Ethiopia is rich in natural resources, including gold, silver, copper, oil and gas reserves. The mining sector has been one of the key drivers of the Ethiopian economy, contributing significantly to the country’s economic growth in recent years. With the late development of a number of large-scale mining projects, Ethiopia is now attracting international investment, including from Chinese companies.
Mining is critical to Ethiopia’s economy as a means of expanding out of farmland. Currently, mining makes for only 1% of GDP. Gold, gemstones (such as sapphires and diamonds), and industrial minerals are essential resources for the country’s export-led development plan. According to the most recent EITI data, the mining industry made up 1% of the overall exports and 14% of all employment in 2019. Exploration for oil and gas continues, but no economically viable discoveries have been made to date.
Ethiopia holds more than half of the elements required for mining success. It is rich in unexplored minerals as well as additional natural resources, including significant gold and tantalum reserves. Petrolia and diamonds have been found as well. There is a proven natural gas deposit accessible for commercial exploration, as well as platinum, tantalite, iron, copper, lead, zinc, nickel, and other base metal deposits.
Ethiopia, located in the Horn of Africa, is also strategically located for foreign investment from Europe, Asia, and Australia, as it is reasonably desirable to investors. A Chinese company recently showed interest in investing in Ethiopia’s mining industry.
Habtamu Tegegn, Ethiopia’s Minister of Mines and Petroleum, met with a number of Chinese investors. According to the Ministry of Mines, a presentation on investment possibilities and beneficial conditions for Chinese investors in Ethiopia’s mining sector was given during the discussion. The investors have been asked to invest in metals, cement, geothermal energy, fertilizer processing, oil and natural gas, and other areas.
According to reports, Chinese firms have expressed a strong desire to invest in Ethiopia’s mining sector, particularly in cement, construction materials, renewable energy resources, and other areas. The potential investment by the Chinese company in Ethiopia’s mining sector could be a remarkable boost to the country’s economy as the mining sector is a notable contributor to government revenue, particularly through taxes and royalties.
Ethiopia’s economic and legal framework allows for a free market economy, enabling both domestic and foreign-based businesses to take part in growing the country’s mining industry. The law authorizes the Ministry of Mining and Petroleum to engage into prospecting, exploration, and production agreements. Production sharing agreements, which are acquired through direct negotiation with interested companies, outline the conditions for hydrocarbon exploration and extraction.
250 foreign companies from China, South Africa, the United Kingdom, the United States, and Canada have been granted licenses. The license requires each mining firm to distribute 5% free equity shares in addition to 8% royalties and 35% income tax. The lease is good for 25 years and can be extended for another ten years.