Ethiopia - Afrikan Heroes

Ethiopia Is Now $52 billion In Debt, Twice The GDP of Uganda

July 6, 2019

Ethiopia ’s debt profile is headed for another level. With over $52 billion debt, the country’s public debt is now more than 65% of the country’s Gross Domestic Product (GDP), and twice the GDP of the East African country of Uganda.

“We borrowed a lot of money but we have been unable to repay on the given time… We have borrowed significantly for infrastructure projects which really failed to achieve the desire result,” said Eyob Tekalign, State Minister of Finance of Ethiopia who presented the 11 months performance report to the Parliament.

What This Means

Although Ethiopia’s fast economic growth registered for over a decade was attributed to being driven by the public investment mainly relying on loan, the economic growth has not been able to make the country pay back its debt.
The Ethiopian government total debt from foreign and local lenders now surpasses $52.3 billion.
As a result, Ethiopia is now forced to restructure the debt repayment schedule negotiating with the major leading country — China as well as by avoiding new debts and new public investment projects

“We have already avoided commercial loans because these loans when they have matured have really created a challenge of accumulated debt,” he said explaining some of the actions undertaken by the ministry as a result of the ongoing reform launched by Prime Minister Abiy a year ago.

“…We have prioritized supply side of economic growth which means working on productive sectors including mining, tourism, manufacturing even agriculture. We are still importing wheat and edible oil which in an economy like Ethiopia is really unacceptable” the Minister said.

The Gross Domestic Product (GDP) in Ethiopia was worth $80.56 billion in 2017. This year the government expects 9.2 percent growth through the economy of the highly indebted east African country has been not doing so well as a result of the internal political crisis and instability.

Charles Rapulu Udoh

Charles Rapulu Udoh is 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 organizations 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.

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Africa Hotel Investment Forum (AHIF) will generate millions of Dollars for Addis Ababa and billions for Africa

July 4, 2019

Independent report reveals the economic impact of Africa’s top hotel conference

An independent assessment by the international tourism advisory expert, Martin Jansen van Vuuren, a partner at Futureneer Advisors, has quantified the significant economic benefits to host countries of the influential Africa Hotel Investment Forum (AHIF).

He reveals that when AHIF returns to Addis Ababa at the end of September, it could bring over one and a half million dollars in direct benefit to the local economy, an additional two million dollars in indirect benefit and over a quarter a million in tax to the Ethiopian host government if spending at the 2019 event is a mere 10% more than when it was held in the city in 2014. This assessment is based on recent research of attendees at AHIF and a study on the economic impact of previous editions of the conference.

Looking back over the history of AHIF since the first conference in Casablanca in 2011, the event has made a total impact on the local host economies of $21.24 million of which $8.64 million in direct and $12.6 is indirect. In doing so, it has helped to create or sustain over 6,000 jobs and generate $1.4m in tax to the governments of the host countries. But that’s not all, the primary purpose of AHIF is to facilitate dialogue and ultimately deal-making between the top businesspeople present.

Two surveys of delegates attending AHIF events between 2011 and 2018 (segmented by delegates that did or did not conclude a deal) indicated an average value of $12.2 million per transaction in 2018 and $4.6 million over the 8-year period. On the assumption that these findings, which were based on a sample of delegates, were representative of the whole group of attendees, AHIF facilitated around $2.8 billion of investment in the hospitality sector across Africa in 2018 and $6.2 billion between 2011 and 2018.

Martin Jansen van Vuuren, said: “One important measure of AHIF’s success is the high-level of the delegates it attracts – the attending CEO’s and MD’s do not only spend more than average by staying in the best hotels but much more importantly, they are people with the ability to make decisions, including whether or not to invest in a destination – and that’s reflected in the value of deals done.”

Martin’s report also highlights intangible benefits that flow from hosting AHIF. These include increased awareness of the destination’s conference and tourism offering, improved credentials, which will assist bidding for future events and employment opportunities and skills transfer for workers in local supplier companies.

Matthew Weihs, Managing Director of Bench Events, which organises AHIF, said: “It’s exciting and gratifying to see how much the conference adds to the destinations we visit and to the hospitality sector across Africa. At this year’s event, I am aware of more serious investors coming with more money behind them than ever before, so it feels to me that the hospitality industry in Africa is rapidly becoming more mature and sophisticated.”

Kelechi Deca

Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry.

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At Last Ethiopia Opens Up Its Telecom Industry, Bidding To Start September

June 16, 2019

At the moment, there is no MTN, Airtel, Safaricom, Vodafone or any other mobile telecom operator in the East African country of Ethiopia, but that will no longer be the case before this year ends. The country is set to award its first set of telco licenses to multinational mobile companies by the end of 2019.

Before this happens, Ethiopia’s government has continually monopolized the country’s telecom industry. Hence, this is expected to end a state-wide monopoly and open up one of the world’s last major closed telecoms markets.

When This Happens, Investors Would Be Looking At Ethiopia’s Population As A Big Bait

With a population of 105 million people, the second most populous country in Africa after Nigeria will be baiting in squads of investors.

