Copyright © Addis Ababa City Road Authority

Ethiopia’s
Grand
Renaissance

Published in

MAY-JUNE 2012

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Turning Vision into a Reality
Africa’s “Diplomatic Capital
The Diaspora Factor
FDI: Fast Track to Progress
The Transition from Agrarian to Agro-Industrial
Generating Ethiopia’s Empowerment
Exchange, The Last Frontier
Finance Blooms as Ethiopia Goes e-Banking
Industries on the Rise
Sugar’s Sweet SuccessConcrete Ambitions
Enterprisingly Diversified
Fabric of Life: Why Ethiopian Textile Matters
Discovering Ethiopia, in Business and Leisure

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Ethiopia’s Grand RenaissanceEthiopia’sGrand RenaissanceGood news from the Horn of Africa is a rare commodity. In recent years, however, Ethiopia seems to be
harvesting a healthy crop. In 2007, Africa’s oldest independent nation had the fastest-growing, non-oildriven economy among African countries, and its GDP growth has averaged around 10 percent since then.
Ethiopia’s five-year Growth and Transformation Plan (GTP) is nevertheless addressing macroeconomic
challenges, with intentions to double agricultural production, further develop the industry and manufacturingsector, and diversify its export basket. New infrastructure projects are under way to bring Millennium
Development Goals (MDG) within reach, reduce foreign donor aid, and ameliorate the investment climate.
Ethiopia knows its strengths lie in a marathon, not a sprint, and the government’s long-term development
policies reflect this. Does this progress signal the beginning of Ethiopia’s revival?

Turning Vision into a Reality:
The Five-Year Growth and Transformation Plan
On April 2, 2011,
Prime Minister Meles
Zenawi of Ethiopia
laid the foundationof the country’s mostambitious infrastructure project to date:the Grand Ethiopian
Meles Zenawi
Prime Minister of Ethiopia
Renaissance
Dam.
Upon completion, the three-mile-long, 164-foot-highdam will feed Africa’s largest hydroelectric power
plant, which is capable of producing 5,250 megawatts of energy. Having issued a dedicated Grand
Renaissance Bond, the government intends to fund the$4.8 billion project entirely by itself.
This dam quite accurately demonstrates the turning
point at which Ethiopia finds itself: with the chance
to realize a vision and overcome past and present
challenges by pulling resources together and mobilizing
citizens, diaspora Ethiopians, and entrepreneurs toinvest in the country’s future. One of Africa’s moststable nations, Ethiopia has outlined its vision in three
five-year GTPs. The first phase, 2010-2015, aims to
expand the capacity of thousands of small-hold farms
and medium-scale agrarian industries into an agro-

industrial economy by linking natural resources withbooming sectors, including construction, cement,
mining, textile, and more.
“Ethiopia will continue having a double-digit
growth,” states Prime Minister Meles Zenawi, who
has been in power for over twenty years. “Theeconomy is expected to expand by more than 11
percent this fiscal year. By 2015, the agriculture sector
will take the leading role, and we expect the industrial
sector to make a significant contribution. Hydropower
will also be instrumental in our economy and infighting poverty.”
Ethiopia forecasts close to $4 billion in export revenue
by the end of the 2011-2012 fiscal year, after a diversification into new commodities earned around $2 billion peryear in the two previous years. Gold exports overtook
oil seeds as the second-largest source of revenue, with
exports in the first six months of the fiscal year topping$258.8 million. Coffee kept the top spot last year, earning
Africa’s largest producer $841.7 million from the exportof 196,119 tons, despite lower crop yields.
Improvements in the social sector have certainly
made their mark. Whereas education coverage wasa mere 20 percent in 1991, gross national enrollment
today is around 95 percent, with over 20 million

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students in 21,000 primary and secondary schools, 31
public universities, and more than 60 private colleges.
The focus is on fostering engineers, scientists, andentrepreneurs. Ethiopians are also getting healthier,with child mortality down 52 percent over the past
decade and a health extension program teaching
prevention of communicable diseases that is reversing
the spread of major pandemics, including HIV/AIDS.
Major infrastructure projects include an extensionof Ethiopia’s rail network by 1,200 miles; this will
help connect Ethiopia to the new port of Lamu in

Kenya, which just announced the discovery of oil. At acolorful celebration marking the start of the $23 billion
port, railway, road, and oil pipeline project, Prime
Minister Zenawi said that “it is not hyperbolic to say
we are making history today.”Each project targets the goals set out in theconsecutive GTP plans. Challenges of inflation, rising
investment needs, and poverty reduction remain, yet
the government’s strong determination to transform
Ethiopia by 2025 into a vibrant, middle-income
economy is paying dividends all around.

Africa’s “Diplomatic Capital”
Addis Ababa hosts the 2012 World Economic Forum on Africa
When the new African Union headquarters wereinaugurated in Addis Ababa on January 28, 2012,
Ethiopia’s Prime Minister, Meles Zenawi, called ita “symbol of the African renaissance.” A gift fromthe Chinese government to the African Union, the$200 million building towers 328 feet above the city.
It is a testament to Ethiopia’s economic growth andstability that Addis Ababa has become the epicenterof a continent’s transformation.
Now, in addition to being Africa’s diplomatic
capital, Addis Ababa will also host the World
Economic Forum (WEF) on Africa 2012 on May
9-11 at the Sheraton Addis. The timing couldn’t
be better; as the rest of the world is undergoing
major financial and political challenges, Africa has
become the focal point of progress, an age-longpromise it is finally showing signs of fulfilling.
Strong leadership will be a main discussion
point at the forum, which will be co-chaired by Kofi
Annan and the President of the China Investment

Corporation (CIC) Gao Xiqing. Interactive, outcomeoriented forum discussions will focus on how
investment can be accelerated in frontier markets
and on scaling innovation for shared opportunities.
“Speeches are strongly discouraged,” the event’s
meeting overview writes, instead inviting all
participants to contribute constructively in sessions
on topics such as Africa’s Green Agenda and From
Digital Divide to Digital Dividend.
African nations want to demonstrate theirability to prosper independently—in conjunction
with international collaboration rather thanby depending on foreign aid. This forum is aninvitation to debate where Africa is heading,a dialogue between political, nongovernmental,
and industry leaders highlighting the right ideas,
models, and solutions emerging from and for thecontinent. Africa already harbors six of the world’s
ten fastest-growing economies, and Ethiopia isundoubtedly among them.

