Africa’s GEM Giant Ethiopia Yet to Tap Full Potential – Ethiopian Business Review

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The bars of gold, the diamonds, the gemstones, and the oil were stories Ethiopians have lived with about the riches of their country under the earth. Not materialized enough to change lives, those stories have remained a myth. Even though various administrations admitted the economic value of gemstones and mining in general, the lack of proper policy and legal frameworks, skilled labour, private investment, and market promotion at local and global scale have challenged the robust growth of the sector. This seems to be the thing of the past as the current administration of Abiy Ahmed (PhD) has put the sector at the heart of its ten-year perspective plan. With an overhauled institution under the leadership of Takele Uma (Engi.), the Ministry of Mines is set to enable the country make the most out of its mineral resources. Even though there are still high hopes for gemstones with positive global market prospects, production is still challenged by conflicts, parallel markets, and artificial products, among many other challenges, writes EBR’s Bamlak Fekadu.

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On the morning of November 10, 2022, Africa Avenue was damp as the capital was witnessing an unusual rain.  That was not the only unusual scene on Africa Avenue, a.k.a., Bole Road on that morning though. The asphalt road was also congested with a long line of vehicles, and federal security forces and traffic police appeared to be on high alert indicating the possible presence of higher government officials.

The presence of higher government officials was witnessed as Takele Umma, Minister of Mines, and Sahleworkd Zewde, Ethiopian president at the Millennium Hall, the venue for the first MINTEX expo powered by the Ministry of Mining. Having served as a COVID medical and emergency response center, the MINTEX expo was regarded as one of the largest trade show at the hall.

The building’s interior space, which measures 19000 square meters including a large expo hall with a floor area of up to 5000 square meters, brought together exhibitors from the financial sector, mining, cement, steel, jewelry makers, among other lines of business. According to the Minister, the purpose of the expo was to provide the opportunity for businesses to directly market their services to domestic and foreign customers via a business-to-business (B2B) and business-to-consumer (B2C) scheme.

“The expo will be of utmost importance in creating a commercial network among mining sector enterprises,” Takele told the exhibitors and visitors, “The arena will also give international businesses the chance to investigate investment potential in Ethiopia’s mining sector.”

Ethiopian International Mining Conference & Exhibition (EIMC 2018) was the first such event to be held in the nation. Internationally, the parties involved in the mining industries have been working to comprehend the value of expos, exhibits, and trade fairs as a conduit between producers, consumers, and miners to expand market reachability.

Among top rated mineral and Gem shows is Tucson, an American based mineral and gem show with over 65000 businesses, Munich Mineraltage with over 1000 mineral dealers in three airplane hangars of the former Munich airport, and Tokyo International Mineral Fair has been rolled for over 30 years bringing together thousands of visitors, designers, lapidarists, collectors and rock enthusiasts every year.

Mining is a priority sector in Ethiopia’s homegrown economic reform. Ethiopia is an ideal mining destination with investment security, a sound infrastructure and largely untapped potential. However, the sector’s contribution to the GDP was just one per cent.

Mining, manufacturing, and modern agriculture are at the heart of the ten years strategic plan of the government of Abiy Ahmed (PhD). The plan calls for increasing mining production and exploration to generate foreign exchange revenue. The endowment of gemstones, ornamental, energy, metals, and metallic minerals such as gold, coal, iron ore, potash, tantalum, marble, petroleum, and other natural resources are potential resources that were identified on strategic plan.

“We anticipate the mining industry to contribute 17Pct of the nation’s GDP during the next 14 to 15 years,” Takele shared his Ministry’s ambition.

The mining and quarrying industry subsector grew by over 115Pct in just 10 years. Various administrations have also tried to support the sector in such a way it could solicit more private investment. Nevertheless, the sector’s contribution to the nation’s GDP remains below two per cent, and its share of exports is only 14Pct.

Currently, the industry is challenged by a number of issues, including illegal brokers, contraband, and an unregulated trading environment. Additionally, there is a lack of a comprehensive strategy and ineffective investment promotion. Many factors, including those linked to infrastructure, financial access, security, concerns, and market access to the majority of the output that comes from remote areas of the country- can be identified as contributing factors for the sector’s struggles.

Ethiopia earned over USD560 million from gold exports in 2021/2022 fiscal year. This is a high growth compared with USD28 million export revenues in 2018/1, Ethiopia’s all-time low expert performance.

 As Ethiopia has considerable gold reserves and a rapidly-developing governance structure in place, Ethiopia could be one of the most attractive investment destinations for the global mining industry, especially for foreign firms looking for a stake in the gold sector.

