BY TEWODROS KASSA
Different researchers and economists said that the economic significance of the Grand Ethiopian Renaissance Dam (GERD) is inarguable and not suspicious. Generally, GERD is believed to change economic and other scenarios in the Horn of Africa region and its surrounding as well.
To be specific, the operation of the Dam will give an impetus to the ongoing economic growth of each country across the region. Various economists also stated that the Dam will be a backbone to Ethiopia’s economy and its neighbors.
A study with the Ethiopian Economics Association (EEA) entitled “the economic significance of the Grand Ethiopian Renaissance Dam (GERD) to the Eastern Nile Economies,” stressed that the net economy-wide effect of GERD operation is positive for all countries including Egypt, reflecting a win-win outcome. This underscores the fact that the benefits of the GERD should be seen in the wider basin-wide economic perspective.
The study further disclosed that the GERD operation will stimulate real GDP in the Eastern Nile basin. GERD’s operation will add USD 8.07 billion in real GDP of Ethiopia, Sudan, and Egypt annually after the completion in 2024.
Accordingly, while Ethiopia will earn a staggering USD 6.79 billion of the total basin-wide gain in real GDP Sudan and Egypt will earn USD 1.11 billion and USD 0.17 billion gain in real GDP, respectively. Thus, all the Eastern Nile countries are expected to benefit from GERD operation, the study explained.
Speaking to The Ethiopian Herald, Global Chairman of Fairfax Africa Fund and economic analyst Zemedeneh Nigatu said that the economic impact of GERD on Ethiopia’s economy and the broader Horn region is very significant. While operational, GERD will generate more than 6,000 MW of electricity, which is two times of the current installed capacity of Kenya. Therefore, the GERD is expected to meet local consumption and to address the neighboring country’s energy needs.
Currently, about 56 percent of Ethiopia’s population still does not have access to modern electricity (MoWIE, 2020). Thus, the accomplishment of the Dam will turn more than 60 million citizens from darkness to light only in Ethiopia. Beyond this, the lives of millions of people in the Horn of Africa will be improved due to enough electricity access.
Explaining electricity export is the current strategic objective of Ethiopia he vowed that the country can generate hard currency very soon in exporting energy to the region. After GERD’s completion, Ethiopia will become the second-largest producer of electricity in sub-Saharan Africa next to South Africa. Therefore, it will bring tangible and sustainable economic growth to Ethiopia and the East African countries as well.
On the other hand, Ethiopia intends to be one of the manufacturing hubs of Africa. Having a wide resource, a competitive labor force, a strategic location in the Middle East market, among others enables Ethiopia to have a comparative advantage. The ongoing aspiration to generate affordable electricity will also be significant to cope up in the manufacturing sector.
He also illustrated that the experience of the Asian tiger’s economy (China, South Korea, Taiwan) is highly based on providing affordable electricity and massive manufacturing industries. As to him, implementing and following this trend will make Ethiopia the China of Africa.
Mentioning that GERD is not a single country’s project as it is a regional project and aspire to interconnect the region he pointed out that it perfectly suits the African Union (AU) regional integration agendas and the African Continental Free Trade Area (AfCFTA) vision. As Ethiopian integrates the whole of Africa via air transportation, GERD will also integrate Africa via electricity, he noted.
99.9 percent of Ethiopia’s energy is clean and renewable adding that the country is the leader in consuming clean-burning energy in the world. It generates power only from hydro, solar, geothermal, and wind sources. Therefore, the country is a great model for the developing world to highly integrate with the green economy. The economic growth in Ethiopia never harms the environment and it is sustainable.
Currently, Ethiopia is exporting power to Sudan and Djibouti while it is on the way to export power to Kenya, Tanzania, and other East African countries. It has also planned to export electricity to North Africa, South Africa, and the Middle East. Ethiopia can produce electricity at a natural cost [naturally reliably] than other countries could do that. Therefore, it can help contribute more to the economic activities [growth] of the broader African countries.
When GERD comes to operation, it will bring a paradigm shift not only to Ethiopia’s power utility but also increases the country’s capacity of exporting power to neighboring countries. And it will bring inclusive growth in the region.
GERD-induced economic growth of Ethiopia is anchored mainly on the tremendous improvements in energy supply which in turn increases efficiency, capacity utilization, and productivity for the energy–constrained economy. The GERD is of paramount importance in reducing poverty, particularly in Ethiopia and generally in Sudan and Egypt, he asserted.
Ethiopia enjoys the largest improvement in household income from GERD operations due to increased economic activity and productivity. Improved household income induced by the GERD operation is expected to contribute to improving household consumption and hence improve the standard of living of the Eastern Nile population.
GERD operation following a four years impounding phase significantly enhances economic growth, household income, and welfare in all the Eastern Nile countries. The GERD would also contribute to poverty alleviation in the Eastern Nile Basin by increasing real income to unskilled labor.
As to Zemedeneh, extending the filling phase of the dam beyond four years will entail a huge economic cost to the Eastern Nile economies in terms of foregone gains in real GDP and welfare. The economic cost rises rapidly as the impounding phase extends from five to ten years.
Delaying the operation of the dam entails a substantial economic cost to all the Eastern Nile economies though Ethiopia is heavily affected compared to the downstream countries, Sudan and Egypt. Thus, extending the GERD filling period and hence operation adversely affects the economy of the entire Eastern Nile basin so that no economic rationale can justify it.
Although all Eastern Nile countries incur costs due to delays in GERD operation, Ethiopia’s economic cost appears to be significant. Therefore, Ethiopia must ensure timely completion of the dam. And, given the mutual benefit of GERD for Eastern Nile countries, there is a strong economic rationale for basin–wide cooperation to finalize the dam without delays, the experts recommended.
All in all, the completion of the GERD is expected to improve access to electricity for the vast majority of the population as well as stimulate the economy and hence result in improved socioeconomic outcomes in Ethiopia and in the Horn of Africa as well.
The Ethiopian Herald April 2/2021