The Diaspora Factor
With approximately two million Ethiopians living
abroad, the diaspora is being asked to participate
in the transformation of its motherland in any
way possible. Bonds for the Grand Ethiopian
Renaissance Dam have been issued in denominations as low as $50 to encourage more Ethiopians
to invest. There are also many cases of nationals
returning who see the developments first-hand.
“The diasporas who come and witness the
positive change become very enthusiastic about thecountry’s progress” says Elias Melake, a diaspora
entrepreneur who returned from the United States
and Nigeria to set up eCentric, specializing in data
distribution and course management systems forhigher education institutions. “I think the majorityof the diaspora Ethiopians would like to contributeto the country in great ways. The progress inAfrica and the economic transformation taking
place are dizzying. New opportunities are opening
every day and are being filled up every day. Thechange is sometimes so fast that it defies analysis.”
Melake adds that the best sources of informationin these cases are local entrepreneurs. “They arerich in experience and wise in their judgment; alot of the challenges can be overcome by learningfrom them. Since Ethiopia is growing rapidly,
new and better policies are introduced constantly.
To make it happen here and be successful, one
has to work hard and adapt to changes as fast as
the locals.”

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FDI: Fast Track to Progress
Over the past six years, Ethiopia has booked aremarkable annual growth average of 10 percent.
Strategic public investment in agro-centric and industryspecific sectors has made a world of difference for oneof Africa’s poorest nations. But this fast-track economic
environment also offers solid incentives for foreign
investors, provided they cultivate the development oflocal expertise and production.
“I think there is a wrong perception that the
government is not really into promoting private
ventures and investments,” says State Minister ofFinance and Economic Development Dr. Abraham
Tekeste, “but the five-year Growth and Transformation
Plan is all about the private sector. When we talkabout agriculture, it is about small private farms intheir vast majority. When we talk about industrial
development, we are basically talking about private
sector development.” Tekeste adds that as a result of theplan, 43,000 miles of rural roads now connect to 10,000
miles of federal main roads, a new 1,200-mile railroad
will enable swift and cost-effective transportation of
bulk cargo, and renewable energy projects should
secure 8,000 more megawatts of power.
India is the leading private sector investor, withover 450 companies investing a total of $4.35 billion.
From horticulture and agriculture, Indian investors
are now also diversifying to manufacturing, agroprocessing, information technology (IT), and othersectors. The single largest purely foreign investment is
by Turkish textile group Ayka, while Saudi-Ethiopianbillionaire Sheikh Al-Amoudi’s Midroc Ethiopia Grouphas chosen Ethiopia as its base in Africa. Subsidiary
Derba Group is investing an estimated $3.4 billion
through seven sister companies over the next five years,
while Midroc Ethiopia Investments recently placed a$74 million aggregate bid on five state companies up
for privatization.
State Minister of Industry Tadesse Haile says
Ethiopia’s industry should be driven by exports.
“Ultimately those industries are to transform thestructural economy of Ethiopia by bringing intechnology and diversifying our exports, our sourceof employment and livelihood for the population.
If you take the World Bank’s 2011 Doing Business
report, Ethiopia is regarded favorably better thansome of the BRIC countries.”
Finally, Finance State Minister Tekeste puts the plans
into historical perspective. “Ethiopia is one of the oldest
nations, with ancient civilization and history. It once
was one of the main centers of civilization and trade.
There is no reason why Ethiopia cannot once again be anucleus of progress, civilization, and growth.”

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The Transition from Agrarian to Agro-Industrial
In a continent where food security is today’s numberone issue, Ethiopia has not only managed to grow its
agriculture sector by 9 percent this year, but has also
increased food exports. “The majority of the export
share used to be only coffee,” says State Minister ofAgriculture Wondirad Mandefro. “Now we havediversified into horticulture and are going into themeat and livestock animal export sector. We are thelargest producer of chickpeas, fava beans, lentils,
haricot beans, and of course common beans. Our
agro-ecological set-up in the country’s highlands isalmost comparable to southern Europe. We cultivate
olives in the northern part and apples are widespreadin the country. This makes us unique.”An increase in productivity, driven by greater
efficiency at the farming level, has been the main reason for this success. The majority of Ethiopian farms
are non-commercial smallholdings. These make up
almost 95 percent of the country’s agricultural output.
State Minister Mandefro explains that the primary
focus in the Growth and Transformation Plan (GTP)
is to improve the productivity of those smallholder
farmers so that they can move on from subsistence toexport farming. “How can we convince them to adopt
best practice, so that everybody as a community gets
mobilized? We have set up twenty-five vocational
training colleges, which train extension workers, who
now count more than 60,000 to 65,000. They are

foremost addressing the issue of attitude. Attitude isnumber one.”
Wondirad Mandefro describes how extension
workers start a dialogue in which the farmers ask
themselves: “‘Our neighbor is benefiting, he is changing his life, he is earning and he is getting more. How
and why?’ So they are debating and are discussing.
The ultimate objective is a change of attitude.” Theanswer then lies in extending technologies so that
farmers can adopt, know, and build their skills.
“To perform agriculture means to improve thelivelihood of each household,” says Mandefro, “andsince the majority of the population lives in the rural
areas, having even a 1 percent increase in agriculture
actually implies that a very significant proportion ofpoverty is reduced.” It is from this point onward that
Ethiopia has been transitioning into an agro-industrial
economy, by modernizing the practices of smallholders
and investing in the large-scale development of highvalue crops. “We have targeted food security andcommercializing agriculture, and all interventions are
already in place. We can transform agriculture andthrough it we can also address poverty from its root.”

