Expected revenue in Birr from external assistance and loans to Addis Abeba City Administration in the 2019/20 fiscal year.
Month: August 2019
“The Constitution should not be amended by the current EPRDF parliament.”
Chane Kebede (PhD), Vice Chairman of Ethiopian Citizens for Social Justice, in an interview with Addis Admas, the Amharic weekly.
LEADING THE WAY
President Sahle-Work Zewde launched a five-year national road map to end child marriage and female genital mutilation (FGM ) with Yalem-Tsegay Asfaw, minister of Women, Children & Youth, in a ceremony held at the Skylight Hotel an Africa Avenue on August 14, 2019.
“The will to end child marriage and FGM exists,” said the President. “I’m delighted that we now have a plan which is a clear demonstration of the government’s commitment to make harmful practices history in Ethiopia,” she added.
The road map is part of the government’s effort to keep the pledge it made at the first Global Girl Summit in London in 2014 to eliminate child marriage and FGM by 2025 and is also a component of the Sustainable Development Goals, which targets to achieve gender equality by 2030.
Ethiopia has made substantial progress in reducing the number of girls exposed to the harmful practice of child marriage and FGM in the last decade. However, 40pc of young women aged 20 to 24 years are still married before the legal age of 18 and 14pc before the age of 15.
The plan, expected to cost 94 million dollars, was developed by the Ministry of Women, Children & Youth, designated as the lead agency, in coordination with the National Alliance to End Child Marriage & FGM, the government, UN agencies, non-governmental organisations and civil society.
International Community’s Shilly-Shally Engagement Not Helping Ethiopia
The coming months pause an acid test for the administration of Prime Minister Abiy Ahmed (PhD). Having been swept into power by the widespread call for change, Abiy’s is an administration overburdened by expectations, perhaps unrealistic in many instances. Neither are his friends in the international community walking the talk where and when it matters most.
He may have been distracted from his initial mandate of ensuring the political space is conducive for competitive and credible national elections. His scorecard on that front is nothing but mixed. Perhaps dancing with political forces that joined his bandwagon along the way, Abiy has indeed wasted some preciously crucial time from focusing on what could have been indispensable moves. He could have prioritised the restoration of law and order and helped the economy remain in full swing.
Instead, the deceptive feeling of and the temptation from the permanence of power appears to have caught on for Abiy. He seems impatient. Unable to wait until he gets a mandate from the majority of the electorate, he wanted to be the moral tutor for the country and an embodiment of the national spirit, but in the way he and his allies defined it. Absolutism in morality. Many who may have different moral prescriptions from Abiy and his allies find this unsettling, if not disconcerting.
If only governing society and managing a national economy is that schematic. Alas! Ethiopia has evolved so much over the past 30 years in many frontiers, its economy being the most noticeable.
In a way, the political force that entrusted Abiy with power and his allies is a victim of its own making. The rapid growth of the last decade it spearheaded had created vast demand as it was meant to do. However, when the economy has not been able to come up with enough to meet demand, the party suffered from a leadership lacking perceptiveness in policy and incapacity to move to the next chapter.
The challenge of success, whether personal or national, is the rise of expectations. Meeting those expectations has not been an easy task. Even though Ethiopia’s pro-poor economic policy started to lift millions of the poorest of the poor out of abject poverty, it has not been able to curb the rise of income inequality. Among a restless youth, it fueled ressentiment, a psychological state resulting from suppressed feelings of envy and hatred and the impossibility to act them out.
In more ways than one, Abiy owes his rise to political power to this phenomenon. Growing economic inequality was behind the discontent and disenchantment of the youth that led to widespread protests, which resulted in the change in leadership and direction by the ruling party. The lull in the protests was premised on the hope and expectation that the new administration will bring in better days.
Meeting the expectations of an impatient, overwhelmingly young population is never easy even for wealthy nations, let alone for a developing country such as Ethiopia. It is a leash on leaders who are tempted by their own folly. It won’t be long before this same group consumed by a feeling of ressentiment turns on him and proves that it is impossible to govern.
Certainly, growing income inequality is not a uniquely Ethiopian problem. It is one of the common challenges across the world. A recent survey conducted in 15 developing countries found that 77pc of policymakers believe inequality to be a threat. It is especially so for a country in political transition and social transformation.
A young population locked in a rigid class structure, with little hope of income mobility, is a recipe for instability. Even though one may not be exactly enjoying the benefits of the country’s economic bounty today, as long as one sees a potential path to future possibilities, there is hope. A good example could be the once-popular expression, “The American Dream”: The perpetual hope that keeps the working class invested in the United States.