According to the six-month report of the Ministry of mines for 2021/22 budget year, the mining sector obtained USD272 million from gold, industrial minerals don’t inch to a million while colored gemstones garnered some over USD10 million, of which sapphire accounts USD2.7 million similarly opal generates USD 2.6 million. There is every reason to be optimistic about the country’s mineral future as Ethiopia boasts around 200 tons of gold, and with a further 360 million tons of coal and 69 million tons of iron, according to Extractive Industries Transparency Initiative (EITI). According to the EITI report of 2018/19, gold mining still accounts for 93Pct of the value generated by Ethiopian mining, highlighting a dramatically imbalanced sector heavily reliant on a single commodity.

Ethiopia has many varieties of high-quality gemstones, including opals, emeralds, sapphires, amazonite, amber, rubies, tourmaline, aquamarine, chrysoprase, peridot, and as well as various types of quartz, agate, jasper. Northern Ethiopia’s State of Tigray is known for its sapphire deposits. For many years farmers around the area have been engaged in mining sapphire. There are three well-known types of sapphire in Ethiopia namely- blue star sapphire, fancy sapphire and the ‘color-changing’ sapphire including the rare and coveted pink sapphires known as ‘padparadscha’, according to the Ethiopian geological survey.

According to the Journal of Gemology published in 2018, Ethiopia has over 40 types of gems, noted exceptionally promising as a significant producer of opal, sapphire, and emerald with a wide-open field for investors to put on these extraordinary gemstones.

The precious gemstone sector can be said to be left untouched despite its billion dollars’ worth globally. Even worse, the precious gemstones sector is now in hot water due to the ongoing conflicts in the States of Tigray, Oromia and Benishangul Gumuz, according to the founder of Axumite Gemstones.

“Currently our business is out of lack as we mainly depended on the supply of sapphire from Tigray,” Axumites’ founder told EBR

According to a recently released book by the historian Meri Ras Aman Belay, ancient Ethiopian documents on gemstones mention their therapeutic uses for treating mental and physical ailments. In the industrialized world, the method of healing with precious rocks is today known as crystal therapy. Opal, for example, is described as an emotional stone that amplifies freedom and strength. Following the medicinal purpose Rough Ethiopian Opal healing piece is now sold between USD 40 to USD 100 in e-commerce platforms such as eBay, and Alibaba.

In recent decades geological studies discovered large reserves of gold, petroleum, and potash as well as valuable deposits of coal, tantalum, copper, platinum, opals, rubies, and other gemstones. Gemstones have never played any significant economic role in the long history and rich culture of Ethiopia. It is only in the last two decades that Ethiopia has emerged in the gem trade.

According to Dagim Teka, a lapidarist with close to two decades of experience, Ethiopia’s mineral resources have remained off the global market due to lack of strong marketing strategy and promotion along with other significant reasons despite the state’s continuing efforts to discover major ore deposits and pull investments.

“Issues of smuggling, limited access to markets and financial services, inadequate mineral value-addition and lack of livelihood diversification have significantly hindered the growth of this sector, “he said.

Dagim calls for the government and stakeholders to eye on the production and the value chain of the market as it is highly exposed for smuggling. It is true that illicit and backward trading systems are among the major factors affecting Ethiopia’s mineral export earnings. In the light of curbing illicitly inching gemstone trade, the Ministry of Mines and Petroleum has signed an MoU with Ethiopian Commodity Exchange (ECX). The MoU aims to bring opal, emerald and sapphire to the ECX platform, planning to commence trading this year. The Exchange has already prepared a manual to begin trading minerals and is yet to commence trading gemstones.

“The deal will encourage gemstones to be sold only in the international market by enhancing supply while fighting illegal trade, “Takele said.

There are several significant mining districts in Ethiopia, each with their own distinctive colors and types of stone. Opal is one big gem type that captures world’s attention since the first big wave of Ethiopian opal to hit gem markets began in the 1990s, sourced from the then Shewa Province. Since the mid-1990s, Ethiopia has become the second-largest exporter of opals after Australia. Most of them are destined for China and India.

Ethiopia is well on course to become the first challenger to Australian opals. In 2008, the discovery of spectacular Wollo opals in the State of Amhara, northern Ethiopia changed the game and became a powerhouse to rival Australia in terms of quality and production. Ethiopian opals trade has been booming, exhibiting 136 Pct increment just between 2000 and 2014 alone. There are now four types of opals being mined in Ethiopia, bearing the original names of towns and provinces where they are found such as Showa and Mezezo, Afar, Wollo and black opals.

