Business as usual for Allana Potash in Ethiopia after a Delicate Political Transition thanks to the Legacy of Meles Zenawi

Allana Potash (Allana, TSX: AAA) is set to become one of the largest potash producers in Africa thanks to its ongoing project in Ethiopia. Allana has taken advantage of Ethiopia’s policies to attract investment, which have enabled the country to record one of the highest economic growth rates in the world (11%, expected to continue until 2014).

However, Ethiopia’s Prime Minister Meles Zenawi, an essential figure in changing the way Ethiopia has been perceived in recent years, died on August 20, raising questions about the future of the country and of its policies. Political succession processes in Africa are typically tense and complex and offer little guarantee of policy continuity, given the strong personal character of leadership. Nevertheless, Ethiopia has made some radical changes in the past two decades under Zenawi’s leadership and his legacy will surely continue under his successor.
Zenawi has turned Ethiopia into one of the fastest growing economies in Africa. While Zenawi cannot be said to have been a democratic leader in the North American or European sense of the term, he should be praised for managing to turn Ethiopia, from one of the poorest countries in the world, to one of the fastest growing economies in Africa such that Ethiopia’s GDP has more than tripled during his rule.

One of Zenawi’s most effective strategies was to allow Ethiopia’s capital, Addis Abeba, to serve as the host for the headquarters of the African Union. This attracted considerable foreign investment from such countries as China, Turkey and India.

As a man, who continued to educate himself throughout his presidency, undertaking business and management courses, he encouraged education and invested heavily in school infrastructure and in the field of women’s rights. In 2008, the IMF stressed that Ethiopia’s economy has grown faster than any other non-oil exporting country in sub-Saharan Africa. Zenawi had a vision for a strong and prosperous Ethiopia and he aimed at taking a leadership role in the Horn of Africa region, political and economic.

While many challenges remain, under Zenawi, Ethiopia went a long way to shed its image of the famine stricken country that inspired the humanitarian aid concerts of the 1980’s challenging famine to one eager to welcome foreign investors in all sectors. More importantly, perhaps, the most significant aspect of Zenawi’s rule was witnessed on his very passing.

Unlike the tense and uncertain future that typically characterizes a succession of power in most Sub-Saharan African context, marked by violence and, in some cases, civil war, Meles Zenawi left a political legacy that has allowed for a smooth and peaceful transition of power to the (former) Deputy Prime Minister of Ethiopia, Haile Mariam Desalegn, who will serve officially as interim head of the government.

The Cabinet will remain intact as will Zenawi’s economic policies. In 2010, Zenawi’s Party, the Revolutionary Democratic Front of Ethiopia, won elections and it currently remains in control of Parliament. A continuity of Zenawi’s legacy shall include Ethiopia pursuing the Millennium Development Goals, attracting even more foreign direct investment, developing infrastructure, developing industry and doubling agricultural production.

The latter goal is perhaps the most important in a country such as Ethiopia, which suffers frequent droughts and food shortages, leading it to have import food. As a potash producer, Allana will likely play an important role in enabling Ethiopia to reach its goal of doubling food production.

Farmers there will start to adopt more advanced agricultural techniques, requiring the use of potash based fertilizers. Allana will also export potash in view of a sustained demand for mineral fertilizers worldwide.

African demand itself is expected to grow over the next decade and Allana has already targeted production at Dallol to begin before the end of 2014, starting at a capacity of 1 million metric tons of muriate of potash (MOP) per year. Allana estimates that Africa could use as much as one to two tons of potash a year, and tripling that amount into the next decade.

Allana has announced the discovery of high sylvinite (potash ore) mineralization in three holes around the Musley deposit at its Dallol project. Committed lenders have invested some USD$ 600 million so far thanks to commitments by Liberty Metals & Mining Holdings and the International Finance Corporation (IFC, a member of the World Bank group), which exceeds the company’s initial debt financing projections.

Allana should conclude the project debt financing for the project by late 2012 in order to begin construction in 2013. Initial production of about 1 million tons is expected to start in 2015, reaching peak levels in 2017. Allana will ship its potash through the tiny Republic of Djibouti, where a new port is being built in Tadjoura.

Allana will have its own terminal with unloading and storage facilities at the new port. The potash will be delivered to the port by truck along a new highway linking the Dallol project with the port, which is already under construction.

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Tags: Allana, Business, Delicate, Ethiopia, Legacy, Meles, Political, Potash, Transition, Zenawi, More…a, after, as, for, in, of, thanks, the, to, usual

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