The dimming of such hope in Ethiopia is what makes the situation worrisome. The tendency of various political leaders tending to use that despair as fuel for power politics aggravates the situation. Income inequality is still one of the main factors that fuels polarisation, hence the potential for conflict.
It is in the midst of these that the coming national elections will be held, if indeed at all. The months ahead will be trying times for Ethiopia. How national elections will take place determines the capacity of the state to hold onto the centre.
With polarisation transforming to radicalisation and fueled by inequality, the challenge for the administration will be one of “ungovernability”.
Ungovernability happens when political forces fail to garner a majority in parliament or form a workable coalition that the government of the day fails to pass and enforce basic laws; systematic corruption of constitutional norms make the political process arbitrary, or even dangerous; and a series of demonstrations and public protests put the state and its leadership in paralysis.
These are all possible scenarios that may happen before and after the elections. Avoiding such possibilities requires a grand bargain by leaders and representatives of the various forces in society in good faith. There needs to be a long and torturous dialogue to reach painful compromises in the spirit of “give and take”.
So far, political leaders of the various parties and interests have not shown interactions in good faith with each other. The only exception to this has been the Memorandum of Understanding signed by representatives of over 100 political parties meant to govern their relationships. However, their commitment to it has been questioned in light of recent events.
These leaders must realise the potential danger and commit themselves and the people they mobilise to comply with the rules of the game agreed upon. They need to be careful not to exploit inequality for further polarisation and push to radicalisation. That is not an election strategy, that is a push for ungovernability that may lead to state collapse.
That should be a concern beyond Ethiopia’s borders. A country with over 100 million people imploding under the weight of its crises will not leave the international community as a bystander. Sadly, it is, and many of its diplomatic corps deployed in Addis Abeba lack this astute observation.
If there are any lessons the international community should take from the failures of similar situations in the past in many other countries, it is to avoid a shilly-shally attitude in dealing with leaders of various forces. They need to have clarity in their message and coherence in their approach. They will have to mobilise themselves to draw the red line against unacceptable actions that the protagonists may have in mind as their respective goals.
That could be a viable way of avoiding the mistake that led to disaster and catastrophe in Eastern Europe in the 1990s.
Int’l Price Cut, Illicit Trade Cripple Coffee Exports
Mathewos Lankemu, a farmer in his early 40s, was born and raised in Nekiya Kebele, Sidama Zone, one of the major coffee producing regions in the country.
Born into an extended family, he was the sixth child to his family. In his early days, Mathewos wanted to be a businessperson. He even opened a small business here, and after that, he dropped out of school in grade nine.
But when his father bestowed his children with land and property, according to the custom of the place, Mathewos got a hectare of land.
Growing up close to the livelihood and already knowing the ins and outs of the practice, he decided to give being a farmer a try.
The land he received already had some coffee plantations on it. He removed his father’s old coffee trees, which had been there for a while, and planted new, improved seeds on a half hectare of land. On the other half, he planted false banana (Ensete ventricosum) and sugarcane.
As he was getting a good income from his land, he decided to continue being a farmer. Mathewos got married and fathered four children, whom he supports with the income he gets from his farm.
Being an active member of the community, he became chairperson of Fero Cooperative Union, an association of coffee farmers in the area.
“Coffee trade is very much characterised by price swings,” said Mathewos. “Sometimes its goes way up, and at other times it gets low.”
However, he says this year was very different. Though he was able to produce 2,200Kg of coffee, a considerable amount compared to his previous harvests, the income he got for his commodity was in fact less.
“Decreased coffee prices meant that I was getting less money than I used to get,” said Mathewos.
Last year Mathewos was getting 11 Br for a kilo of coffee, but this year he was only able to get nine Birr a kilo.
Mathewos and his cooperative union supply their coffee to the Sidama Coffee Farmers Cooperative Union, the second-largest union of coffee growing farmers in Ethiopia next to Oromia Coffee Farmers Cooperative Union.
Sidama Coffee Farmers Cooperative Union is made up of around 70,000 farmers organised under 57 associations and primary cooperative societies. The Union receives coffee from the associations, exports it and pays back dividends to the associations.
The union, just like Mathewos, was able to increase the amount of coffee it exported by 10pc. However, the revenue it got was below the year before.
“Since we provide speciality coffee that is traceable, we directly export our coffee and can get higher prices than the market price,” said Tsegaye Amebo, general Manager of Sidama Coffee Farmers Cooperative Union.
“However, the prices we get are affected by the global market price,” said Tsegaye. “Because of declining global coffee prices, our revenues also decline with it.”
