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Ethiopia eyes bond trading in cautious capital markets opening
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* Bond market could expand pool of funds for state
* Foreign investors likely to be excluded
* Government keeps tight rein on economy
* PM open to starting bourse, but will take time
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ADDIS ABABA/NAIROBI, May 29 (Reuters) –
Ethiopia is seeking to create a secondary market for local currency Treasury bonds, possibly in a year or so, the World Bank said on Friday, a move seen as a cautious step towards liberalising one of Africa’s fastest growing economies.
Ethiopia, once brought to its knees by communist purges and famine, has become an increasingly attractive destination for foreign investors although the government tightly controls what sectors they can invest in. There is no stock market.
Prime Minister Hailemariam Desalegn told Reuters last month that Ethiopia was open to having a bourse but said it would take time.
Lars Christian Moller, the World Bank’s lead economist and programme leader for Ethiopia, told Reuters the World Bank and the International Monetary Fund had offered advice to Ethiopia’s central bank on developing a secondary debt market that could help the government raise funds.
A spokesman for the central bank, the National Bank Of Ethiopia, had no immediate comment when asked about the plan.
“The benefit from the goverment’s perspective is that you can tap into more investors, so in that sense you can run a higher domestic fiscal deficit,” Moller said.
That could help the state keep up the pace of its ambitious infrastructure investments, which have pushed annual growth to about 10 percent and built new roads, railways and dams.
A secondary bond market could start in about a year but foreigners would most likely be barred, Moller added.
Foreigners are already blocked from investing in banks or retail, while the telecoms industry is a state monopoly.
Investors in Ethiopian Treasury bonds are mostly state institutions which keep the debt to its maturity, which means the government has firm control on setting interest rates. The last transaction made on the interbank market was in 2008.
Under plans for a secondary bond market, the price of traded debt would be driven by market forces not only the central bank.
“That would be an important further step in the direction away from the 1991 communist socialist planning mode to the market-based approach,” Moller said.
But there is no sign that other financial restrictions would be lifted. Banks must now invest the equivalent of 27 percent of their loan portfolios in low-yielding state bonds, used to fund development but which experts say hinders lending to business.
A secondary bond market, where market rates prevail, would expand the pool of funds for the government to tap by drawing in a broader range of private investors beyond the banks.
Last year, Ethiopia tapped the international bond markets for the first time with a $1 billion Eurobond.
The prime minister said in May, during a vote in which his EPRDF coalition extended its quarter century in power for another five-year term, that he did not rule out setting up a stock market but businesses need time to mature.
“What matters is that you should have a strong private sector before having a stock market,” he told Reuters on May 24.
http://af.reuters.com/article/commoditiesNews/idAFL5N0YK1WC20150605?sp=true
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Prime Minister Hailemariam Invited to G7 Summit
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Prime Minister Hailemariam Desalegn is invited to take part in the G7 summit that will be held on June 7 and 8, 2015 in Munich, Germany.
The premier, along with other African heads of state and governments including presidents of Liberia, Nigeria, Senegal and Tunisia, is expected to attend the G7 outreach meeting.
The outreach meeting is aimed to create a platform for G7 to support African countries in their reform efforts and thereby strengthen peace and security, growth and sustainable development in Africa.
It also serves the two sides to engage in dialogue on the common challenges they face.
The 41st G7 summit will focus on the global economy as well as on key issues regarding foreign, security and development policies.
The Group of Seven (G7, formerly G8) is a governmental forum of leading advanced economies in the world.
Canada, France, Germany, Italy, Japan, United Kingdom and United States are the current members of the G7 after the suspension of Russia in 2014.
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Ethiopia’s Hot, Nigeria’s Not, for Investors Eyeing Africa
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Michael CohenWilliam DavisonRenee Bonorchis
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Africa has a hot new investment destination and it’s not Nigeria.
The buzz at the World Economic Forum on Africa, an annual summit of the continent’s rich and powerful, is all about Ethiopia, where the economy is flourishing and the government is embracing select foreign capital. Executives from General Electric Co., Dow Chemical Co., Standard Bank Group Ltd. and MasterCard Inc. attending the June 3-5 gathering in Cape Town all singled out the East African nation as a market with strong potential.
