As more international companies make way for Ethiopia’s mineral wealth, the country opened its door to license more than 250 companies to excavate its natural treasures. The government is offering a variety of incentives to attract investors, including tax holidays, import-duty exemptions, lower royalty levels and guarantees on selling rights.
Ethiopia’s mining sector is undergoing a massive transformation with an increase in opportunities for investment. A wide variety of mineral resources are available in Ethiopia, according to recently conducted geological studies. The Ministry of Mines surveyed over half of the country’s geological landscapes and discovered large reserves of gold, petroleum and potash as well as valuable deposits of coal, tantalum, copper, platinum, opals, rubies and other gemstones. Recent explorations also have confirmed the deposit of tantalite, soda ash and phosphate rock. Industrial and chemical minerals have also been identified. More explorations are taking place to find precious stones such as diamonds, sapphires and other gemstones.
At the famous tourist destination, Danakil Depression, geologists found the world’s largest potash deposit. Three companies Allana Potash Corporation, Yara International and Ethiopian Potash Corporation are digging the reserves. These companies are expected to start full scale production in 2017, extracting high grade sulphate and potash. Such commercial mining operations will transform the sector into a large-scale export-oriented mining activity. Although there are two large-scale mines by the state-owned Tantalum Mine in Kenticha and Lega Dembi gold mine, 90% of the country mining activities are small scale with limited export capacity.
The mining sector currently accounts for a little over 1% of the Ethiopian economy. However, the government anticipates that in a few years’ time, it will represent up to 10% of GDP. Potash is one of the natural resources expected to increase the sector’s contribution to this growth.
“Ethiopia is on the right track to diversifying its economy. Drawn by its untapped potential, investors are having a growing interest in the country from every sector. It won’t be long for the mining sector to be a producer of another major export commodity which could potentially replace coffee” said Alexander Burtenshaw Country Manager of Jovago Ethiopia.
Back in March, three years after its first application, Ethiopia was accepted as an Extractive Industries Transparency Initiative (EITI) candidate. EITI is a global standard to promote open and accountable management of natural resources. It seeks to reinforce government and company systems, inform public debate, and enhance trust. Each implementing country it is supported by a coalition of governments, companies and civil society working together.
Ethiopia has been working to build the capacity of local companies with the support of the World Bank which has assisted the country with its EITI application process. Mining operations are expected to be an important economic catalyst for the country’s export-oriented development strategy. Companies from America, Canada, China, Guyana, Italy, Norway and South Africa are operating in the buoyant sector supporting the strategy. The mineral sector was opened up to the private investors in 1991, calling for large-scale investments, advanced technology and trained manpower.