Tuesday, December 9, 2014

Will Eurobonds Boost Ethiopian Food Security?

Deutsche Bank and JP Morgan will handle the sale of a 10-year, dollar-based Ethiopian bond yielding 6.75 percent to fund increased agricultural production, power generation and transportation infrastructure, InvestorIntel reports.

Agriculture investments in Africa increased by 137 percent in the first half of 2014 compared to the same period in 2013, thanks in part to improved political risk and easier transactions, according to international law firm, Freshfields,

Ethiopia has been Africa’s fastest growing economy for the past few years, according to InvestorIntel. It follows the lead of other African countries that issued similar bonds (Eurobonds) recently, including Kenya, Ivory Coast, Senegal and Ghana.

Ethiopia’s bond issue reflects both growing interest of foreign investors in the country and Africa, and the scope of its development ambitions, according to the report. The country needs to raise at least $50 billion USD before the end of the decade to complete its development targets.


Ethiopia has taken full responsibility for funding the Millennium Dam, considered crucial for boosting agriculture in Ethiopia as well as some of its neighbors such as South Sudan, Kenya and Uganda. This will give Ethiopia greater control over the flow of the Nile. Its power will allow Ethiopia to become a regional hydro-electricity hub.

Ethiopia is home to the third largest agricultural industry on the African continent, according to InvestorIntel. Not long ago the country was plagued by famine. Now it’s on track to achieve food security thanks to farming method research and innovation.

But Ethiopia’s ambitions reflect the wider agricultural growth occurring throughout Africa, which has been fueling private investors. The African food market is expected to triple by 2030 with exponential growth of the middle class and increasing urbanization, according to a 2013 World Bank study.

U.S. private equity fund KKR & Co recently made its first investment in Ethiopia.

International investment and financing such as the bond issue will help address the technical challenges to agriculture throughout Africa, according to InvestorIntel. Enthusiasm is growing among private equity companies for Sub-Saharan Africa. Agriculture appears to be a natural investment sector.
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