Protectionism over local coal miners will end if they fail to substitute imports
The government of Ethiopia gave a one year ultimatum to a group of local investors to substitute coal imports as Ethiopia continues to aspire to become self-sufficient in coal supply and demand by next year.
Eight local investors embarked on coal washing projects to comb impurities out of local coal and improve its heat value. With 6.1 billion birr in capital and 4.2 million tons of local coal pledged to be washed annually, the eight investors see no obstacles other than foreign currency, to import the coal washing technology soon.
However, Takele Uma (Eng.), Minister of Mines, hinted at his frustration while signing agreements with the eight investors on January 13, 2022. The companies were selected out of a dozen eager companies, under the first phase.
The eight investors include ET Mineral Development S.C (Dawro zone), East Africa Holdings S.C (Dawro), Sun Mining and Trading Plc (Gurage zone), Oromia Mining S.C (Yayu), Realmine Trading Plc (Jima), Shaka and Sons Plc (Benishangul), and Elnet Technology Group (Kamashi).
“You must start operation shortly and fulfill the domestic demand. We are going to ban coal imports legally, beginning next year. Based on the performance of the eight, we will give licenses to others, under the second phase. Many investors are interested, but if the first eight fail, we will open the sector to foreign investors. Currently, we are protecting and reserving the sector, giving priority to local investors,” Takele told the investors.
The government is determined to save the USD300 million it spends on importing coal annually.
“Despite the huge coal reserves Ethiopia has, Ethiopia could not substitute imports. This is because the previous regime worked hard to make Ethiopia remain import dependent. They blinded us so we do not exploit even our own natural resources. They have been saying local coal is sub-standard and cannot generate sufficient heat,” said Takele.
Currently, Ethiopia’s coal demand, mainly from cement industries, stood at around two million tons per year. But since the demand from textile, metal and other industries is growing, coal demand will soon reach 7.5 million tons per year, in a few years. This is because Ethiopia is planning to invest in heavy industries, including iron ore mining, which consume large coal energy, under its Ten Years Perspective Plan.
“We are working to substitute import of fertilizer, coal, and metal and metal product. The first time I came to lead this Ministry, I was not sure I can change that perception. We are seeing a good progress now,” added Takele.
Managers of all of the eight companies said they are already in the process of installing the coal washing machines and pledged to resume production in months-time.
Rough estimations indicate that there is close to 250 million tons of coal reserve, in major coal belt crossings in Chilga, Jima, Kamashi and Dawro. Nonetheless, environmentalists stress that Ethiopia’s decision to mass coal mining is against global measures taken towards ending coal energy usage.