This year saw the lowest global coffee prices in 13 years, and the price reached as low as 0.87 dollars for a pound of coffee, a figure much lower than the price registered in 2011, which was 2.5 dollars. Globally, the price of coffee has been decreasing for the past two years.
A lot of factors affect global coffee prices. Among these, weather, the flowering cycle of the coffee trees, supply and stock are mentioned. Around 50pc of the world’s coffee is roasted by four companies. The stock these companies hold has a direct impact on coffee prices.
Apart from the global prices being low, local factors like political instability in some areas resulted in the failure of collecting the beans on time, as well as the blocking of transport roots, according to the Ethiopian Coffee, Tea Development & Marketing Authority.
However, the Authority says it worked on increasing the amount of coffee production so that the price deficit would be balanced. The country managed to export a record number of 239,144tn of coffee this year.
Ethiopia was able to bag 774.1 million dollars from the export of coffee. However, with the decrease in global prices, the revenue also saw a decline of 9.4pc from last year.
Ethiopia has around 442 coffee exporters, though only 290 are active. It also has about 5.3 million coffee farmers who cultivate 1.6 million hectares of land.
Creating better market linkages, better branding and promotion of Ethiopian Coffee, as well as improved regulation of the coffee trade chain, were the reasons attributed by the Authority for the higher export volume.
The Authority has been going through institutional and legal reforms for the past two years after it was re-established with the primary goal of creating an entity to oversee all aspects of the sector.
“After the Ministry of Coffee was dissolved around three decades ago, there has not been an entity that took the sole responsibility for the sector,” said Hairu Nuri, market information and regulatory director at the Authority.
The Authority aims to boost the sector by introducing new reforms. One of these reforms is better regulation of the coffee trade and value chain.
In the just-ended fiscal year, the Authority took administrative measures on exporters after investigating the records of exports of the past years.
By working with the Ministry of Revenues, the National Bank of Ethiopia and the Ethiopian Commodity Exchange, the Authority filtered out exporters that were engaged in illicit trading, according to Hairu.
“Some exporters after buying export coffee from ECX either didn’t export the coffee, sold it to other companies outside of their contract or didn’t deposit the forex with the National Bank,” said Hairu.
The Authority issued warnings to 226 exporters, while it revoked the licenses of 16 exporters. While the 226 exporters were the ones that came to the Authority to explain their situation, the 16 were the ones the Authority was not able to trace.
“We’ve transferred their files to the Office of the Attorney General, and legal proceedings will begin soon,” said Hairu.
Another big challenge the Authority is dealing with is under-invoicing. The Authority claims a growing number of exporters are engaging in the business with the sole purpose of getting foreign exchange to import other commodities.
“The exporters are selling the coffee on the international market below the market price in a bid to quickly get the money,” said Hairu. “Though the act is not profitable, they add their loss to their profit margin on the commodities they import, which creates inflated prices here.”
It is not only the export of coffee that is being affected by under-invoicing, but other exports of agricultural commodities are also affected, according to the Ministry of Trade & Industry.
The Ministry blames under-invoicing as one of the major causes for the declining export revenue besides political instability, low quality of the commodities, volatile global prices, electric power interruptions and growing contraband trade.
Ethiopia’s earnings from exports in the current fiscal year stood just under 2.7 billion dollars, a 6pc decline from the year before. This was also well below its target of 4.3 billion dollars.
Between 55pc and 80pc of the illicit financial outflows leaving Ethiopia are traded using under-invoicing, which amounts to an estimated six percent to 23pc of the total value of the country’s trade, according to data from Global Financial Integrity, a Washington, DC-based think tank that produces an analysis of illicit financial flows.
Three months ago the Ministry sent a warning letter to sesame exporters suspected of under-invoicing.
Signed by Misganu Arega, state minister for Trade & Industry, the letter urged the exporters to shy away from under-invoicing and threatened to take measures against those involved in under-invoicing from revoking their business license to a legal proceeding.
While the warning letter was sent to sesame exporters, the investigation of coffee exporters suspected of engaging in under-invoicing is still ongoing.
“We’re currently identifying the exporters and will soon reveal the findings and measures we will take,” said Hairu.
Experts in the area call for tighter law enforcement and strict regulations to curb the practice.
The country has the framework as well as the technology to identify those engaged in under-invoicing, according to Hussein Mohammed (PhD), a lecturer at Hawassa University’s School of Horticulture & Plant Science.
The whole reason such actions became widespread is because of the lack of regulations and failure to take action, according to him.
Besides, he suggests that the only way the country can withhold the global market fluctuation is through exporting value-added coffee.
The Authority agrees with Hussein and says it has been working on improving the coffee trade chain to get better revenue from the sector.