A Bigger Export Basket
To raise revenues, farmers are encouraged to adopt
high-value commodities. Cotton, rubber, sugar, andpalm oil can be cultivated in most areas of thecountry, be it on a smallholder’s field or a large-scaleindustrial farm.
“In some commodities like sesame, we are now
one of the top three exporters in the world,” says State
Minister Mandefro, “and it is still only being grown inselective areas. Agriculture products need to be valueadded instead of exported raw.”
As such, the Castel Winery, set up in 2008 by
the BGI Group, has started producing high-quality
Ethiopian wine, says Robel Seido, Castel’s marketingand sales manager. “We will export wine regionallyand to the United States, where diaspora Ethiopians
can get a new taste of their homeland.”Cotton is being manufactured into high street
apparel by investors like Ayka Textile, and Ethiopian
cattle leather is soon to find its way to global feet as
Huajian, the Chinese maker of Calvin Klein footwear,
opens a plant near Addis Ababa. Industry Minister
Mekonnen Manyazewal says that total shipments ofleather and leather products generated $2.8 billion lastyear, and Huajian might well add an annual $4 billion
within a decade. “Big buyers are putting Ethiopia
on their radars as a source of industrial products,” agratifying milestone for Ethiopia.

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Generating Ethiopia’s Empowerment
Large-scale, landmark projects such as the Grand
Ethiopian Renaissance Dam, Gilgel Gibe III Dam, andtheir hydropower stations reveal a profound desire
to reinforce economic growth and development.
How attainable are Ethiopia’s infrastructure plans,
and how will they create a better quality of life for 80
million citizens?
Ethiopia counts no fewer than twelve river basins,
nine of which might now drastically alter people’s
lives. Through irrigation development, hydropower,and drinking water sourced from ground and surface
reservoirs, the government is hoping to secure 93 to
100 percent utility coverage by 2020.
The real game changer lies in energy generation,
as Minister of Water and Energy Alemayehu Tegenu
explains. “Our hydropower potential is 45,000 MW,
of which we have only developed 2,100 MW. In
our Growth and Transformation Plan we have set
a target to reach 10,000 MW within the coming five
years.” The minister says that the Gilgel Gibe III
Dam is just over halfway finished and is expected
to start producing 1,870 MW as of September 2012.
The Grand Ethiopian Renaissance Dam promises anencouraging 5,250 MW when completed in 2015, withexcess power to be exported to neighboring nations.
“The Grand Renaissance Dam is one of thebiggest in Africa,” boasts Alemayehu Tegenu. “Ourfirst priority is to supply power to our economy, ourindustries, our investments, our domestic users. In
this regard, the Renaissance Dam will play a very
big role in our development.” Currently underconstruction by Italian contractors, the dam is locatedupstream from Sudan and Egypt. However, Ethiopia
is adamant that the mega-project will not have an
adverse impact on downstream communities. “Wealways want to cooperate with Sudan and Egypt
for the equitable utilization of resources; this is ourprinciple,” insists Minister Tegenu.
Ethiopia also has abundant geothermal, wind,and solar power potential. In Ethiopia’s northern
Tigray region, construction has commenced on
the Ashegoda Wind Farm, which has a generation
capacity of 120 MW. “With regards to geothermal,
we have 7,000 MW of potential in the Great Riftsystem. There is one project under constructionin the Langano area for 70 MW.” Biomass andbiofuel production are also starting in Ethiopia, as
the government has chosen decisively in favor ofrenewable and green energy.
Finally, landlocked Ethiopia is regeneratingtransport connections with Djibouti and Kenya tobolster East Africa’s regional economic integration.
In the past year alone, deals were signed for two
railway projects and a 500-mile road network,
facilitating imports and exports through neighboring
ports. The future, it seems, is in full swing.

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Exchange, The Last Frontier
Africa takes back its commodity markets
The journey of a coffee bean, from its harvest on arural Ethiopian plantation to the moment you sip
your morning latte, can be long. With 400 billion
cups consumed every year, it is the world’s mostpopular beverage and the second most heavily
traded commodity, after oil. Strange as it may
seem, the price a farmer gets for a bag of his red
berries is also determined thousands of miles away,
in London and New York. A unique initiative in
Ethiopia might now change this.
Dr. Eleni Gabre-Madhin is the founder and CEOof the Ethiopia Commodity Exchange. She says
the idea behind its establishment in 2008 was “tocreate a marketing system of integrity from which
all involved parties could benefit. If you could
connect buyers and sellers in a more reliable way,then that would have a potential impact on fourlevels: to make Ethiopia more competitive, promoteagro-industrial links to help domestic processing,
improve food security through a better internal
distribution system, and raise productivity. If
farmers have a way to access markets at a national
level and get a very clear, transparent pricing
and a fair return for their efforts, then they will
respond by producing better quality and become
more commercially oriented.” Today, 12 percent
of ECX membership is composed of cooperative
unions representing 2.4 million small farmers. “Ourmarket is designed for the small players, and has
an end-to-end approach from quality certification,
warehousing, and trading all the way up to delivery
and logistics.”
Today, ECX operates the only Exchange clearing
and settlement system in Africa that settles all
payments on a “T+1” or next day basis. Market
data from ECX disseminates real-time pricing

