Panama Papers: Mossack Fonseca leak reveals elite's tax havens

A huge leak of documents has lifted the lid on how the rich and powerful use tax havens to hide their wealth. The files were leaked from one of the world's most secretive companies, a Panamanian law firm called Mossack Fonseca.

What are the Panama Papers?

The files show how Mossack Fonseca clients were able to launder money, dodge sanctions and avoid tax.

In one case, the company offered an American millionaire fake ownership records to hide money from the authorities. This is in direct breach of international regulations designed to stop money laundering and tax evasion.

It is the biggest leak in history, dwarfing the data released by the Wikileaks organisation in 2010. For context, if the amount of data released by Wikileaks was equivalent to the population of San Francisco, the amount of data released in the Panama Papers is the equivalent to the population of India.

You can find our special report on the revelations here.

Who is in the papers?

There are links to 12 current or former heads of state in the data, including dictators accused of looting their own countries.

More than 60 relatives and associates of heads of state and other politicians are also implicated.

The files also reveal a suspected billion-dollar money laundering ring involving close associates of Russia's President, Vladimir Putin.

Also mentioned are the brother-in-law of China's President Xi Jinping; UkrainePresident Petro Poroshenko; Argentina President Mauricio Macri; the late father of UK Prime Minister David Cameron and three of the four children of Pakistan's Prime Minister Nawaz Sharif.

The documents show that Iceland's Prime Minister, Sigmundur Gunnlaugsson, had an undeclared interest linked to his wife's wealth. He is now facing calls for his resignation.

The scandal also touches football's world governing body, Fifa.

Part of the documents suggest that a key member of Fifa's ethics committee,Uruguayan lawyer Juan Pedro Damiani, and his firm provided legal assistance for at least seven offshore companies linked to a former Fifa vice-president arrested last May as part of the US inquiry into football corruption.

How do tax havens work?

Image copyrightAFP/getty Images

Image captionPanama is one of a number of popular tax havens in the Caribbean

Although there are legitimate ways of using tax havens, most of what has been going on is about hiding the true owners of money, the origin of the money and avoiding paying tax on the money.

You can read more on how tax havens work here.

Some of the main allegations centre on the creation of shell companies, that have the outward appearance of being legitimate businesses, but are just empty shells. They do nothing but manage money, while hiding who owns it.

One of the media partners involved in the investigation, McClatchy, has more on how shell companies work in this video.

What do those involved have to say?

Mossack Fonseca says it has operated beyond reproach for 40 years and never been accused or charged with criminal wrong-doing.

Mr Putin's spokesman Dmitry Peskov said the reports were down to "journalists and members of other organisations actively trying to discredit Putin and this country's leadership". Publication of the leaks may be down to "former employees of the State Department, the CIA, other security services," he said.

In an interview with a Swedish television channel, Mr Gunnlaugsson said his business affairs were above board and broke off the interview.

Fifa said it is now investigating Mr Damiani, who told Reuters on Sunday that he broke off relations with the Fifa member under investigation as soon as the latter had been accused of corruption.

Who leaked the Panama Papers?

The 11.5m documents were obtained by the German newspaper Sueddeutsche Zeitung and shared with the International Consortium of Investigative Journalists (ICIJ).

The ICIJ then worked with journalists from 107 media organisations in 76 countries, including UK newspaper the Guardian, to analyse the documents over a year.

The BBC does not know the identity of the source.

In all, the details of 214,000 entities, including companies, trusts and foundations, were leaked.

The information in the documents dates back to 1977, and goes up to December last year. Emails make up the largest type of document leaked, but images of contracts and passports were also released.

How can I read the papers?

So far, a searchable archive is not available at the moment.

There is a huge amount of data, and much of it reportedly includes personal information (including passport details), and does not necessarily include those suspected of criminal activity.

Having said that, there is plenty of information out there. The ICIJ has put together a comprehensive list of the main figures implicated here - you can also search by country.

You can sign up on the ICIJ's website for any major updates on the Panama Papers here.