The Authority has been giving incentives for those engaged in exporting roasted coffee. Last year 51 new exporters acquired licenses to export roasted coffee. Out of these, 29 of them already started exporting.
“Another reason the Ethiopian coffee trade lags is because of a lack of studies, research and professionals behind the commodity,” said Hairu.
To address this issue, the Authority is in the process of establishing a coffee research institute. In addition, in collaboration with the Ministry of Science & Higher Education, the Authority has been developing a new curriculum for coffee, and starting next academic year, students will be able to enroll in a bachelor’s degree programme in coffee at Dilla University.
The Authority says it has also been trying to diversify Ethiopian Coffee export destinations and is exploring the Asian markets.
“The results of our work are to be seen in the coming years, and the changes we’ve introduced will bring better coffee prices for Ethiopian coffee farmers,” said Hairu. “We also anticipate that the global coffee price is going to pick up this year.”
Mathewos knows the reason behind why he gets low prices for his coffee, but this is unacceptable to him.
“No matter how much the price fluctuates,” he said, “I have settled on being a coffee farmer. Now I can only hope for better global prices and better interventions from the government when prices get low.”
City Reclaims Real Estate Firms’ Land
Addis Abeba City Administration has reclaimed land plots covering a total of 41ha “illegally” possessed by real estate developers.
The move from the city’s Land Management & Development Bureau followed the housing and real estate audit that was launched this year and conducted for the past five months. Composed of eight members and chaired by a representative from the Office of the Mayor, the audit team kicked off operations last December.
It audited 139 real estate developers, which have leased land from the City Administration since 2005. The audit aimed at making sure whether the lands were utilised for the appropriate purpose or not.
Finalised recently, the audit discovered lands that were illegally seized by developers and housing units that were not delivered to the home buyers for an extended period of time.
“The repossessed land has been returned to the city’s land bank,” said Deputy Mayo Takele Uma, while presenting last fiscal year’s report to the city council.
Along with the repossessed land, the City Administration made the real estate developers deliver 732 delayed housing units to the home buyers.
“The housing units weren’t transferred to the home buyers on time because of the City Administration’s failures and real estate developers’ ‘greediness’,” Takele said.
The audit also discovered 1,743 housing units built by four real estate firms and transferred to home buyers that do not have title deeds. The City Administration passed a decision to grant title deeds to the home buyers. Out of the total houses, 472 of them were built by Ayat Real Estate S.C, one of the pioneer real state firms.
“We’ve started giving the title deeds to homeowners,” said Beyene Lambiso, director of land lease follow-up and revenue collection. “We expect all of them to receive the documents within two months.”
The country has around 630 real estate investment companies with a registered investment capital of 3.5 billion Br. In the last decade, the real estate industry contributed 12.5pc to domestic growth. Incomes generated by the real estate market have also been growing at an average rate of 14.1pc annually.
The audit on the lands that were taken for investment has also discovered that over 25,000 plots that cover a total of 600ha of land remained undeveloped. In response to this, last year the City Administration repossessed undeveloped land from 95 companies, 18 diplomatic missions and 11 government institutions totaling 1.3 million square metres.
Yiheyis Mitiku, a lecturer of land management at the Kotebe Metropolitan University, appreciates the City Administration’s actions.
“Repossessing the land is not enough,” he said. “The lands should be used to improve the life of the city’s residents.”
Yiheyis recommends that the City Administration review the land resource usage policy and perform extensive research on the land and housing problems of the city.
“Before giving the land to a real estate firm, the Administration should check whether the firm is capable or not and follow up on them at every stage,” he added.
Asmelash G.Geziabher, deputy director of Ayat Real Estate Firm S.C, told Fortune he knows nothing of the issue.
Gov’t Puts Economic Reform Plan in Place
With the main aim of addressing economic imbalances and sustaining growth, a team of experts under the Office of the Prime Minister drafted a three-year economic reform programme.
Dubbed the Homegrown Economic Reform Programme, the document was prepared by experts from the Office of the Prime Minister, the National Bank of Ethiopia and the Ministry of Finance. It follows the economic reform document that was approved by the Council of Ministers on June 1, 2019.
The reform, which is expected to be implemented in the coming weeks, aims at stimulating the country’s economy, ensuring sustainable development, reducing unemployment, maintaining macroeconomic stability and transforming the economy from state-led to private sector-led.
“It is designed in response to our needs, as well as the problems and inefficiencies of the economy,” Mamo Mihretu, senior advisor to the Prime Minister and the country’s chief trade negotiator, told Fortune.
The reform identified five major problems in the economy and targets how to address them. Unemployment, inflationary pressure, foreign currency crunch, debt stress and credit problems are the major challenges spotted by the document.
