The Courier

Construction workers on an Addis Ababa building site.

© François Misser

Addis Ababa, the capital city with four million inhabitants, was buzzing with excitement months before the event. The capital’s millennium secretariat was working on some 20 projects including the creation of a bookshop, schools and health centres as well as the organisation of festivals involving street children and people who are HIV-positive, and were aimed at increasing public awareness of their situations through various events. These included theatrical performances and a huge concert planned by the country’s richest man, Sheikh Mohammed Alhamudi, owner of the Sheraton and the Midroc group.

But Addis Ababa still looks like an enormous building site. Our hotel, situated in the Bole District near the airport, was surrounded by buildings under construction, most of them new office blocks, a symbol of the economic boom. Ethiopia achieved 9.6% growth in GDP in 2006–2007 and the same rate is forecasted for the next financial year. In June, the International Monetary Fund (IMF) said that economic performance of recent years had contributed significantly to the reduction of poverty, generating an annual increase of 7% in income (taking into account the demographic growth rate of 2.7%).

The Chinese in pole position

In view of the increasingly important role of Addis Ababa as capital of the African Union – with more than 110 embassies the city is becoming the ‘Brussels’ of Africa – China is investing US$150 million in constructing an annex for the African Union. Having already built the capital’s orbital road, Chinese companies recently won 60% of the contracts awarded by the Ethiopian Roads Authority. The Addis Ababa House Development Project Office estimates that 225,000 new homes will be built between now and 2010. Addis Ababa’s international standing is also enhanced by the fact that it is the continental hub of Ethiopian Airlines (more than US$1 billion turnover this year), described by the American ambassador, Donald Yamamoto, and many others as the best airline in Africa.

However, this spectacular growth – driven by direct foreign investment that has risen from US$149 to US$365 million a year since 2001 – is not without its downside. It was impossible to buy a SIM card in July, as Ethiopian Telecoms was unable to satisfy demand. The only option available was to hire one. Traffic jams in Addis Ababa and in particular on the Debre Zeit motorway, 50 kilometres to the south, constantly produce excessive levels of CO2 emissions. There is heavy traffic in the direction of the Port of Djibouti from the industrial areas along the route, where there is a proliferation of tanneries and textile, shoe and furniture factories owned by Chinese, Pakistani, Ethiopian and Turkish companies. Even a Fiat Regata assembly plant. Past Debre Zeit, in the direction of Nazareth, the road can only be described as dangerous. To make up for lost time, the drivers of the ‘Al Qaidas’ – the little Isuzu trucks – hit breakneck speeds to reach Djibouti or Kenya, often causing fatal accidents. Lack of cement is another problem. However in this case, a solution would seem to be on the horizon, as 14 cement factories are being built in Dire Dawa, Wuchale and other towns. Yet there is still room to improve economic performance. Only 54.3% of the manufacturing sector’s capacity is being used because of constraints such as a shortage of raw materials and poor water and electricity supplies.

Agriculture: “the country can be self-sufficient”

The economic boom has not rid the country of its chronic problems. GDP per capita is just US$170. This is a country that has known terrible famine, and providing sufficient food is still the main challenge. Ethiopia still has a cereal shortage of 600,000 tonnes a year, which is causing serious inflation (19% in February 2007, according to the IMF). This in spite of an increase in production from 8.7–11.6 million tonnes between 2001–2002 and 2005–2006. The causes of the problem include poor agricultural yields, the subdivision of farmland in a country that has two million extra mouths to feed each year, and insufficient seed production.

However, according to Tim Clarke, the EU delegate in Ethiopia, the situation is not irretrievable. Clarke said: “The country can be self-sufficient”. One key factor is improving the management of the country’s most precious commodity – water. Each year for four months, the Keremt unleashes a flood on the highlands, making possible the miracle of the rise of the Nile, without which Egypt would not survive. But this natural phenomenon remains underused.

Nevertheless, there have been some positive developments such as a recent US$100 million loan from the World Bank for a 20,000 hectare irrigation project in the region of Lake Tana and India’s decision to invest US$640 million in various agricultural projects to capture rainwater and to increase the production capacity of the sugar industry. A paradox concerning water in Ethiopia is that while the rate of access to drinking water is 70% in Addis Ababa, it drops sharply to 16% in Afar, 13% in Ogaden and 18% in Gambela.

Agriculture in Ethiopia has considerable potential. Thanks to an agreement in May with the American chain Starbucks, Ethiopia – the leading African producer of coffee, with an average crop of 300,000 tonnes a year – has found a way of maximising its income because the intellectual property of the planters and the labels of the ‘Sidamo’, ‘Harar’ and ‘Yirgacheffe’ arabica beans are to be recognised. Production in Harar increased by 20% last year according to the cooperative farmers’ association. Additionally, producers of oil and horticulturalists are enjoying a spectacular period of growth, in particular floriculture, which employs 50,000 workers (mostly women) near Addis Ababa and in the Rift Valley. Exports doubled last year to reach US$60 million. According to Anat Harari Degani of Jericho plc, the sector has a bright future providing quality equivalent to Ecuador, one of the leaders in the world market, and with lower costs than its Kenyan competitors.

