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Israel investment conference to showcase Ethiopia
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A high profile Ethio-Israeli investment conference is scheduled to take place next Monday in Tel Aviv. The conference, which will be held at the Dan Panorama Hotel, will be organized by the Ethiopian Embassy in Israel and headed by Ambassador Helawi Yoseph.
Several presentations will be given at the conference to showcase to Israeli investors the significant investment opportunities in Ethiopia. The presenters include Fitsum Arega, the director general of the newly restructured Ethiopian Investment Agency and Zemedeneh Negatu, the managing partner of Ernst & Young, Ethiopia.
According to information obtained by The Reporter, a diverse group of Israeli investors are expected to attend the conference representing sectors such as agriculture, manufacturing, mining and technology.
In the past few years, Israel’s close relationship with Ethiopia has expanded beyond the historical ties, which included the resettlement of hundreds of thousands of Ethiopian Jews in Israel in the 1980s, to the investment sector. Recently, several announcements have been made by Israeli investors regarding their intentions to invest in the rapidly growing Ethiopian economy. This includes Israel Chemicals, which has invested in Allana Potash and is also planning to invest in a fertilizer processing plant.
Another recently announced Israeli investment deal is Eshet Engineering Ltd, which signed a memorandum of understanding with the Ethiopian Ministry of Industry to form a joint venture to set up an industrial zone in Kombolcha, in the Amhara Regional state. The total project cost is estimated at USD 200 million and will be constructed on 1,000 hectares. In March of this year, a delegation of 60 Israeli companies visited Ethiopia led by Yair Shamir, the Agriculture Minister. Israeli companies were one of the first to invest in Ethiopia’s flower and horticulture sectors starting about 10 years ago.
According to information obtained from the government of Ethiopia, there are more than 100 Israeli companies that have already invested in Ethiopia or that are in the process of investing in sectors such as agriculture, natural resources and manufacturing.
The investment conference in Tel Aviv is part of a broad strategy by the Ethiopian government to attract Foreign Direct Investment (FDI) from diversified sources. Similar investment conferences led by senior government officials, including Prime Minister Hailemariam Desalegn and Foreign Minister Tedros Adhanom (Ph.D.), accompanied by representatives of the Ethiopian private sector, had been organized in Europe, South Korea, Japan, the Middle East and the US, and just three weeks ago a delegation led by the Mayor of Addis Ababa, Driba Kuma, visited Germany and gave presentations in Leipzig promoting investment in Ethiopia as part of the 10-year anniversary of the establishment of the relationship between the two cities.
Last year, according to data obtained from Ernst & Young, the global professional services firm, USD one billion in FDI was received by Ethiopia, the highest amount ever. Ernst and Young is forecasting annual FDI flows to top USD 1.5 billion dollars for each of the next three years, excluding investments in the mining and oil and gas sectors.
The Ethiopian economy grew by an average of 10.6 percent between 2004 and 2011, according to the World Bank, amongst the fastest in the world. The Ethiopian government is forecasting more than 10 percent GDP growth for the current fiscal year, which ends on July 7.
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Southwest Technologies, partners to launch data center in Ethiopia
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Southwest Technologies and its partners announced they are set to launch a data center in Ethiopia to make Ethiopia a hub for IT in Central Africa on Tuesday at the Sheraton Addis.
“It’s a historic event,” Tewdros Ashenafi, Chairman—Southwest Holdings said applauding the move of the company alongside its involvement in the energy industry.
“In terms of this opportunity, people may say think, isn’t it too early to do this? But we say we are in the right time,” he said. According to him, his company is interested in making history, and this would pick Ethiopia’s standing in the world to realize e-commerce, e-agriculture and so many sectors.
Dhaneshwar Damry, Chairman—Buhmishq Group hailed Southwest Technologies’ interest that aims to develop the country’s Information Technology (IT) sector that accelerates the economy in being more competitive worldwide. “In 2050 my daughter will tell me who fixed all the setbacks here as she had asked me where I was going after retrieving the map of the country on her iPad,” he said. “Because the country would have transformed by then as it carries out such vital developments.”
He further pointed out that Ethiopia would become an IT hub of Central Africa as Kenya has already stepped up its efforts to remain East Africa’s IT hub. “IBM will remain fully committed to this project and, this data center will be a model for the world,” he said.
