As the current global economic trend clearly witnessed, Africa is on the rise while Europe and America are tied with the downward trend due to their current financial and economic woes. According to the recent United Nations economic report, five out of the ten countries the UN forecasted to register fast GDP growth in the year 2012 are African countries Ethiopia included.
The prevailing progress of Africa is not only on GDP growth, but also on the reduction of foreign aid. As the domestic private sector becomes the engine of growth across much of Africa, an increasing number of African countries are beginning to step away from aid dependency. Currently, at least a third of African countries receive aid that is equivalent to less than 10 percent of their tax revenue. They include Algeria, Angola, Equatorial Guinea, Gabon and Libya. This is a significant change from years of high dependency on aid.
Significant domestic resource mobilisation is essential to solidify ownership over development strategy and to strengthen the bonds of accountability between governments and their citizens. Adam Elhiraika, Director of the Macroeconomic Policy Division at the Economic Commission for Africa (ECA) stated that mobilising domestic resources, from both the public and private sectors, is central to Africa’s collective success in achieving the 2030 sustainable development goals (SDGs) and the continent’s 50-year development plan, Agenda 2063.
According to a comprehensive look at African resource mobilization by the recent African Economic Outlook report, on average, Africa has managed to raise an estimated 441 dollars in taxes per person per year while receiving 41 dollars per person per year in aid. In other words, what this means is that Africa as a whole receives aid that is less than 10 percent of collected taxes. Although aid exceeds 10 percent of tax revenue in 34 countries, these countries have shown a progressively higher expansion of their tax base. They include countries such as Mozambique that have almost doubled their tax revenue, as well as Liberia which in the last decade has increased tax revenue from six percent to about 20 percent. Ethiopia aspires to cover a round 70% of its annual budget by mobilizing domestic tax revenues. Botswana is another strong economy whose development is largely driven by domestically raised revenues. Although countries such as Rwanda raise more resources from donors, the nation also has a strong focus on foreign direct investment.
Roy Culpeper, President of The North-South Institute in Canada stated that in Kenya development is donor-driven, but aid has been useful in building sustainable infrastructure. As a result, Kenya has been able to build state of the art roads. For instance, the Thika Road super highway has made the real estate business in that region exponentially profitable. In similar fashion, Ethiopia’s infrastructure development is donor assisted. Many road and infrastructural development projects were financed by the country’s major development partners such as the World Bank, the European Union, the African Development Bank and the like. The construction of these roads greatly accelerated the country’s product movement and domestic trade. By the same token, this has attracted private investors and had a positive direct and indirect impact on taxes, as people establish and expand already existing businesses.
Uganda depends substantially on donor funding for development. But like Kenya, aid has gone into building strong infrastructure, which has created an enabling environment for private investment. On different occasions, the government of Uganda stated that in the last few years, Uganda’s economy has been driven by the growth in telecommunications, the construction industry, as well as the expansion of financial institutions – economic sectors dominated by private investors accounting for about 54 percent of the GDP, as compared to the agricultural sector that accounts for about 24 percent of the GDP.
According to Aniket Bhushan, a researcher at The North-South Institute in Canada, from Africa’s 54 countries, aid exceeds taxes in only 12 extremely poor countries such as Niger. But under that West African nation’s Accelerated Development and Poverty Reduction Strategy (ADPRS), which supports the growth of the private sector, additional revenue from this growth is projected to double the current real GDP growth rate to 11.5 percent.
Aniket Bhushan noted that politically stable and democratic countries in Africa such as Tanzania and Madagascar are now raising alternative resources primarily through increased taxation, trade and domestic borrowing. Aid has been the main source of income in countries such as Tanzania, which received 2.9 billion dollars in aid, making it the leading recipient of ODA in the region. However, economic analysts predict that the ongoing private-public partnerships in Tanzania will make the country more self-reliant.
These partnerships include the Southern Agricultural Growth Corridor of Tanzania (SAGCOT), a private-public agribusiness partnership meant to support small farmers. In Kenya, leading private companies such as Safaricom, East African Breweries Limited and private banks have widened the country’s tax base by expanding their branches and scope of distribution, consequently increasing the number of people who are employed and, thus, taxed. Safaricom is a leading mobile network operator in Kenya.
