Axis between Ethiopia-Allana Potash-African Export Import Bank: What cost to Ethiopia?

23 Jun

by Keffyalew Gebremedhin – The Ethiopia Observatory

As noted in The Reporter’s article, below, the Africa Export/Import Bank (Afreximbank) is hardly a household name in Ethiopia. Operation of the bank and its involvement with Ethiopia are better known amongst officials of the National Bank of Ethiopia (NBE) and Comercial Bank of Ethiopia (CBE) and foreign investors in the country that are benefitting from CBE’s Letters of Credit (LC) or export guarantees.

The little we know about Afreximbank’s exposure in Ethiopia dates back to Dec 14, 2003 Authorization of $226,864,759.

However, Ethiopia has been accepted as guarantor or borrower under risk class 7, for short-term value up to EUR one million and “Under wholeturnover policies transactions can be covered up to a maximum amount of EUR 5 million.”

Risk category 7 includes all sorts of risks, especial emphasis placed on guarantees for political insolvency risks, when and if applicable. Moreover, according to Afreximbank annual report for 2011, the CBE acquired additional shares (Class B), which to some degree have improved its position as guarantor for investors in the country.

For instance, CBE was guarantor forEL Sewedy, an Egyptian company, to the tune of €65 million toward the purchase of equipment for use in the energy sector. There is no indication to date that Ethiopia has provided such support to domestic companies.

At this stage, little is known about the role of Ethiopian banks in the transaction for the loans between Afreximbank and Allana Potash.
 

by Asrat Seyoum, The Reporter

Allana Potash, a Vancouver-based mining company listed on the Toronto Stock Exchange, is set to acquire financing for its mammoth potash mining project in Danakil Depression in the Afar Regional State of Ethiopia in the order of 11.1 billion birr from the little-known-in-Ethiopia Africa Export/Import Bank-Afreximbank. It is the largest loan to be approved for a private entity in Ethiopia to date.

Officials of Afreximbank, who were in Addis Ababa last week celebrating the Bank’s 20-year anniversary, told journalists that the Bank is reviewing a loan proposal for one of the two giant potash projects in the Danakil Depression while refraining from divulging the name of the company. However, The Reporter’s sources close to the Vancouver company on the other hand revealed that Allana has received the green light to secure the loan from the stated institution. Dubbed Dallol Potash the project is comprised of four concessions stretching 312 square kilometers in the North-Eastern part of the Danakil Depression, an area known for small-scale mining activities.

From 2010 to 2012 Allana completed a comprehensive exploration program including camp construction, diamond drilling, a 2D seismic survey and water drilling, according to information posted on the company’s website. Furthermore, citing preliminary results obtained so far, it has presented a feasibility study to the Ministry of Mines for which it is expecting a positive feedback. According to the study, in the initial stages the company would start with the production of the one million tonnes per year with planned expansion of additional one million tonnes every year. The study is also useful in terms of upgrading Allana’s exploration license to a mining license.

 

PM Hailemariam meets African Export-Import Bank board members

Prime Minister Hailemariam Desalegn asked the African Export-Import Bank to strengthen its support to Ethiopia’s agriculture and other sectors.

The Premier made the remark on Thursday while holding talks with board members of the Bank at his office.

Hailemariam said the Bank has been supporting mainly the agriculture sector of Ethiopia over the last 20 years. In addition, the textile and garment, leather and leather products as well as other manufacturing sector investors have secured financial support from the Bank, he said.

The Premier commended the Bank’s effort of boosting intra-Africa trade and improving quality of export products for better revenue. He requested the Bank to strengthen its support to Ethiopia and other countries.

The African Export-Import Bank is marking its 20th Anniversary while also holding shareholders board meeting in Addis Ababa.

President of the African Export-Import Bank Jean-Louis Ekra praised Ethiopia for facilitating the Bank’s Anniversary to be held in Addis Ababa. He also unveiled the Bank’s readiness to give loan to the nation’s agriculture sector as well as other public and private sectors.

Any implicit Ethiopian guarantees to African Export-Import Bank (AfrEximBano)?

The African Export-Import Bank (AfrEximBank) has indicated intentions to finance $600 million potash project in Ethiopia.

The bank is currently conducting its annual meeting and celebrating its 20th anniversary in Addis Ababa.

“In Ethiopia, we are at the moment looking at potash project. It is about $600 million and we are still at the preliminary stage, but we are positive about that,” said Denys Denya, AfrEximBank’s Executive Vice-President for Finance, Administration and Banking Services.

Potash is one of the main components in fertiliser production.

A total of eight companies have explored the Danakil depression in the Afar region of northern Ethiopia for potash.

Currently, Allana Potash Corporation of Canadian is working on a $642 million potash mine project in Ethiopia.

According to information from the Geological Survey of Ethiopia, Alana Potash plc has drilled more than 30 holes and identified a deposit of 673 million tons measured and 596 million tons inferred.

Power project

Research by Green Markets, a fertiliser industry information provider, shows that globally, potash production capacity was estimated to rise 38 per cent to 96.5 million metric tonnes by 2017 with the demand rising 26 per cent to 66 million tonnes.

Currently, the priority financing areas of AfrEximBank are agribusiness, transport and hospitality services.

“Our appetite at the moment is agribusiness where we can add value and we encourage investors in this area to approach us, especially in countries like Ethiopia,” Mr Danya told the African Review.

“It is our intention to continue to develop our activities in East Africa,” said Mr Jean-Louis Ekra, the President and Chairman of the Board of Directors at AfrEximBank.

“We have a couple of projects on course. We have been invited to look at some windmill electricity project here in Ethiopia.

We have been also been looking at financing a small power project with the involvement of China’s Exim Bank,” Mr Ekra added.

AfrEximBank is currently financing different projects in East Africa, including large sugar project in Sudan and coffee development in Uganda.

In addition, the bank is also at the final stage of financing power project in Tanzania with other financial institutions, according to Mr.Denya.

Over the past 20 years, AfrEximBank has been providing 85 per cent of its total financing to private sector, with the remainder going to the public sector.

The Africa Review

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