Gustavo Alvarez, IT service leader, IBM in East Africa also shared the views expressed and added that IBM has already moved from selling commodity business to value added services. “Eighty per cent of people working in IBM are in the service area so that we need to look for selling services rather than selling hardware and printers,” he said.
After many years of active involvement in East Africa, IBM launched a Kenyan Innovation Center last year housing a cloud company center that aims to drive Information Technology skills development in the region, and it also announced that it would open more Innovation centers in Africa aiming at seizing the opportunity of the economic growth of the continent.
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Infrastructure coordination office to be established
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A new draft bill proposing the establishment of a federal coordinating agency for integrated infrastructure with a mandate of execution of infrastructure development works in accordance with road masterplans and the development of a formula for the assessment of compensation for properties has been presented to the House of People’s Representatives (HPR).
The newly proposed bill indicates that the agency would be accountable to the Office of the Prime Minister and is believed to solve the recurrent problems of uncoordinated activities among various organizations which at the same time create havoc while one organization engages in particular development activities by damaging other’s infrastructure.
According to the explanation attached to the proposed proclamation, this agency will be dealing with conflicting natures of infrastructure development such as for example, a new road facing damages by other organizations’ expansion projects like by the Water Resource Development office, telecom expansion or electric power expansion by the newly formed Ethiopian Electric Power Services Office (EEPSO).
Ethio Telecom, EEPSO and Water and the Sewerage Authorities have been fiercely criticized for demolishing newly or existing roads while attempting to address the access of telecom demand, power and water access for society and organizations.
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Giant car dealers unite to voice common industry issues
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Some of the renowned car and machineries importers have sustained in the industry over half a century in Ethiopia.
Orbis Trading and Technical Center SC, for instance, has been in business for over 60 years importing and selling Mercedes-Benz cars. Orbis together with 13 giant importers recently formed an association which is expected to voice common interests of the rivaling companies.
Abraham Y. Abegaz, Chief Executive Officer (CEO) of Nyala Motors SC and board chairman of the newly formed association, on Thursday told The Reporter that to echo common challenges the industry faces, it has become essential to join hands. The new association, to which some 14 exclusive agents belong to, is expected to leverage major issues of customs on import duties, shortages of hard currency, and fluctuation of hard currency.
Abraham said that price invoices they present to the Ethiopian Revenues and Customs Authority (ERCA) were rejected on a number of occasions, the latter saying the invoices are not reflecting the true prices of the cars imported. The argument ERCA holds to justify this is basically sourced from the Internet or websites of manufacturers, Abraham said. Doing so in such ways will never prove the actual price since the manufacturers assign 18 digit numbers which detail the make and price of the vehicle, he argues.
The introduction of a new taxation levied on to cover transportation costs from Djibouti to the capital is also a concern the new association has to deal with.
The government was escaping procurements from importers staging two major complaints. Price hikes and delays of delivery were critical for the government to procure from Dubai. Abraham deviates as this is not a realistic approach to pursue. He argues that real prices are rather reflected by the exclusive agents since they avoid the middlemen in the process. Besides, bypassing and traveling abroad for procurement may inflict corruption to prevail, Abraham said.
He went on to saying that delivery sometimes fails to address the demands of the government on conditions where both the dealers and the manufacturers follow the newly introduced “just-in-time” delivery strategy which intends to reduce stock piling costs.
Mekamu Assefa Mamo, CEO and vice chairman of Marathon Motor Engineering (exclusive importer and distributor of Hyundai vehicles and parts) said that the company as a genuine brand car importer guarantees and takes risks of any defects, contrary to the foreign third party procurements made in the past.
Abraham furthered the risking challenges where public agencies react when requested to be bound by conditions of exchange rate fluctuations and other unforeseen issues while procuring. On top of such cases, new models are not recognized by the public agencies as quickly as the dealers require, since the manufacturer produces the vehicles based on the climate and topographic nature of the buying countries, importers regret.
Hence, to voice such issues and other objectives a new association has become a reality to the industry. According to the preconditions of the association, importers need to prove they have licenses both from the government and the original manufacturers.
Rolf Gautschi, general manager of Orbis, Chris De Muynck, managing director of Moenco, Ries Engineering and BH trading and technical services are board members of the association.