information through SMS updates and a free calling
service, which receives over a million monthly
calls. “Farmers and small traders in rural areas now
know exactly what is happening up the supply
chain. For that reason we are seeing prices at the
local level converging and correlating much closer
with the ECX national price and the New York
coffee market.” Dr. Gabre-Madhin points out that
whereas, in the past, the farmer’s share of the final
coffee export prices was 35 percent, it is now up to
70 percent. “Last year we traded $1.2 billion dollarsof commodities representing almost 55 percent of
the country’s agricultural export earnings withcoffee, sesame seeds, and pea beans. We havebeen doubling volume every year, servicing 350
members and nearly 11,000 clients today.” A fully
integrated in-house IT system handles nearly 2,000
daily trades at around $20 million, earning ECX themuch coveted CIO100 IT award, the first in Africa,and Africa Investor’s Commodity Initiative of theYear in 2011.
The ECX CEO says eighteen African countries
interested in replicating Ethiopia’s model havevisited ECX. “During the last decade, emergingmarket exchanges have been growing tremendously
and in some sense taking back their commodities.
Malaysia has become the world reference pricefor rubber and palm oil, similar to the DalianCommodity Exchange in China for soybeans andsilver in India’s MCX. In essence, Africa is thelast frontier of the frontier markets. There is no
reason why we can’t create an East African coffeeindex or one for West African cocoa. This is ourtime, it is Africa’s moment. We must take back ourcommodity markets by transparently referencing
prices in our own markets.”

Finance Blooms as Ethiopia Goes e-Banking
The fast-growing economy of Ethiopia has fostereda dynamic banking sector. Corporate and project
lending has formed the lion’s share of Ethiopia’s
seventeen banks, but as more jobs are created andincome is made available, credit services to the
public are starting to expand. The sector might
not be open to foreign banks yet, but co-funding
arrangements for projects is common practice.
Where does the sector stand in the current economic
climate, and how do institutions align with thegovernment’s Growth and Transformation Plan?

Two banks give us their views.

Fertile Funding
Established over one hundred years ago during the
Ethiopian Empire, the Development Bank of Ethiopia
has been promoting the agenda of the country andexisting government, specializing in project financeand loans. Today’s focus is on financing agriculture,agro-processing, and manufacturing; it is one of
the few institutions capable of funding long-term
projects. The Development Bank’s president, Esayas

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Bahre, says the risk factor involved in the sectors
it funds is relatively high, a reason why mostbanks are not willing to engage themselves in it. “Ifyou take agriculture, for example, it is vulnerable
to many natural calamities and rainfall problems,many eventualities. We built up the capacity of
our employees in such a way that they are able tomitigate such risks and keep on financing the criticalsectors of the economy.”
Mr. Bahre adds that the bank is developing a
database to facilitate the analysis and appraisal ofincoming project requests. Due to the high pace ofgrowth in recent years, the challenge lies in keeping
the database modernized and up to date. “Thisneeds a vibrant research center.” In the past two
years, the Development Bank’s loan portfolio has
jumped from $45 million to $74 million.
By example, the bank started funding long-term
horticulture projects five years ago. “Up to now
over to 95 percent of the floriculture sector has
been financed by us, and over 80 percent of ourcustomers in the flower sector is performing very
well. Everybody is committed to do their level best,as Ethiopia is a fertile ground for foreign direct
investment.”Core Values
Nib International Bank (NIB) was established only
12 years ago, starting with 27 employees, $1.5

million in paid up capital, 717 shareholders, and one
branch office. Today it has 52 branches, nearly 2,000
employees and over 3,500 shareholders. Its sharecapital grew to nearly $61 million. “There was not
one period when we experienced loss; it was always
profit,” says Amerga Kassa, NIB’s president.
This year, NIB is adopting a revitalized corebanking system in contract with Swiss softwaredeveloper Temenos. It will install 60 ATMs and 300
POS terminals, establish a debit and credit cardbanking consortium with two other banks, andintroduce its services through mobile and e-banking
for the first time. As for loans, NIB has been involved
in some high-profile projects. “Your lending capacity
is limited to the capital. Any single borrow limit is25 percent of the capital. The higher your capital, themore you can extend credit to your customers, andthere are big borrowers who have gone up to thesingle borrower limit. Our single borrower limit iscurrently over $15.4 million. The government reallydeserves credit for the establishment and flourishingof private banks. However, private banks need a fair,level playing field,” says Mr. Kassa.
Despite Ethiopians’ propensity for not saving
much, NIB is still branching out into rural areas. “Wereach the society by opening branches, and our target
for this year is opening ten new ones. Next year thatmay double. Reaching out to the farmer and therural areas helps to get the economy moving.”

