The executive supervising MIDROC’s Ethiopian agriculture projects talks to The Africa Report about how rocketing consumption has been an opportunity for the company.
The skyline of Ethiopia’s capital city, Addis Ababa, would be incomplete without the MIDROC building – a column of white and blue that towers over the traffic jams at Meskel Square, the lush grounds of the imperial-era Ghion Hotel and the national football stadium, home to Ethiopia’s beloved Walias.
Reap what you sow
Sept. 23, 1970 – Born in Addis Ababa
1993 – Left Ethiopia for the US to pursue higher education
1994 – Returned to Ethiopia
1994 – Founded Ahfa, a company that imported cooking oil
2004 – Switched businesses from auto parts to fast-moving consumer goods
2008 – Opened Horizon Plantations
From his office on the 15th floor, Jemal Ahmed has a bird’s-eye view of the pitch where players face off against international contenders. But he does not have much time for watching matches these days – indeed, most of the time he is not even in his office, a bright space with sparkling white floors and expansive windows.
“I work 24 hours a day, whether it’s from home or in the field,” he says.
When it comes to private enterprises in Ethiopia, the conglomerate MIDROC is a behemoth. It is owned by Sheikh Mohammed Al Amoudi, a Saudi-Ethiopian businessman who is the country’s largest private investor and the 75th richest man in the world, according to Forbes magazine.
The company’s assets include Ethiopia’s only commercial gold mine, its biggest cement factory and the world’s largest contiguous coffee plantation.
Agriculture, which employs more than 80% of the Ethiopian population, is a focus for three of the enterprises under MIDROC’s vast umbrella, and Jemal has a supervisory role in all of them. He is the new chief executive of Saudi Star, the managing director of Horizon Plantations and Al Amoudi’s representative for Ethio Agri-CEFT.
According to Jemal’s estimates, Ethio Agri-CEFT produces coffee, tea and cereals across an area of about 25,000ha, while Horizon is currently cultivating about 32,000ha and plans to invest another 500m birr ($25m) in coffee and oranges, two of its “bread- and-butter” products.
Saudi Star controls 14,000ha of land in the western region of Gambela, where it plans to grow rice and cotton.
Though Ethiopia depends heavily on agriculture, crops alone will not be enough to sustain this fast-developing country, where gross domestic product (GDP) grew 10.3% in the last fiscal year according to official figures.
The government wants Ethiopia to diversify away from commodity sales by investing in value-added exports and supporting industrial development.
In that arena, MIDROC is a pioneer in Ethiopia. Its processing plants roast coffee, turn oranges into marmalade and reduce tomatoes to a paste.
“When agriculture is integrated with industry, it boosts economic growth,” Jemal says. “In Ethiopia, with the population we have and the labour we have, I think we could compete in medium-scale industries.”
Despite the government’s ongoing efforts to restructure the economy, Ethiopia’s manufacturing sector represents just 4.2% of GDP.
Jemal pins the blame on poor trade logistics and a lack of infrastructure. He says that he looks forward to the completion of government projects, including dams and railways, that will make it easier for exporters to operate efficiently.
“There has been a big need for infrastructure, which we didn’t have, but the government has been investing heavily in that,” he says.
MIDROC, too, has been making investments in support of Ethiopia’s economic goals. It purchased bonds worth 500m birr – more than any other private enterprise – to support the Grand Ethiopian Renaissance Dam, a flagship project that will raise electricity generation to more than three times its current level.
Right place, right time
Addis is Jemal’s home town. He went to the US to pursue an education but this was cut short when his father died and he returned to Ethiopia to support his family.
He learnt his trade on the shop floor.
“I started as a trader at my father’s shop, importing auto spare parts and then moved into commodities by importing cooking oil,” he says.
The company he founded, Ahfa, became one of Ethiopia’s largest cooking oil importers. Jemal met Al Amoudi through mutual friends, and the two became business partners in 2007.
“I learned a great deal about Ethiopia’s economic growth through cooking oil. The consumption was just skyrocketing year after year. Sheikh Mohammed and I got together and wanted to develop a cooking oil project in Ethiopia, so with that we established Horizon,” he explains.
The government took over all palm oil imports in 2008, but by then Jemal was well on his way to a position of power within Al Amoudi’s diversified agricultural empire.
MIDROC rose to prominence as a key player in Ethiopia’s long-term privatisation drive.
The current ruling party overthrew the Soviet-allied Derg government in 1991, and although the government has retained strong control over sectors like telecommunications and electricity, it has spent two decades selling various state enterprises to the highest bidders.
“We have bought a lot of companies from the government,” says Jemal, though these purchases often come with stringent conditions: “They will put clauses in the contracts that will bind you, like you cannot lay off employees or you have to invest the amount that you put on your business plan orelsefacepenalties.”
MIDROCis especially adept at navigating the business environment, says Jemal. “In the last 20 years, we have faced different challenges, so we have earned a lot of experience.”
But the company is not without controversy. With its collection of diverse assets and tight ownership structure, MIDROC’s inner workings are shrouded in secrecy.
Saudi Star is a subject of particular scrutiny, and human rights groups have lambasted it for participating in ‘land grabs’ in which the government leases huge tracts of land to companies while ignoring the rights of locals.
Jemal says the criticism is unfounded: “There was nobody there,” he says, referring to Saudi Star’s land in the Gambela region. “It was a virgin land. It is bush that we are clearing. There is no one displaced because of Saudi Star – not a single person.”
Saudi Star has also failed to produce crops according to schedule.
Aside from a 4,000ha plot recently acquired from the government, the land leased for rice has not reached commercial production.
The company cleared its plot but it is now overgrown. It will have to be cleared again before the scheme can take root.
The farm also requires irrigation from the nearby Alwero Dam, and Saudi Star is completing a 21km canal.
Construction of the conduit has slowed, sparking claims that MIDROC is facing financial troubles – a charge Jemal denies. He admits the project is “very behind schedule” but insists the firm’s ambitions will be realised: “We are hoping that by the end of 2015 we will develop the whole 10,000ha.”
Jemal does not seem worried about the prospects of Saudi Star or any of the enterprises under his watch.
But there is one thing he has yet to accomplish, and it has to do with the very thing that attracted him to agriculture in the first place: cooking oil.
All these years later, MIDROC has yet to secure the land Jemal and Al Amoudi want for the cultivation of ground nuts and oil palm.
“Cooking oil is still the best project I would love to get into!” he says. Available land has so far been hard to come by – mostly because Jemal and Al Amoudi do not want to start small.
“It’s just that we want to do it in a very big way,” he says. “I think both of us are very ambitious, and if we think there is potential, we try to grab it and develop it.”●