The global tourism industry has huge economic importance. It contributes 10% of the world’s gross domestic product and 6% of exports. One billion people a year travel somewhere in the world.
Africa’s natural and cultural points of interest give the continent tremendous tourism potential. This shows in the numbers. In 2015, the sector generated USD$ 36 billion in Africa (7% of all exports in the region), up from USD$ 10 billion in 2000. Travel and tourism also directly supports 466,000 jobs. It’s expected that by 2030 the number of tourists will reach 134 million annually.
But African countries’ tourism industries are often constrained by a lack of infrastructure development, air connectivity and financing.
Ethiopia, in East Africa, is an example. The country has immense natural, cultural and historical attractions, but is a largely untapped tourism market. It suffers from a lack of infrastructure and the negative publicity the country received after the famine in the 1980s and various conflicts. It needs to make a big effort to market its potential and develop the measures to support the industry.
Ethiopia’s tourism sector showed a steady increase in the last decade. International tourist arrivals rose from 64,000 in 1990 to 680,000 in 2013 and are expected to reach 815,000 by 2024. This 2024 figure would mean a contribution of USD$2 billion to the country’s GDP. Over the next five years the sector is expected to create over a million jobs, or 3.6% of total employment.
Comfortable hotels play a vital role in attracting tourists. After the fall of the communist government 27 years ago, Ethiopia started privatising most of the state owned hotels and tourism establishments. To support this, the government adopted a policy that allows duty-free imports of hotel furniture, fixtures and equipment. It also provides for favourable loans to investors for the construction of new rated hotels.
But, while the hotel industry is growing, the number of available hotel rooms is still the lowest. In terms of room availability, Ethiopia is globally ranked 134 out of 140, compared to Kenya, Uganda and Tanzania at positions 122, 121 and 118 respectively. Furthermore, there are few hotels of an international standard, and many are old and unattractive. Infrastructure to support the hotels is lacking. There are no zoning policies to establish the areas where hotels should be constructed, or tourist activities to complement them when they are built.
Until recently, Ethiopia did not have enough hotels recognised under international rankings or ratings – they generously awarded themselves their own stars. This made it hard for visitors to judge the quality of a hotel. This changed in 2015 when the Ethiopian government, with the help of World Tourism Organisation, started rating hotels in the country. Though participation in the grading process is mandatory, the graded hotels still haven’t undergone annual audits to ensure they’re keeping up with the standard they were awarded.
Ethiopia also only has six internationally branded and managed hotels. This is a very low figure bearing in mind that the average number of tourists per year is nearly 700,000 and these six hotels have a combined total of less than 1,500 rooms. By comparison, Nairobi in neighbouring Kenya already hosts most of the international hotel brands – and expects 13 more to open their doors over the next five years.
There are also only three five star hotels in Ethiopia and the majority of the “rated” hotels which guarantee a certain standard of service are situated in the capital, Addis Ababa. Other hotels, rated only by online travel agents based on the guests’ comments and with fewer than 100 rooms, are scattered throughout major towns. This is a problem because most of the tourist attractions are located in the countryside. There is also a scarcity of budget facilities, like youth hostels, to cater for budget travellers and backpackers.
Another major issue is the hotel structures. After the fall of the communist regime, from 1995, Ethiopia started privatising. Over 287 enterprises were transferred from the public to the private sector – out of which 34, or 11.8%, were hotels. The aim was to improve economic efficiency, stimulate the private sector and mobilise more foreign and domestic investment. However, the process has been weighed down with problems which include; corruption, loss of jobs and a lack of ownership and transparency. The state retains control of many of the most valuable assets in the sector. These are not well maintained, as they are about to be privatised. For example, Addis Ababa’s Hilton hotel, completed in 1987, now needs urgent refurbishment.
Finally, the hotel industry needs to be supported by tourism infrastructure. It needs physical facilities like car parks, sewerage and water works, transport projects and roads. These have to be based on zoning policies, to establish where the hotels should be built. With the exception of Addis Ababa, there are also hardly any offerings of recreational or entertainment activities like parks, concerts or cinemas. And there are logistical gaps like the lack of adequate ATM machines and foreign exchange bureaus outside Addis Ababa. This means visitors need to carry large amounts of cash in local currency, which is inconvenient and unsafe.
To spur tourism growth and development, Ethiopia must improve the hotel industry and the infrastructure that supports it. It will take the cooperation of all stakeholders – government, hotel professionals, hotel owners and hotel trade associations – to achieve a competitive and sustainable sector.
Ethiopia’s youth has come under the spotlight recently for their role in a political protest that is seen to be threatening stability. But Ethiopia’s youth bulge doesn’t need to be a political problem. It can be converted to an economic muscle.
Over the past 12 years Ethiopia has been lauded as one of the fastest growing economies in the world with average Gross Domestic Product (GDP) growth of 10.8%. It has also seen a significant decline in poverty. In 2004 it had a poverty rate of 39% which had fallen to 23% by 2015.
But Ethiopia still has a lot going for it, including a large youth population – over 70% of the country’s population is under 30 years of age. This could be turned to a massive advantage if backed by appropriate policies.