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Power Africa goes off-grid in Addis Ababa
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Solar panels are installed in Rema, a village 150 miles northwest of Addis Ababa, Ethiopia, where many rural households still do not have access to electricity. U.S. President Barack Obama’s Power Africa initiative will invest in off-grid and small-scale energy projects to bring electricity to rural areas. Photo by: Stiftung Solarengie / Bread for the World / CC BY-NC
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The U.S. Department of Energy Tuesday announced a new framework for investment — “Beyond the Grid” — a partnership with 27 “investors and practitioners” who commit to direct $1 billion towards off-grid and small scale energy projects in sub-Saharan Africa, in support of President Barack Obama’s Power Africa initiative.
The announcement could help assuage some environmentalists’ and pro-poor advocates’ fears that Power Africa investments lean too heavily on conventional and grid-connected energy projects and threaten to increase carbon emissions while neglecting rural communities that are often the most impoverished and underserved.
U.S. Energy Secretary Ernest Moniz announced the new framework Tuesday at the U.S.-Africa Energy Ministerial co-hosted by the governments of Ethiopia and the United States in Addis Ababa. U.S. Agency for International Development Administrator Rajiv Shah, African Development Bank Director Alex Rugamba, U.S. National Security Council Senior Director Gayle Smith and other notable public figures are participating in sessions that span topics related to access to energy for women, governance and natural gas utilization, among others.
“With close to 600 million people without access to modern-day electricity, it is clear that centralized grid access is not a comprehensive solution for these countries in one of the world’s least urban continents. But through solutions including off-grid and small scale energy projects, we can bring electricity to these rural areas,” Secretary Moniz said in a statement.
Overseas Private Investment Corp. President and CEO Elizabeth Littlefield presented Wednesday a set of guidelines for power purchase agreements, intended to make them more “bankable” in the eyes of potential investors. A multi-agency effort to produce those guidelines — which Devex detailed in March — arrived at a set of “key elements for attracting financing to energy projects,” according to a statement from OPIC.
“Bankable power purchase agreements are key to unlocking private and public sector capital needed to build generation capacity across the continent — which is the goal of Power Africa,” said Littlefield in a statement released ahead of her address at the ministerial.
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About the author
Michael Igoe is a Global Development Reporter for Devex. Based in Washington, he covers US foreign aid and emerging trends in international development and humanitarian policy. Michael draws on his experience as both a journalist and international development practitioner in Central Asia to develop stories from an insider’s perspective.
https://www.devex.com/news/power-africa-goes-off-grid-in-addis-ababa-83621
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Where to Invest Around the World, 2014 Edition
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Do you work at a company that does business overseas? Or maybe you’re an investor hoping to buy a chunk of the growth in emerging markets? Either way, you’re probably wondering where the right places are to invest for the next five years. It’s an especially tough question today, given the geopolitical and financial risks plaguing the global economy. But a detailed consideration of all the things that can happen between earning a return abroad and bringing it home can offer a useful place to start.
Last May, I presented the first edition of the Baseline Profitability Index (BPI), which brought together eight factors to predict the total pretax return investors might expect in countries around the world: economic growth, financial stability, physical security, corruption, expropriation by government, exploitation by local partners, capital controls, and exchange rates. (In the original article linked above, I list my data sources.) In each case, I estimated how likely a given factor was to affect an investment, and then how costly the effect might be.
The idea of the BPI is to see how all of these factors might affect a foreign direct investment — the kind a private equity firm might make — over five years.
To my knowledge, it’s the first publicly available tool that explicitly takes a holistic approach to forecasting investment returns. It’s not perfect, because it doesn’t account for the interactions between all of these factors; just looking at them individually already involves many layers of complexity. But it’s a start.
In just the past 12 months, quite a lot has changed in the global investing environment. Some struggling economies have found their feet, notably in Europe, while others around the world have fallen victim to conflict. A few have improved their economic institutions, too; neighbors Greece, Macedonia, and Turkey all bolstered legal protections for investors, and nearby Azerbaijan strengthened its property rights.