The programme targets to address these problems in three dimensions via macroeconomic, structural and sectoral reforms. Under the macroeconomic overhaul, the programme outlines implementing conservative fiscal policy; reforming the state-owned enterprises; increasing foreign currency earnings; controlling inflationary pressure; and ensuring the healthiness of the financial sector.
Structural reform will focus on creating a conducive investment climate by revising and amending legal frameworks, administrative procedures and policies. It also considers reforming the logistics, power and telecommunications sectors.
Under the sectoral reform, the document calls for accelerating productive sectors to be more effective. Assisting the agricultural and manufacturing industries to create more jobs and exploiting the industries that were not productive previously, are the critical areas of the sectoral reform. It picked mining and tourism as the areas that can potentially create jobs and generate foreign currency.
It also pinpoints the ICT and creative industries as a new source of growth and requires special attention in the reform.
Getachew Asfaw, an economist who has a track record of publishing a couple of books on the macroeconomic conditions of Ethiopia, appreciate the new initiative from the government in starting talks on macroeconomic issues.
“The economy was under the shadow of the politics,” Getachew told Fortune. “This is a time when the country needs radical reform.”
For the implementation of the programme, a National Reform Committee has already been formed and consists of members from the National Bank of Ethiopia, the Office of the Prime Minister and the Ministry of Finance.
“Subcommittees will also be formed based on the nature of the reform,” Mamo said. “What differs from the previous efforts is that it is explicit and specific.”
Before implementing the reforms, the draft programme will be tabled for public and stakeholder consultation in the coming weeks, according to Mamo.
“The consultation forum will help us ensure transparency and get feedback on the areas we skipped or overlooked during the drafting process,” Mamo told Fortune.
However, Getachew does not agree with the approach the team followed in drafting the reform programme, saying the document should have been prepared in collaboration with experts.
“Rather than inviting experts to comment on the drafted document,” said Getachew, “it could have been good if the team took input from experts first and then drafted the document.”
Along with this document, over the past couple of months, the government has been launching new projects that are believed to address the challenges in the economy. Six months ago, the Office of the Prime Minister formed a high-level committee that will be tasked with reforming the ease of doing business and making it favourable for foreign direct investment.
As an add-on to the ease of doing business committee, the Prime Minister Office has formed another committee that will be working on attracting foreign direct investment to the country and creating three million jobs in the current fiscal year. The committee, which became operational two weeks ago, targets to generate 1.1 million jobs in the industrial sector, one million in agriculture and the remaining 950,000 in the service sector.
Getachew cautions the government to take extra care while implementing these reforms.
“The outcomes of the reforms shouldn’t be inflationary or burden the economy,” he said. “Thus, the government should be prudent.”
New Directive Eases Passport Application Process
Ethiopian citizens who hold kebele identification cards and birth certificates can now obtain a passport from the Immigration, Nationality & Vital Events Agency.
Over the past 11 months, the Agency was requiring passport applicants to present documents that prove their travel plans. The applicants had to submit documents proving that they have either been allowed to study or work overseas, hotel bookings, certificates of competence from accredited employment agencies to acquire a passport or medical documents to show they were travelling to receive treatment.
Issued on August 8, 2019, the new directive lifted this requirement, which was put in place due to the foreign currency shortage that limited the Agency from printing the passports in France. On average, the Agency spends an average of five million dollars to print passports.
The Agency, which was issuing an average of 12,700 passports daily before it passed the restriction, had downsized the number to 2,000 after the mandatory requirement.
“Now after working with the National Bank of Ethiopia, we’re currently importing passports,” said Desalegn Teressa, communications director at the Agency, which issued around 361,000 passports and 169,000 visas in the first three quarters of the last fiscal year.
Previously, the Agency, which operates through nine branches in Adama, Semera, Jigjiga, Hawassa, Dire Dawa, Jimma, Dessie, Bahir Dar and Meqelle, was issuing passports in seven days. But last year it was extended to 45 days following the new requirements.
Currently, it takes up to 45 days to get a passport through the normal procedure, which costs 600 Br for 32 pages and 900 Br for a 64-page passport. But, applicants can get their passport in the quicker way between three and five days after paying 2,186 Br.
However, the requirements on job seekers that travel to Middle Eastern countries are still in place and are imposed by a different law passed by the Ministry of Labour & Social Affairs.
“While the government respects its citizens’ freedom of movement, it also has a duty to protect them and ensure their safety,” said Desalegn.
Individuals looking to travel to Middle Eastern countries with whom Ethiopia has signed bilateral labour agreements are required to receive a three-month training, acquire certificates of competency and applicants must be at least 21 years of age and must have completed eighth grade.
