1 March 2018

Ethiopia: Alternatives to Advance Mining

Photo: Voice of America
A map of Ethiopia's Oromia and Somali regions.

Ethiopia was among the leading states in exporting mining products in the world of ancient times. It was also gold and other gifts that Queen Sheba had taken in her visit to King Solomon 3000 years ago. Since then, the country has been extracting various mines and providing it to the international market. However, as a country that began mining in the primal times, the mining industry in Ethiopia has not seen the expected growth due to various factors, but mainly with shortage of capital and knowledge. It is clearly seen that due to these constraints, the country is still working with artisans, few local and more foreign mining companies.

Even though the sector has registered certain improvements in terms of FDI inflow increment, the foreign exchange earnings has shown a slight decline in the past few years due to the above mentioned factors. In addition, price devaluation, weak market competition and illegal trade have been playing roles for the decline. In 2012/13 fiscal years, the country has earned some 650 million USD from the sector. Then followed the decline. However, the Ministry is still working to encourage the sector through facilitating loans and other incentives.

The recent endorsement of the Mining Operations Proclamation No. 678/2010, which came into effect in 2010, is expected to play significant role to uplift the sector with revised mining laws by broadening the range of mining licenses available. The Proclamation confirms the requirement for environmental impact assessments and regulates health and safety matters. New legislative incentives have also been introduced. These include lower royalty payment levels, exemption from customs duty and taxes on mining equipment, guarantees in respect of the right to sell minerals locally or abroad and the availability of dispute resolution procedures, such as arbitration.

Aimed at realizing accountable and transparent operation in the sector, the country has applied the Extractive Industries Transparent Initiative (EITI) on March 2014 and published its first report on March 2015 reporting the 2013/14 period payments made by extractive companies and revenues. The report indicated that 1,413 million Birr was collected from extractive industries and contributed 0.71 percent of total national GDP during the fiscal years of 2014/15. And 3,544 jobs were created by the sector.

Among the wide variety of mineral resources that are available in Ethiopia, gold production is considered to have huge potential. According to the information from the Ministry, investors from China, India, Germany, Australia, Sweden and South Korea are showing interest to become key stakeholders in upcoming mining projects. Mining companies are actively exploring for further gold reserves and base metals, such as silver, copper, cobalt and zinc. Additional explorations have confirmed the presence of deposits of platinum, tantalite, soda ash and phosphate rock. Petroleum and other metallic, industrial and chemical minerals have also been identified.

The collection of these endeavors encourages the sector in the country. Currently, there are about 124 mining companies in the country exploring various types of mines. The ministry is also promoting the investment opportunities available in the country through the mining sector. The country's mining experts are increasing in the sphere and the number of local mining companies reached 36.

Today the Nation is striving to export its natural gas that was discovered in 1980s. The natural gas is estimated about six billion cubic feet. This includes petroleum, naphtha, kerosene and benzene among others. The ministry recently is working to stretch a pipeline from the area where the gas was found in Somali State to Djibouti. The project would be operated by a Chinese company called Poly GCL.

The Company would develop the natural gas and operate the construction of the pipeline beginning this fiscal year. Through all the efforts underway, the Nation would start natural gas export by 2020, said Bacha Faji, Public Relations Director at the Ministry of Mines. By exporting the natural gas, the country plans to earn about one billion USD per annum. The resource is also expected to satisfy local demand with fair price, according to him.

He also noted that the country is still exploring additional mineral resources in Abay gorge, Tekeze and Baro basins and Ogaden areas by five licensed international mining companies. Ethiopia has many of the essential elements required to be a successful mining nation. It is unquestionably resource rich, with a vast breadth of undeveloped minerals and resources, including significant gold and tantalum deposits.

Exploring the ways of excavating and utilizing the abundant mining resources would help the country to penetrate the international market at large. Producing standard products should be one of the issues to be dealt with in this sector. On the other hand, the engagement of experienced foreign companies would help to enhance the endeavor to export finished products and to advance the sector with knowledge and technological transformation. If the nation achieves its plan in the sector by realizing the development of mining, it would get back to the status where it was, once again in the history of mining export.

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