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Ethiopia: Africa’s new economic powerhouse

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By Florence Gichoya

Ethiopia is a country of many contrasts. Africa’s most populous land locked country, is a rising economic powerhouse, recording the highest economic growth rate in the continent. But then again, Ethiopia performs dismally in the area of democracy and press freedom. The country’s parliament is deficient of opposition MPs. The ruling party, Ethiopian People’s Revolutionary Democratic Front (EPRDF), and its allied parties, won all the 546 parliamentary seats, in last year’s May elections.

Still, the state driven economy is upbeat and trounces many African countries, which are either grappled with conflict, corruption or hostile political environment that is unfavorable for investors.

There is an unstoppable construction boom. In 2013, Africa’s biggest wind farm was built in the south of Addis Ababa. The 324 MW wind power will address the growing energy demand for domestic and industrial use. Another mega project is the construction of the 6, 000 MW Grand Renaissance dam. It will cost $4.8 billion, making it the seventh biggest hydropower plant in the world.

By increasing and diversifying the source of energy, Ethiopia has paved way for local and foreign investors. In April last year, an American owned company General Electric Transportation announced that it would set up an electric cars factory in Ethiopia, it will be the first in the continent. The plant is expected to make 4,000 cars per month, and will offer employment to thousands.

In November last year, Ethiopia’s Ministry of Transport launched the country’s first manufacturing and assembly plant. The Bushoftu Automative Industry located in a military base, is expected to manufacture 10,000 to 20,000 vehicles per year. The Transport Ministry indicated that in 2014, there were only 587,400 vehicles for 94 million people in the country. That translates to two vehicles for every 1,000 people.

“This is a light duty manufacturing plant. In this factory we can manufacture and assemble pickups, station wagons, single and double cabins and mini-trucks. We can manufacture or assemble more than 20 units per day. If there is more demand we can increase this production,” said Major Metafer Beshawhwured, the factory’s Assistant General Manager.

Ethiopia has an ambition to not only manufacture automobiles to cater for domestic demands, but also to export to neighbouring countries including Kenya.

Transport and infrastructure boom

In November last year, Ethiopia made history when it launched the first light rail system in Sub-Saharan Africa. The 32 km rail is essential in decongesting the city that has a population of more than 4 million people. Another 800 km railway line connecting Addis Ababa and Djibouti’s Port City was completed. The train ferries 1,500 trucks of goods daily to land locked Ethiopia.

An elaborate road network to increase the economic growth is under construction. The World Bank Group is partly financing the construction of Modjo-Hawassa 203km road, to the tune of $370 million. The expressway will connect the southern region to central area, and northern Ethiopia will be linked to the Djibouti Port. The road will reduce duration of travel, from four hours to two hours, and accommodate 4,000 vehicles per day. The road is part of the transcontinental 10,000 km Cape Town to Cairo highway.

Unlike other African airlines that are making loses, year in year out, Ethiopia Airlines has maintained a sturdy profit making record. In the 2014 to 2015 financial year, the government owned airline recorded $175 profit. Last month, the carrier signed a pact with Rwanda’s RwandAir, to rid the fifth freedom rights. This partnership now allows both carriers to operate without restrictions in Ethiopia and Rwanda airspace.

Sustaining traditional exports

Coffee is Ethiopia’s leading foreign exchange earner and the country is Africa’s leading exporter of Arabica coffee. According to National Geographic Magazine, 12 million Ethiopians depend on coffee as a source of income. Kenya has a lot to learn from Ethiopia’s coffee industry.

In January this year, Ethiopia projected a 45 per cent increase in coffee exports. “Coffee exports will increase 45 per cent to over 260,000 tons this year. Incentives will help achieve this goal, and they will include marketing linkage, loans for coffee exporters and processors, and the promotion of the Arabica coffee that the country exports at trade shows abroad,” Shimelis Arega, Ethiopia’s Trade Ministry spokesperson pronounced.

In 2014, the World Bank indicated that Ethiopia’s coffee contributed to 84 per cent of the country’s total exports and 80 per cent of the country’s total employment. The country’s Ministry of Trade has embarked on training small scale farmers on value addition, in order to increase sales.

The country has also diversified into horticulture business, which has grown tremendously over the years. According to World Bank Economist, Lars Christian Moller, who authored Strengthening Export Performance through Improved Competitiveness (July 2014). He evaluated Ethiopia’s flower industry had grown, “from one single firm 14 years ago to about 100 firms today, earning $200 million per year from exports and employing an estimated 50,000 people.”

When it comes to livestock industry, Ethiopia takes the lead. The livestock contributes to 17 per cent of the country’s GDP. According to Ethiopia’s Ministry of Foreign Affairs, “Every year, the country produces about 2.7 million hides, 8.1 million sheepskins and 7.5 million goat skins.” The government attributes the high volume of animal hides and skins to the large population of 54 million cattle, 25.5 million sheep, 24 million goats, 7 million donkeys, two million horses and one million camels in the country. As a result, the leather industry has continued to thrive. Over 30 tanneries and numerous factories are used to process leather into shoes, bags, purses, industrial gloves, and other assorted items.

The end-products are exported to Asia, Europe and American markets. Foreign investors are encouraged to invest in the leather industry, where they enjoy a wide range of incentives, including more relief from income tax for a period of five years.

