that's a great article wshaw! nice find!!
the whole section on mining is worth a read.....
Thriving Mining Sector Sees Rising Share in Ethiopia’s Economy
By Andualem Sisay
It was in 1999 the idea of engaging in the mining business first crossed Yegoraw Zewdalem’s mind when he came back from California to visit his family in Addis Ababa, 12 years after he left.
“I looked at all sectors in Ethiopia and found gemstones export more promising. Hence, I decided to take samples to the United States at the end of my visit,” Yegoraw said.
Then came venturing into the business with the initial ups and downs, which caused him to lose money in his first mining attempt in Somali region, between 2003 and 2005. That was due to lack of experience; he now sees bright future in the business.
Just last year, he exported some 700 kilograms of gemstones, including high quality opal with price tag of $25,000 – 30,000 for ten grams.
He gets the stones from middlemen who collect them from traditional miners’ cooperatives. It is estimated that currently there are around 30 cooperatives engaged in gemstones mining in Ethiopia, each having 20 to 50 members.
Catching up fast on coffee
The history of coffee as the leading foreign currency generating commodity of Ethiopia began to fade away over the past five years. Its share is now down to about 25 percent of the total $3 billion annual export income of the country from about 40 percent five years ago.
The diversification of export items, which brought flower and other produces to the major export commodities list; the shift of traditional miners from contraband to formal line of business; and the fluctuations of the global coffee market, among others, are the reasons for the decline of coffee’s share.
Since last year, the less known mining sector has become the source of Ethiopia’s second export commodity. It took over oil-seeds’ position earning $526 million in the past 11 months (July 2012 – May, 2013) catching up fast on coffee, which generated $654 million.
The latest geology survey shows that Ethiopia is endowed with natural resources ranging from tantalum, which is used for manufacturing of mobile phones, laptops and other electronic gadgets, to coal and potash. The list includes, platinum, nickel, copper, silica, diatomite, bentonite, soda ash, gemstones, phosphorus, salt, geothermal, other industrial and construction minerals, among others.
Gold mine
The recent data from the Ministry of Mines (MoME) shows that out of the total earnings from mineral export $419 was earned from one million traditional gold miners operating in six regions of the country.
The rest of this earning is attributed to MIDROC Gold Mining Company, which the government privatized in 1997 to the Ethiopian born- Saudi tycoon, Sheikh Mohammed Hussein Ali Al-Amoudi, whose MIDROC Ethiopia Group Investment has over 40 companies and affiliates in Ethiopia.
While the promising potash is expected to take over the lead role in the coming few years, gold is Ethiopia’s top hard currency earner mineral generating an average of half a billion US Dollars annually since the previous fiscal year./
Potash is one natural resource from which the country expects huge revenue in the near future. The Canadian firm, Allana Potash and Fertilizer Company, co-founded by an Ethiopian diaspora, has invested in the Danakhil Depression of Afar Region.
It has secured financing from two significant strategic investors - the International Finance Corporation (IFC), a private sector financing arm of the World Bank Group, and Liberty Metals and Mining, a member of Liberty Mutual Group.
Anticipating to start production of one million tons a year by mid-2015, Allana has also got green light from Africa Export Import Bank (Afrexim Bank), while offering shares on the Toronto Stock Exchange, at the same time.
The new Ethiopia- Djibouti railroad, which recently secured some $300 million loan from the Indian Export Import Bank, is among the ingredients that are expected to boost performance of mining and other export businesses in Ethiopia. This is also expected to ease transportation of potash and fertilizer, indicating a promising future for the sector.
“Had it not been for the decline of gold prices globally, mining could have generated more foreign currency to the country than coffee,” says Bacha Faji, Public Relations Director at MoME.
Estimations by the Ministry indicate that the western part of Ethiopia - around Lega Dembi and Sakaro - alone has production potential of about five tons of gold per annum. In addition, gold production has recently started in Tigray, Gambella, southern parts of the country and Guji and Borena zones of Oromia.
Much Anticipated Oil & Gas
For the past two decades, there has been aggressive exploration for oil and natural gas in the four major sedimentary basins of Ogaden, Gambella, Blue Nile and Southern Rift Valley. Though none of the companies prospecting for oil and gas in Ethiopia have announced the much anticipated production news so far, there have been growing interests on the sub-sector.
Most recent developments are elevating hope of the people. The discoveries of oil in neighbouring countries, Kenya and Uganda, by Tullow Oil Company (partner of Africa Oil), which Ethiopia has also welcomed to its territories, and recent news from the company are boosting hope of the country.
“The most significant well results during the period were the Etuko-1 oil discovery in Kenya and encountering an oil prone system in Ethiopia with the Sabisa-1 well,” Tullow stated in its 2013 half year report released on July 2, 2013.
Coal Production
One of the natural resources the country has started utilizing is coal. Currently Ethio-Pak Coal Mining firm, which was established as a joint venture by two endowment companies (Ezana Mining with 40% share and Mesobe Cement Factory with 25% share) partnering with a Pakistani company with 35% share, seems to be on the lead. It has started producing coal since 2009 near Jimma area of Oromia Region, 300km west of Addis Ababa. The area is said to have 14 million tons coal reserve.
In addition, to further utilize the huge coal potential around Yayou area of Oromia Region, the government has decided to invest solo after its repeated attempt to attract private investors has failed.
Yayou Coal Phosphate project is one of the largest of about a dozen coal reserve sites in Ethiopia. It is estimated to have a potential of producing 300,000 tons of urea for fertilizer and 90 megawatts of electricity per year.
The Big Picture
Though Ethiopia has listed over 875 mineral occurrences in SIG Afrique mineral resources database, the share of the mining sector to the country’s gross domestic Product (GDP) is currently 1.5 percent. The Ministry of Mines envisages boosting the current annual revenue earnings from minerals export tenfold ($5-6 billion/year) by 2020 while at the same time producing most of the currently imported industry inputs locally; hence, import substitute.
To encourage investment in the sector, the government has recently reduced the income tax from 35 to 25 percent. Lower royalty payment levels, exemption from customs duty and taxes on mining equipment, guarantees in respect of the right to sell minerals locally or abroad are also included in the new law.
With no investment capital limits, government also provides guarantees for opening of a local account in a foreign currency.
“What we need from investors in the sector is only detailed work plan with budget breakdown,” Bacha says.
Out of the total of 135 mining companies currently operating in the country, 55 are engaged in production of various minerals ranging from gold, coal and tantalum to various gemstones such as opal. The remaining are at exploration level searching and analyzing economic viability of other natural resources including potash and crude oil.
In addition, the country has also engaged Russian Geological Survey, Zaru Bezggeologia, and its Ethiopian counterpart to analyze the major input for nuclear power development - uranium deposit - found six years back in Bale zone of Oromia Region.
Any Room for Diaspora?
Recent statistics show that the engagement of the Ethiopian Diaspora in the mining sector is encouraging. Of the total 135 mining companies registered 36 are owned by Ethiopians while 33 are joint ventures between Ethiopians and foreigners. Most of these investors are Ethiopian Diasporas like Yegoraw, according to Bacha.
The government is now encouraging both foreign and Ethiopian Diaspora investors to invest on areas where technology and value addition is need the most. This includes improving traditional miners’ performance investing on upgrading their skills and equipments and engaging in cutting and polishing gemstones business before export.
“Though there are challenges, this is the sector I am pushing my fellow Diasporas into,” Yegoraw said while urging the authorities to decrease the week-long period consumed on paper works at customs just to clear duty free imported machineries.