Bilateral labour agreements between Ethiopia and Saudi Arabia, Qatar and Jordan were signed to formalise the employment exchange. The government, as part of its job creation scheme, aims to send around 50,000 workers to the Middle Eastern countries, mostly nurses and drivers.
Getachew Assefa (PhD), a constitutional lecturer at Addis Abeba University’s School of Law & Governance, believes the move by the Agency to ease requirements rectifies its past mistake, which was unconstitutional.
Every citizen of Ethiopia has the right to obtain a passport without any requirements, according to Getachew.
“The Agency should have had a different system in place to issue passports if it was faced with a shortage of forex,” said Getachew.
MIDROC Expands Three Plants, Boosting Capacity
MIDROC Technology Group inaugurated the third major expansion project in a month, pushing the total investment for the projects to 574 million Br.
In the latest round of expansion, the company invested 229 million Br to expand three factories under Daylight Applied Technology Plc, a company established to produce glass products, electronic home appliances and assemble electronic devices.
Two weeks ago MIDROC Technology, founded by the Ethio-Saudi business tycoon Mohammed Hussein Ali AL-Amoudi (Sheik), announced the expansion of Summit Partners Plc, WANZA and Addis Gas for a total of 286 million Br. Four weeks ago the Group opened the eighth branch of Queens Supermarket by investing 59.3 million Br.
Cork, tin can and glass factories have undergone the latest expansions. The inauguration of three factories located at Legetafo was held last Thursday, August 15, 2019, with the presence of Arega Yirdaw (PhD), CEO of MIDROC Technology Group, and Teka Gebreyesus, state minister for Trade & Industry.
The Group expanded the factories in response to the call of Prime Minister Abiy Ahmed (PhD) to boost the economy, according to Arega.
“We’re expanding to different new projects to support the initiative,” he said.
Daylight Applied operates two crown cork factories, which were established with 72 million Br in investment and employ 53 workers. One can produce 700,000 crown corks in just eight hours, while the other can produce double that amount in the same period.
Using coating and printing and blanking and lining machinery, the crown cork factories produce different sizes of corks and print customer logos on the corks. The factories produce 1.8 billion corks a year, which are used to seal bottled products like soft drinks and beer.
Moha Soft Drink Industry S.C, one of the affiliates of MIDROC Group, has a demand of 1.4 billion corks a year and began buying 20pc of its demand from Daylight five months ago.
“Two years ago we faced a shortage of crown corks, which forced us to produce only 40pc of our capacity,” said Getachew Birbo, CEO at Moha.
The second factory, a tin can plant, was built for 57 million Br and can produce 36,000 tin cans in three different sizes in eight hours. The factory, which employs 60 people, has two sections, the body making line and the end making line. The factory produces 28 million tin cans a year, which are used for packaging peeled tomatoes, tomato paste, vegetables and meat soups.
The third factory going through expansion is a glass bottle factory that rests on 10,000Sqm of land out of the total 26,431Sqm of land possessed by Daylight Applied. The glass bottle factory was built for 100 million Br and can produce 30,000 to 36,000 glass bottles in eight hours and 12 million glass bottles a year.
However, production was suspended in February 2017 due to a technical problem occurring in its glass melting furnace. The factory is not operational to date.
All three factories have production floors, offices, workshops, laboratories, spare part stores and stationery stores.
“The expansion will save foreign exchange, which was previously used for importing corks and tin cans,” said Teka during the inauguration ceremony.
Daylight was established in 1994 as Daylight Engineering Plc when it acquired the state-owned Sara Lamp Factory, which used to make incandescent lamps and glass tubes (fluorescent lamps), with a capital of 35 million Br. However, production was discontinued due to the lack of market demand at the time.
Daylight joined MIDROC Ethiopia under its current name, Daylight Applied Technology, in 2004. Currently, the capital of the company has reached 162 million Br. Through its cork and tin can factories, it employs 159 permanent employees, including the 46 employees of a glass factory, which is currently providing printing services.
Hailemariam Kebede (PhD), a lecturer at the Marketing & Management Department of Addis Abeba University, appreciates MIDROC for investing in the manufacturing sector.
Most companies are hesitant to invest in the manufacturing sector because of the complicated procedures and the time it takes to generate profit, according to Hailemariam.
“The company should work toward restructuring its management and exporting its products to foreign markets,” Hailemariam said.
MIDROC will keep on expanding, according to Arega.
“The company is conducting a study to start a food and beverage packaging service,” Arega said.
Chinese Firm Ploughes $70m into Textile Plant
A Chinese company set up a new export-oriented yarn plant in Adama, Oromia Regional State, with an investment of 70 million dollars.
