government is targeting annual economic growth of 11.2 percent to 14.9 percent through mid-2015, while the IMF and World Bank say the country’s growth potential is as much as 8 percent.
The looser monetary policy will “definitely increase” money supply in Ethiopia and may result in higher inflation, Eyob said. Annual consumer inflation stood at 39.2 percent in November, according to data released by the Central Statistical Agency last month. The government has blamed the surge in consumer prices last year on high global commodity prices and increased money supply.
–Editors: Paul Richardson, Alastair Reed.
By Sarah McGregor
(Bloomberg) — Ethiopia’s “highly distorted” monetary policy requires urgent reorganization because it is stunting growth and undermining macroeconomic stability, the International Monetary Fund said.
The Horn of Africa country’s five-year economic-development plan that starts in the fiscal year beginning July 8, 2010, and targets annual growth of 11.2 percent is “very ambitious,” the Washington-based lender said. The IMF projects output for the period will range from 6 percent to 8 percent a year.
“The main concerns stem from heavy financing needs that have not been secured, insufficient prioritization and the limited role envisaged for the private sector,” the IMF said in an e-mailed report today. “High and rising inflation and entrenched negative real interest rates also threaten Ethiopia’s macroeconomic stability.”
The coffee-producing nation’s commodity-dependent economy grew 8 percent last year, versus 10 percent in 2010, the fifth- fastest in sub-Saharan Africa after the Democratic Republic of Congo, Zimbabwe, Botswana and Nigeria, IMF data showed.
Expansion may slow to 6 percent in the fiscal year through July 7, 2012, from an estimated 7.5 percent last year, because of rising inflation, restrictions on private-bank lending and a difficult business environment, the IMF said on May 31. Unrealistic Ethiopia’s goal to reduce inflation to less than 10 percent, from 40.1 percent in September, won’t be easily achievable mainly because the central bank’s monetary policy is unsuitable to tackle rising prices, the IMF said today.
“Single digit-inflation projections in the plan appear unrealistic as long as a loose monetary policy and a heavy dependence of public-sector financing on bank credit continues,” the lender said. The development plan envisions Ethiopia increasing crop production, boosting infrastructure and improving electricity generation to meet its growth goals.
Ethiopia plans to ramp up debt offerings to finance its planned 5,250-megawatt Grand Ethiopian Renaissance Dam, after raising 7 billion birr ($407.5 million) in bond auctions in the past six months, Communications Minister Bereket Simon said on Sept. 27. The 80 billion-birr hydropower project to build Africa’s biggest power plant is being funded domestically to demonstrate how Ethiopia’s economy is reviving, Simon said.