It will cost $1.2 billion with the Export-Import Bank of China financing 70 per cent and the Ethiopian government 30 per cent. It will be one of the first electric trains in East Africa, with a speed of 120 kilometres an hour. It will reportedly be easier and cheaper to maintain than the former French diesel locomotives, the last of which shut down in 2008, as it will be mechanised, relying on locally-produced hydropower to run.
The Addis-Ababa-Red Sea line is one of a network of planned rail infrastructure that will link land-locked Ethiopia in a series of eight rail corridors totalling 4,744 kilometres, creating a series of key trade routes to neighbouring Kenya, South Sudan, Sudan and — crucially — to Djibouti’s port. Another planned line will connect the region of Afar, where Ethiopia is encouraging the mining of potash for fertiliser. Lack of efficient road and rail infrastructure has cost the economy dearly. Difficulties such as poor roads and old truck fleets mean transporting goods from the Addis Ababa to Djibouti can take days. The new railway line will cut the time to about eight hours, a huge economic boost and an example of the economic transformative power of well-conceivedinfrastructure.
The new Chinese-built Addis Ababa to Red Sea railway will open Ethiopia directly to trade with China and Asia
The grand infrastructure project is named GTP, the Ethiopian Government’s five year Growth and Transformation Plan to lift the country out of poverty and transform its agriculture and industrial potentials to the level of a middle income country in the next ten years. Other parts of the GTP call for new roads and dams to produce hydro-electric power to produce planned GDP growth rates of at least 8% yearly. In addition to the Chinese, Turkish and Brazilian construction companies have bid on other parts of the GTP.
The Chinese have clearly done their homework in making the decision to build critical economic infrastructure in Ethiopia. It is Africa’s second largest in population after Nigeria with some 96 million population. Something little discussed, it lies along the African Great Rift Belt, a tectonic fault line or belt some 6,000 kilometers long from Lebanon’s Beqaa Valley to Mozambique in South Eastern Africa. Some geophysicists believe the Ethiopian or East African Rift Belt contains some of the world’s richest untapped mineral deposits and potentially Saudi-levels of hydrocarbons–oil and gas. Until now colonial occupation by Mussolini and lack of development during the Cold War have kept that richness from being of benefit to the country. That is now changing.
For the Chinese, the reasons are many to make the rail link between the Red Sea Port in Djibouti and the interior of Africa’s second largest market. One reason is to begin bringing Chiense factories into Ethiopia to produce at lower costs than the same factories are able to in China where in the past decade wage levels have steadily risen. The combination of cheaper labor costs, some costs as low as 10% of those in today’s China, adequate hydro-power electricity and now accessibility to the sea are making the country a magnet for foreign direct investment of a size for the first time. As an example of the recent rise in manufacturing wages in China, average factory pay in Henan, about 800 kilometers from the China coast, rose 103 percent in the five years ended in September 2014. They rose 80 percent in Chongqing, 1,700 kilometers up the Yangtze River, and 82 percent in Guangdong. A typical Ethiopian unskilled factory worker makes about $30 a month. South Africa, Africa’s largest manufacturing country has a monthly average wage of $1,200 and China today about $560 a month.
Foreign direct investment in the nation surged almost 250 percent to $953 million in 2013 from the year before, according to estimates by the United Nations Conference on Trade and Development. The Government expects 2015 to be a record for foreign direct investment, up 25 per cent from 2014’s $1.2 billion, for a record $1.5 billion. When the new rail link to the Red Sea opens in early 2016 that FDI level should greatly rise as especially Chinese, Indian and Turkish companies flock to locate there.
In May, 2014 Chinese Prime Minister Li Keqiang and Ethiopian Prime Minister Hailemariam Desalegn, met in Addis Ababa. After their meeting Hailemarian told the press, China is “supporting Ethiopia’s great vision to become Africa’s manufacturing powerhouse.” Hailemariam told reporters at a joint press conference in Addis Ababa. vii
What is emerging around the Chinese construction of a semingly minor rali link in a land-locked East African country could be the building block for a major economic development of Africa for the first time in modern history, something European colonial powers from France to Belgium to Portugal to Britain did all in their power to avoid.
F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”.