Panama Papers: Full coverage; follow reaction on Twitter using #PanamaPapers; in the BBC News app, follow the tag "Panama Papers"

• Watch Panorama on the BBC iPlayer (UK viewers only)----------------

The Panama Papers are an unprecedented leak of 11.5m files from the database of the world’s fourth biggest offshore law firm, Mossack Fonseca. The records were obtained from an anonymous source by the German newspaper Süddeutsche Zeitung, which shared them with the International Consortium of Investigative Journalists (ICIJ). The ICIJ then shared them with a large network of international partners, including the Guardian and the BBC.

What do they reveal?

The documents show the myriad ways in which the rich can exploit secretive offshore tax regimes. Twelve national leaders are among 143 politicians, their families and close associates from around the world known to have been using offshore tax havens.

A $2bn trail leads all the way to Vladimir Putin. The Russian president’s best friend – a cellist called Sergei Roldugin – is at the centre of a scheme in which money from Russian state banks is hidden offshore. Some of it ends up in a ski resort where in 2013 Putin’s daughter Katerina got married.

Among national leaders with offshore wealth are Nawaz Sharif, Pakistan’s prime minister; Ayad Allawi, ex-interim prime minister and former vice-president of Iraq; Petro Poroshenko, president of Ukraine; Alaa Mubarak, son of Egypt’s former president; and the prime minister of Iceland, Sigmundur Davíð Gunnlaugsson.

An offshore investment fund run by the father of British prime minister David Cameron avoided ever having to pay tax in Britain by hiring a small army of Bahamas residents to sign its paperwork. The fund has been registered with HM Revenue and Customs since its inception and has filed detailed tax returns every year.

A lengthier overview of the revelations can be found here.

What is Mossack Fonseca?

It is a Panama-based law firm whose services include incorporating companies in offshore jurisdictions such as the British Virgin Islands. It administers offshore firms for a yearly fee. Other services include wealth management.

Where is it based?

The firm is Panamanian but runs a worldwide operation. Its website boasts of a global network with 600 people working in 42 countries. It has franchises around the world, where separately owned affiliates sign up new customers and have exclusive rights to use its brand. Mossack Fonseca operates in tax havensincluding Switzerland, Cyprus and the British Virgin Islands, and in the British crown dependencies Guernsey, Jersey and the Isle of Man.

How big is it?

Mossack Fonseca is the world’s fourth biggest provider of offshore services. It has acted for more than 300,000 companies. There is a strong UK connection. More than half of the companies are registered in British-administered tax havens, as well as in the UK itself.

How much data has been leaked?

A lot. The leak is one of the biggest ever – larger than the US diplomatic cables released by WikiLeaks in 2010, and the secret intelligence documents given to journalists by Edward Snowden in 2013. There are 11.5m documents and 2.6 terabytes of information drawn from Mossack Fonseca’s internal database.

Are all people who use offshore structures crooks?

No. Using offshore structures is entirely legal. There are many legitimate reasons for doing so. Business people in countries such as Russia and Ukraine typically put their assets offshore to defend them from “raids” by criminals, and to get around hard currency restrictions. Others use offshore for reasons of inheritance and estate planning.

Are some people who use offshore structures crooks?

Yes. In a speech last year in Singapore, David Cameron said “the corrupt, criminals and money launderers” take advantage of anonymous company structures. The government is trying to do something about this. It wants to set up a central register that will reveal the beneficial owners of offshore companies. From June, UK companies will have to reveal their “significant” owners for the first time.

What does Mossack Fonseca say about the leak?

The firm won’t discuss specific cases of alleged wrongdoing, citing client confidentiality. But it robustly defends its conduct. Mossack Fonseca says it complies with anti-money-laundering laws and carries out thorough due diligence on all its clients. It says it regrets any misuse of its services and tries actively to prevent it. The firm says it cannot be blamed for failings by intermediaries, who include banks, law firms and accountants.

