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Sunday, November 25, 2012
Sunday, November 18, 2012
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Ethiopia was once a byword for poverty and famine.
It is still one of the poorest countries in the world, with an estimated third of the population earning less than $1 (63p) a day, but the country also has one of the world's fastest growing economies.
Opinion is sharply divided, however, as to whether or not it is wise to invest in the country.
Since 2004, its economy has been expanding by about 10% a year. The government expects growth to continue in double digits - but a report by the International Monetary Fund (IMF) suggests it will slow to 6.5% in 2013.
Even the IMF predictions are impressive, however, considering the current global financial climate and the fact that unlike many other countries on the continent, Ethiopia does not have much in the way of natural resources.Entrepreneurial spirit
Coffee is one of the biggest export earners in Ethiopia.
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Michael GirmaCoffee exporterYou need to be aggressive, but not arrogant”
In Addis Ababa, the country's capital, coffee exporter Michael Girma says it was a challenge to launch his business.
"To start up in the export sector, you need to perform with your own cash. Then after that, you can approach the banks," he says.
Apart from exporting coffee, he now also owns a cafe, a bar, and a pizzeria, employing 140 people altogether.
Although the business environment is getting very competitive, he is achieving a profit margin of 20-30% each year and feels confident about the future.
"A lot has changed in the last seven years," Mr Girma says. "You need to be aggressive, but not arrogant."
Although foreign investors are encouraged, many sectors are reserved for domestic investors.
"The restricted sectors are those which supply to the local people. If foreign investors want to come in and invest in projects which are export oriented, anything is open," Mr Girma says. "It would be very hard to compete otherwise."Diverse opportunities
Despite annual high inflation, some investors think the potential in Africa's second most populous nation has not been recognised.
Earlier this year, Shultze Global Investments launched a $100m equity fund aiming to invest in Ethiopian businesses.
In a nondescript building on a hillside overlooking Addis Ababa, Berhane Demissie decides where to put that money.
"Ethiopia offers significant opportunities for investors," she says, pointing out that agriculture is a strong growth sector.
"Anything grows in Ethiopia with the various climate and soil diversities that we have. That also follows through to the agricultural value-added chain with processing and exports," Ms Demissie says.
With 85% of the population dependent on the agricultural sector, she says the government is trying to ensure those farmers have access to finance and fertilisers that will allow them to grow more.
Ms Demissie says this will lift people out of poverty.
"If the programme was just about big farms I would have said no, but the smallholder farmers are being included in the overall growth of the economy," she says.
She also says there is a lot more demand for consumer goods and services within the country, but too few manufacturing companies.Business concerns
In 2010, Transparency International, which rates countries according to perceived corruption, listed Ethiopia at 120th out of 183 countries and the Washington-based Global Financial Integrity research organisation concluded that illicit financial outflows between 2000 and 2009 totalled $11.7bn (£7.4bn) in 2009 - which was more than Ethiopia had earned through exports.
It is reports like those which deter some of the diaspora from returning to the country to look for business opportunities.
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Berhanu NegaBucknell UniversityThe government has been pushing tens of thousands of people off their lands because of the land grabs by China, Saudi Arabia and India”
Berhanu Nega went back to Addis Ababa in 1994 after the change in government and was elected mayor in 2005 - only to find himself imprisoned for life on the day he was elected on charges of treason, because he had called for the overthrow of the president.
He was released after 21 months and returned to the US where he is now an economics professor at Bucknell University. He is also the co-founder of Ginbot 7, an Ethiopian opposition party, and he does not believe the country is a good place to invest in for the medium or long term.
"If you want to make big bucks and get out then it is good for the short term," he says.
Apart from concerns about corruption, he is also worried about the uncertainty of inflation: "The government has been printing money since 2005 and inflation, depending on which figures you look at, ranges between 40-60%."
He says many businesses have closed down because of the taxation the government has imposed to pay for its expanded security forces.
He adds: "The government has been pushing tens of thousands of people off their lands because of the land grabs by China, Saudi Arabia and India among others, which has caused serious conflict in many areas."
Mr Nega does not feel there will be any changes soon and is pessimistic about the country's future business environment
Saturday, November 17, 2012
Ethiopia is one of the last countries in Africa to permit mobile banking.
Mobile banking has proved to be profitable in the developing world, where many people still do not use banks. Earlier this year, the World Bank reported that seventy-five percent of the world’s poor are “unbanked.” That is about two point five billion people. Banking through mobile telephones lets people take part in financial services even if they are not near a bank office.
In Africa, only Ethiopia and Zimbabwe do not provide mobile money services. Now, that will change for Ethiopia.
BelCash and M-Birr are mobile banking technology providers. They have been setting up mobile banking and mobile money services in Ethiopia for the past three years.
Dutch company BelCash is working in partnership with banks to provide easier access to financing through bank accounts. Ireland-based M-Birr is a mobile money service that works with micro finance groups where no registration at a bank is needed.
Ethiopia’s mobile industry is young. And wireless service coverage in the country is not well developed. The pressure on the wireless network is expected to increase.
In the past four years, the number of mobile users grew from three to seventeen million. And Ethiopia’s telecommunications provider, Ethio Telecom, expects that number to grow to forty million in the next three years.
The government closely controls Ethiopia’s telecommunications market. That means there is only one provider. Competition is not permitted.
M-Birr General Manager Thierry Artaud says Ethiopia’s neighbors have several mobile providers.
“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.”
He says, if Ethiopia had no restrictions, his company would have to compete with larger companies.
Ethiopia has looked at other developing countries with mobile banking. National Bank of Ethiopia officials visited Kenya, Pakistan and Brazil.
Frezer Ayalew is with the National Bank of Ethiopia. He says mobile banking services will help the country.
“For the economy it has great contribution in terms of mobilizing domestic savings with these services.”
The National Bank of Ethiopia recently finished a draft order on how mobile banking services should be structured. This comes as more companies have shown interest in starting mobile banking services.
Thursday, November 15, 2012
Ethiopia: A single digit inflation by all means disproving the inflated growth preached in time of Zenawi
Tuesday, November 6, 2012
By William Davison
Nov. 5 (Bloomberg) -- Ethiopia is set to approve a mining license for Nyota Minerals Ltd. to develop the Tulu Kapi gold deposit, Mines Minister Sinknesh Ejigu said.
“We have agreed on the technical and environment terms and we are finalizing the economics,” Sinknesh said in a phone interview from the capital, Addis Ababa, today. “At the end of the day, they will get the mining license.” There is no date set for approval, she said.
The project in western Ethiopia 500 kilometers (310 miles) west of Addis Ababa, contains an estimated 1.87 million ounces of gold, according to the website of Nyota, whose shares trade on exchanges in the U.K. and Australia. Nyota Chief Executive Officer Richard Chase didn’t immediately respond today to an e-mailed request for comment.
Ethiopia, Africa’s largest coffee producer, is diversifying its economy away from a reliance on agriculture by encouraging investment in mining and manufacturing. Revenue from gold exports jumped 32 percent to $602 million in the 2011-12 fiscal year from the same period a year earlier, according to Access Capital, an Addis Ababa-based research company. Midroc Gold, which is owned by Saudi billionaire Mohamed al-Amoudi, is the only company mining gold in the Horn of Africa nation.
Nyota is exploring for the precious metal around Tulu Kapi in Oromia region and in the north of the country, according to its website.