Investment climate in Ethiopia is birthing a thriving business eco-system as the country has aggressively continued to open various economic sectors to new investments and potential sectors to run multitude of goings-on. Investment areas banking and insurance, iron and steel industry, micro-credit and savings, packaging, forwarding and shipping, among others are also exclusively reserved for Ethiopian nationals and are now in a state of booming.
Taking this fact into account, The Ethiopian Herald held an exclusive interview with Brook Melese, an industrial engineer graduated from Addis Ababa University, to solicit crucial information about the contribution of steel industry to the economic sector.
He said, “Ethiopia’s rapid economic growth and infrastructure development has been creating high demand for steel products. Besides, the potential to reduce reliance on imported steel, saving foreign exchange, job creation and economic diversification benefits need to be well embarked on. Making domestic iron ore deposits robust, enhancing key raw material provision for steel production, development of industrial parks providing infrastructure and logistics support as well as growing construction sector driving steel demand are of paramount importance in making a difference in the industry under discussion.”
As to him, the very limitations that have been compromising the growth of iron and steel industry like limited steel production capacity compared to demand, lack of access to finance for steel projects, technical skills gap in steel manufacturing and inadequate energy supply for steel production need to be met.
“A number of strategies for the promotion of steel industry have called on decisive measures like investment incentives and tax breaks for steel manufacturers, streamlined regulatory framework to facilitate project development and public-private partnerships to develop large-scale steel projects. These steps are quite invaluable to make a difference in all aspects of the steel industry.”
Needless to state, Brook said the steel industry supports economic growth by creating jobs, driving infrastructure investment, and supporting other industries. Steel is used in many products, including buildings, vehicles, and machinery. The steel industry in Ethiopia is considered a strategic sector for the national economy, playing a key role in economic development by providing essential materials for construction, manufacturing, and other industries, although its current contribution is still relatively nascent and faces challenges related to production capacity and access to finance. Here, the government is actively working to expand its role in industrialization efforts.
He said, “To promote the steel industry in Ethiopia, key strategies include: encouraging domestic iron ore exploration and mining, investing in modern steel production facilities, facilitating partnerships with international companies, improving infrastructure, implementing supportive government policies to reduce import reliance, and focusing on quality control and export initiatives to compete in the regional market; all while addressing challenges like high raw material costs, energy fluctuations, and potential regulatory hurdles.”
Unequivocally, the steel industry has massively supported the national economic growth. In the first place it helps the nation have social security via job creation, which pronounces that the industry creates jobs directly and indirectly. For example, a job in the steel sector has more the supply chain.
Second, it has fostered conditions in terms of infrastructure investment. This signifies the steel industry helps build roads, bridges, and other infrastructure. Third, regional development as the industry helps regional states in particular and the nation in general transform local economies. Third, the industry is of supreme importance in boosting innovation, to mean that the steel industry develops new technologies that make buildings, roads, and bridges safer and more durable.
Next, the industry is instrumental in booming supply chain, which has potentially served as a viable means for change. Here, the steel industry supports other industries that produce items essential to the economy.
Amid all the lucid significances, however, the steel industry also has environmental challenges because steel production is energy-intensive. To address these challenges, the industry is adopting cleaner technologies and recycling processes. The demand for steel is expected to grow in the coming years due to increasing demand in emerging markets and more efficient production technologies.
The steel industry will also create more capacity for the Ethiopian construction and industrial sector and show the way in which the government is increasing private sector participation.
The sector has focused on finding new export markets for its steel and attempts to attract more buyers with lower prices. In an environment of weak global demand, this has caused difficulties for competitors. China’s behavior puts growing pressure on the steel industries of countries worldwide.
True, Brook added promoting the Steel Industry in Ethiopia would help enhance the potential for developing a robust steel manufacturing sector. The country’s existing iron ore reserves, growing construction demand, and opportunities for export need to be well fostered, and scarcity of access to financing, and skilled labor shortages, among others have to be tackled for the growth of the sector. To this end, proposing workable strategies, incentivizing investment in the steel industry through government policies and partnerships with private sector players as well as consolidating sector-to-sector ties need to be practically applied.
“Steel is one of the most innovative and flexible alloys. It can be customized for many requirements. Africa’s second most populous country—Ethiopia—has several high value infrastructure projects (Roads, rail, energy, and telecom) ongoing at the moment resulting in massive steel demand. Ethiopia has been a major importer of steel and other metal related products but now the government is taking steps to promote iron processing and steel making industry locally. The government believes that there is sufficient iron ore, coal and limestone in the country to manufacture iron and steel in the country.”
An industrial facility for the production of steel is known as a steel mill or steelworks. Ethiopia’s major iron ore reserves are found in Amhara and Oromia States. Additionally, it will increase Ethiopia’s industrial and construction industry’s capability and demonstrate how the government is fostering greater participation from the private sector, he opined.
Yes, said Brook technological changes have contributed significantly to unemployment in the steel industry. The more steel produced through the electric furnace method of steel making would cause an increase in the ratio of employment to output.
The proportion of steel which is continuous cast is constantly increasing in Ethiopia though a lot remains to be done. The industry is expected to grow and the market for steel products has to be made increased substantially in the future. Thus, as technological improvements are also expected to foster the employment opportunities of the industry, the former should be given due emphasis.
Ethiopia has been undertaking infrastructural developments and investments aggressively on human capital development he said adding that investment in power, telecommunication and road obviously enhance competitiveness of firms in the industry. However, these facilities are scanty in iron ore potential areas. Since the export performance of the industry is still limited to few markets, it needs to be expanded. Export share of the industry is also small and shrinking over the years as compared to Eastern and Southern African countries. Hence, the country has to work hard on the sector to make it much more benefited out of the sector.
He said, “Limited innovation and product diversification into high value added commodities, low iron ore extraction in the country due to poor infrastructural developments, lack of credit for working capital and new investment, inability to withstand foreign competition have to be well done away with.”
The government should arrange means for easy credit access for working capital and for buying the necessary technology to diversify their production. In the long-term, the industry should be able to allocate its own budget for research and development.
Improvement of current technology quality, improvement of quality and productivity management, facility improvement and development, certification and standardization system as well as adoption of new and appropriate technology considering available resources have to reinvigorated for the sector to grow.
In sum, the nation is expected to facilitate partnership between/among steel industries in order to meet the need for raw material, to facilitate restructuring of production machinery and equipment, to increase utilization of nameplate capacity steel rolling industry and its downstream industries and to encourage strategic between national steel industry and technology sources using local raw materials as well as to use locally-manufactured steel for construction infrastructure like natural gas mining, train rail, port, bridge, automotive, etc. as enhancing the competitiveness of the industry is invaluable for supporting the growth of the manufacturing and construction sectors, making exports of iron and steel products sustainable needs to come to the forefront. Besides, encouraging collaborations among producers and users of steel has to receive increased attention to help the country beneficiary out of the steel industry.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD THURSDAY 20 FEBRUARY 2025