Panama Papers reporting team: Juliette Garside, Luke Harding, Holly Watt, David Pegg, Helena Bengtsson, Simon Bowers, Owen Gibson and Nick Hopkins

Drought drops Ethiopian grain production nearly 20 | World Grain

3/30/2016 - by World Grain Staff

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WASHINGTON, D.C., U.S. — Ethiopia is facing its worst drought in decades because of a strong El Niño weather phenomenon, the U.S. Department of Agriculture’s (USDA) Foreign Agricultural Service (FAS) said in a March 18 report.

Untimely and insufficient rainfall through many parts of the country has pushed national market year 2015-16 grain production steeply downward, which has in turn led to upward pressure on grain prices. In particular, production of major grains corn, sorghum, wheat, teff, barley and millet fell about 4.5 million tonnes, a drop of nearly 20% from the previous year. However, of these grains, it is important to note that teff and barley production were only down marginally since the regions where these crops are grown were only slightly affected by the drought.

With weather conditions expected to improve, grain production is expected to partially rebound in market year 2016-17. The production of major grains in market year 2016-17 is expected to reach about 21 million tonnes, but still about 1 million tonnes lower than the market year 2014-15 pre-drought production figures. A full recovery, in terms of grain production, is expected to take a couple years as farmers re-build assets, purchase seeds and fertilizer, and gradually begin to resume normal living patterns.

Over the past year (Jan.-Dec.), retail grain prices have gone up, with the biggest increases in teff and sorghum prices, which grew 19% and 16%, respectively. Corn marked the smallest price increase for this period at just 3%. In the latter part of the year, the drought-related production losses have been exerting additional upward price pressure.

Owing to these drought-caused losses in grain production, more than 10 million people are targeted for emergency assistance. In response, Ethiopia and international donors have ramped up food relief, largely consisting of wheat imports. Ethiopia has purchased huge volumes of foreign wheat, totaling around 1.8 million tonnes. Donors are expected to supply an additional 700,000 tonnes of wheat, bringing the projected market year 2015-16 wheat import estimate to 2.5 million tonnes. However, market year 2015-16 wheat imports could possibly go as high as 3 million tonnes.

Major changes in agriculture yield big results

Ethiopia’s agricultural sector is in a period of historic transformation, as it shifts from being subsistence based to market oriented, and is employing modern techniques to make dramatic differences in its yields, practices and results. Khalid Bomba, CEO of the Agricultural Transformation Agency (ATA), explains the extent of Ethiopian agriculture’s evolution and vast potential.

Could you please give us a brief overview on Ethiopia’s agriculture sector?

Ethiopia is one of the unique countries where we have over 30 different agro-ecological zones, which allow us to grow a variety of commodities and products. Many countries in Africa, and certainly in Asia, typically rely on a handful of commodities. That's not the case in Ethiopia. Given the fact that we have agro-ecological zones that are at sea level or below, and agro-ecological zones above 3,000 meters over sea level, the types and varieties of products we can produce are quite varied.

That being said, Ethiopia's agriculture sector has historically been and continues to be in many parts of the country, very much subsistence based. That means that most of what a farmer produces is consumed at his/her home. It's only a small percentage that they would then market. The trend has been one of: produce for home consumption, and if there is a surplus, you then look for a buyer.

That dynamic is now beginning to change. Our farmers are seeking to specialize their production based on what their agro-ecosystem is better suited to produce, rather than trying to produce everything that they will consume at home.

Moreover, they have begun to produce based on what the market is demanding. So if they are producing coffee, for example, they will try to get a better sense of in which market they are going to sell their coffee and then produce the quality and variety that that market demands in order to receive the highest price.

Ethiopia's agricultural sector is indeed in a stage of transition and change.

Nowadays, given the downturn in commodities, it is critical to focus on ecological, high quality products in order to market them to buyers that are also willing to pay a premium price.

