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Interview: German companies should be active players in this trend

In 2015, Ethiopia was Africa`s fastest growing country. H.E. Kuma Demeksa Tokon, Ethiopia’s Ambassador to Germany, talks about his country`s strategic positioning as a regional transportation hub and the priorities of his government’s industrial development strategy. According to him, it is expected that Ethiopia’s economy will start moving to manufacturing in the coming five years and that German companies should engage in this dynamism.

blog:subsahara-afrika: Your Excellency, your country`s first light rail line was launched in Addis Ababa last year. What does this project mean to Ethiopia?

H.E. Kuma Demeksa Tokon: The Addis Ababa light rail project is seen as an integral infrastructure development of Ethiopia. In recent years, Ethiopia has made significant progress in infrastructure, and its infrastructure indicators compare relatively well with low-income country peers. The Addis Ababa light rail, the first of its kind in Sub-Saharan Africa except in South Africa, helps to spur the capital city’s economic activities as it has the capacity to transport 60,000 people per day who live in the suburbs and bringing them towards the center for work. It is a clean energy project benefited from the various energy development projects and uses the energy generated from big dams constructed. The rail project has also brought skill and technology transfer from the Chinese company throughout the construction to the operation of the rail transport. The initial stage of operation is being overseen by the Chinese company Shenzen, as an exchange of skills and knowledge between Chinese and Ethiopian experts.

blog:subsahara-afrika: Your Government has decided upon another mega infrastructure project: A new major airport is to be built for 120 million passengers per year.

Ambassador Kuma: The country developed Ethiopian Airlines, one of the best airlines in the world. Ethiopian Airlines is the biggest passenger transport and cargo fleet in Africa and increasingly associated itself with other airlines to be the transport hub. Currently an expansion work on Addis Ababa Bole International airport is underway and set to complete in 2018. The airport, less than a decade ago, handled fewer than a million passengers a year but that rose to more than 7 million in 2015. Passenger numbers are expected to continue rising by 18 per cent a year. The current expansion work, when completed, would make the airport to accommodate an estimated 20 million passengers per year. However with the current pace of passenger and cargo fleet growth and with the country’s sustained economic growth, the expansion of the airport would only serve for 15 years. Therefore, plans are made to build another international airport in Ethiopia.

blog:subsahara-afrika: Could you give some current insights into this project?

Ambassador Kuma: Potential site for the construction of the airport were whittled down from eight to there, all of which are within 60 to 70 kilometres from Addis Ababa. According to the Ethiopian Airports Enterprise, once the site is approved and designs and financing are confirmed the airport will be built at an estimated cost of $4billion. The airport will not only comprises runaways and terminals, but includes hotels, shopping malls, office buildings and other facilities. The French airport engineering specialist ADPI is conducting the planning study for the new facility.

blog:subsahara-afrika: What are the opportunities for German companies to participate in the airport project? The light rail line was built by Chinese firms only.

Ambassador Kuma: Overall, the infrastructure development projects are open to all and are not exclusively reserved to Chinese or any other country. For example, the Italian company named Salini is constructing the biggest dam in Africa, the Grand Ethiopian Renaissance Dam as the Chinese company has engaged in railway projects. Of course Germany lags behind in terms of FDI in Ethiopia and topped by countries such as Turkey, India, Sudan, USA, the United Kingdom and a few others. However, it is encouraging that German companies like Siemens, Bosch and Voith Hydro GmbH are working in different projects in Ethiopia. Voith Hydro GmbH is working with the Ethiopian Metal and Engineering Corporation, METEC, on the mechanical engineering part of the Grand Ethiopian Renaissance Dam while Siemens is working on the high voltage electric transmission line project between Ethiopia and Kenya. In the first wave of FDI that started to Ethiopia, say seven years ago, a lot of it came from the newly emerging economies. However, we are seeing in the last three or four years a gradual balancing between emerging economies and western investors. Therefore, German companies should be active players in this trend.

blog:subsahara-afrika: Your country`s strategy is to become a prime location for the international textile industry. Swedish retailer H&M, for example, already produces textiles in Ethiopia.

