NAIROBI, Kenya, Nov 22 – Taking the helm of one of Africa’s fastest growing non-oil economies after a predecessor as influential and at times controversial as Meles Zenawi, is indisputably a daunting task.
However, Ato Hailemariam Desalegn now the Ethiopian Prime Minister, is showing no signs slowing down the momentum Zenawi started.
During his visit to Kenya it was evident Desalegn was on a mission to chart a new path for his country in the region.
Meeting with President Mwai Kibaki and other Kenyan dignitaries, the premier was certainly putting to work his diplomatic skills garnered from his days as Minister for Foreign Affairs.
In barely six months, Desalegn managed to broker a deal with the Kenyan government that saw the signing of the landmark Special Status Agreement, meant to enhance trade between Kenya and Ethiopia.
Ethiopia’s economy has been on a robust growth path expanding by 11 percent annually over the last nine years, with its key areas of focus in labour-intensive manufacturing and agriculture.
With figures like that, the premier’s task of wooing the local business fraternity in a swank Nairobi hotel would be a cinch, and he did just that making a strong case for Ethiopia as the ultimate investment destination.
“Why Addis is growing so fast especially in infrastructure is simply because we don’t let the investor purchase land. We give a minimal lease rate to the investor so that they can put their money in real investment like building the complex,” he explained receiving a spirited applause from his audience.
Records on Ethiopia’s Ministry of Agriculture website showed annual land rental rates for foreign firms ranging from $12.80 per hectare to just $1.15.
With most of Ethiopia’s industries export based, the government has set aside 1,000 hectares in Dire Dawa located in the East of the country as a designated Industrial Economic Zone.
“The government has put in place infrastructure such as power, telecom, water utilities, sewerage and drainage. Investors just pay a fee to recover the investment,” the Prime Minister elaborated.
Dire Dawa, which is the second chartered city after Ethiopia’s capital Addis Ababa, is ideal because of its close proximity to the port of Djibouti.
Other incentives include duty free capital goods, a five to seven year tax holiday for manufacturers, and the world’s lowest energy costs at three US cents per kilowatt.
Energy costs in Ethiopia can remain that low because the government owns the energy sector and absorbs the risk that often is borne by consumers.
The country’s potential in light manufacturing has positioned it as an attractive option especially as labour and manufacturing costs in Asia continue to rise.
Currently its main commodities and resources include leather, wood, cotton, as well as farmland and lakes which serve as inputs for agro-processing industries.
When it comes to access to capital, the government too has a hand in providing loans to investors through the Development Bank of Ethiopia.
The bank gives loans without collateral to select priority sectors, requiring 30 percent equity from the borrower and advancing remaining 70 percent.
The heavy government involvement may seem a bit totalitarian; however, Desalegn has a different view on the privatisation of the banking system that has thrown Ethiopia into a 20-year row with the World Bank and International Monetary Fund.
“If the government has to give incentives it should have a hand in the banking sector. We got a policy that does not allow the foreign banks to come in. This policy helps us provide loans to our priority sectors,” he said adamantly defending his government’s position.
Relations between Ethiopia and Kenya have been amicable and moving in a progressive direction with projects like the Lamu Port and South Sudan Ethiopia Transport (LAPSSET) Corridor that will in part complete the missing links the make up the larger Cairo-Cape Town Highway.
Though it is an achievement worth tooting a horn or two, the Ethiopian Premier urged the local business community to broaden its scope beyond the Kenya-Ethiopia ties and use the advantages of cheap labour and a young population to maximize on opportunities available in Africa and the world at large.
“This is the century for Africa. If we believe this is the century for Africa then we have to look at the global situation now and see where we can be competitive. The market of Kenya and Ethiopia is not enough,” he said.