That is right. We need to look at premium markets and ask ourselves what do those premium markets demand? The other thing I should mention is that if you look at Ethiopian supermarkets, five or 10 years ago most of the finished products were coming from outside the country. What Ethiopia is now trying to do, and its agriculture sector more broadly, is not just focus on the production of raw agricultural products, but how to add value to them. What we’re aiming for is that the products local farmers are producing don't get shipped out of the country, unprocessed, and then come back to the country as corn flakes, or tahini, or hummus. We are rather focused on producing finished products directly in the country.

Could you please discuss ATA’s establishment and what are the main actions taken by the GoE to raise productivity, intensify market-oriented agriculture, and promote private investment in the agriculture sector?

The ATA was formed at the beginning of GTP I to focus on the transformation side of the GTP. The Growth and Transformation Plan has two pillars: it is not just growth, which we certainly have been achieving, but also structurally transforming the economy. For us at ATA, it is more about transforming the agricultural sector. What we mean by that is changing the dynamics of how the sector works so that it is not just producing more, but rather “How are we producing?” and “Are we producing sustainably?”

By sustainably, we are thinking about environmental sustainability, social and gender inclusion, and financial sustainability, by thinking about markets. That is a primary aspect of the production side of the equation. The comparative advantage of specialization that we talked about is another aspect of transformation.

And thirdly, it is the market linkages that are important for this transformation, so that we move our farmers from subsistence farming to commercial and market orientation.

Now, these things do not happen magically. What the ATA has been focused on is thinking about what are the systemic bottlenecks; the two to three big issues within each of the major sub-components of agriculture that we can unlock. By unlocking them, you actually create the momentum to unlock many other things simultaneously.

The way that we work is really in consultation and in collaboration with many partners. We are a problem-solving organization, although in some cases we take on particular projects and try to implement them. Even in those cases, the implementation is done jointly with the Ministry of Agriculture or somebody who will take that project forward in the long term.

Our primary role is to support the Ministry of Agriculture and other partners in effectively executing the specific issues within the Agricultural Transformation Agenda that we have all agreed are important for transformation.

We are also a time-bound organization; we are an organization that will cease to exist 15-20 years after it was founded. It gives us a sense of urgency to get things done within a short window of time and thus not become a bureaucracy that just exists for the sake of existing. We have very specific measurements, timelines, and metrics that we look at on a monthly, quarterly, or annual basis. Our five-year plan, along each one of our deliverables and our programs, is very much results and data driven.

What were the bottlenecks you identified and how are you working to remove them?

If you look at our Progress Report for the past five years, what it will highlight is that we have been working during GTP I on 16 program areas with 84 deliverables. Each one of these 84 deliverables unlocks a particular issue. Let me mention three examples.

The first one is in the teff value chain. Teff is native to the country and it is one of the most important commodities for Ethiopia. It is grown by over 6.5 million farmers and it is the staple food of the country as well.

The yield of teff, when the GTP I began, was 1.2 tons per hectare. The ATA was asked to identify a technology that could increase the yield of farmers. Although many people were really worried that we were going to introduce biotechnology and GM approaches, what we found was that a very simple technology, which changed the way farmers grow teff, can increase their yield by about 70%-80%. This technology was essentially planting the teff seed in rows and reducing the amount of seed that farmers were using by 90%; so from 30-50 kilos of seeds per hectare down to 3-5 kilos instead.

In our first year of operations, only two farmers were willing to work with us. But last year we reached a milestone of 6.5 million farmers trained. Of those, nearly 2 million farmers are actually using the technology.

During the GTP I, what we have seen is over a 40% increase in the national yield of teff, from 1.2 tons per hectare to over 1.6 tons per hectare.  Many individual farmers using the technology are actually achieving yields of 2.5 and 3 tons per hectare. This has been one of our most successful interventions, because it has directly affected the yield of over 2 million farmers and improved their incomes and their livelihoods.

