Ethiopia has signed a deal with two Chinese companies –Tyson Group and Green Diamond– to invest a total of USD 2 billion for the purpose of processing Ethiopia’s bamboo and producing paper products for both local and export market.
How The Deal Is Going To Work
- Tyson Group and Green Diamond would be processing bamboo in the Benishangul Gumz Region of Ethiopia, according to Abebe Abebayehu, Investment Commissioner of Ethiopia who helped seal the deal.
- Once fully implemented, the investment of Tyson Group and Green Diamond is expected to create many job opportunities for residents of Benishangul Gumz, which has the lowest unemployment rate (of 6.3 percent) in the whole of Ethiopia.
- Mr. Abebe, further revealed that the planned annual production capacity of the company will be one million tons of paper products.
Key Analysis of What This Deal Means For Ethiopia
- With a GDP of $80.56, this deal is expected to add, at least 1.6% growth to Ethiopia’s economy, which is over 241 times less than that of the largest GDP in the world — US. As at 2017, the share of Ethiopia’s GDP contribution from agriculture was more than 34%.
- Despite having estimated one million hectares of natural bamboo forest, (the largest in the African continent, mostly spread out in Ethiopia’s six regional states of Amhara, Benishangul-Gumaz, Gambella, Oromiya, Southern Nations Nationalities and Peoples’, and Tigrayis), only about three known companies are engaged in the development of products made out of bamboo — Bamboo Star Agro-forestry, ADAL Industry and African Bamboo.
- Ethiopia spent about US$55.2 million on average, per year between 2005–2013 to import different processed wood products, including bamboo products. Expenses on the importation of this different processed wood products increased by 13% in each of these years.
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China Is Strategically Positioning Itself in Africa
Apart from the bamboo processing deal, another Chinese company, CGOC, has agreed to open processing of cattle and sheep meat in Awash Febntale area of Ethiopia in a investment worth $215 million.
Another Chinese medical equipments manufacturing company has also agreed to come to Ethiopia, investing $75 million in a manufacturing plant in Kilinto Industrial Park in Addis Ababa.
Ethiopian TV also reported that another Chinese company has agreed to invest in printing industry in Ethiopia.
A Sinking Ethiopia?
At the moment, imports in Ethiopia far outrank exports by as much as 400%, while government debt stands at 59% of its gross domestic product. About half of its external debt is owed to China.
- The largest part of the debt was for the construction of the $4bn Ethiopia-Djibouti railway. The Export-Import Bank of China backed the project with $3.3bn in loans.
- A Chinese diplomat told the Financial Times in June 2018 that China is “way overextended” in Ethiopia. China’s main project insurer, China Export and Credit Insurance Corporation, known as Sinosure, also said it had lost more than $1bn on the Ethiopian-Djibouti railway.
- Chinese firms also built and funded the $475m light railway in Addis Ababa, a $86m ring road and the East African country’s first six-lane highway.
In August 2018, Chinese paper Xinhua reported that Ethiopia had licensed 1,294 Chinese investments in the 2017/8 financial year out of a total of 5,217 investment projects. There are about 400 Chinese investment projects valued at more than $4bn already in full operation in Ethiopia. A good number of this are based within industrial parks and the real estate sector.
Prime Minister Abiy told parliament in February 2019 that his government has successfully renegotiated the repayment period for 60% of its external debt, which currently stands at over $26bn.
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.