Approximately 120km northeast of the capital Addis Ababa, the city of Debre Berhan is establishing itself as an alluring investment destination. Thanks to infrastructure upgrades over the last decade it now only takes two hours to travel to Debre Berhan from Addis Ababa. Bolstered by economic incentives as part of the Ethiopian Investment Commission's industrial park strategy, Debre Berhan has seen an influx of investors (both local and foreign) since the 1,100-hectare industrial park was inaugurated in 2019. This specific industrial park focuses on agro-processing as its cluster specialization.
The industrial sector by nature is perceived as one of the world's most competitive, demanding technology, the best infrastructure, and the most capital-intensive. Based on its national scheme to transform the country's economy from agriculture led to industry led, Ethiopia's government has built industrial parks in selected cities across the country to enhance this sector and also constructing new ones. Debre Berhan is one of these cities.
The old town of Debre Berhan has not been able to grow as much as it used to, but in recent years it has struggled to make up for it. Today, it is becoming a major investment destination for national interest. The city is in the process of becoming an industrial hub, especially in the country. The city's industrial park has also been a major driver of its growth. The 75.4 million USD worth industrial park was inaugurated two years ago by Prime Minister Dr. Abiy Ahmed and Kenyan President Uhuru Kenyatta.
The industrial park, which is located in the city where industrial peace prevails and has sufficient amount of necessary inputs such as water, energy and other infrastructure, has eight sheds. When fully operational, it is expected to create more than 13,000 jobs. Various activities have been carried out to bring the industrial park into full potential and to attract investors. The Ministry of Trade and Industry has been undertaking various activities to enhance the role of the manufacturing sector in terms of national production and job creation, especially in industrial parks.
Currently, there is an increase in the number of manufacturing participants coming to the industrial parks nationwide. Various investors have also started working at Debre Berhan Industrial Park. On top of creating jobs for many citizens, the park is also earning foreign exchange. Debre Berhan Industrial Park General Manager, Yeshitla Mulugeta, said that the industrial park, which has been operational for less than a year, has created job opportunities for 1132 citizens and earned 17 million USD.
According to the manager, in one of the five shades, the Spanish investor is engaged in knitting. It is exporting its products and earning foreign currency. In the first nine months of its operation, it earned more than 2.2 million USD. French company Boortmalt has been also generating more than 3 million USD by producing 3,000 tons of malt per month since January 2021. Doing so, the company has saved over 15 million USD foreign currency, Yeshitla said.
According to sources, the company, which was built by a French investor at a cost of 2.3 billion Birr and become operational last year, has the capacity to produce sixty thousand tons of malt a year. This will meet the needs of more than 14 breweries in the country. The enterprise receives the inputs needed for production through its connections with local farmers. More than 40,000 farmers in Debre Berhan and the surrounding area are directly or indirectly participating in this market linkage.
When it goes fully operational, the new factory is expected to reduce the volume of malt Ethiopia's breweries have been importing from abroad. Through contract farming Boortmalt's new factory is also expected to help malt barley farmers in nearby areas to consistently supply their produce moving gradually to cluster commercialized farming.
The information from Industrial Parks Development Center of Ethiopia shows that the new factory has began its operations in two of the factory's eight slots and plans to increase its production capacity gradually.
During a visit to the industrial park a few months ago, the original writer of this article noted that there is a one-center service in the park, but banking is a major problem. According to the park's general manager, the investors were forced to go to Addis Ababa to get financial services they needed.
In a related development, last year another French company, Groupe Soufflet, has secured 20 million USD from International Finance Corporation (IFC) of the World Bank Group for its new malt factory to be opened in Ethiopia.
Most importantly, 13 hectares of land has been set aside for the construction of sheds and investors, but the land has been wasted as it has not been able to attract investors. The Federal Investment Commission (FEC), which is responsible for making the park fully operational and attracting new investors, has been asked to pay attention to the issue.
Regarding the participation of investors, Debre Berhan Industrial Park General Manager, Yeshitla Mulugeta, said one of the remaining three shades in the park is owned by a Taiwanese company. He emphasized that the company has now completed the installation of the machine and will soon start hiring workers and commence operation.
Including the new factory, currently, there are three operational malt factories in Ethiopia. The first one is Assela Malt factory owned by Oromia Farmers' Union, which was privatized by the Government a few years ago. The other malt factory was set up a few years ago by Dashen Breweries, which is owned by a British company and the ruling party in Amhara Region.
A study on commercialization of malt barley conducted in 2018, the country's malt demand is 50,000 tons while local sources cover only 50 percent of it. "Contracted famers gained a 10 percent high price advantage than the non-contracted counterparts. Given barley gene pool resources and favorable production agro ecology, booming beer industries and growing malt demand imply malt barley production prospect is promising and attractive," stated the study by Addisu Bezabeh Ali, Department of Rural Development and Agricultural Extension, Haromaya University.
"Following beer companies' privatization and enhanced working capacity, the demand for malt increased by 83 percent. As result, malt barley contract farming scheme introduced by Heineken/chord to ensure local sourcing of malt barley by integrating large number of farmers to the value chain. Contracted farmers take a 10 percent higher price for malt barley than non-contracted food barley producer counterparts due to high yielding varieties productivity advantage from same parcel of land, similarly malt factories are integrated and benefiting from processing local raw material," the study indicated.
Meanwhile, latest reports suggest that national demand of malt is over 200 000 tons per year, as estimation for this year. And the production without Soufflé and Boortmalt involved already cover 25 percent of it.