Kingdom (Ethiopia) Linen Plc built the integrated plant on 2.9ha of land and plans to produce 5,000tn of linen yarn annually, generating 45 million dollars from exports.
The company is constructing the plant in three phases on 32ha of land for a total of 200 million dollars. The first phase of the project is underway for 70 million dollars on 12ha of land designed for sheds and administrative buildings.
The first phase of the construction of the plant, which is expected to begin trial production after two months, started in mid-2018, and all major construction for the first phase was completed in July of this year. All the equipment used for the construction of the plant was imported from Italy and China.
When becoming fully operational, the total production capacity of the plant will be 20,000tn, four times the first phase level, and will employ 4,500 people.
The company will be exporting its products to the Kingdom’s existing clients in Italy, Portugal and India, according to Chan Zhang, deputy general manager of Kingdom (Ethiopia).
“Instead of using the government’s standard sheds, Kingdom built its factory to its tailored specification,” she adds.
IT Electronics Eleventh Design & Research Institute Scientific & Technological Engineering Corporation Limited, a company engaged in engineering consultation, design and general contracting, is the contractor for the project. Shanghai TJU Engineering Service Co., Ltd, a Chinese company specialised in construction project supervision for industrial assets, is supervising the construction of the plant.
The company is also partnering with Adama Polytechnic College to provide an apprenticeship programme for their students during the machine installation, according to Chan.
Founded in 1999 and listed on the Hong Kong Stock Exchange in 2006, Kingdom currently has four production factories and an organic flax raw material production base in China with more than 3,000 employees. Kingdom’s total annual production capacity of linen yarn in China has reached 18,000tn, and the company now shares over 10pc of the global linen yarn market.
Kingdom Ethiopia will join the 1,345 textile, apparel, garment and leather industry projects registered by the Ethiopian Investment Commission and the regional investment bureaus. Out of the total companies, only 16pc of them are operational, while the remaining are at the implementation and pre-implementation stages.
Last year, the country generated 110 million dollars from the export of textile products, meeting only 46pc of the goal. Shortages of cotton, lack of trained employees and instability in some parts of the country were the causes for the shortfall.
Abera Kechi (PhD), Ethiopian Institute of Textile & Fashion Technology Scientific Director at Bahir Dar University, believes that besides transferring technological advancement and creating job opportunities, it will generate forex for the country and increase the competency of Ethiopian products in the international market.
He also suggests that the shortage of electric power supply and the culture of labour will be a challenge for the company.
“To motivate the employees to be more productive, they will have to pay a relatively good salary,” Abera said.
Local Shoemaker Acquires Bankrupted Tannery
A local shoemaker has acquired a bankrupt tannery located in Bahir Dar, Amhara Regional State, for 28.8 million Br.
Development Bank of Ethiopia’s Bahir Dar District foreclosed on Habesha Tannery for failing to service its debt. Anbessa Shoe Factory S.C. acquired the company by offering the highest bid during the financial opening that was held on July 26, 2019. The initial floor price of the company was 22 million Br, and Anbessa Shoe Factory vied with two other bidders.
Resting on 40,000Sqm of land, Habesha Tannery failed to service the 20-million-Br loan it took from the DBE. The company also owes an unspecified value of debt from Addis International Bank.
The management of Anbessa decided to buy the company with the main aim of increasing its export volume from 10pc to 70pc, according to Bamlaku Demissie, general manager of Anbessa.
Anbessa exported products worth half a million dollars two years ago, down from the 750,000 dollars it made in the 2015/16 fiscal year. The company exports its products to different countries in Asia, Europe, the United States and Africa.
“We’ve been buying finished leather from the different tanneries,” said Bamlaku. “Now we’ll make our own.”
Habesha Tannery is one of the foreign companies owned by Turkish nationals that shut its doors in recent years after becoming mired in default proceedings with the Development Bank of Ethiopia in March 2019.
Habesha commenced operations in 2011 after securing loans from Development Bank of Ethiopia and Addis International Bank. When it began operations, it planned to produce crust leather with a target of generating two million dollars a year.
The Turkish company has been exporting semi-processed hides and skins for seven years. However, since April 2019, the company has entirely ceased operations after defaulting on its loan and has since terminated its 220 workers.
The company has over one million dollars in machinery installed at the factory that is sitting idle, according to Wossen H. Mariam, who was the deputy manager of Habesha.
To resume production, Anbessa plans to buy different machinery to make semi-processed hides and skins and finished leather. It also aims at building a water treatment plant at the tannery, which is expected to be operational in the coming half-year period.