Ethiopia is an emerging power house that is on the rise. There is divided opinion on the ruling regime’s track record on human rights abuses, and its punitive methods of combating dissent. Nevertheless, Ethiopia continues to achieve great economic strides, making it an envy of Africa’s leading democracies

Why EAC Ranked Top in Regional Integration

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By Florence Gichoya

The inaugural Africa’s Regional Integration Index, ranked East Africa Community (EAC) as the top regional body in Africa. The report was compiled by African Development Bank (AfDB), African Union Commission (AUC) and Economic Commission for Africa (ECA), and was released on April 2 2016, in Addis Ababa, Ethiopia.

The Index, showed the progress and impact of regional integration in the continent. It looked at 28 indicators among them regional infrastructure, trade integration, productive integration, free movement of people and goods, and financial integration.

Africa has 8 regional intergovernmental organizations under the African Union. East Africa Community (EAC), Economic Community of Central African States (ECCAS), Economic Community of West African States (ECOWAS), Intergovernmental Authority on Development (IGAD), Community of Sahel-Saharan States (CEN-SAD), Southern African Development Community (SADC), and Arab Maghreb Union (UMA).

Overall, EAC was ranked the most integrated region, followed by SADC and ECOWAS came third. CEN-SAD was ranked the least integrated region. IGAD, which Kenya is a member, was ranked the best performer in the area of infrastructure.

Free movement across borders

On January 1 2014, the tripartite partnership of Kenya, Uganda and Rwanda launched the use of national identity cards to travel across the three countries. “Time has come for us to remove colonial boundary barriers that have kept us apart and also isolated the people from interacting and doing business freely.” President Uhuru Kenyatta said.

The initiative’s aim was to encourage more integration, free movement of goods and services in the region that would boost the economy. “This is what we have agreed as leaders so that our people can interact by visiting each other’s country to do business and develop domestic tourism.” Uhuru said. So far the project has had considerable success, evidenced by the favorable ranking in the Africa’s Regional Integration Index.

EAC has also been commended for implementing easy travel for tourists intending to visit the region. On February 20 2014, the East Africa single tourist visa for Kenya, Uganda and Rwanda was launched by Presidents Uhuru Kenyatta, Yoweri Museveni and Paul Kagame. Tourists need not apply for visas from the three visas, the 90 days visa allows multiple entries in the three countries. Kenya, Uganda and Rwanda also embarked on marketing the region in international tourism fairs.

However, research has shown the project is still unpopular in the region. Kenya Tourism Federation announced in June 25 last year that 58 per cent of tourists had not used the single tourist visa, due to lack of awareness.

The Africa’s Regional Integration Index reported that, “When visa or work permit restrictions are cut, gains in time and resources open up, which supports more competitive businesses and economies.”

Africa Union Passports

Just like the European Union (EU) issues EU passports to citizens of its member states. The African Union (AU) will soon launch African passports to all Africans. The AU plans to issue the 53 Head of states, with the passports in efforts to popularize the travel document to their citizens.

EU passport holders don’t need visas to travel across Europe; likewise, AU passport holders will freely access all African countries without restrictions. “A few of us at the AU are already using that passport within Africa, and it is very useful, but we want the heads of states to carry it when they are visiting African countries to make it official and known to others as well.” Dr.  Nkosazana Dlamini Zuma, Chairperson of the African Union Commission said.

African continent is still beset by restrictions of free movement of goods and services. During the African Leadership Forum held in Dar es Salam in July 2015. Olesugun Obasanjo, Nigeria’s former president called for the abolition of visas by African governments. “What we need to do in order to speed the integration process is to abolish visas in Africa. West African countries have done it and it is working.” He said.

According to AfDB’s Africa Visa Openness Index (2016), 55 per cent of African countries still issue visas to African travellers intending to visit their countries. Only 20 per cent of African countries, allow visitors without visas. Seychelles has the best visa openness policy. “Visa openness promotes talent mobility and business opportunities. Africa’s leader’s and policymakers have a key role to play in helping Africans to move freely in support of  (AU) Agenda 2063’s call, to abolish visa requirements for all Africans by 2018.” Moono Mupotola, AfDB’s Director of Regional Integration and Trade said.

European Union

The European Union has succeeded in economic and political integration, compared to other regional bodies in the world. It has a membership of 28 countries and has existed for more than 55 years.

Within the EU, there’s free movement of people and goods. In 1999, it successfully launched the Euro, replacing the member countries’ currencies, with the exception of Britain and Denmark.

The regional body was awarded the Nobel Peace Prize in 2012, for contributing, ‘to the advancement of peace and reconciliation, democracy and human rights in Europe.’

Although Europe is a leading regional body, it is currently facing the threat of terrorism from Islamic State. It also has to cope with unprecedented immigration crisis, which has deeply divided EU’s membership on its policy on open borders for asylum seekers.

Terrorists attacks in EU’s capital Brussels, Belgium, on March 22 2016 that killed 31 people. And the deadly Paris terror attacks in 2015 have caused proponents of EU to be apprehensive on regional cohesion. Countries like Britain and France are now calling for tougher measures on EU’s immigration policy.

Another challenge for EU is the looming exit of Britain, the exit dubbed ‘Brexit’ will be determined by a referendum in 2017. Britain, a leading economy in Europe, has maintained its national currency, sterling pound, and declined to adapt the Euro currency. It has also restricted free flow of immigrants from Syria and other Middle East countries. If the referendum sails through, Britain will join Switzerland and Norway, which are the only European countries that are non-members of the EU.