Ethiopia was Africa’s eighth-largest recipient of foreign direct investment last year, up from 14th position in 2013, a report released by accounting firm EY on June 2 showed. The number of projects in Ethiopia surged 88 percent, the most of all countries ranked, while those in Nigeria slumped 17 percent.
“It’s got a government that is managing economic development in a very deliberate, cautious manner,” Ross McLean, Dow’s president for sub-Saharan Africa, said in an interview on Thursday. “It’s the second-most populous country in Africa. It hasn’t urbanized like other African countries, but it’s going to. It’s a very exciting place.”
Ethiopia’s economy is expected to expand 8.6 percent this year and 8.5 percent in 2016, compared with 10.3 percent growth last year, the International Monetary Fund said in its World Economic Outlook released on April 14. Nigeria, which has Africa’s largest economy and is grappling with energy shortages and the fallout of an oil price slump, is forecast to grow 4.8 percent this year and 5 percent next year.
Construction Boom
Ethiopia’s capital, Addis Ababa, shows all the signs of a construction boom. Private developers are erecting scores of office blocks and luxury housing estates, while the government is clearing slums to build low-cost apartments. Radisson Hotels International Inc. and Marriott International Inc. are among global chains that have opened hotels to cater for an influx of business travelers.
A Chinese-built railway line that snakes alongside the capital’s main roads is part of a nationwide infrastructure development program that’s helping entice investors. In April, Chinese company Huajian Group began work on a $400 million shoe-manufacturing park on Addis Ababa’s southwestern outskirts, while companies including Taiwan’s George Shoe Corp. have opened plants in an industrial zone in the Bole Lemi district.
On Thursday, Dangote Group, the Nigerian company controlled by Aliko Dangote, Africa’s richest man, said it will spend $500 million expanding its cement plant in Ethiopia, adding to $600 million already invested.
Credit Rating
“We will leave no stone unturned to make this country a suitable destination for foreign investment,” Prime Minister Hailemariam Desalegn said at the opening of the plant at Mugher, about 80 kilometers (50 miles) west of Addis Ababa.
The country was assigned its first credit ratings in May. Moody’s Investors Service rates it a non-investment grade B1 with a stable outlook, while Standard & Poor’s and Fitch Ratings awarded the country a B, one grade lower.
Yields on the nation’s debut $1 billion Eurobond have climbed to 6.77 percent from 6.625 percent when they were sold on December 4.
Business Obstacles
“We’ve done quite a lot of Ethiopian business,” said David Munro, head of corporate and investment banking in Standard Bank, which has applied for a license for a representative office. “We see it as a prospective place to grow our business. There’s the possibility of significant resources and it’s within an economically significant zone, the east African trade area.”
Obstacles to doing business in Ethiopia remain. The Ethiopian Peoples’ Revolutionary Democratic Front has ruled the country for the past two decades and the state continues to dominate the financial services, telecommunications and transport industries. Foreign exchange is in short supply, because the government uses inflows to finance its infrastructure program and exports remain meager.
Razia Khan, Standard Chartered Plc’s head of Africa macroeconomic research, said Ethiopia’s economy has a “hollow” structure because it doesn’t have a big enough middle class to enhance economic growth.
Poverty Data
Only 18 percent of Ethiopia’s 94.1 million people are urbanized and the economy is worth just $48.9 billion, according to the Abidjan, Ivory Coast-based African Development Bank. About 30 percent of the population live in poverty, according to 2010 data from the World Bank, down from 46 percent in 1995.
Pan-African lender Ecobank Transnational Inc. has a representative office in Ethiopia. Equity Group Holdings Ltd., owner of Kenya’s second-biggest bank, will prioritize its Ethiopian business as part of an expansion into nine other African nations, Chief Executive Officer James Mwangi said in an interview in Cape Town.
Dow doubled its sales in Ethiopia last year and sees more growth to come.
“There are some significant challenges,” said McLean. “We manage them. We think we are in at the right time.”
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Ethiopia: East Africa’s biggest cement plant opens
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Dangote Group, the West African industrial conglomerate owned by Africa’s richest man Aliko Dangote, have inaugurated the biggest cement plant in East Africa in Ethiopia’s Mugher district, located about 85km away from the capital, Addis Ababa.The new factory, commissioned by the Dangote Group at a cost of $480million, has a production capacity of 2.5 million tonnes of cement per annum.