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Industries on the Rise
According to the Ethiopian Investment Agency(EIA), there are four focus areas when it comes todevelopment: textile and garments, leather products,
meat and agro-processing of sugar, and farming. But
industry is also booming outside these categories.
Cement, mining, chemicals, and even car assemblies
are on the rise. EIA data shows that by February 2011,
thirteen vehicle and tractor plants had been licensed
and were starting production, three of which are
Ethiopian. Since 2006, the Ethio-Dutch joint venture
Holland Car has been producing six passenger models
and one locally designed all-road bus, all named after
Ethiopian rivers. Based in Mojo, the company now
plans to produce Africa’s first bio-gas car, as well as
the organic fuel to fill it.
“Industries are coming up,” says Ministerof Industry Mekonnen Manyazewal. “We are justbeginning, it takes a long time, but I think we havea committed leadership, a government with zerotolerance for corruption. We can say that there isno systemic corruption in Ethiopia. Everybody whocomes acknowledges that this is a peaceful, stable,
welcoming country and people.”
Minister Manyazewal adds that investment
incentives have also drawn many foreign companies.
“In terms of exports you are exempt from paying
taxes on exported goods for two to seven years, andthe import of machinery and material is duty free.

One important asset for every investor is access toland. Here land is state owned, it is public property,
and government allocates on the basis of strategic
importance for the youth. So for industry, or social
services, these have concessional access with low lease
rates depending on the industrial use.”
Mining has also experienced increased activity
in exploration and studies, especially for gold andother minerals. Exploratory operations by the National
Mining Corp., Nyota Minerals, and Stratex reportpromising finds that may double Ethiopia’s gold
production to over twenty tons per year. Gold exports
surged 75 percent in 2011, generating an income of$485.3 million.
“Now the plan is to develop industrial zones,”
continues Mekonnen Manyazewal. “We have alreadystarted building two or three sites in Addis Ababa
and five or six nationally. The sites in Addis should beready within six months because investors have alreadyshown interest and we have managed to complete thesequickly. They will be one-stop services for the factories.”
It may not be a full-scale industrial revolution, but
Ethiopian manufacturing and industry are becoming aforce to be reckoned with.

Sugar’s Sweet SuccessFood security first, export production next: this, inshort, is the agricultural scope of the first five-year
GTP. Ethiopia’s sugar industry is earmarked as having
great potential, as both soil and climate in various partsof the country are well suited for large sugarcane crops.
With only 37 million acres currently in use as farmlandin Ethiopia, State Minister of Agriculture Wondirad
Mandefro says there’s literally a vast expanse ofopportunities. “Almost 165 million to 172 million of
Ethiopia’s 276 million acres are suitable for agricultureuse. Our rural development policy states that the country’s vast lowland areas will be developed throughlarge-scale farming by the private sector.”
The government thus set up Sugar Corporation,
a company that would kickstart the mass productionof sugar through new plantations to meet growinginternational demand. It is also building the largest
sugar mill in Ethiopia at Tendaho, in Afar state, at a
cost of $571 million, $391.85 million of which is a credit
facility provided by the Indian government. Heading
this “sweet” revolution is Abay Tsehaye, director
general of Sugar Corporation. “This corporation wasestablished to make Ethiopia one of the major sugar
exporters,” explains Tsehaye. “We took ownership of
three existing factories and are building ten new plants

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within the next four years.”
Phase one includes the designation, appropriation,and cultivation of land. “We will be focusing more on
the industrial area in the second five-year plan, which
will start in 2015,” says Tsehaye. “Until then we will
have 657,000 acres of sugarcane plantations as opposedto the 65,000 acres that we have right now. In order toimplement this, we are trying to transfer technology
from those countries that have the best practice in sugar
factories like India and South Africa. We need new
species that are of better productivity and lower cost inorder to compete internationally.”
Sugar Corporation’s director says that interested
parties from Europe, India, and Brazil have alreadyvisited sites. “However, we have to put the infrastructure in place ,since any such ventures will need energy,
roads, telephones, and so on. We are giving them theland so they can start work and then we will catch up to
have the infrastructure ready.” Major dams are to feed
irrigation water along areas earmarked for mass farming in the South Omo zone. “The plan is to start fromscratch because we are building these factories in areas
where there is no activity. Those areas are scarcely populated and you don’t have to displace many people.
And if you have to displace a few people, you relocate
them and you give them irrigated land and infrastructure.” Tsehaye, a former national security adviser, says
Sugar Corporation will offer investors a “full packageof support, helping them in handling local communities. There will be big, state, commercial farms.”
With roughly $5 billion of capital investment in
the first phase, Sugar Corporation expects to actually
start exporting 1.87 million tons of surplus sugar infive years.

Concrete Ambitions
If there is one material that embodies the renaissance that
Ethiopia aspires to, it is without a doubt cement. Almost
every development needs this building resource, notleast the country’s various hydropower dam projects,
which require an immense amount of concrete.
In order to feed the rapidly rising internal demand,a new venture by Ethio-Saudi billionaire Sheikh
Mohammed Hussein Ali Al-Amoudi has createdEthiopia’s—and potentially Africa’s—largest cementproducing company, Derba Midroc Cement.

“The driver behind its foundation,” says Derba
Midroc’s CEO, Haile Assegide, “was to participate
in the Ethiopian development. Eight years ago, a tonof cement in Ethiopia cost $31. Last year it was $315.
Sheikh Al-Amoudi’s vision was that there should not be
any shortage of cement in Ethiopia and its price had tocome down.” In recent years Ethiopia has had to import
2.5 million metric tons of cement annually from Egypt,
Pakistan, and China, with very costly transportation
charges. “So when we started production in February

