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April 2017 · Africa

Upcoming feature: ETHIOPIA - Mines, Petroleum and Natural Gas

Interview with H.E. Mr. Motuma Mekassa, Ministry of Mines, Petroleum and Natural Gas, Ethiopia

Prisma Reports (PR): How can the vision of the government – to transform the economy from agrarian-led to export led - translate to the industrialization of the country, especially considering the potential offered by the mining sector?

H.E. Mr. Motuma Mekassa (H.E.M.M.): Our government’s vision is clear. It seems very ambitious but we purposely made it ambitious. The development of this country is backwards; especially when compared to other countries, we are late to develop. Therefore, to make our vision a reality we have to run, speedily. That is why our plan is very ambitious. In fact, for the last 14 years, our economy has developed by double-digits, which is very significant for a small country without oil and with such traditional farming practices. We have achieved a lot, especially in the last 14 years. Now, we are in GTPII, the growth and transformation plan, which was previously GTPI, a five-year plan. Previously we had ADLI, Agricultural Development Led Industrialization, but the point now is how can we go from agriculture to industrialization. This is very important because our farming practices are based on individual farmers and small plots. This the way we are farming. In fact, the agriculture is the backbone of our economy and it is coming from small individual farmers.

Our vision is that we cannot continue the same way as we are progressing now. We have to transform our economy and go for the industrialization. One of the reasons is that we cannot expand the amount of land being cultivated, because the farming population size is increasing. The same plot of land will be shared for two, three people. The solution is to go for industrialization. Focusing on this ADLI is one of the major issues we have.

Therefore, in this case we are trying to change the agriculture issue. We have achieved a lot in the production of agriculture. We cannot continue having these smallholder farmers forever. This is why we are going for that change, and nowadays we are focusing on single manufacturer industries; that is why we are trying to establish industrial parks in different areas of the country. This is one of the areas in which we can make the industry grow. Gradually, we will reduce the agricultural share in the economy and increase the industrial one.

Concerning all the mining in this area, we have many mineral resources but we still have not identified all that we have in this country, the untapped potential. We are trying to identify all the resources. We are doing work in the mining part of the gold area; some are in exploration to discover the potential; few are on the development level. Our aim is the mining, first.

One of the issues that we have now is the lack of foreign exchange. The country started so many mega projects like railways, roads, industrial parks, and they are only consuming money at this stage, national and foreign currencies. They have not started to generate revenues yet, such as sugar and other projects. The intention was to export the sugar products abroad to bring the foreign currencies from there. We have not started yet; we are still in the process of building. There are lots of constructions, all consuming a lot of money. Maybe in one, two years’ time, these projects can start to generate money and, then the country may be in a better position to solve the critical shortage of foreign currency.

Therefore, mining is one of the areas in which we have to focus to generate foreign currency, from gold and other precious stones that we export. That is why the government is focusing on the mining sector and, in fact, our plan is to make mining contribute with 10% of the foreign currency generation by 2025. Currently, it is at about 1.5%, so the plan is ambitious but if we can work hard, develop this potential that we have, we can achieve this target.

In the mining areas, we have big companies working in exploration and development, mostly on the exploration phase. We are working with all international companies, not only with Chinese but also with Western companies, including the American. Now, for example, we are working a lot with Canadian companies in different areas, potash and gold mining, and we also have a big American company, Newmont Gold Mine, which is trying to start their exploration.

The last time that I was in Toronto, Canada, there were a lot of big companies that were interested in coming to Ethiopia. Our government is trying to create environment conditions for the investors and for companies to come here. We are trying to promote the resources that we have in potash, gold and other areas. There are so many companies that want to come here; Chinese, Americans, Canadians as well as companies from the UK that are coming here and asking how to go about it. For example, we have a Norwegian company working in the potash and other areas. Our Ministry is trying to facilitate the legal framework; security on the mining part.

In oil and gas, we also have the potential. The exploration of oil and gas started more than 50, 60 years ago by the Americans. They tried to discover it in the Ogaden basin, then they left, the Russians came and did a lot. Now, I can say that we are on the third phase. Currently, there are many companies working in the Ogaden area, one of which is Chinese; there are about eight big companies working in exploration of oil and gas.

(PR): This year you can start producing natural gas to be exported. Would you say that the greatest potential is in the natural gas area?

(H.E.M.M.): There are about eight companies working in the exploration of oil and gas, two of them are doing well; one of them, the Chinese company Poly-GCL, has already discovered natural gas; they are still to know the potential of the area discovered. We are already negotiating with this company, and we are now working on the development of the pipeline to Djibouti. In Ethiopia, we already completed negotiating everything, and now we are negotiating with Djibouti government. The pipeline is about 700km long from the well to Djibouti port, with about 80km being inside Djibouti and the rest in Ethiopia. We have now finalized for the development of the pipeline. Company called NewAge, that discovered natural gas, is also working on the drilling.

(PR): What kind of new partners are you looking for, and as far as the American companies are concerned, where do you stand?

(H.E.M.M.): If we can have big companies as partners we can make it feasible. In other countries, the share of the mining sector makes up about 30-40% of the GDP. Ours is minimum, even compared to other African countries. We are used to working with partners, we are trying to communicate with big international companies, from the USA and other places, and they are coming to Ethiopia. They are trying to minimalize risks because mining is very capital-intensive. It took so many years, even to explore, to develop and go for operation. To achieve our plan, we are trying to promote the resources we have. Now, for example, we are going to implement with Morocco a phosphate development in the eastern part of the country, they [Morocco's Office Cherifien des Phosphates (OCP), the world's largest phosphate exporter] already signed the agreements; and in the Potash area, Yara is doing well, so is Circum Minerals. Those are the ones started but we need more to come. We, as the government, are promoting the opportunities but the companies that are working with us can also promote to bring others, because sometimes they believe more the companies that are working here rather than the government. Therefore, we are promoting our resources and I hope we will get more partners. In fact, there are a lot working here in the oil, gas and mining.

(PR): Have you met recently anyone of the US delegation or from the new companies, that might be interested in your particular sector?

(H.E.M.M.): I have had communications only with Newmont and the people from the US Embassy here. They visited me last week and I explained the mineral plan that we have. I hope they will come.

(PR): What would you like the readers of our report to have in mind when thinking of Ethiopia, as of 2017?

(H.E.M.M.): My government is ready to create the environment conditions for any investors to come here. I hope that if they come they will be very profitable. This country is very peaceful, people are very polite and you can go anywhere. It is a destination for investments. I hope that the companies who read Foreign Policy will come to Ethiopia.