Ethiopian Prime Minister Hailemariam Desalegn, who attended the opening ceremony on Thursday, says the factory will also enable Ethiopia to meet its ever increasing local cement demand.
The new plant will raise Ethiopia’s annual cement production to 8 million tonnes from the current 5.4 million.
And it will also bring Dangote Group nearer to attaining a total production capacity of 40 million tonnes per annum globally, before the end of the year, according to the company.
Apart from high ranking government officials, the opening ceremony was attended by top members of the Nigerian business community.
The Prime Minister took the opportunity both to invite more investment from African businesspersons and Ethiopia’s commitment to support them.
The 480 million worth cement plant has seen the Dangote Group becoming the single largest investment by an African corporate in Ethiopia.
A statement from the Dangote Group said the project will improve local economic prospects.
The Dangote cement plant is now the fifth in the series of the offshore plants by the company that has rolled out cement production firms within the last year on the continent.
The other four are located in Senegal, Cameroon, South Africa and Zambia.
Nine other countries such projects are on the cards, as cement plants are in various stages of construction.
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Ethiopia, Burkina Faso, Nigeria to Benefit More from Gates Fundations’ $776 Million Fund
Addis Ababa: June 5, 2015 – Gates made the announcement in Brussels, where she urged European leaders to make the nutrition of women and children a priority. The huge pledge also unlocks $180 million in matched funding from Britain’s Department for International Development.
‘Malnutrition is the underlying cause of nearly half of all under-5 child deaths,’ said Gates. ‘Yet for too long the world has underinvested in nutrition. Today we see an opportunity to change that.’
Much of the money will be spent in India, Ethiopia, Nigeria, Bangladesh and Burkina Faso, where there is serious malnutrition and a real chance to make positive changes, the foundation said.
The Bill and Melinda Gates Foundation is the world’s largest private philanthropy organisation, with a $40 billion endowment. It aims to tackle disease and poverty in the developing world. Bill Gates earned his billions as co-founder of Microsoft.
Every year millions of children die because they get substandard nutrition during the critical 1,000-day period from their mother becoming pregnant until their second birthday, the foundation said in a statement.
‘Many European donors are now prioritising nutrition, which we believe will be one of the fundamental solutions to help cut child mortality in half by 2030,’ said Melinda Gates.
The extra funding announced in Brussels will aim to help women and girls before they get pregnant, improving the likelihood of a healthy mother and child. It will also be spent on solutions ‘proven to improve nutrition’ including fortifying food and promoting breastfeeding.
Women and girls play a crucial role in reducing poverty and improving health, Gates said. ‘From their leadership as farmers, entrepreneurs and consumers to their role as mothers; investment in women and girls will be key to improving nutrition globally.’
United Nations member states aim to agree in September a set of Sustainable Development Goals (SDGs), targets for making progress and reducing inequality in areas such as poverty, health, education, women’s rights and climate change by 2030.
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Host Country Agreement signed between Ethiopia and the UN for FFD 3
Addis Ababa: June 5, 2015 – H.E. Ambassador Tekeda Alemu, Permanent Representative of Ethiopia to the UN signed the Agreement with Mr. Wu Hungbo, Under Secretary-General of the United Nations for Economic and Social Affairs.
Ethiopia has attached great importance to the organization of this Conference whose outcome is very critical to the implementation of the next generation of Sustainable Development Goals (SDGs) to be adopted during the 70th session of the United Nations General Assembly.
In this regard, the Ethiopian government has established a National Committee composed of all relevant stakeholders to ensure that the conference is a resounding success.
http://www.fanabc.com/english/index.php/component/k2/item/3109?Itemid=674
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Power Africa Initiative Coordinator Says Corbetti Project Testimony to Ethiopia’s Priority for Energy Sector
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U.S. Government Coordinator for the Power Africa Initiative said the Corbetti Geothermal Project that is being built in Ethiopia displays the priority the country gives for the energy sector.
During a televised conference he held with journalists from sub-Saharan Africa countries, Andrew Herscowitz said the Power Africa Initiative has been exerting efforts to discharge the electric energy demand of the countries by carrying out various projects with private investors.