SPONSORED SECTION | ETHIOPIA - 102012 with an 8,000-ton-per-day capacity, the price hadalready fallen to about $112 per ton.”
The company’s first plant, located only 43 miles
north of Addis Ababa, was set up with a $351 million
investment and has a projected annual capacity of
2.5 million tons. By comparison, the Grand Ethiopian
Renaissance Dam, for which Sheikh Al-Amoudi
pledged $88 million, will require 10 million tons ofconcrete. “Once the Ethiopian need has been satisfied,”
Assegide says, “then Derba Midroc will consider
exporting regionally, mainly to South Sudan, Djibouti,
and Kenya.”
The company’s CEO says Derba Midroc wants
to bring about a change in the business culture of
Ethiopia. “We do not want people to come with their
cash and put money on our table. We want automationand innovation, bank deposits and an online system toknow who has paid. We will also give credit to credible
companies. Credit isn’t known here, it does not exist.
So we want to change this mentality.”
Midroc founder Sheikh Al-Amoudi, referred to by

many countryfolk as the Beloved Son of Ethiopia, isinvesting $3.4 billion in his motherland through the
Derba Group. It encompasses mining, chemicals, packaging, transport, steel, construction, real estate, water
drilling, and cable manufacturing companies. In addition, the Derba Group’s Declaration of Establishmentcommits to alleviating the food shortage problem
through its Saudi Star Agricultural Development, “withplans to grow crops like rice, sugar beet, wheat, barley,
and maize.” Saudi Star has leased nearly 25,000 acresof land in Ethiopia’s Gambella regional state, for which
it plans to build two rice mill factories. Together with
Derba Hotels and Resorts opening up facilities aroundthe country, the Derba Group predicts employment
opportunities, both temporary and permanent, “would
exceed 370,000 by the time the projects start operation.”With two more cement factories, a steel mill, anda rice plantation in the pipeline, Derba Group wants
to reach $5 billion dollars in revenue by 2022, notan unlikely sum judging by the dynamic rate ofdevelopment in Ethiopia and environs.

Enterprisingly Diversified
Economic diversification in Ethiopia is not limited tothe public sector. East African Holdings (EAH), its
companies ranging from agri-business to consumer
goods and cement to biofuels, has become the hallmark
of a successfully diversified Ethiopian family business.
With annual revenues of around $100 million, itslargest enterprise is the East African Group of fastmoving consumer goods, with over one hundred food,detergent, and packaging products.
Chairman of East African Holdings Buzuayehu T.
Bizenu explains how, having established a fifty-acreindustrial park outside Addis Ababa in 1997, the familygave a 51 percent share to South African multinational
Tiger Brands in 2010, subsequently investing the entire
purchase consideration straight back into the company.
“Growth has no limit in my group,” says Bizenu. “There
are lots of immense opportunities in this country. By
focusing on two areas like agro-processing and mining,
we keep the others as joint ventures and management
contracts.” EAH is one of the few private sector groups
involved in tea farming. “We were the first to start a
private plantation, Simba Tea. Originally there wereefforts to export to Dubai; we even had our office there.
But because of the impressive growth of the Ethiopian
economy, we can only maintain the local demand.”The top spot in the EAH portfolio might soon be takenover by its National Cement Share Company. Originallybuilt in 1936 by Italians, Ethiopia’s first cement plant wasbought by the group during privatization and is now
rapidly becoming the biggest indigenous private sectorbusiness. The plant at Dire Dawa is being upgraded
and will soon start delivering cement to neighboring
nations, as it is strategically located near a port corridor
in Northeastern Ethiopia. “We are going to move on toa bigger capacity of about five thousand tons of cement
per day,” says Bizenu, adding that EAH has also enteredinto an exploratory project to mine coal in the southernstate of Oromia to fuel the plants.
When it comes to challenges, Buzuayehu Bizenu
is an optimist. “Instead of counting my troubles, I
like counting my blessings. The challenge now is thecompetition, which is coming in from multinationals
and other foreign investors.” Bizenu points out that thisglobal exposure also has its upside for local consumers
and businesses. “These people are coming up withknowledge, resources, and a large network.”
Currently counting nearly 5,000 employees, Bizenu
has a unique vision to reach a labor force of 100,000. “Mystrategy is to create one hundred millionaires in my businesses over the next ten years through entrepreneurship.
We will offer share options to the employees.”
Bizenu says that EAH entities mainly invest in
knowledge by hiring both international and qualified
Ethiopian employees. “In my company I have several
foreign professionals working with local Ethiopian
employees, and this has always been my priority. My
people are promising and fast learners. We are very
lucky here in Ethiopia. We also have a strategy tobring in diaspora Ethiopians as they have no language
barriers and can blend in at once.”

11 - ETHIOPIA | SPONSORED SECTION

Fabric of Life: Why
Ethiopian Textile Matters
With an abundance of cotton and labor, Ethiopia isnaturally a textile giant in the making. The sector
has in fact a longstanding name in fabric production,
well known for its traditional hand-woven garments.
Ethiopia’s first modern factory was built in 1939, andthe textile sector has since become one of the largest
industrial employers.
For this reason, the first category to be earmarked
under the medium and large industries development section of the Growth and Transformation
Plan 2010–2015 is the textile and garment industry. It
touches a wide gamut of Ethiopian subsectors, withthe capacity to maximize cotton production, become
an even larger source of employment, induce industrial modernization, and considerably raise foreignexchange export earnings. As such, the government
believes the sector can raise its aggregate production
value to $2.5 billion by the end of 2015.
“The whole effort is getting the sector geared
up for more international exposure by translating the comparative advantage into competitive
advantage,” says Seleshi Lemma, director generalof the Textile Industry Development Institute (TIDI).
Established under the Ministry of Industry, TIDI provides support and services all along the value chain,from investment promotion to marketing. Some of
the core functions in which TIDI supports investors
are consultancy, research and development, training
human resources, and laboratory services.
TIDI acts as a matchmaker between local producers and buyers from the United States and Europe,as they constitute the two major destinations for
Ethiopian textiles. Seleshi Lemma explains that there
are currently ninety medium- to large-scale production units in Ethiopia, covering segments fromginning—the separation of cotton from seeds—togarment manufacturing. “The second category is
the small-scale industries with a labor force of ten or
less. Microenterprises are of course in the majority.”
The initiative has been showing encouraging sector
results, both in investments as well as export earnings; 2011 exports registered at $62.2 million, up from
$14.6 million in 2008.
The future looks even more promising. “We have
3 million hectares available to grow cotton but weare using only about 6 to 7 percent of this resource.
You can imagine the potential that we have in thissegment,” TIDI’s director general asserts. “Ethiopia
is the second-most-populated country in Africa next
to Nigeria. Most of our labor force is under the age ofSPONSORED SECTION | ETHIOPIA - 12thirty, so you can imagine the role that the young areable to play in that development. Of course the labor
cost is extremely competitive when you compare withother countries.” Turkish, Chinese, and Indian textile
investors have already set up factories in Ethiopia, andthe government is now approaching interested parties
in Italy, the UK, and the United States. “Some European
countries are interested in relocating their facilities, andthis happens to be a good opportunity for us.”

