Ethiopia

Addis Ababa, Feb. 6, 2024: The Lemi National Cement Factory in Ethiopia, the country’s largest of its kind, is to begin production soon, company officials have said.

The factory is expected to be completed in March, according to its constructor, Sinoma International Engineering Company.

When fully operational, the factory is expected to boost the East African country’s annual cement production capacity by eight million metric tonnes, the officials said.

The Deputy Manager of the factory,  Abebaw Bekele, said that the plant would help to alleviate Ethiopia’s incessant cement shortage currently affecting the country’s construction sector.

The mega cement production factory is also expected to create employment opportunities for some 20,000 Ethiopians, according to the officials.

Owned by a joint venture of West International Holding, the African arm of West China Cement, and East African Holding Company, the Lemi National Cement Factory is under construction at a cost of 600 million U.S. dollars.

It is located at Lemi Building Materials Industrial Park, some 150km north of Addis Ababa.

Company officials have recently announced installation of huge preheater frames and rotary kilns, structures in which big rocks are decomposed under high temperatures to produce cement.

Nairobi, Jan.19, 2024: Ethiopia is set to issue licences to let foreign investment banks operate in the country.

This is a key step ahead of its planned launch, later this year, of a securities exchange, an official,  Brook Taye said.

The liberalisation initiative attracted foreign investors such as  Kenyan telecoms operator, but faced recent setbacks due to what some analysts described as an unpredictable regulatory environment, security concern, and macro-economic instability.

The justice ministry authorised the capital market regulator, this week, to go ahead with issuing the licences, according to Brook Taye, Director-General of the Ethiopian Capital Market Authority.

The move is part of a drive by Prime Minister Abiy Ahmed, since 2018, to open up the country of 120 million to greater private investments.

Ethiopia’s economy is still heavily controlled by the state, a legacy of being a command economy for decades.

The shift by Abiy  Ahmed toward a more private sector involvement was notable for being more ambitious than previous attempts at opening up.

There are currently no investment banks in Ethiopia, and commercial banks are only able to offer limited funding to businesses due to prudential requirements.

The director-general said that the demand for capital-raising services was “huge” because businesses were  paying 25% interest on commercial bank funding, and had to provide collateral worth 70% of the value of the loan.

“This is the biggest bottleneck in the Ethiopian economy, There is no optimal way to raise capital,” the official said.

The regulator is offering licences to global and regional investment banks, securities brokers and dealers.

This also involves credit rating services providers who can help businesses list shares on the securities exchange and issue corporate debts, said the official.

“The exchange would launch sometime this year and would enable the government to plug its budget deficit by offering debt securities to retail investors,”  the official added.

Zemen, an Ethiopian commercial bank, will be among the owners of the exchange after its commitment to buying five per cent of the shares last week, according to the official.

The Horn of Africa nation is facing acute foreign exchange shortages and high inflation.

It defaulted on its one billion dollars international bond last month after failing to make 33 million dollars coupon payment.

Ethiopia’s overall spending is expected to rise slightly and economic growth to accelerate in the next fiscal year starting in July, finance minister Ahmed Shide said on Thursday.

Mr Ahmed said in a budget speech to be presented to parliament that overall spending would rise to 801.65 billion birr ($14.7 billion) in the 2023/24, from 786.61 billion birr in 2022/23.

Ethiopia’s fiscal year runs from July 8 to July 7.

The impacts of the Covid-19 pandemic, a two-year war in the northern Tigray region and droughts, floods and locust invasions in parts of the country are still being felt by the economy, which also experienced foreign-currency shortages.

Ahmed said the economy was forecast to grow 7.9 percent in 2023/24 from an estimated 7.5 percent in 2022/23.

“In the next couple of years, the economy will be free from (this) chaos and will be fully healthy,” he added.

The budget deficit is expected to be 281.05 billion birrs in the coming year. A 2022/23 deficit of 231.4 billion birr was projected at last year’s budget speech.

“There are plans to cover the deficit by getting about 39 billion birrs from foreign loans and 242 billion birrs in domestic borrowing,” Ahmed added.