The Power Africa Initiative will also create favorable condition for investors to engage in the energy sector through undertaking feasibility studies, identifying opportunities for energy and creating strong relationship among government and investors, he added.
According to him, Corbetti Geothermal Project is expected to generate 500 MW and play vital role in the endeavor of Ethiopia to have enough access to energy in the country.
The government of Ethiopia has reached an agreement with Reykjavik Geothermal and power Africa is striving to provide technical and consultancy assistance so that the companies will engage in the sector.
The US had allocated over one billion USD to increase power supply in sub-Saharan Africa countries with the cooperation of 40 companies. In addition to Corbetti Geothermal Project, which is under construction in Ethiopia, similar projects are underway in Tanzania and Nigeria, it was indicated.
The Corbetti project is part of the Power Africa Initiative announced by President Obama in 2013 which seeks to add more than 10,000 megawatts of cleaner, more efficient electricity in six priority countries in sub-Saharan Africa.
A key thrust of the Power Africa strategy is to accelerate the development of the vast and renewable geothermal potential in the Rift Valley which extends through both Ethiopia and Kenya.
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Ambassadors Hail Ethiopia’s Effort to Fulfill Energy Demand of Regional Countries
Addis Ababa: June 4, 2015 – Ethiopia aims to generate 11,000 megawatt of electricity and to build 15,000 km transmission lines during the Second Growth and Transformation Plan period.
Beyond satisfying its energy needs, the country is currently working to export electricity to neighboring countries.
A master plan that connects various East African countries to North Africa through electric lines is being implemented.
Executed on the basis of the master plan, a 2,000km line that connects Ethiopia-Kenya-South Sudan-Rwanda is nearing completion.
Ethiopia plans to sell 400 megawatt of electricity to Kenya next year, and a memorandum of understanding is expected to be signed to construct an electric line that connects Ethiopia-Tanzania-Burundi-Yemen and Somaliland.
Kenya and Djibouti are countries which obtain electricity from Ethiopia, but still need additional power.
Djibouti’s Ambassador to Ethiopia, Mohammed Idriss Farah said Ethiopia plays a leading role in reducing the region’s power shortage which is the main obstacle to the economic growth of the regional countries.
Since Ethiopia’s power supply is dependable and comparatively cheaper, Djibouti has a desire to buy additional electricity from Ethiopia, the ambassador noted.
The electric supply would help avert Djibouti’s power shortage and generate foreign currency for Ethiopia thus contributing to the strengthening of the economic integration of the countries, he elaborated.
Kenya’s Ambassador to Ethiopia, Catherine Mwangi on her part stated that Ethiopia’s strategy of brining mutual growth is appreciable.
Ambassador Mwangi also expressed Kenya’s desire to obtain electricity that entirely comes from renewable energy sources from Ethiopia.
The ambassador further said she has been following the execution of the Ethio-Kenya power transmission line that is being built with the support of African Development Bank.
She said Ethiopia’s efforts to satisfy the region’s electricity demand and the participation of the public in the construction of the Grand Ethiopian Renaissance Dam is commendable.
Water, Irrigation and Energy Minister Alemayehu Tegenu said Ethiopia is undertaking successful steps in fulfilling its energy demand and that of neighboring countries.
Ethiopia’s electricity demand has shown a 20-25 percent annual growth, according to Chief Executive Officer of Ethiopian Electric Power (EEP), Azeb Asnake.
To meet the demand and benefit regional countries, the country has formulated a 25-year master plan, she added.
CEO Azeb noted that Adama I and II Wind Farms, Ashengoda and Fincha Amertinesh power plants were completed in the first GTP while GERD, Gilgel Gibe III, Genale Dawena and Reppi Dry Waste energy generating projects are transferred to the second GTP.
http://www.fanabc.com/english/index.php/component/k2/item/3100?Itemid=674
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Food products brace for new compliance certification
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By Tesfaye Getnet |
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The Food, Medicine and Health Care Administration and Control Authority (FMHACA) is preparing a new directive that obliges food processing companies to obtain competency certification from the authority before they can release their products to the market.Filed under: Economy, ethiopia, Infrastructure Developments, News Round-up Tagged: Business, East Africa, Economic growth, Ethiopia, G7, Grand Ethiopian Renaissance Dam, Investment, Millennium Development Goals, Sub-Saharan Africa, tag1