The private sector has proved useful in boosting GDP. Years of depending on agriculture has been Africa’s undoing. Consequently, more African countries are now diversifying their economies by creating an enabling environment for the private sector to thrive. Already, telecommunications is one of the main sectors driving Uganda’s economy. The involvement of the private sector in establishing profit-driven educational institutions has become another source of revenue. According to the United Nations Educational, Scientific and Cultural Organization (UNESCO), South Africa, Senegal and Nigeria have the highest number of such institutions.
While much more remains to be done by government to stimulate domestically-funded development in Africa, the African private sector is increasingly giving greater focus to corporate social investment and core business alignment, to help African governments to implement their national development agenda initiatives. The end result of both domestic resource mobilization and private-public partnership acceleration has been greater African autonomy in regard to the continental development agenda and this has been universally regarded as a very positive trend.
Africa’s Quest to Mobilize Domestic Resources
Golden or Tarnished Legacy?
“Understanding expands and contracts based on what details are placed in dialogue together…” Niama Safia, Artsy.net
Too often we find ourselves in reaction mode when faced with challenges, be it in the political or personal realm. As a fast changing country and continent with reportedly three quarters of the population being under the age of thirty five years old, reaction and knee jerk solutions may not be the best way to approach or assure solid solutions to problems from family crisis to government crunches. Yes, that is a stretch on the spectrum of life, but it’s a reality for the average adult.
Case in point comes from my personal experience over the past 5 weeks where I have been in the US caring for my 82 year old mother, with my family, who has enjoyed good health for the most part, but suddenly faced a health emergency. She is doing fine now but her hospitalization shook the fiber of our family and tested the foundation of love and morality established generations ago by my great-grands in Jamaica post slavery, against all odds, yet arguably we were ill prepared. Simultaneously, my family in Ethiopia was dealing, vicariously, with the annual renewal of my business license, along with hundreds of irritated hard working tax payers operating above board, in an office ill equipped to reconcile the challenges. For the record, the same old issues I have dealt with for the past thirteen years and others businesses much longer.
In both instances, resolutions were achieved, somehow, and goals were met, somewhat. But is this good enough and shall we as people or citizens continue in cycles which simply gloss over serious issues which perpetuate knee jerk reactions and inefficiency on one hand and shaky legacies based on questionable policies on the other hand for generations to come? What we fail to realize, as we react or live in the moment verses thoughtful planning and preparation predicated by critical thinking, is that one day when history judges us, it can bring shame or fame to our family or nation. The following exhibition and excerpt reviewed in Artsy.net by Niama Safia summed it up, in my usual art related discourse.
“CARVANS OF GOLS is the first exhibition in recent memory to apply a wide lens to the pre-colonial period of African civilizations and their impact to effectively challenge what we think we know about the world. It’s a fallacious notion that Africa is without history, one that ultimately fuels the racialized subjugation and exploitation of people of African descent around the globe. The museum’s decision to present fragments is a novel one; it requires the viewer to make inferences and employ reasoning in a way that the standard, tacit relationship between a viewer and an art object typically does not. As we move forward in our efforts to transform narrative cycles that do not reflect who we want to be as a global society, this juxtaposition of fragments can be instructive: Nothing, history included, is ever totally complete. Understanding expands and contracts based on what details are placed in dialogue together, and fragments present an opportunity for robust critical engagement, analysis, and—most importantly—to stoke the imagination.”
Powerful. I am an advocate for stoking the imagination and more so in the context of the communities, country and continent we want to leave for our kith and kin. CARAVANS OF GOLD allows for deep reflection on how even the creative minds and hands of incredible artists were subdued and confiscated and consequently risen and celebrated, though not by us or necessarily for us. It makes me beg the question, what do we in Ethiopia and Africa in generally expect our great grand children to think and say of us? When will we stop living in reaction mode and move to solid solutions that are not only sustainable, but considerate applying principles of foreseeability for long term social, cultural and political implications which impart lessons of love for family and country alike? Or are we satisfied with legacies of drama and trauma that will lead subsequent generations to elucidations of what not to do to keep their successive generations out of the proverbial hall of shame? As people with shared concerns, goals and circumstances, we can and must do better to ensure that just as CARAVANS OF GOLD presents the best of our creativity amidst a narrative of pain and disruption, that our personal and political/governmental administrations are tended to with care, concern and a true sense of best interest in order to avoid repeating negative narratives which promote best practices towards the positive and productive transformation across the board.