“There will be a bidding war. It’s the last greenfield site. There’s an opportunity to be market dominant,” said one company executive.

A law to create the new watchdog — the Ethiopian Communications Regulatory Authority — is already being debated by parliament. The new telecoms regulator will issue the licenses when the law is approved and this institution set up.

“By this time next year, we hope that many Ethiopians will be using different SIM cards. We are operating on a very aggressive timeline,” Ethiopia’s State Minister of Finance Eyob Tekalign Tolina said.

Vodafone, South African operator MTN, France’s Orange and Etisalat of the United Arab Emirates are likely to be among the leading contenders vying for entry into the Ethiopian market. Senior executives from those companies attended a telecoms conference in Addis Ababa this week and met with government officials.
The bidding process for two licenses will open in September and the licenses would be awarded in December.
Company executives who met with government officials this week were told to expect an announcement on the liberalization plan, possibly next week.

A Look At Ethiopia’s Telecom Market

Right now, the average rural inhabitant of Ethiopia has to walk 30 kilometers to the nearest phone. The ETC announced 7 September 2006 a program to improve national coverage and reduce the average distance to 5 kilometers. The ETC has also stated that the rural telecom access within 5 km radius service has currently reached 96 percent.
Since 26 September 2017, it is not possible to buy and use Ethio Tel SIM cards in mobile devices that haven’t been purchased in Ethiopia or registered with the authorities.
As of 2012, 20.524 million cellular phones and 797,500 mainline phones were in use.
Use of voice over IP services such as Skype and Google Talk was prohibited by telecommunications legislation in 2002.
In 2007, there were just 89 internet hosts. There were 447,300 internet users in 2009. In 2010, just 0.75 percent of the population was using the Internet, one of the lowest rates in the world.
Telecommunications in Ethiopia is a monopoly in the control of Ethio Telecom, formerly the Ethiopian Telecommunications Corporation (ETC).

With the proposed new reforms, Ethiopia would be seeking to liberalize the country’s economy.

Government officials are already looking at several potential options, including the sale of a minority stake in Ethio Telecom, granting of new licenses to multiple telecoms operators or a combination of both.

The government will expect the winning companies to start operations next year, initially using Ethio Telecom’s infrastructure to run their networks, the sources said.

Ethiopia’s potential as an untapped market could outweigh concerns about any risks, including Ethiopians’ low-income levels and the country’s over-valued birr currency.

There are 31 countries in Africa where there is a state-owned incumbent telco that is either dominant or has monopoly privileges that hamper the growth and efficiency of the market.

These are: Algeria; Angola; Benin; Burundi, Cameroon, Central African Republic, Chad, Comoros, Congo-Brazzaville, DRC, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Libya (which has several state entities), Mali, Mozambique, Namibia, Niger, Sao Tome, Sierra Leone, Swaziland, Tanzania, Zambia and Zimbabwe.

Charles Rapulu Udoh

Charles Rapulu Udoh is 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 organizations 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.

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Foreign Investment In Africa Increased By 13% With South Africa, Congo, Ethiopia, Ghana Leading The Largest Investment

June 14, 2019

More foreigners are starting to commit more funds to Africa by way of investment. African countries put together saw a 13% inflow of foreign investment in 2018 alone according to the United Nations Conference on Trade and Development. Aggregate investment volumes climbed to $32 billion, challenging a global downward trend and reversing two years of decline.

Which Countries Foreigners Are Choosing To Invest In

At the head of all these are some African countries which performed better than others. A breakdown of the performance of African regions and countries is as follows:

The Southern Africa region performed the best, taking in FDI of nearly $4.2 billion, up from -$925 million in 2017.
Foreign investment in South Africa more than doubled to $5.3 billion. Though much of the South African jump came from intracompany loans, new investments included a $750 million Beijing Automotive Group plant and a $186 million wind farm being built by the Irish company Mainstream Renewable Energy. President Cyril Ramaphosa, who took office last year pledging to revive the economy, is seeking to attract $100 billion in FDI to Africa’s most developed economy by 2023.
Investments in northern Africa jumped seven percent or $14bn from the previous year. This increase in FDI helped to offset less investment in Egypt, which was down eight percent. However, despite the decline in FDI for Egypt, UNCTAD data shows that the country was still the largest recipient of FDI continent-wide.
Ethiopia remained East Africa’s top recipient of FDI at $3.3 billion, despite an 18% drop compared with the year before. Kenya, another East African country, received $1.6bn worth of FDI. These investments were mainly in manufacturing, hospitality, chemicals, and the oil and gas sector.
Generally, Kenya, Uganda, and Tanzania all saw increases in FDI inflows. Foreign investment in Uganda jumped 67% to a record $1.3 billion, boosted by the oil and gas development of a consortium that includes France’s Total, CNOOC of China and London-listed Tullow Oil.
Ghana, which is in the midst of an oil and gas boom and saw inflows of $3 billion, making it West Africa’s leading destination for foreign investment. Italy’s Eni Group was behind Ghana’s largest greenfield investment project.
By contrast, inward FDI to Nigeria, a major oil producer, plunged 43% to $2 billion. Investors were put off by a dispute between the government and South African telecom giant MTN over repatriated profits. Banks HSBC and UBS both closed representative offices there in 2018.