White gold

Ethiopia fully intends to harness its significant hydroelectric potential (between 30,000 and 40,000 megawatts), the second highest in Africa behind the Congo basin, which allows it to meet the requirements of its booming economy and the needs of its neighbours (Sudan, Djibouti, Kenya). According to the Minister of Mines and Energy, Alemayehu Tegenu, four hydroelectric power stations are under construction (Gilgel Gibe II, Amerti-Neshe, Takeze and Anabeles), with a total output of 880 megawatts, and will double the country’s current power generation capacity between now and 2010. In September, the Italian company Salini Costruttori will start work on the Gilgel Gibe III power station (1870 megawatts), a US$1.6 billion investment. Also, the World Bank has just approved a US$130 million loan to provide electricity in 295 towns and villages.

Waiting for black gold

Ethiopia, whose geology bears similarities to Sudan and the Yemen, also hopes to become a supplier of petroleum and gas. The Malaysian company Petronas is carrying out exploration work in the Ogaden (where gas reserves of 4,000 billion square foot have been identified) and Gambela basins. Elsewhere, the British company White Nile is conducting a geophysical study in the Omo river region in the south of the country. The Malaysian-owned company Pexco, Lundin East Africa (Sweden), which owns several blocks in Ogaden, and the American company Afar Exploration in the north of the country are also in the hunt. According to Abyi Hunegnaw, head of the ministry’s petroleum operations department, the centre of the country and the Mekele region in the north will also be opened up for exploration in due course. However, the true value of the Ogaden finds will not be fully known until peace has returned to the region.

Revenue from the mining sector has doubled in a year, which is partly explained by the formal incorporation of gold prospectors into the sector by the ministry.

The subsoil, which has been under-explored, is attracting the attention of Indian, Chinese and Ethiopian companies in search of gold, platinum, coal, tantalum and precious stones such as olivine. Around 20 licences were granted last year according to the ministry’s director of mining operations, Gebre Egziabher.

Exports in 2005–2006 (US$1.08 billion) were exceeded in 11 months in the following financial year. The World Bank says that this performance should continue to improve at the same rate thanks to regulatory reforms introduced in various sectors. Assistance from the Ethiopian diaspora, which amounted to more than the total export revenue in 2006–2007 (US$1.1 billion in the first nine months) is another important factor. There was an exodus of intellectuals, a third of whom are doctors, under the Marxist dictatorship of Derg.

Tourism is another sector enjoying growth thanks to the country’s cultural richness and its exceptional diversity of flora and fauna. The persistent tension in the Afar region and on the border with Eritrea, which partly explains why 8% of the budget is spent on defence, is hardly noticeable in the capital and the rest of the country where crime rates are low. As a result, there has been an increase in the number of visitors from 139,000 to 227,000 between 1997–2005, a period which has seen revenue from tourism triple to reach US$134 million.

The government is also aiming to make the most of the key factor in development – the Ethiopian people. It aims to increase the rate of primary school education from 79% to almost 100% between now and 2015 and to invest heavily in training and university education. The number of universities has risen from 1 to 8 since 1991 and 13 more are under construction. The country is undergoing a complete transformation thanks in particular to the government’s policy of devolution of power to the regions. In 2007–2008, almost a third of the budget was allocated to the regions, 55% more than in the previous year.

* In April 2007, an attack on a petroleum plant by the rebels of the Ogaden National Liberation Front (ONLF) forced a Chinese company to stop prospecting work it was carrying out on behalf of Petronas.

Ethiopia

Key facts

• Area: 1,133,380 km²
• Population: 77 million
• Main cities: Addis Ababa, Dire Dawa, Harar, Nazareth, Gondar, Mekele, Bahar Dar, Dessie, Shashemene, Debre Zeit
• Languages: Amharic (official language), Guaragigna, Oromigna, Tigrigna, Somali, Afar, Sidamo, Anuak and others
• Religions: Ethiopian Orthodoxy, Muslim, animism, Protestant, Catholic, Jewish
  GDP: US$13.1 billion
• GDP per capita: US$172
• GDP growth rate: 9.6% (2005–2006)
• Main exports: coffee, oil-producing plants, leather, flowers, maize, cement, clothing, manufactured goods, khat
• Infant mortality rate: 77 in 1000 (in the 1st year)
• Children in primary education: 79.8%
• Access to electricity: 16%
• Access to drinking water: 19%
• Life expectancy: 49 years
• Sources: PASDEP, IMF, World Bank

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