The second example is in the fertilizer industry. Ethiopia had been using the same two types of fertilizer for 30 years. We did an analysis and came up with a new project called EthioSIS, which stands for Ethiopian Soil Information System. This project has allowed us to map the soil fertility of the entire country’s agricultural lands using remote sensing and satellite technology, as well as collecting field samples from across the country. In 2016, we will finish mapping the entire country. We have already finished mapping 65%-70% of the country and provided new fertilizer recommendations. So farmers are no longer just using the old fertilizers of DAP and urea, but they are now using NPS, and other fertilizers that include magnesium, calcium and sulphur. For example, nobody knew that 96% of the agricultural land in Ethiopia had been deficient in sulphur.

The last one that I would mention is a project called Direct Seed Marketing. Ethiopia in the past has used its cooperative system to distribute seed and fertilizer to farmers. These cooperatives are essentially given directions from the government, through a very centralized process, for how much seed and how much fertilizer to distribute.

We made a recommendation to the government that by introducing a private sector element to seed distribution we could get better efficiency, better distribution of seeds, and ultimately lower prices for farmers. What started with only a handful of woredas, last year grew to over 400 private seed distributors in over 100 districts of the country working on seed distribution, something that the country has never had before.

What is the impact you are seeing in the small-scale irrigation SSI projects that the Ministry of Agriculture is implementing?

That is the direction that we ultimately want to go across the whole country, to become less reliant on rain. Irrigation is certainly one of the major ways of insuring that. What we have been working on together with the Ministry of Agriculture is the groundwater mapping; understanding how much water is under the soil, how deep it is, and how fast it recharges so that we don't deplete it very quickly.

In addition to that, what we’re trying to do is to create a supply chain of irrigation pumps so that we are not just distributing pumps without anybody providing maintenance or spare parts. For example, we are training auto mechanics to also be able to maintain irrigation pumps, and training well drillers in local communities to go and drill these wells, instead of having international companies come and do this.

How would you describe the collaboration between the different stakeholders?

The engagement with investors has improved over time, but certainly, more can be done. The Ethiopian Investment Agency is now an Investment Commission that reports to the Prime Minister. That has been a very good and positive change, ensuring that there is one entity that is coordinating and supporting investors coming into the country. That being said, the federal and regional level issues still have some additional challenges to be resolved. The one-stop shop that existed at the Ethiopian Investment Commission has to be strengthened. Some of the regulations and policies that the government is creating to support private sector investors also have to be streamlined. These are the things that the government is working on at the moment. The collaboration between different government partners has improved as well, but certainly more can be done.

Which investment opportunities would you like to highlight to investors in the UK, for example?

Since I work in the agriculture sector, of course I am going to focus on agriculture as the opportunities that are probably best placed for UK investors. I think one of the most important is on the sourcing side of the equation. For UK supermarkets to source fresh fruits and vegetables from Ethiopia, I think it's a prime opportunity. But beyond fresh fruits and vegetables, there are also commodities such as the gluten-free teff that the UK market is becoming more informed about and which we can supply. So there is that kind of relationship that I think we can certainly strengthen.

But there are also opportunities for UK businesses to come to Ethiopia, similar to what Diageo & Pittards have done, and invest. Because we do have the raw materials to be able to process, add value, and export, not only to the UK but also to many regional and international markets.

In the five years leading the agency, what has been the biggest challenge you have encountered and how did you overcome it?

The biggest challenge we have encountered at the ATA is the fact that we are a new and different kind of organization that nobody had ever heard of; nobody had ever seen this kind of organization before. So there was a lot of education and building confidence and trust that we had to do with our partners.

The only thing that has allowed us to do that effectively is the space and support that we were given by the Prime Minister, the Minister of Agriculture, and other senior government partners, to engage us and give us the time to build that confidence.

How to sell a country in five minutes-Ethiopia

SAVE | EMAIL | PRINT |  PDF    BY: DUKE MALAN

Countries compete. For investment dollars, tourists and talent, in much the same way that they compete for sporting medals - fiercely. On top of the podium of fastest growing economies is Ethiopia.