Dr. Desta Meghoo is a Jamaican born
Creative Consultant, Curator and cultural promoter based in Ethiopia since 2005. She also serves as Liaison to the AU for the Ghana based, Diaspora African Forum.
Chinese New Year warmly received in Addis Ababa
The Chinese Embassy in Ethiopia and its mission to the AU hosted the spring festival of the Chinese New Year on 18 January. The festival which is going to be celebrated by the Chinese people and some Asian countries will begin on January 5, this year.
Tan Jian, Chinese Ambassador to Ethiopia, warmly welcomed the attendants of the event including former president Mulatu Teshome and his wife. He remarked that the celebration of the spring festival in between Ethiopian Epiphany and the Christmas make the season more enjoyable.
“Taking holidays is not just to relax, also to reflect, to bid farewell to the past and embrace the new,” said Tan to the audience. “Last year was the Chinese anniversary of its milestone reform and opening up its policy which now brings sea change lifting out 740 million people out of poverty.”
Tan also reflected that same year to be full of events for Ethiopia as well with bringing P.M Abiy Ahmed (PhD) as a prime minister as an impressive reform, but with all the challenges.
He expressed the countries confidence on Ethiopia government and its people referring the World Banks economic growth forecast of a GDP growth to be 8.8 percent in the coming, which is more than China.
He expressed that his country wishes all the success for Ethiopia.
“We are with you and we are behind you,” said the ambassador.
Coffee Concerns
Ethiopian coffee is in high demand in Europe and Asia but the country has not fully utilized its potential to earn as much coffee can bring in. Illegal coffee trading, lack of value addition, coffee prices and the way coffee is promoted hinder coffee’s earnings. Another challenge is traceability. Although both exporters and importers are well aware of the high quality of Ethiopian coffee, they are often unable to find information regarding production and marketing. Last year Ethiopia managed to secure 838.2 million USD from the export of 238,465 tons of coffee, which is 44 percent less compared to the earnings from the same period of preceding year.
Historical records indicate that when coffee was introduced to Yemen from Ethiopia in the fourteenth century, it was referred to as “qahweh” (kaffa). Ethiopia boasts 99.8% of the genetic diversity of Arabica coffee, which is renowned for being the highest quality.
Jemal Ahmed Abdu, owner of Co-founder of Horizon Plantation argues that problem based research should be done to solve the coffee challenges in Ethiopia. “We must update ourselves we must do more to get more results,’’ he argues. Capital’s Reporter Tesfaye Getnet sat down with Jemal to learn more about the Ethiopian coffee market. Horizon Plantation with a starting capital of 190 Million birr in 2003 developed green projects in agriculture and manufacturing and expanded its projects to 15 companies that have a cumulative capital of over 10 billion birr.
Capital: If Ethiopian coffee is as good as it sounds, then why is it not as pervasive as Vietnamese or Colombian coffee?
Jemal Ahmed: Ethiopian coffee has a unique flavor so it has been able to carve out a niche for itself on the international market. This is especially true when it comes to blending specialty coffees. I don’t think Vietnam influences our market, because most of that country’s exports are Robusta. That type of coffee, Robusta, is not traded in NY, it is traded in London and has a different market, although most roasters do use it for blending as a filler. Our strongest competitor in the washed coffee business is Colombia. They have excelled in the area of value addition. All of the coffee Columbia processes is washed whereas in Ethiopia around 30 percent is washed. They have the most advanced technology when it comes to pulping, fermenting and drying. My company procured machines that were not only made but also invented in Colombia. Coffee is traded in the differential market. Ethiopia’s mainstream natural coffee is sold for less than 20 percent of the world’s average price but our washed coffee is traded for between 30 and 100 percent more than the average price. As far as I am concerned, this is where our value addition in coffee exports should focus. Our national average is only 30 percent. My company Horizon Plantation processes up to 90 percent washed coffee. That is how we survive in this depressed international market.
Capital: What does coffee production look like today? Where is it heading? What is it missing?
Jemal: Our coffee production as a nation is growing fast. More and more farmers and commercial farm developers have entered into the coffee business. Places like Gurage zone have started growing coffee. The Amhara region has done impressive work introducing coffee growing to farmers. However, when it comes to traditional farmers, the khat crop is a major challenge because it has an ever growing local market and a very stable price, not to mention a relatively low regulatory and logistical cost. The biggest challenge is the lack of research in new varieties which we will need to face climate change and the international market demand for flavor and aroma.