Ethiopia requested in early 2021 a debt rework under the Group of 20’s Common Framework, an initiative for restructuring government debt aimed at low-income countries. Progress was complicated by the war in Tigray.

“Even though we hoped that the G20 framework opportunity would bring meaningful change on debt treatment, it wasn’t quickly implemented, and it remains to be our next homework,” Ahmed said.

The EastAfrican

The World Bank Group’s private investment arm and guarantee agency have pledged more support for the first private telecoms operator in Ethiopia, Safaricom Ethiopia.

In September,  investment arm the International Finance Corporation (IFC) said it planned to inject up to 160 million dollars in equity.

However, in a statement dated June 8, World Bank Group said that IFC’s equity investment would be 157 million dollars and that it would also provide a 100 million dollar loan.

The Multilateral Investment Guarantee Agency would provide 10-year guarantees of one billion dollars to cover the equity investments of Safaricom Ethiopia’s shareholders: Vodafone Group (VOD.L), Vodacom (VODJ.J), Safaricom (SCOM.NR) and British International Investment.

“The investment and guarantees will help Safaricom Ethiopia roll out and operate 4G and 5G mobile networks across the country including in rural and urban areas,” the statement said.

Safaricom Ethiopia launched its mobile network in October after winning an operating licence in May 2021.

Previously state-owned Ethio Telecom had a monopoly in Africa’s second-most populous country with a population of about 120 million people.

Ethiopia has toppled Tanzania and Uganda as the leading destination of Kenya’s investment abroad, buoyed by the expansion of local firms in the giant neighbouring market.

Fresh data shows that Kenya’s direct investment in Ethiopia hit Ksh60.2 billion ($440.7 million) in 2021—surpassing Tanzania and Uganda’s Ksh51.5 billion ($377 million) and Ksh56.3 billion ($412 million), respectively.

Direct investment abroad — also referred to as outward direct investment — is a category of cross-border investment associated with a resident in one economy having control or a significant degree of influence on the management of an enterprise that is resident in another economy.

As well as the equity that gives rise to control or influence, direct investment also includes investment associated with that relationship, including investment in indirectly influenced or controlled enterprises, investment in fellow enterprises, debt (except selected debt), and reverse investment.

The newly released Economic Survey 2023 shows that although Tanzania was the leading destination for Kenya’s investment abroad at the start of 2015, the table has since tilted in favour of Addis Ababa.

 “Tanzania was the leading destination for the country’s investment abroad at the start of 2015 the review period, with investments declining in 2018, but later recovering to reach Ksh51.5 billion in 2021” the survey said.

“Kenya’s direct investment in Uganda reached its peak at Ksh56.3 billion in 2019, while investments in Ethiopia reached Ksh60.2 billion in 2021” it added.

Several Kenyan firms including giant telecommunications company Safaricom have ventured in the Ethiopian market where it operates under the subsidiary Safaricom Telecommunications Ethiopia private limited company (STE).

Safaricom Ethiopia’s phased launch commenced in August 2022 in the city of Dire Dawa and will spread to 24 other cities, including Addis Ababa in the months that follow.

The new operation has ambitions of achieving gross margins of 40 percent in 10 years. The target is backed by heavy investments that the subsidiary will make in hiring staff and building infrastructure to acquire customers in the country with a population of more than 100 million.

The Nairobi Securities Exchange-listed Safaricom is the major shareholder of the subsidiary whose other owners are Vodacom Group, Sumitomo Corporation, and CDC Group.

Kenyan lenders, including KCB Bank, have expressed interest in entering the Ethiopian market. A delegation of senior executives from KCB Bank visited the Ethiopian Investment Commission (EIC) in Addis Ababa in October last year where they held talks with Ethiopian government officials.

The visit by the KCB team came a month after Ethiopia’s Council of Ministers passed a landmark decision to open up the country’s banking sector to foreign investors.