**Op investor economies in Africa, 2013 and 2017**
(Billions of dollars) Source: UNCTAD

AfCFTA Is Going To Be A Game Changer

Much like the European Union, the newly ratified African Continental Free Trade Area Agreement could be a huge game changer on FDI, especially in the manufacturing and services sectors.

“The ratification of the African Continental Free Trade Area Agreement could also have a positive effect on FDI, especially in the manufacturing and services sectors,” the report said.

The AfCFTA aims to eliminate tariffs between member states, creating a market of 1.2 billion people with a combined GDP of more than $2.2 trillion.

Also the development of new mining and oil projects, a new U.S. development-finance institution could further boost foreign direct investment (FDI) in 2019, the report said.

**Africa: economies with the most SEZs, 2019**
(Number of zones) Source: UNCTAD

Again, the creation of the U.S. International Development Finance Corp could help support FDI inflows this year. A replacement for the Overseas Private Investment Corp, it will have a budget of $60 million and a mandate to make equity investments.

Right now, Africa stands in sharp contrast to developed economies, which saw FDI inflows plunge 27% to their lowest level since 2004, the United Nations Conference on Trade and Development wrote in its “World Investment Report”.

**African FDI Inflows: Top 5 Recipients**
(Billions of dollars). Source: UNCTAD

Comments

This report shows Africa is continuously becoming a new market for international investors. Indeed, this new report shows Africa is defying the current slowdown in global foreign direct investment. In fact, for the third year in a row, foreign direct investment (FDI) is down all over the world, but not in Africa. In 2017, France was the top foreign investor in Africa, followed by the Netherlands, the United Kingdom, and the United States. Critically, UNCTAD’s data shows that from 2013 to 2017, Chinese FDI in Africa grew 65 percent, only topped by the Netherlands, for which FDI was up more than 200 percent. Most African countries are also resorting to creating zones. In fact, in 2018, Burkina Faso, Côte d’Ivoire, and Mali launched an SEZ spanning border regions of the three countries. Similarly, Ethiopia and Kenya recently announced their intention to convert the Moyle region into a cross-border free trade zone.

UNCTAD notes that stronger regional cooperation also creates scope for more ambitious regional and cross-border zones.

This is exactly what AfCFTA is proposing. So expect more inflows of FDI before this year ends, but mostly in countries that have agreed to be part of AfCFTA.

Charles Rapulu Udoh

Charles Rapulu Udoh is 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 organizations 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.

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New Findings: Ethiopia Plans To Boost Her Economy With More Tax

May 9, 2019

Ethiopian authorities are resorting to more taxation to boost the country’s revenue, new report by the African Development Bank says. AfDB says in its findings that revenue collection in Ethiopia has increased significantly after the government implemented tax reforms.

Key Findings From The Report

The study found that the introduction of electronic cash registers in Ethiopia increased value added tax (VAT) collections and payments by about 32%. This increase can be considered large, the bank said.

However, given the lack of capacity by many Ethiopians to pay tax, government is looking beyond the current reforms to third-party information on taxpayers, promoting electronic tax filing and payment systems, and enhancing analytical capacity using comprehensive national databases.

Another study however revealed that the threat of companies and businesses being audited by the government of Ethiopia could increase tax payments by 38%, while moral persuasion could increase collections by 32%.

The findings are merely presenting alternative ways to increase taxation on businesses in Ethiopia.

The Role of The African Development Bank In This Regard

In this regard, the Bank conducted original research to evaluate the impact of major tax policy reforms in Ethiopia, in collaboration with the Ethiopian Development Research Institute (EDRI) and the Ministry of Revenue and the Ethiopian Customs Commission (formerly Ethiopian Revenue and Customs Authority).

The African Development Bank said it would provide technical assistance to support the authorities in implementing the research findings.

Also See: Finding Money In The Bamboo: Ethiopia Signs New Deal With China

The assistance will complement ongoing advisory services to support reforms, notably to the Public-Private Partnerships Framework and the logistics sector.

Additional assistance is being designed to advance financial sector development, industrial policy and strategy development, and the mining and petroleum sectors.

Beyond implementing the emerging policy recommendations, the Ethiopian government and the African Development Bank pledged to explore additional areas for impactful policy research on domestic revenue mobilization, in line with the mutual commitment to improving the quality of life of the people of Ethiopia.

The findings were revealed at a workshop hosted by the African Development Bank and a high-level delegation from the Ethiopian government. The workshop formed part of the Bank’s commitment to helping the government fund its ambitious development plans.

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.

Finding Money In The Bamboo: Ethiopia Signs New Deal With China

May 4, 2019

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.

Also See: How International Organisations Are Helping Startups In Africa

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.