In the late 2019 film “Uncut Gems,” starring Adam Sandler, concerning smuggled Ethiopian opal to the New York market, which delves into the actual gemology of the featured Ethiopia opal, Ethiopian opal made it to Hollywood. It tells the story of how the opal amplifies strength and freedom.

A decade ago, the then Ministry of Mines and Petroleum tried to ban the export of rough opal but failed. The reason behind the ban was to keep the employment and revenue rather than ship those jobs to India with the rough. Some countries such as Tanzania had done this before. However, it didn’t work. The Ministry altered the ban in 2016. Today, opal exports must include both finished stones and uncut rough. The gap between the skills on demand and those available in the labor market, as usual, is the case in many industries across the continent, still challenges the success of gemstones production in Ethiopia.

The traditional method of extraction has undervalued the country’s earnings from the colored gem sector as a result of damages performed on valuable hot rocks during extraction. Utilization of archaic tools on extraction and grinding minerals ensued limitation and quality of output.

“Unprofessional artisanal miners utilizing traditional tools are affecting the quality of precious rock,” said Axumite’s founder who blamed regulators and officials of the sector for lacking the knowledge and turning a blind eye to the precious gem sector.

President Sahlework Zewdie who opened the Mintex Expo then emphasized the necessity of eradicating the mining industry’s notoriety with child labor, illegal trade, and environmental pollution.

‘’Ethiopia hopes to utilize mining to a full potential and is important for substantial economic growth,” she said.

Security challenges, particularly attacks by several armed rebels such as Oromo Liberation Army, also appears to be an obstacle to the sector growth which is predominantly controlled by low skilled, small-scale miners forcing a bulk of trade to the black market. Unrecognized challenges such as homemade fabrication of synthetic gem are also shadowing the fate of the sector as trade relation trust is increasingly missing.

According to Godswill, a Nigerian who exports precious stones through a tunnel used for the black market, the nation’s weak marketing plan costs money, while others have benefited from less publicized colorful gems without paying royalties. Godswill specifically revealed to EBR that traffickers from the Middle East, Asian nations like South Korea and India, as well as African nations like Tanzania, are among those that snare the nation’s treasure.

“Foreign restaurants in the capital’s downtown are the most gems traded in the black market,” he said. “Many of the precious stones leave the country in a rough form to have their value added elsewhere.”

International gem forums were buzzing back in 2017 about the finding of high quality and size of emerald deposits in Ethiopia along with other hot rocks, that’s why gemologists called Ethiopia as- African gem giant. In 2018 the finer stones of emerald have fetched average wholesale price USD 5000 for 2 to 3 carats, although some of the very best quality used to be sold USD10,000. Some precious metals, high-quality gems are portable wealth. They don’t deteriorate. They are easy to hide (smuggle), and they’re quickly convertible to cash. For all these reasons, people have been buying gemstones in record numbers, even during the pandemic.

The emerald deposits discovered in August of 2016 located in the Sebo Boru district in the State of Oromia, where the rural villages of Kenticha and Dermi host particularly high-quality deposits. Despite the prophecy that pictures Ethiopia as a gem giant, the earning from emerald in the first six months of the current financial year was found to be the exact opposite, recording USD 520,000 from 414 kilos of emerald.

According to the African mining market’s report, gemstones worth USD22 billion were traded in 2018. According to the Gems and Jewelry Exports Promotion Council of India, India’s export of Gems and Jewelry is expected USD39.1 billion at the end of 2022. The industry contributes 7Pct to India’s Gross Domestic Product (GDP). It also employs more than 5 million of skilled and semi-skilled workforce in the country. With this, the sector contributes about 10-12Pct of India’s total merchandise exports, accounting for the third largest commodity share. During 2021-22, the gems and jewelry exports played an instrumental role in growing India’s overall exports to USD 419 billion with a growth of 44Pct from 2020-21 and 34Pct from 2019-20.

Ethiopian gemstones are also available in many digital interfaces. In some online platforms such as etsy.com, 200 carat equivalents to 40gms of Ethiopian opal is auctioned for USD1600 and above, while GRS certified sapphire of 8.59 equivalent to 3.4 gram is sold for around USD40,000 on eBay and emeralds 2.79 carats for USD14000. A study by the World Bank Group suggests the demand for minerals will grow by as much as 500Pct in the next 30 years. EBR


11th Year • Nov 2022 • No. 112

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