State owned Development Bank of Ethiopia has reworked its lending policy to cater to foreign horticulture investors as the country looks to entice international investors to invest more into the fledgling industry.
The order came from the Investment Board, which is presided by Prime Minister Hailemariam Dessalegn. The Board has notified DBE to exempt foreign horticulture investors from the 50 percent deposit requirement the bank set to all foreign investors who seek to access the bank’s capital funding.
DBE, in November 2015, has amended the 70/30 lending requirement which was a fixed requirement for all its customers.
The amendment, however, introduced two separate lending requirements with rates of 50/50 and 75/25 crafted for foreign and local investors, respectively. That means foreigners, who seek to access DBE’s investment loan, are required to deposit the 50 percent amount to get the remaining 50 percent in funding. At the same time the bank reduced the 30 percent deposit requirement to 25 percent for local investors.
The latest direction from the Investment Board will force DBE to exempt foreign horticulture investors from the 50 percent deposit requirement that have been set on all foreign investors and treat them with the 25 percent rate it has set for the local investors.
The economic opportunity the sector has been creating is the main ground for the Investment Board’s latest decision. It has evaluated the sector’s significance, mainly in terms of creating enormous job opportunities for the rural and semi urban parts of the country, the sources said. For instance Afriflora, a Dutch-owned flower farm in Ziway town, Oromia Regional State, located 100km to the South East of Addis Ababa has employed some 5,000 workers, out of which women are the largest in number.
Thus, the decision is somehow a reward to sustain the employment opportunities gained so far. Despite its short journey, horticulture has been the fastest growing sector in Ethiopia. The sector currently shelters close to 70 farms significantly dominated by foreign investors. Apart from the employment opportunity it has created for several thousands of Ethiopians, the horticulture sector has been an alternative source of foreign currency.
In the year 2015/16 alone the horticulture sector has generated $275 million.
Earlier to the aforementioned decision, the Investment Board also deliberated on the extent of damages the horticulture sector has encountered during the recent political protests. During the discussion, the Board has identified 23 horticulture farms that have been attacked by protesters.
Many of these farms have encountered partial damages while few of them were totally damaged by the protesters. After determining the level of damage, the Board granted the 23 farms a one year tax relief and duty free privileges to their imports.