If the company built a secondary treatment plant, it could continue operations with the assistance of the Ethiopian Leather Industries Development Institute, according to Hailekiros Debesay, deputy director-general of the Institute.
“We can give training, assist the process of changing old machinery, consult the procurement of new machines and invite professionals in the sector for experience sharing,” said Hailekiros.
The history of the Ethiopian shoemaking industry goes back close to nine decades, when the former Asko Tannery, currently known as Tikur Abay Shoe Factory was established.
The country’s annual export made from the footwear industry reached 34.6 million dollars five years ago, up from only 6.3 million dollars generated a decade ago.
Export of Ethiopia’s finished leather generated 75 million dollars in 2017 down from 101 million dollars generated in 2013. Leather footwear export brought in 49 million dollars, up from 31 million dollars made in 2013.
Anbessa Shoe was established as Darmar in 1935 by an Italian owner. It was then transferred to different owners following the political regime change in the country. The plant was first sold to an Armenian in 1942, but the Dergue regime nationalised it in 1975.
The Dergue later restructured it into two enterprises, Anbessa Shoe Factory and Awash Tannery. After the downfall of the military regime, the company was re-established as an autonomous body under the National Leather & Shoe Corporation.
It was then transferred to private owners at the cost of 4.3 million dollars in 2011. Currently, Anbessa has seven shareholders and one factory that produces kids shoes, bags and belts for the local and export markets.
Anbessa has 39 retail shops in different parts of the capital and other towns, including Bahir Dar, Gonder, Jimma, Nekemet, Dire Dawa, Hawassa and Adama.
Habtamu Birhanu (PhD), a lecturer at Addis Abeba University’s School of Business & Economics at Addis Abeba University, says that the government has to give incentives to local companies to encourage them.
“The government should increase incentives for local companies to motivate them,” Habtamu said.
Power Shortage Suspends Abattoir’s Operations
Finished with an expansion project that consumed half a billion Birr, Organic Export Abattoir Plc has not begun operations at the new facility due to a lack of power supply.
Organic Export Abattoir, which exports organic sheep and goat meat, completed the construction and installation of the machinery of the slaughterhouse, which requires 32kV of electric power to start operations. The transmission lines from the nearest substation are already installed, but it has not had power for two years, according to Alem Mengistu, founder of Organic.
“We’ve submitted a letter to Ethiopian Electric Power to receive power and are waiting for their response,” said Alem.
Resting on 100,000Sqm of land, the construction of the expansion plant began in 2015 and was expected to start operations after six months with 400 employees.
Cogemat Slaughtering Systems, an Italian company that was established in 1988, designed the plant and installed the slaughterhouse machinery.
The facility is equipped with Italian cattle processing machinery, a de-boning room [a system that removes the bones from meat], meat and by-product processing facilities, refrigerators, cold trucks, animal supply trucks, a wastewater treatment plant, biogas systems and an electric power generator.
The expansion is expected to increase the annual production capacity of Organic’s business by 30,000tn and generate 75 million dollars from exports.
Located in Modjo, Oromia Regional State, the company was founded by Alem, who also founded Meridian Hotel, which is located in Bole District in the capital. Organic was established in 2006 with 20 million dollars and has been exporting sheep and goat meat for the past 14 years. It operates with 200 permanent and temporary employees at its existing abattoir.
The objective of the expansion is to explore new product categories and enter new market opportunities to generate foreign currency, according to Alem.
In the last fiscal year, the company generated 11.3 million dollars by exporting 2,070tn of processed goat and sheep meat to Saudi Arabia and the United Arab Emirates.
“To meet the increasing demand for beef in the international market, the company will add beef as one of its export products,” said Alem.
“We’re supporting the company, providing capacity building training, creating market linkages, conducting promotional activities and research,” said Mekonen Goshu, deputy director at the Ethiopian Meat & Dairy Industry Development Institute, which was established in 2008 and assists companies in the meat, milk processing, honey and wax processing, animal feed and fish industries.
Mohammed Aman, assistant professor at the School of Agricultural Economy & Agribusiness at Haramaya University, suggests the company work on quality, including sourcing organic meat and livestock free from any disease.
“International buyers want organic and healthy red meat,” said Mohammed. “Exporting such kinds of products will help the company generate sustainable revenue.”
Mohammed also fears that the company may face a shortage of live animals since there is a broad contraband activity in the livestock market.
Ethiopia has the largest livestock population in Africa and the tenth in the world. Out of the over 300 abattoirs in the country, 11 of them are export-oriented and generated 95.5 million dollars from the planned 192.7 million dollars in the last fiscal year. The revenue came from the export of 19,104tn of meat.
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