Thanks to the availability of new data, four countries joined the BPI this year: Cyprus, Ethiopia, the Democratic Republic of Congo, and the Republic of Congo. It also lost a few: Benin and Tunisia (whose sovereign debts are no longer rated by Standard and Poor’s); and Ukraine (whose economic forecast from the International Monetary Fund is currently in flux).
Before I get to the results, I have three notes: In the 2013 edition, I used the International Property Rights Index as a gauge of the likelihood of government expropriation. The index is valuable, but covers fewer countries and does so more idiosyncratically than other sources. This year, I decided to use the property rights component of the Heritage Foundation’s Index of Economic Freedom. In the rankings below, I have recalculated the 2013 numbers using last year’s edition of the Heritage index. Also, the World Bank changed its methodology slightly for measuring protection of investors and then revised all previous years of data; these changes are reflected in the 2013 rankings as well.
Finally, the Chinn-Ito index I used to evaluate capital controls has not been updated, so I’m using the same values as last year. Some countries did indeed change the ease with which money could be moved across their borders; Cyprus, Ghana, and notably Ukraine made it more difficult, while Argentina and Venezuela made it easier. Hopefully a future update will include the effects of these new policies.
Comparisons across the first two years of the BPI tell plenty of interesting stories. Botswana originally ranked second last year, but using the Index of Economic Freedom puts it in first place for two years in a row. Four other countries in sub-Saharan Africa join it in the top 20, with strong prospects for growth and, in Ghana and Rwanda at least, friendly business climates. East Asia performs even better, locking down seven of the top 20 places. India maintains its sixth position in large part because of the potential for real appreciation in the rupee; this may now be more likely than ever, thanks to Narendra Modi’s supposedly reform-minded government and the strong hand of Raghuram Rajan at the central bank.
China’s case is one where the switch to the Index of Economic Freedom is noticeable. It ranked 21 in the original 2013 BPI and slipped to 43 after the change. The index takes a dim view of Chinese property rights, perhaps because of the country’s nominally communist system. China’s expectations for growth dimmed significantly as well, pushing it still further down the rankings to 60th place in 2014.
Several countries made even wider jumps between the two years of uniform data. The biggest movers in the right direction were Jamaica, Japan, and the Philippines. Forecasts for faster growth, a better credit rating, and an increase in political stability helped the Philippines. In Japan, the 2013 BPI foresaw a real depreciation in the exchange rate, which indeed came to pass thanks to the huge expansion of the money supply encouraged by Shinzo Abe’s government; with this risk somewhat lessened going forward, Japan became more attractive for investment. Jamaica had a bit of both: a slight increase in its growth forecast and a suggestion that its currency was ripe for appreciation.
The deepest drops in the BPI were by Cape Verde, Egypt, Turkey, and Uruguay. Cape Verde suffered downgrades in both its economic forecast and its credit rating; Standard and Poor’s cited the country’s rising budget deficit — in part a consequence of lower growth and tax revenues — in cutting the rating. In Egypt, expectations for the economy worsened markedly as the army’s coup heightened the general level of uncertainty, while the likelihood of being shortchanged by a local partner rose. Turkey actually improved some protections for investors, but its security situation and its growth forecast both became gloomier. The political tribulations these economies have suffered in the past year did them no favors in terms of attracting investment. Meanwhile, peaceful, pot-smoking Uruguay also saw some erosion in the rule of law and a decrease in expected growth. I’ll let you draw your own conclusions.
Once again, the BPI suggests that not every fast-growing country is a perfect target for foreign investment. Many other factors determine just how much of that growth will be transformed into a cash return back home. Plenty of them are not included in the BPI, but it still contains much more information than a simple economic growth forecast.
We won’t know how predictive the BPI has been of investment returns until a few more years have passed. Even then, it might be tough to compare its forecasts to the profits earned by multinational corporations and private equity funds. But at the very least, the BPI synthesizes the many factors that can affect an investment; as a first approximation, it should at least help investors to ask the right questions.
Full content original article (registration required) here: http://www.foreignpolicy.com/articles/2014/05/29/where_to_invest_around_the_world_2014_edition_bpi
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Filed under: Ag Related, Economy, Infrastructure Developments, News Round-up Tagged: Addis Ababa, Africa, African Development Bank, Agriculture, Business, East Africa, Economic growth, EEPCO F.C., Ethiopia, Investment, Sub-Saharan Africa, tag1 