Ethiopia’s race to the top

The East African nation has a powerful story to tell. In 2015 it was the world’s fastest growing economy - driven by investment in infrastructure, the agriculture sector, population growth and a rapidly expanding manufacturing sector. Ethiopia’s entry into the global sourcing and manufacturing big leagues is remarkable, taking on and often winning against global leaders like Bangladesh, Vietnam, China and India.

©tang90246 via 123RF

We recently had the opportunity to work with the Ethiopian Investment Commission on a trade visit to Hong Kong to engage the investment community and reaffirm that “Ethiopia is open for business".



Dr. Arkebe Oqubay, a senior Minister in the Ethiopian Government and author of Made in Africa: Industrial Policy in Ethiopia, was in Asia to deliver the keynote address at Prime Source Forum, one of the largest gatherings of senior stakeholders from the apparel and footwear supply chain.



The audience heard from Dr. Arkebe about mega developments such as the 1.3 million m²Hawassa Industrial Park geared for the textile, apparel and leather industries. There are a number of factors that have attracted major companies like PVH, owners of Calvin Klein and Tommy Hilfiger brands, including the use of hydropower, tax credits and a highly skilled workforce at competitive rates - to name a few.

Competing for attention

Effectively telling your story to a trade industry audience is a very different proposition to a sprightly five minute interview with Bloomberg TV’s Asia Edge team. Dr. Arkebe delivered a master class in effectively “selling” a country in the interview. The top three communication lessons that can be drawn were:

- Create the conditions for trust: A sceptical or ill-informed audience need to hear things that will make them trust you. Early on in the interview he mentioned that Ethiopia has been experiencing double digit growth every year for the last 12 years. Stellar growth at that rate is rare and commands respect. 
- Cue key message, and repeat: Reinforcing key messages is the only way to ensure that it sticks in the minds of viewers. The key theme came through repeatedly: ‘Ethiopia has a clear vision; the economy is growing and has the people and policies to make that vision a reality’. 
- Bridge away from off-message issues: Ethiopia has challenges (as do all countries) and in response to a question on recent protests in the country, Dr. Arkebe reframed discussion to focus on the underlying market dynamism.

For Africa to continue rising and join the economic winner’s circle, more leaders need to effectively tell their good news stories to the international investment community.

Posted on 24 Mar 2016 11:23

Rising instability in Ethiopia could impact markets | Global Risk Insights

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 by Elliot Kratt ,  January 19, 2016

Ethiopia is experiencing increased levels of instability, calling into question the notion that Ethiopia is ‘rising’, but such issues are unlikely to have an adverse impact on the economy in the long-term.

Ethiopia is facing a number of sensitive challenges which have arisen in tandem with its impressiveeconomic growth rates, which the World Bank claims will result in the country reaching middle-income status by 2025 thanks to the government’s astute economic decision-making.

Ethiopia’s continued rise

Exciting developments continue to emerge from Ethiopia into 2016. On 5 January, the Ministry of Foreign Affairs announced plans to increase regional trade links with Sudan, South Sudan, Kenya, Somalia and Kenya, supported through the government’s increased investments in infrastructure linking the neighbouring countries.

In addition, Ethiopia’s large coffee industry is set to play an increasingly important role in the country’s economy. According to recent reports, Ethiopia will likely increase coffee exports by 45% due to government initiatives, with coffee exports already earning around 30% of Ethiopia’s hard currency.

Furthermore, the Ethiopian government is implementing an Urban Productive Safety Net Programme costing USD 559 million. Efforts such as this, complemented by continued economic growth have reportedly decreased poverty levels to 29%, down from 60% around 20 years ago.

Development and instability

As Ethiopia develops, its capital city, Addis Ababa is also set to expand, a source of significant controversy and instability. There are plans to utilise farmland surrounding the city for business parks which expand into the Oromia region. This has sparked protests met with a severe government response. On 8 January, it was alleged that security forces were responsible for killing 140 people in a crackdown on protestors. In turn, Human Rights Watch claims that the country is on a “dangerous trajectory” posing risks to the country’s long-term stability.