The Economic Survey further shows that Kenya’s overall direct investments abroad generally exhibited an upward trend over the review period with a value of Ksh239.6 billion ($1.75 billion) as at the end of 2021 compared to Ksh93.5 billion ($684 million) as at the end of 2015 with the exception of 2020 where the stock of outward direct investment declined by 8.4 percent to Ksh161.1 billion ($1.18 billion), due to the Covid-19 pandemic.

Published by The EastAfrican

Ethiopia is in talks with the International Monetary Fund (IMF) to borrow at least $2 billion under a reform programme, four sources familiar with the matter told Reuters.

The IMF is still working on assessing the country’s debt sustainability after a request for a programme equivalent to about 500 percent of the size of its stake in the global lender, the sources said this week on condition of anonymity because the talks are private.

In this first debt analysis, the IMF calculated that Ethiopia is set to face a financing gap of at least $6 billion until 2026, according to two sources close to the negotiations. That would still leave a funding hole of roughly $4 billion over that period should the country succeed in securing the amount under discussion.

Talks are still ongoing in Washington this week during the IMF and World Bank Spring Meetings. An IMF staff mission visited Addis Ababa from March 27 to April 7.

“The scope of the support for Ethiopia is yet not set in stone, both parts are still working on the debt sustainability analysis,” one of the sources said.

An IMF spokesperson did not immediately reply to a request for comment.

Ethiopia’s State Finance Minister Eyob Tekalign Tolina and central bank chief Mamo Mihretu also did not immediately respond to Reuters’ requests for comment.

Africa’s second-most populous country in early 2021 requested a broader debt rework under the Group of 20’s Common Framework, an initiative for restructuring government debt aimed at low-income countries. But progress has been complicated by a two-year civil war that broke out in the country’s northern Tigray region in November 2020, leading to the deaths of thousands of people and displacing millions more.

Juba is choosing to lobby behind the scenes to members of the UN Security Council while Somalia is publicly calling for the lifting. Published by The EastAfrican

The soaring price of fuel is impacting transportation service in Addis Ababa, Ethiopia’s capital where commuters are seen waiting for hours before they could get rides.

The Ethiopian Ministry of Trade and Regional Integration recently increased the price of gasoline by 30 per cent to 47.83 birr (0.92 U.S. dollars) per litre and hiked the price of one litre of diesel by 38 per cent to 49.02 birr.

Commuters who spoke to Xinhua said they had to wait for hours for taxis and pay higher fares despite the government’s fuel subsidies for commercial transport providers.

“There is a critical transportation problem and we had to queue for long hours as there are fewer taxis.

“This is due to the fuel price hike,” said Lidya Endeshaw.

Endeshaw said that the taxi fare increment that followed the fuel price hike “is in particular affecting low-income people.”

Tewodros Meshesha, a taxi driver in Addis Ababa, on his part said amid the latest fuel price hike, the number of vehicles on the road had decreased significantly.

He argued that taxi drivers were not well-informed about the government’s new fuel subsidy scheme and were purchasing fuel at the same price as ordinary private vehicle owners, causing them to eventually charge higher fares due to their rising fuel expenses.

The Ethiopian Ministry of Transport and Logistics recently said it had introduced a Fuel Subsidy Beneficiary Scheme for commercial transport providers so that they could serve commuters at reduced transportation costs.

Abdulber Shemesu, an official from the Ethiopian Ministry of Transport and Logistics, said that the subsidy is part of the government’s efforts to relieve commuters from the impact of the latest fuel price hike and increasing cost of living.

“The subsidy has been in place since July 6 but the majority of commercial transport providers lack awareness on how they can make use of the subsidy and they have been observed halting services,” said Shemesu.

The increase in fuel price is stoking fears of further deteriorating the already soaring cost of living among ordinary Ethiopians.

Africa’s second-most populous nation is already witnessing a sharp price increase in basic items.

Five litres of edible oil which used to be sold for around 400 birr but is now being sold for about 1,100 birr.

Amid scarce edible oil supply to the market and the eventual soaring demand, the government had previously dropped taxes and tariffs on imports of all edible oil products.

Ethiopia recorded 34 per cent general inflation in June, with food inflation alone reaching 38.1 per cent.