Ethiopia’s demographic profile mirrors China’s in the 1980s and of East Asian countries in the 1950s. The spectacular economic growth in East Asia in the second half of the 20th century is partly attributed to the demographic transition that supplied the economies with a young work force. The key to reaping this demographic dividend is, of course, that there are jobs for those joining the labour force.
While a young population can be a positive economic factor, it can also be a political risk in an economy that doesn’t create enough opportunities.
Until recently Ethiopia had avoided large scale political upheaval among young people. This was partly due to the government’s tight control of youth groups and surveillance of their activities. But recent unrest with youth at the helm signals huge problems, indicating that their livelihood and unemployment issues can no longer be suppressed or ignored. Addressing the problem head on is the smarter thing to do.
Every year more than a million young Ethiopian men and women join the labour market. But the economy produces far fewer new jobs and opportunities. This is partly due to the structural make up of the largely agrarian economy.
Over 80% of Ethiopians live in rural areas. While the agricultural sector in Ethiopia has declined significantly as a contributor to the economy in the past decade and now accounts for less than 50% of the national product, it still employs more than 70% of the labour force.
Historically, most people who were born in rural areas tended to settle there. But land scarcity and population growth, coupled with limited non-farm employment opportunities has started pushing young people into the urban areas.
National level labour surveys and other studies suggest that young people with secondary education or more are the ones missing out the most from the flourishing economy. Many – about 70% – join the labour market with little or no practical or specialised training past the general secondary education.
High aspirations and expectations
High levels of unemployment among educated young people is a troubling phenomenon. The country’s youth have increasingly higher aspirations and expectations due to the possibilities they see, given the country’s economic growth. They also have high expectations of what they believe they deserve as relatively educated people.
But not only are there no jobs, wages are often not high enough to support high living costs.
This gap between aspirations and economic reality is clearly becoming increasingly frustrating.
In focus groups of young people in different parts of southern Ethiopia we captured a deep sense of hopelessness and a fear that they would remain trapped in poverty.
For those living with their parents the main concern was that unemployment was “waiting for them” when they finished school. Many said that they previously thought that hard work at school was the way out of the life of poverty their parents had endured. Many were clearly itching to do something about their lives.
One sign of this pent up frustration is the surge in young people choosing to take the risk of irregular international migration even when they’ve been warned about the risks.
Ethiopia’s youth bulge can be an engine for growth as international companies look to set up operations where they can access low wage labour. On top of that, an increase in the number of young people working would boost demand and investment in the country.
But to transform young people into an engine of growth requires improving access to employment.
The government should create an enabling environment for the private sector by improving the country’s dismal business environment.
At the same time, it should design effective employment programmes. It’s recent effort to increase job opportunities for unemployed young people is a step in the right direction. But policymakers, politicians and those implementing policies should resist the temptation to use access to jobs and employment as a political tool.
Ethiopia’s Water, Irrigation and Electricity Minister Sileshi Bekele said that his country will not stop constructing the Grand Ethiopian Renaissance Dam (GERD) despite Egypt’s protestations, the Ethiopian News Agency (ENA) reported.
During a press briefing on Saturday, the minister responded to a question on whether Ethiopia would stop building the dam due to Egypt’s current stance on its impact on downstream countries, saying, “the dam is 63 percent completed and it is being constructed around-the-clock”.
“On our part, we are constructing the dam according to the schedule, the quality and the standard that the dam of this size requires”, he added.
Egypt has criticized the construction of the dam on the basis that it would reduce its share of Nile water, which currently stands at 55.5 billion cubic meters per year in accordance with a 1959 treaty.
Ethiopia has been constructing the Rennaissance Dam since 2011 over the Blue Nile, one of Egypt’s major sources of freshwater, and is expected to be completed within the coming period. Sileshi said that Egypt and Sudan will benefit from the energy that the dam will generate and the fact that it will secure the countries’ water needs in case of future droughts.
“We have to take this dam as a real opportunity that provides lots of benefits for the three countries. We have carried out relevant and adequate studies on our side which prove that the dam does not bring any significant impact on downstream countries”, the minister further stated.
On his part, Ethiopia’s Foreign Ministry Spokesperson Meles Alem said Thursday that the construction of GERD is crucial for Ethiopia’s development, which has suffered from series of droughts over the years.
ENA quoted Meles as saying that the “zero sum game diplomacy” with respect to the dam is not useful to any country in the Nile Basin.
- Egypt Independent
As Ethiopia strives to become the manufacturing hub of Africa, more and more Chinese companies are showing an interest in investing in the east African country.
The latest Chinese company that will soon establish a presence in Ethiopia is the Wuxi No. 1 Cotton Mill, which is part of the Guolian Development Group and one of the largest textile manufacturers in China, according to the Ethiopian Investment Commission (EIC).
The company has signed an investment agreement with the Ethiopian government to establish an integrated textile industry in Ethiopia's second largest city Dire Dawa, some 446 km east of Ethiopia's capital Addis Ababa.