Ethiopia’s government is likely to depend on its continued economic performance to maintain internal and external legitimacy. Yet, those who do not feel the benefits of economic growth will continue to perpetuate social unrest, a potentially serious risk, given that the Oromo, the affected ethnic group in the case of Addis Ababa’s expansion, account for 40% of the population. Responsive to the current protests, the government has decided to halt its Oromia expansion plans.

The government’s continued management of social unrest will be decisive in determining its long-term stability. If the government fails to manage human rights issues sensitively, then increased frequency of protests and crackdowns could cause substantial problems economically. Foreign investors may be deterred in an attempt to avoid reputational risks, a problem which would be enhanced if the US begins to pull back from supporting the Ethiopian government.

US-Ethiopia relations

Ethiopia’s relations with the US may be taking a turn for the worse, despite the two countries’ strategic counter-terror relationship. There have been increasing reports of heavy handed government responses to journalists expressing dissent, including imprisonment. In response, the US spoken out, an unusual move as the US rarely addresses human rights issues in Ethiopia. Consequently, the US decision to comment on the Ethiopian government’s actions may represent a growing rift between the two.

Increasingly strained US-Ethiopia relations may have also influenced the US decision, on 4 January, to shutdown drone operations in Arba Munch, Ethiopia. These emerging trends would not bode well for Ethiopia economically, with Western investors likely to be discouraged from entering an increasingly controversial market. The impact would be limited, however, as Ethiopia continues to attract substantial FDI from China and the Middle East.

Rising or falling?

In the long-term, despite recent instability, Ethiopia’s economic outlook remains very positive and will ultimately serve to benefit its broader population. High economic growth rates will ultimately function to mitigate an overarching trend toward instability as Ethiopia continues to rise, but such growth will need to be inclusive, especially for the millions who have been affected by the recent drought.

However, the recent increased incidences of social unrest could spark a degree of political instability undermining growth, in the short to medium term, if the government fails to ensure that communities affected by development plans are compensated for disruption. Additionally, displaced or marginalised communities, and the potential for continued heavy-handed governance, may increase security and reputational risks for the many multinationals excited about the opportunities that Ethiopia holds.

Ethiopia: Government, private sector steps up mining activity

Country has vast untapped resources of gold, potash, zinc and tantalum, experts say

30.11.2015   Addis Ababa  economy, africa    

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by Addis Getachew

ADDIS ABABA

The Ethiopian government, along with private sector partners, is taking steps to tap the country's vast underground resources.

“Ethiopia has considerable reserves of gold, potash, zinc, gemstones and tantalum,” geological survey consultant Yalew Bekele told Anadolu Agency on Friday. “But they remain unstudied, unexplored and undeveloped.”

Ethiopian Minister of Mines, Petroleum and Natural Gas Tolossa Shagi told Anadolu Agency on Friday that the government is stepping up efforts to support the mining industry.

“There is hope that Ethiopia will become a country in the short term whose extractive industry will contribute significantly to GDP,” the minister said in an interview.

The minister pointed out that revenue from mining had not met its goal, as defined by the government’s economic plan for 2014. Ethiopia had planned to secure mining revenue of $646 million during 2014/15 but only earned about half of that, $363 million, according to government statistics.

“Within a period of two years, Ethiopia will start natural gas production from its Kalub and Lala areas in the Somali regional state where 7.4 trillion cubic feet of natural gas is being developed for domestic use and for export via Djibouti,” the minister said. The government is financing the project, in a public-private partnership with the Chinese mining firm GCL; GCL will also build the pipeline to Djibouti.

“Indications of much larger deposits of natural gas have been found along the Great Rift Valley stretching as far south as Uganda, and exploration is underway in this area,” Shagi said.

Russian company GBP Global Resources, which was granted the concession in 2014, is currently exploring natural gas and oil reserves along the Ethiopian Rift valley area. Revenue will be shared between the company and the government if reserves are found.

“Currently eight exploration companies including from China and Russia are engaging in exploration and development of natural gas throughout the country,” he said.