A Touch of Turkey
As Ethiopian designers gain respect from global fashion circles, the bright colors and quality of local fabric
are also catching investors’ eyes. “Five years ago the
Ethiopian government invited us from Istanbul,”
recalls Yusuf Aydeniz, group chairman of Ayka Addis
Textile and Investment Group. “Already in the second meeting with the trade and industry minister
we decided to start a textile factory in Ethiopia. We
established the company, opened a bank account,
and within three days all the related procedures forthe land purchase were done.” Within six months thewhole project was completed. “A year later we started
the machinery installation, and the spinning factory
was ready with a daily production of twenty tonsof yarn. Now we have two companies here: AYKA
Addis Textile and AYKA Addis Construction.”
Ayka workflow involves buying local Ethiopian
cotton and selling the produced yarn to Germany,
Honduras, Egypt, Greece, Turkey, and Yemen. “Thesecond year we started knitting,” continues Aydeniz.
“We bought twenty knitting machines and started
exporting raw fabric. Now we have 133 knitting
machines. Very soon we will have a total capacity of
forty-five tons of yarn.”

Having invested $165 million in the textile company, Ayka now employs 185 Turkish technical staff
and about 7,000 Ethiopians who work on three shifts.
“The Ethiopian people are very clever, they learn very
fast. By our side, we also try to support them in thebest way possible, providing them, among else, withfood, services, and a clinic. We have our own water
treatment plant and make use of steam power in theframe of an ecological system.”
Ayka does not sell domestically; for now it only
exports to the European market. “In 2011 we made$50 million in exports. Our target for this year is $75
million.” A new chemical and dye plant will keepeven more of the process in Ethiopia, and Ayka hopes
to establish a second large factory for denim to produce jeans, from raw material to final product.
Aydeniz confirms that ultimately it was the people who won Ayka over, as well as the incentives
provided by the government. “I had visited China,
India, Egypt, Turkmenistan, Uzbekistan—but here in
Ethiopia I felt that the government was closer to our
vision than those in all other countries. The Ethiopian
government provides significant incentives, including
tax exemption for five years, low land leases, and electricity at reasonable prices.” Out of respect, Aydenizsays Ayka in return provides employees with goodsalaries, training, and social benefits.
Ayka now has a 50 percent market share of thewhole textile-exporting sector in Ethiopia, and is on
target to make more export revenue than its plant inTurkey. “The conditions in this country are getting
better every day. The economic state of Ethiopia isvery different than it was five years ago. We are moving forward very fast and we are very happy to bepart of this growth.”

13 - ETHIOPIA | SPONSORED SECTION

Discovering Ethiopia, in Business and Leisure
Under an ancient slab with a carved sun, crescentmoon, and Sabaean inscriptions found in Ethiopia’s
northern Tigray region, British archaeologist Louise
Schofield has uncovered the entrance to a mysterious
mine. It may well have been the place where three
thousand years ago the Queen of Sheba sourced hergold that she gave to King Solomon, as described inboth the Qur’an and the Bible.
Ethiopia is rich with hidden secrets, historicallocations that link ancient legends to a tangible present,
and eight World Heritage sites, including the rockhewn churches of Lalibela.
National carrier Ethiopian Airlines serves as themain method of entering and moving around thecountry. Based out of Addis Ababa Bole International
Airport, the new Star Alliance member serves the lion’sshare of the pan-African network and a total of sixtyfour international destinations now expanding into
Asia. The company mirrors its host nation’s economic
success in that it is now Africa’s fastest-growing airline. “We have been growing on our own capacity forthe last seven to eight years,” says the carrier’s CEO,
Tewolde Gebremariam. “We have tripled the size ofthe airline, from $390 million annual revenue to about$2 billion now. Our ‘marriage’ with Star Alliance means
we are going to cover a much larger global network inassociation with twenty-eight member carriers. This issending a message that Africa can also have a successstory, a role model, a global brand. Africa is changing.”
Business and conference visitors will find that
Addis Ababa decently caters to their needs, with
the Starwood Luxury Collection Sheraton Addis,
the Hilton, the Intercontinental, the newly opened
Radisson, and two Jupiter International Hotels. “Basedon available statistics,” says Antro Korajlan, deputy
managing director of Jupiter International Hotels,“Ethiopia receives from four to five hundred thousand
visitors per year. A large portion of these can broadly
be described as business tourists, followed by tour
and travel groups and nationals who visit friends andfamily.” These numbers are set to grow exponentially,and for this reason the Ethiopian-owned Jupiter Groupplans to operate more hotels both in and out of Addis
Ababa in the next few years.
Ayele Gelaneh, coordinator of the Tourism
Development and Marketing Directorate at the
Ministry of Culture and Tourism, says that “there areenormous untold stories in our rich cultural, natural,and historical attractions. We are inviting the world tocome and experience them.”
www.foreignaffairs.com/ethiopia-sponsored-section