According to the EIC, Chinese companies, with close to 379 projects that were either operational or under implementation in 2012-2017 period, are on top of Ethiopia's investment landscape, both in number and financial capital. Among these companies, 279 were operational in Ethiopia with projects that worth over 13.16 billion Ethiopian birr (over $572 million) during the reported period, while the remaining 100 are under implementation.
In terms of employment creation, Chinese companies have created more than 28,300 jobs in various sectors in Ethiopia during the reported period, of which over 19,000 were created in Ethiopia's manufacturing as it is the leading sector in attracting companies from China.
In a statement sent to Xinhua, the EIC indicated that the Wuxi No. 1 Cotton Mill and the Guolian Development Group will bring state-of-the art manufacturing technology, knowhow and excellence accumulated over a span of 100 years to Ethiopia.
Noting that the company currently has a weaving capacity of 26,000 tons of yarns and 30 million meters of gray fabrics yearly, the EIC expects Wuxi No. 1 Cotton Investment Company to play a big role in Ethiopia's ambition in putting its export industry in the map.
As part of the investment agreement, which was signed in Wuxi city in China on Nov 2 between the EIC and officials of the company, the Wuxi No. 1 Cotton Mill has agreed to invest in a large scale and integrated fabric mill and spinning plant in Dire Dawa, targeting the export market.
The Ethiopian government also envisages that high profile companies, such as Wuxi No.1 Cotton Mill which is said to be known for supplying leading global brands where 75 percent of its products are mainly exported to Europe, America, Japan, and Southeast Asia, will help push Ethiopia to be the leading player in Africa's apparel and textile manufacturing sector.
Abebe Abebayehu, Deputy Commissioner of the EIC, believes the arrival of such investors in the country will help Ethiopia realize its target.
"This investment would contribute immensely to our government's vision to build a sustainable, vertically integrated and export-oriented, apparel and textile manufacturing hub in Ethiopia. Indeed, our vision is to make Ethiopia the leading manufacturing hub in Africa," the statement quoted Abebayehu as saying.
According to the EIC, in addition to creating direct employment opportunities and boosting Ethiopia's foreign exchange reserves through exports, this investment is expected to create significant backward and forward linkages in the country's fast growing textile and garment industry.
In a bid to create better market opportunities for large scale cotton production in the country, the project plans to purchase raw materials such as cotton from local sources, it was noted.
- Xinhua News
In the midst of a Forex currency crisis, the National Bank of Ethiopia (NBE) has devalued Birr by 15pc and raised the interest rate by two percentage points to seven percent. The devaluation pegs the Ethiopian Birr at 26.91 to the dollar, up from 23.40 Br on the official market. It will be effective from today, October 11, 2017.
The Central Bank justifies the move as an effort to control the inflationary pressure and prop up export earnings. The export proceeds have been stagnant at around three billion dollars for the past three years, whereas inflationary pressure has been in the double-digits for the past two months, having reached 10.8pc in September 2017.
Yohannes Ayalew (PhD), vice governor and chief economist at the Central Bank, announced the adjustment today in a press conference where only the state media was invited to attend.
Seven years ago, the government had made a 17pc devaluation resulting in inflation that had reached as high as 40pc.
"Since investment return is high in Ethiopia, the devaluation won't cause an inflationary pressure and adversely affect import," said Yohannes.
For more than half a year, the official exchange rate stood at around 23 Br to the dollar, while black-market traders sold a dollar for nearly 29 Br.
The current devaluation surfaced almost 11 months after the World Bank (WB), in its fifth economic update, suggested the government devalue the currency to raise the country's competitiveness in the global arena. The recommendation, however, was rejected at the time by Yohannes, although the real effective exchange rate (REER) has appreciated in cumulative terms by 84pc since the nominal devaluation in October 2010.
Source: Addis Fortune
In East Africa, Ethiopia is preparing for Phase 1 construction of a $51 million ethanol plant, to commence in October.
Together with Germany’s Eugen Schmitt Company, Ethiopia’s sugar Corporation will construct the ethanol plant at the Wonji Shoa Sugar Factory. Construction of the first phase will commence in October and construction of the second phase will start next year; according to Gashaw Aychiluhim, corporate communications director of the Sugar Corporation.
Construction Review reported that Eugen Schmitt Company from Germany will have 83% of the share, while the Ethiopian government and the three other shareholders will take the remaining 14% and 3% shares, respectively.
Ethanol plant capacity
According to media, when the plant is in full operation, it will have the capacity of producing 60,000lt of ethanol per day using molasses. Molasses is a by-product of sugar, which the Wonji Shoa Sugar Factory discharges during its production processes.
Finchaa and Metehara are the two sugar factories in Ethiopia that are currently producing ethanol from molasses, Construction Review Online reported. According to media, the plant will become the third mill in the country producing ethanol from molasses.
Sugar factory production
Construction review Online reported: “Through an expansion project conducted at Metehara sugar factory, the plant implemented an ethanol producing plant by the end of 2010. “Currently the factory’s ethanol plant has a capacity of producing 12,500 Meter Cube ethanol a year. It also generates 9MW of power used for self-consumption.
Sourece: ESI AFRICA