The Midroc Group, a company owned by the Saudi businessman Al-Amoudi, is developing gold in Southern Ethiopia. The miner Alana Potash, acquired by Israel Chemicals in March 2015, is working on the massive deposits of potash in northeastern Ethiopia, Bekele said.

Ethiopia is developing its gem stone industry. According to the minister, small-scale traditional miners and middle men are earning about $25 million annually from gem stones that are to be found in abundance in many areas in the country.

“This can be increased tenfold if we transfer gem stone extraction to the mainstream mining sector,” Shagi said. “That is why we have recently put in place a Gemology Institute.”

According to Bekele, only 350,000 square kilometers (135,135 square miles) in total have been studied using seismic techniques for reserves. Ethiopia covers a total of 1,100,000 square kilometres (420,000 sq mi).

“Exploration should be intensified covering an expanded study area,” Bekele said; satellite images and surveys on the ground show Ethiopia holding immense resources under the surface. 

Ethiopian entrepreneurs struggle as command economy soars | Business Recorder

Ethiopian entrepreneurs struggle as command economy soars | Business Recorder: "In Ethiopia, where state spending rather than private enterprise has been the driving force behind double-digit economic growth, tech entrepreneurs like Araya Lakew feel stuck in the slow lane. Five years ago, the 34-year-old spotted a niche for a website matching buyers and sellers of second-hand cars in a nation where prices often rise even as vehicles age because of high tariffs on imports.

His website, Mekina.net, receives 316,000 hits a month and adds 20 cars a day to its sales list but he has struggled to expand beyond the capital because of poor Internet penetration and a ropey mobile network run by state monopoly Ethio Telecom. "We are only touching a tiny surface of the market," Araya told Reuters. "We try to optimise what we have as there are a lot of obstacles to growth."

In a nation where the authorities have little tolerance of criticism, Ethiopian entrepreneurs are reluctant to blame the government or its agencies for the challenges they face. But economists say the state's tight grip and a list of restrictions on where private business and foreigners can invest risk stifling tech and other start-ups that will be vital for creating jobs and driving innovation.

"The way things stand, this sector may not survive," said Markos Lemma, co-founder of iceaddis, a technology hub in Addis Ababa that supports entrepreneurs. "Ethiopia is leaving out a huge talent-based opportunity." Telecoms services are in the hands of the state, while foreigners are barred from retail and banking. Entrepreneurs struggle for funds as banks have to invest the equivalent of 27 percent of their loan portfolio in low-yielding state development bonds, leaving less for private lending.

Araya said private equity firms had shown interest in his plans. "But they are put off by the regulations," he said. Ethiopians only need look south to Kenya to see what a more free-wheeling approach could deliver in a nation where telecoms firms and Internet providers are in private hands. Two thirds of Kenya's 45 million people had Internet access as of March 2015, while in Ethiopia, a nation of more than 95 million, it was just 2.9 percent at the end of 2014, figures compiled by private firm Internet World Stats showed.

In terms of innovation, Kenya's biggest operator, Safaricom , partly owned by Britain's Vodafone, pioneered a system in 2007 that allows Kenyans to pay bills or receive funds on the simplest of mobile phones. M-Pesa swept across Kenya, where few people have formal bank accounts, and has been mimicked across Africa. But in Ethiopia, similar 'mobile money' systems are less than two years old and cash is still king.

"That is a major issue for us," said Feleg Tsegaye, founder of Deliver Addis, Ethiopia's first online food delivery service, adding that mobile payments would make his service more efficient. "We are currently not at that level yet." Mobile users complain that even basic telephone coverage is poor and Internet speeds are sluggish even in the capital, although Ethio Telecom is rolling out faster services. But the government shows no sign of easing its grip, citing economic growth that is on track to exceed 10 percent this year, one of the fastest in Africa. It says profits from Ethio Telecom are ploughed back into a range of infrastructure projects, such as railways. The firm generated revenues of 21.5 billion birr ($1.03 billion) in fiscal 2014/15 and gross profit of 14.5 billion birr. "



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