Ambassador Kuma: The textile industry is among investments traditionally known as ‘migratory” since it constantly shifts its destination on the basis of cost pressures. Recently, East Africa is getting more attention from the textile and apparel industry as a potential investment destination. Accordingly, the government aimed to make Ethiopia to be the next hub of textile and garment for Africa. Hence, the industry is considered as number one priority by the government’s Industrial Development Strategy due to various reasons.

blog:subsahara-afrika: What exactly has Ethiopia to offer to foreign investors?

Ambassador Kuma: The availability of some 3 million hectares of land and climate suitable for cotton cultivation, out of which only close to 5 percent is utilized so far, makes Ethiopia the preferred destination for the textile investment. The country also has huge potential for organic cotton cultivation; Ethiopia provides one of the cheapest environmentally friendly power supplies and competitive labor cost than the average in Africa. The skilled labor is increasing rapidly in Ethiopia as a result of the fast expansion of education and training institutions in textile technology. These institutions will also provide technical inputs for textile factories. Ethiopia also offers huge markets, be it domestic or international, as you can reach half of the world population within just an average of eight hours flight. It is a perfect strategic location for investment. Special industrial zones and industrial parks are set up with one-stop shop services with the view to expand the manufacturing sector along with incentives provided by the government, particularly investment and operational incentives such as tax holidays, including 100 percent free importation of new or used machineries, and other financial incentives.

blog:subsahara-afrika: Which other sectors should take Ethiopia on their map?

Ambassador Kuma: The Second Growth and Transformation Plan, GTP II, of Ethiopia, which is going to be implemented in full between 2016 and 2020, focused on the light manufacturing sector which is going to be agro-based. Agriculture continues to be the back bone of the economy for some time but the foundation has to be laid for the economy to be industry-led economy. Therefore, small-holder farming which is integrated with private sector mechanized farming is one of the focus areas. German companies can invest in large-scale farming and intensive agriculture like floriculture. The combination of small-holder farming and big companies involved with livestock development and processing would help Ethiopia to further its agricultural modernization programs. Vertical integration is very important for Ethiopia, and we see manufacturing as one of the pillars. As I mentioned, we focus on textile and apparel which has vertical integration to cotton production value chain. Another linkage with agriculture is leather. Ethiopia, with the number one cattle population in Africa, is suitable for leather production, shoe manufacturing and other leather related products. Therefore, huge opportunities are there on “integrated agro-industrial production” with the focus on light manufacturing as well as heavy manufacturing such as steel, metal and engineering, petro-chemicals and pharmaceuticals.

blog:subsahara-afrika: And tourism?

Ambassador Kuma: Huge investment opportunities are also there for those who want to engage themselves in the tourism sector. These ranges from five-star hotels to tour operations as well as engage in eco-tourism investments that goes in line with the country’s Green Resilient Economic Strategy. Also, investments in tourism information technology, consulting as well as professional trainings are highly encouraged. It is expected that Ethiopia’s economy, which is still reliant on agriculture, start migrate to manufacturing in the coming five years and we call German companies to engage in this dynamism.

blog:subsahara-afrika: How can your Embassy in Berlin support German businesses that are interested in doing business with Ethiopia?

Ambassador Kuma: The Embassy, in addition to participating in different business promotional activities, is working in giving detailed information for companies who are interested to invest in Ethiopia. It also arranges meetings and appointments with respected officials and companies in Ethiopia, facilitates pre-investment visits, conduct follow-up meetings with business people and provides the necessary support. For this, it has specific department purely to follow such business activities. As economic diplomacy is our country’s prior focus, the embassy is working in line with the country’s focus and always ready to render the necessary support for German investors.

blog:subsahara-afrika: Your Excellency, we thank you very much for your thoughts.

Ambassador-Kuma

H.E. Kuma Demeksa Tokon, Ethiopia’s Ambassador to Germany, is a former Defense Minister (2005-2008) of his country and a former Mayor of Ethiopia`s capital Addis Ababa (2008-2013). Contact: Email: emb.ethiopia@t-online.de; Internet: www.aethiopien-botschaft.de.

 

 

(Bildnachweis: „The round about of Mexico Square, in Addis Ababa, crossed by the LRT“ von Turtlewong – commons.wikimedia.org)

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