Public Enterprises Holding and Administration Agency (PEHAA) has closed the budget year with the record lowest privatization process by transferring only a single enterprise. They have also been calling investors who are interested in joining value addition development at a tantalum mine in Qenticha.
For the last quarter century, the agency has been transferring public enterprises including huge and potentially public properties to private actors and sometime regional administrations or party and association affiliates.
However, for the current budget year that ends today, the agency has only transferred one government owned enterprise.
Wondafrash Assefa, Public Relations head of PEHAA, told Capital the agency has transferred Ethiopian Crown Cork and Can Manufacturing Industry which was controlled 75 percent by the government for a total of 130 million birr.
The sole bidder CGF-Crown Cork and Aluminum Cap Manufacturing Factory, who had been in the business since 2012 had a higher offer when compared with the floor price of 125.9 million birr that PEHAA estimated.
Recently the agency also floated a bid to develop Qenticha Tantalum mining through value addition instead of exporting a concentrated product. “We want the company that has capability in technical and capital measurements to develop the Qenticha Tantalum jointly,” Wondafrash said.
It is not the first time the government has invited interested parties to jointly develop projects although none have come to fruition.
“We have tried to develop tantalum mining but so far we haven’t been successful so we floated another round last month,” he said.
Qenticha is one of the very few companies floated during the just ended budget year with Ethiopian Crown Cork and Can Manufacturing Industry, National Alcohol and Liquor Factory (NALF) and BM Textile.
Previously the government considered selling out tantalum mining without any preconditions like requirement of value addition, but it has changed its plan.
Years ago experts said that the bid document for Qenticha should focus on making value added products from the mineral as opposed to mining raw tantalum. They say a value addition factory at Qenticha would cost a minimum of USD 120 million and a maximum of a quarter billion USD. However, this would establish an industry that would boost the country’s hard currency from exporting end products as opposed to raw production.
The government has attempted to expand the 25- year-old Qenticha mine, located 550km south of Addis Ababa at Adola, many times. However, the facility is still the property of the state owned Ethiopian Minerals Development Enterprise, which is now under the Ethiopian Minerals, Petroleum and Bio Fuel Corporation.
Experts said that tantalum mining, which is exported as a concentrate, has several related products that can be produced locally and contribute for huge amount of hard currency for the country.
Lithium demand has been growing because the battery is used it in various industries so the global market is huge. For instance, the lithium-ion battery automobile industry and growing in popularity for military and aerospace applications is now on the rise and is searching for lithium, according to experts.
Tantalum is a major input for the production of electronics, aircraft parts and medical equipment.
“A factory that would make value added products would really help the economy,” experts in the industry added. Tantalum is used to make mobile phones and other electronic gadgets, aircraft parts and medical equipment. A pilot tantalum production project began in 1990, during the Derg era.
Wondafrash said that they have been focusing on restructuring the former Ministry of Public Enterprises to PEHAA and including huge public enterprises that were not under the mandate it in related with the recent government move that decides to sell mega enterprises fully or partly.
“Due to the new attention and almost finalized privatizing other public enterprises we sold only one enterprise for the year,” he said.
However, during the budget year the agency invited interested buyers to sell out the over 46 percent on BM Textile but failed. He said that BM has also floated with Qenticha in the bid notice issued last month.
NALF, which is a very successful public factory in terms of profit, was the other enterprise that was expected to be fully transferred for private investors. “In the case NALF we have gone successfully and got a huge offer but the transfer was delayed because the case is changed to a legal issue,” he said. The former owner of one of the four branches of the liquor enterprise has claimed in the case that delayed the privatization process.
Excluding Shebele Transport, PEHAA, is controlling 22 huge public conglomerates under the new restructure.
Ethiopian Development Bank, Ethiopian Mineral, Fuel and Bio-fuel Corporation, Ethiopian Pulp and Paper, Ethiopian Metals and Engineering Corporation, Ethiopian Trading Corporation, Commercial Bank of Ethiopia, Ethio Telecom, and Ethiopian Shipping and Logistics Services Enterprise (ESLSE), Ethiopian Agricultural Business Corporation , Chemical Industries Corporation, Birhan ena Selam Printing Enterprise, National Alcohol and Liquors Factory, Fil Wuha Spa Services Enterprise, Ethiopian Construction Works Corporation, Ethiopian Construction Design and Supervision Works Corporation, Ethiopian Tourist Trade Enterprise, Hotels Development (Hilton Hotel), Ethiopian Insurance Corporation, Ethiopian Airlines, Ghion Hotel Enterprise, Sugar Corporation, and Ethiopian Postal Service.
Shebelle Transport has been floated on different occasions and the agency is also interested in selling out, according to the public relations head.
“Besides that we are now preparing to sale the mega enterprises as per the direction of the government,” he said.
A year ago the government has been announced that it will sale share on Ethiopian Airlines, Telecom, ESLSE and electric sector, and stated that it is looking to fully transfer the sugar and other sector.
The process for telecom and sugar seems to sell shares or be fully transferred, while the valuation work in other enterprises is on the process.
Cork factory only PEHAA’s privatization this year
UNCTAD emphasizes Rules of Origins
The 2019 report of the United Nation Conference on Trade and Development (UNCTAD) recommends for simple and business friendly steps and says attention should be given to the Rules of Origin (RoO) to get the best from the African Continental Free Trade Area (AfCFTA).