Capital: What are the biggest problems exporters face today?
Jemal: The uncontrollable influence of hedge funds on the world’s futures trading, which depresses the New York market. Very powerful conglomerates have no knowledge about growing, trading or roasting, they just invest in futures trading with other commodities and they have found coffee to be the best commodity for them to keep their money or liquidate assets. They have experts and all the information of the growers and the market demand. They have much better and more accurate data about our production than our concerned government institutions. Most of the time our experts in the government use their data for their presentations. We also have a major problem with the behavior of our exporters. Almost every coffee exporter is offering coffee at 20-30 percent less than their cost. They compensate their loss with the high margin they get on their imports. Even worse now is the ever increasing elicit trading of forex by importers. International coffee buyers know this very well, when they negotiate the price they will say: “you can make your profit with your import’’. It affects our differentials. One example is Sidamo washed coffee. This previously would make 80-100% of premium, it now has gone down to 30%.
Capital: Illegal coffee trading and lack of value addition are also challenges in the coffee sector, how can Ethiopia overcome these issues?
Jemal: I beg to differ on this one. Why do we have illegal coffee trading?? We are coffee producers and consumers, so why can’t we make coffee as free as other products. I believe our policy which denies the local market should be looked at. Whether we like it or not we are a coffee drinking society, our local market should be given a competitive chance with our export. I personally believe, if we liberalize the local coffee market where more than 80 % is traded through unofficial channels, our differential and volume of export would increase. A tourist who comes to our country thinks of sourcing good quality coffee while the official local market only allows rejected coffee. This is counterproductive. As for the value addition, not all major coffee growing countries are known for their roasted coffee, the main market for our quality coffee is the western world, which has a very different market controlled by very few companies. The best value addition we can do is on our green coffee processing like Colombia.
Capital: Globally Climate change and structural factors threaten the coffee industry’s prosperity, how can Ethiopia reduce this challenge?
Jemal: I do believe this is a challenge we already have started facing. That is why we need research on developing frost, drought and pest resistant verities. Moreover, supplementary irrigation is also something to look at. We are using varieties released in the eighties. We have different diseases and a different climate now.
Capital: Will the rising domestic demand reduce export availability for the rest of the world?
Jemal: I do not think so because our production is also growing. We even have room to triple our output with the proper cultural practice of coffee farming. We as a nation do not use proper fertilizer and more than 70 % of our coffee trees need to be rejuvenated. We need a national campaign on this.
Capital: With a simple bird’s eye view we can observe that Ethiopian coffee farmlands are owned by small scale farmers but some argue that commercial farming should also expand to produce more. What do you think about this subject?
Jemal: I think there is a clear possibility of increasing our output from both small holders and commercialized farms as we have millions of hectares suitable for coffee. In the short term by adapting the proper agricultural practice of coffee farming we can at least triple our farmer’s productivity. By developing commercial farms which takes 4-5 years, we can also increase our national production.
Capital: One of the concerns raised by critical analysts of liberalization is the possibility that the coffee market is dominated by a few large scale actors which result in non-competitive behavior at the expense of producers. What do you think about this?
Jemal: That is totally untrue. We are by far a country which has the longest value chain and more traders than the volume justifies, compared to any other exporting countries.
Capital: Brazil which exports more than 40 million bags sends less than 30 traders while we have up to 100 traders to export less than three million.
Jemal: Nowadays every importer has a coffee export license and exports coffee at a loss. Contrary to that, the producer is affected negatively for having too many players on the value chain.
Capital: Coffee traders say that competition from buyers has led to purchasing crops that are not ready to be marketed, what should be done to tackle this?
Jemal: On the farm level un-ripened coffee that is harvested does impact the quality so only ripe coffee should be supplied. But I do not share that concern as the buyers who operate the mills and inspect and buy the coffee. In the wholesale market, coffee is traded only after attaining its desired moisture level and cup.
Capital: Economists argue that liberalization of the commodity trade and processing has often led to deteriorating export crop quality in several countries and, in some cases, to price discounting on the international market and loss of reputation for a ‘national’ crop. What is your comment on this issue?
Jemal: On the contrary, when commodities are liberalized, quality become the price determining factor.
