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Ethiopia’s Abiy signs deals to get things moving

By David Whitehouse
Posted on Friday, 22 February 2019 16:11, updated on Friday, 8 March 2019 12:18

Construction work takes place at the site of the Grand Ethiopian Renaissance Dam near Assosa, Ethiopia. Elias Asmare/AP/SIPA

The Grand Ethiopian Renaissance Dam is just one of the energy projects producing deals for Chinese companies in a government spending spree

The Ethiopian government has signed a flurry of energy-related deals to improve its power production and foreign-currency reserves.

  • On 19 February, the government announced it had signed a $40.1m contract with China Gezhouba Group Co. and a $113m contract with Voith Hydro Shanghai to complete the Grand Ethiopian Renaissance Dam (GERD).
  • Ethiopia and Djibouti signed a deal to build a gas pipieline in what a Djibouti minister told Reuters will be “the most expensive project ever built in the Horn of Africa region”.
  • A Chinese company, POLY-GCL Petroleum Investments, has been developing two gas fields in Ethiopia since 2013. It is also the company that will construct the 767km pipeline.

Renewable energy is also on the list.

  • In January, the Ministry of Energy issued tenders for six large-scale solar plants with a combined capacity of 800MW.
  • In 2018, a waste-to-power plant became operational.

But the biggest national project remains the Grand Ethiopian Renaissance Dam (GERD).

  • In May 2018 Ethiopian ministers told New China the 17,300MW project was 65% complete, and that they expected it to be fully operational in four years.
  • Launched in 2011 by then Prime Minister Meles Zenawi, it was expected to cost $4.7bn, funded from government bonds.
  • In early February 2019, Prime Minister Abiy Ahmed said the project has a 60% cost overrun due to delays.

The project has been complicated by a diplomatic tiff with Egypt and corruption within one of its primary contractors.

  • Late last year, Abiy cancelled the contract for turbines/electromechanical work that had been awarded to the Ethiopian military conglomerate Metals and Engineering Corporation (METEC). More than 27 former army officers were arrested on corruption-related charges.
  • It was further complicated when chief project manager Simegnew Bekele died in an apparent suicide.
  • Abiy travelled to Cairo in June to assure the Egyptians that the dam would not affect the flow of Nile waters.

The government is also trying to encourage diaspora investments in the dam and other sectors such as finance.

  • Three draft bills by the National Bank of Ethiopia seek to amend laws governing the financial sector.
  • Abiy’s government is also making a concerted effort to improve relations with its diaspora community, especially for ongoing national projects.

The accession of Egypt’s President Abdel Fattah al-Sisi to the chairmanship of the African Union (AU) could shift the balance.

  • Egypt, which has always been against the construction of the GERD, could use this regional position to pressure Ethiopia to make concessions.
  • Another likely challenge is that Ethiopian Electric Power, the state body that owns GERD, is among companies listed for privatisation, as Abiy’s government seeks to implement extensive economic reforms.
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