RoO are the criteria which establish the nationality of a product enabling it to circulate duty free within a free trade area as long as the goods qualify as originating within FTA.
Rules of origin are the cornerstone for the effective implementation of preferential trade liberalization, the critical policy tool needed to make any FTA operational and are of vital importance in creating opportunities for African LDCs to boost trade,” Dr. Kituyi said.
“The criteria needed to determine the nationality of a product – could make or break the African Continental Free Trade Area (AfCFTA) that entered into force,” says a new UNCTAD report.
The AfCFTA is expected to lead to the creation of a single continental market of more than 1.3 billion people, with a combined annual output of 2.2 trillion USD.
AfCFTA is also expected to boost intra-African trade by 33% once full tariff liberalization is implemented, attracting additional intra-African investments and creating market opportunities to foster Enabling goods to circulate duty-free within a free trade area as long as these goods qualify as originating within the FTA.
According to UNCTAD estimation the gross domestic product of most African countries could increase by 1 to 3 percent once all tariffs are eliminated, and if the agreement is fully implemented
The report also warns that if rules of origin are made too costly or complex to comply with, firms may instead forego these preferences and choose to trade with partners outside the AfCFTA.
Half of trees in reforestation program don’t thrive
Even though the government has increased the forest coverage from 15.5 percent to 17.8 percent in the last three years by planting trees in an estimated 2.8 million hectares; half of the trees have not been growing. The trees are planted by government workers, and private institutions, according to a source that Capital spoke with in the Environment, Forest and Climate Change Commission. This source said that the main reason is that there is not sufficient follow up after the trees are planted. They said more human resources should be invested to take care of the trees.
Currently PM Abiy Ahmed is working to plant four billion trees in a short period of time, hoping Ethiopia will reach 20 percent forest coverage.
“Deforestation, soil degradation and other forms of environmental degradation that could lead to desert encroachment has become a major concern in our country and the PM who understands this started a campaign to plant a billion trees and this must be appreciated and supported but planting trees is not enough. They have to be watered, weeded, and the soil must be conserved to increase forest coverage.”
“Most people think that planting trees is a one time job and they don’t return to see the plant after they place the seedling. They need to check and see if the plants are thriving. In consideration that government alone cannot drive and meet our re-afforestation targets, appropriate incentives are being worked out to stimulate private sector and community participation.”
“We need to think more broadly – about matching trees to their location, about the effects on nearby insects and other animals and about relationships with soil and the changing climate.”
Ethiopia has severe problems with deforestation. This is due to agricultural expansion; the increasing demand for construction material, industrial use, fuel wood and charcoal; lack of a forest protection and conservation policy; absence of a strong forest administration system capable of arresting the rapidly increasing rate of deforestation; lack of effort to ensure the participation of communities in forest protection and conservation and the sharing of benefits, and failure to clearly demarcate and enforce the boundaries of natural forest reserves.
Ethiopia eyes exporting value added coffee to African countries
Ethiopia is revising and improving laws enabling it to export value added coffee to African countries.
A two-day consultative forum dubbed “Africa Coffee Consumption and Market”: held in Addis Ababa, attracted six country representatives. The goal is to promote coffee consumption in African countries.
“Ethiopia’s value added coffee export is less than two percent and almost all export goes outside Africa, said Adunga Debela, Director-General of Ethiopian Coffee and Tea Authority adding that Ethiopia should work on improving its coffee export law for Africa countries.
Ethiopians are among the largest coffee consumers in Africa in which 53 percent of produced coffee is consumed locally and growing.
“This is against the government’s attempt to lower domestic coffee consumption in order to have more coffee beans for export” Adugna said.
“The increasing trend in coffee consumption in African countries and opening opportunities to trade within African countries will benefit coffee growing farmers and stabilize coffee prices,” said Denis Sedieu, chief economist at the international coffee organization (ICO).
According to the director, the Authority is working to expand its market access to African countries by value addition of its coffee bean.
There are a multiple challenges to coffee production in Ethiopia: dependency on rain fed agriculture, production by small land holders which is 95 percent, the need for improved seeds, improper tree management, the lack of price incentives for coffee producers, and the inability to use an irrigation system are the indicated bottle necks both in boosting quality and quantity.
Another problem comes from people tearing out coffee bushes and replacing them with chat plants because they produce more revenue than coffee.
Stabilizing the price of coffee by working on value addition and finding new coffee export destinations what the authority hopes will improve things.
Ethiopia’s coffee forecast for the year 2019/20 remains at a record level of four million bags (240,000 metric tones.)
Ethiopia has more than 400 coffee exporters, 395 coffee farmers who directly export coffee, and over30 import-export companies who export coffee and import other materials like vehicles and construction materials.
Ethiopia export coffee over 60 countries and based on the coffee export data 2017/18, the principal export market for Ethiopian coffee were Germany, Saudi Arabia, United States, Belgium, Sudan and Italy and registered a record of 917 million USD that makes Coffee the most important export for the country accounting for about 34 percent of the value of all exports.
Today, Ethiopia is the fifth largest coffee producers next to Brazil, Colombia, and Indonesia harvesting approximately 280,000 metric tons of coffee annually.
According to the Director-General, Ethiopia is still a major producing country of high-value coffee and the government is targeting African countries as alternative coffee export destinations as the price in global market fluctuates.
