I mentioned in the last post that Ethiopia had been enjoying terrific economic growth over the last decade. Commenter Christine asked where this was coming from: oil, or something?
Well: no oil. Ethiopia has been enjoying growth in agriculture, in manufacturing, in extraction industries (mining)... and in services.
Yeah, services. That one is a little weird. Services is transportation, communication, and finance. Also tourism and accounting and consulting and haircuts and oh, all sorts of other things, but in an Ethiopian context it's transportation, communication and finance that have seen incredible hothouse growth. Basically the country came to mobile phones and internet stuff late, but built them very fast; has a state-owned flagship airline, Ethiopian Airlines, that's doing improbably well; and has a banking sector that's seen dramatic, almost explosive growth in the last decade or so.
There are a lot of questions here. Like: why is Ethiopian Airlines so incredibly successful? It's a state-owned airline in a Sub-Saharan African country, which means it should either suck, or be going bankrupt, or both. Instead it's profitable, reliable, and (despite a very famous crash) safe. the 28th largest airline in the world, and the largest and most successful one based in Africa between South Africa and Egypt. Ethiopian Airlines is the reason that Addis is a major regional hub, collecting flights from half a continent. They're partnered with Lufthansa in the Star Alliance, for goodness' sake. (There are US based airlines that Lufthansa won't partner with.) How has EA managed this, when most other African airlines (and plenty of non-African ones) have floundered? I have no idea. But it's an interesting question, no?
Anyway. Ethiopia seems to be quite deliberately pursuing an Asian model of export-driven growth. I'm not sure if this is really a good idea, myself. For one thing, Ethiopia is landlocked -- almost all of its exports are going out a single road-rail link through Djibouti. Their backup? Port Sudan. Yeah, some possible problems there. And developing non-primary exports from a poor African country is not always easy. Here' are some notes from a meeting with a company we'll call Axum (not its real name):
Axum is a major exporter of sesame from Ethiopia. Axum also works in imports and logistics but its specialty is the export of oilseeds. In 2010 Axum exported 36,000MT, mainly to China (app. 60%) but also to Israel and various Arab countries. The company shipped smaller quantities to Turkey, Greece and the UK. Axum exports other oilseeds and is in the process of negotiating the sale of Niger Seed to a US buyer, but sesame is the main export.
Ethiopia produces two kinds of sesame: Humera and Wollega. Humera is the higher quality variety with minimum oil content of 50%. Humera makes up the bulk of Ethiopian production; only about 30,000MT of Wollega is produced. Humera is known on the international market for its very white color and superior taste...
The CEO passed around a brochure illustrating Axum's profile which showed the substantial size of the company and its investments in infrastructure and cleaning equipment. When asked why Axum had not invested in oil production, he explained that it is not a question of lack of finance or production expertise. All that would be needed is appropriate and efficient technology to crush seed and produce oil. But the domestic market for sesame oil is non-existent; sesame oil is too expensive for local consumers. And the export oil market is completely different from the oilseed market. Axum management is concerned that Ethiopian-produced oil might not be competitive on the international market.
Japan, for example, imports large quantities of sesame oil from China. Japan is very particular about quality and does not try to source oil elsewhere. Japan does not process sesame nor is it interested in investing in oil production in Ethiopia. In fact, China has a quasi monopoly on the export of sesame oil. Although the white sesame produced in Ethiopia is the best in the world, China is the world’s largest producer of sesame, producing around 500,000MT annually. China is also the world’s largest importer of sesame seeds and by far the largest exporter of sesame oil. If Axum were to produce sesame oil for export, it would have to be able to produce oil, bottle it, pack it in cartons, containerize it, ship it overland to a port – all with the highest quality considerations. Oil importers would be very hesitant to trust the quality of sesame oil from an African source. Axum would have to invest time and money in the identification and development of a discerning and complex market. They would have to demonstrate that they could deliver a quality product consistently year after year. This would be a major project and the Chinese producers and refiners might take offense.
Axum ships cleaned sesame seeds to China in 50kg bags, containerized, on its own trucks across the Sudan border to the north and out of Port Sudan. [For export to those countries with commercial sanctions on Sudan, Belayneh Kindie ships out of Djibouti.] The Chinese government currently gives an import tax break to importers of Ethiopian sesame, permitting the importers to offer a better price for Ethiopian sesame compared to what they offer other African producers such as Sudan or Nigeria. During the twelve month period from July 2009 to June 2010, China imported about 140,000MT of sesame from Ethiopia.
So it's not a simple matter of just buying some equipment and crushing seeds.
Might have enough odds and ends for another Ethiopia post. Meanwhile: any requests?