Ethiopia's Economic Climate

Mines And Energy

Ethiopia is a land rich in mineral resources of which gold, tantalum, soda, ash, potash, nickel and platinum are the most likely candidates for development either by local or foreign investment. Although Ethiopia's potential national mineral wealth is enormous; the sector's contribution to the national economy remains less than 1%.

Between 1974 and 1991 private investments were not allowed in the mineral sector. The government was fully responsible for the exploration and development of the sector. As the development of mineral resources required huge investment, advanced technology and trained manpower, the government was unable to significantly develop the mineral sector.

The new economic policy of Ethiopia both permits and fosters private investment and has created a conducive environment for the participation of local and foreign companies in the development of the mineral sector. The 1993 Mining Proclamation provides license holders with a number of incentives, including low royalties, exemption from custom duties and taxes on equipment, machinery, vehicles and spare parts necessary for mineral operations. It also contains a 10-year provision to allow investors to carry forward losses.

The future of the mineral sector is now firmly allied with private investment. The new Mining Proclamation recognizes the essential role of private investment in capital formation, technology acquisition and the marketing of minerals.
The Legadembi primary gold mine, which is Ethiopia's only modern mechanized large-scale mining operation, was privatized in 1997 via a sales contract with the National Mining Corporation, a foreign-owned mining company.

The resource potential of petroleum and other types of energy is also highly promising. Potential petroleum, oil and gas development areas have been selected and are now open for private investment.

Regarding energy, the sector requires foreign investment if it is to develop at a pace that will sustain the country's economic and social development. The potential of Ethiopia's renewable and non-renewable energy resources is enormous. However, currently less that 4% of the population is supplied with electricity. The majority of the population still uses traditional sources of energy, mainly biomass. This has resulted in massive deforestation.

This brochure gives only a brief idea of the mineral, petroleum and energy resources of Ethiopia, and outlines just some of the potential areas of investment in the sector.

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