“The economy is expected to expand by more than 11 percent this fiscal year.
By 2015, the agriculture sector will take the leading role, and we expect theindustrial sector to make a significant contribution. Hydropower will also be
instrumental in our economy and in fighting poverty.”
Meles Zenawi, Prime Minister of Ethiopia“Big buyers are putting Ethiopia on their radars as a source of industrial
products […] You are exempt from paying taxes on exported goods for two toseven years, and the import of machinery and material is duty free.”
Mekonnen Manyazewal, Minister of Industry“The Grand Renaissance Dam is one of the biggest in Africa. Our first priority is
to supply power to our economy, our industries, our investments, our domestic
users. The Renaissance Dam will play a very big role in our development.”
Alemayehu Tegenu, Minister of Water and Energy“The five-year Growth and Transformation Plan is all about the private sector.
When we talk about agriculture, it is about small private farms in their vast
majority. When we talk about industrial development, we are talking about
private sector development.”
Dr. Abraham Tekeste, State Minister of Finance and Economic Development“If you take the World Bank’s 2011 Doing Business report, Ethiopia is regardedfavorably better than some of the BRIC countries.”
Tadesse Haile, State Minister of Industry

“Since the majority of the population lives in the rural areas, having evena 1 percent increase in agriculture actually implies that a very significant
proportion of poverty is reduced.”
Wondirad Mandefro, State Minister for Agriculture“There are enormous untold stories in our rich cultural, natural and historicalattractions. We are inviting the world to come and experience them.”
Ayele Gelaneh, Coordinator for Tourism Development and Marketing
Directorate at the Ministry of Culture and Tourism“We will have 657,000 acres of sugarcane plantations as opposed to the
65,000 acres that we have right now. We need new species that are of better
productivity and lower cost in order to compete internationally.”
Abay Tsehaye, Director General of Sugar Corporation“The driver behind Derba Midroc’s foundation was to participate in the
Ethiopian development. Eight years ago, a ton of cement in Ethiopia cost $31.
Last year it was $315. Sheikh Al-Amoudi’s vision was that there should not be
any shortage of cement in Ethiopia and its price had to come down.”
Haile Assegide, CEO of Derba Midroc“The conditions in this country are getting better every day. The economic
state of Ethiopia is very different than it was five years ago. We are moving
forward very fast and we are very happy to be part of this growth.”
Yusuf Aydeniz, Group Chairman of Ayka Addis Textile and Investment Group“Last year we traded $1.2 billion dollars of commodities representing
almost 55 percent of the country’s agricultural export earnings with coffee,
sesame seeds, and pea beans. We have been doubling volume every year,
servicing 350 members and nearly 11,000 clients today.”Dr. Eleni Gabre-Madhin, Founder and CEO of the Ethiopia Commodity Exchange“Growth has no limit in my group. There are lots of immense opportunities
in this country. By focusing on two areas like agro-processing and mining,
we keep the others as joint ventures and management contracts.”
Buzuayehu T. Bizenu, Chairman of East African Holdings“We have tripled the size of the airline from $390 million annual revenue toabout $2 billion now. This is sending a message that Africa can also have a
success story, a role model, a global brand. Africa is changing.”
Tewolde Gebremariam, CEO of Ethiopian Airlines“Everybody is committed to do their level best, as Ethiopia is a fertile groundfor foreign direct investment.”
Esayas Bahre, President of the Development Bank of Ethiopia“There was not one period when we experienced loss; it was always profit.”
Amerga Kassa, President of Nib International Bank

“We have 3 million hectares available to grow cotton but we are using only
about 6 to 7 percent of this resource. You can imagine the potential that wehave in this segment.”
Seleshi Lemma, Director General of the Textile Industry Development
Institute“The majority of the diaspora Ethiopians would like to contribute to thecountry in great ways. […] New opportunities are opening every day andare being filled up every day. The change is sometimes so fast that it defies
analysis.”
Elias Melake, Founder and CEO of eCentric“We will export wine regionally and to the United States, where diaspora
Ethiopians can get a new taste of their homeland.”Robel Seido, Marketing and Sales Manager of Castel-BGI“Ethiopia receives from four to five hundred thousand visitors per year.
A large portion of these can broadly be described as business tourists,
followed by tour and travel groups and nationals who visit friends andfamily.”Antro Korajlan, Deputy Managing Director of Jupiter International Hotels

Ethiopia’s Grand
Renaissance
Published in

MAY-JUNE 2012www.foreignaffairs.com/ethiopia-sponsored-section

Copyright © Addis Ababa City Road Authority

Good news from the Horn of Africa is a rare commodity. In recent years,
however, Ethiopia seems to be harvesting a healthy crop. In 2007, Africa’s
oldest independent nation had the fastest-growing, non-oildriven economy
among African countries, and its GDP growth has averaged around 10
percent since then. Ethiopia’s five-year Growth and Transformation
Plan (GTP) is nevertheless addressing macroeconomic challenges,
with intentions to double agricultural production, further develop theindustry and manufacturing sector, and diversify its export basket. New
infrastructure projects are under way to bring Millennium Development
Goals (MDG) within reach, reduce foreign donor aid, and ameliorate theinvestment climate. Ethiopia knows its strengths lie in a marathon, not asprint, and the government’s long-term development policies reflect this.
Does this progress signal the beginning of Ethiopia’s revival?