ETHIOPIA & PRESIDENTIAL ADVISOR
9103 OU31 - Ethiopia – RTZ
In 1993 my liaison between the Western ambassadors and Ethiopia government more or less came to an end. Most of my responsibilities had been passed across to the liaison committee I had set up. In any case, the Ethiopian government was feeling much more confident about its dealings with the outside world. Accordingly, my brief from the Ethiopian government changed to finding commercial opportunities. They were trying to develop the country; and their strategy was 'agriculture led industry'.
From my marketing experience the most obvious route was to better market the existing coffee crop. This was Ethiopia's main export. However, it was very subject to international price fluctuations. In particular it was subject to conditions in Brazil, the world's biggest producer. Hence, in the early Nineties, a frost in Brazil killed off much of its coffee crop and world prices skyrocketed and Ethiopia benefited. Even so, there was no guarantee that this would continue - as indeed it didn't - so my advice to the government there was to try and address the luxury coffee market. This was much more stable, and also much more profitable.
The background to this was that coffee had originally emerged from Ethiopia. Thus, while coffee is now being grown across the globe, its original site was in Ethiopia. Consequently, there were large amounts of wild coffee in Ethiopia, which were casually collected and, as such, were graded by the world markets as the lowest quality coffee. There were also large plantations, though in the south these were being grubbed out to be replaced by chat, which was much more profitable crop for growers. But even these plantations were treated by the rest the world as providing the lowest grade of commodity coffee. My suggestion, therefore, was to sell wild coffee very much as a luxury product. The problem was this meant putting in place an infrastructure which allowed for the plantations to be upgraded in terms of quality control, but in particular to impose some sort of quality control on the wild coffee. I felt, and still do, that wild coffee, harvested from the original home of coffee, would be a very luxurious product. Unfortunately, it was not possible, at least in the short term, to put in place the necessary infrastructure -- so this first idea went out the window.
They were particularly interested in commercial opportunities in Tigray Providence, not just because that was where the government came from but also because it was the poorest area. In particular, they were interested in using the marble that was conveniently available near Mekele. But convenient for Ethiopia is not necessarily convenient for anyone outside. I talked with my architect friend, Ian Donaldson, who had used large amounts of marble in the buildings he was creating in Saudi Arabia. The problem, he pointed out was that the cost of getting marble from Ethiopia would have been prohibitive, in view of the poor communications. Even Saudi Arabia, its nearest customer, had much better communications with Italy; and, in any case, this was believed to have a better quality of marble. Strike two, in terms of commercial possibilities.
There was some oil in the south of the country, and various oil companies were prospecting for this. Again, though, access was problematical; since it was nowhere near the high seas.
It finally came down to the most likely contender being mining in the north of Tigray Providence, next door to Eritrea. Surveys had shown that there were various minerals, not least gold, in the mountains there. Accordingly, I approached RTZ. There are number of mining companies around the world who conduct such operations, but RTZ was -- as far as I could see -- now the most respectable these, though it had a rather chequered past.
Accordingly I met with its middle managers, and learned that in essence their requirements for a mine were to be seen in terms of its physical dimensions. "If the hole isn't one mile by one mile on the ground and one mile in depth - in other words a cubic mile -- then it won't be of interest to us". It is amazing just how modern technology has changed mining. In South Africa they drove tunnels to their underground gold, RTZ now used gigantic drag lines and bulldozers.
Thus began a period of negotiations about the price and conditions. I prepared a business plan, giving the sort of prices the Ethiopian's wanted. It was laughed out of court by RTZ. The Ethiopian's were using the prices quoted by other African countries. RTZ admitted these were the prices quoted, but it said they and other mining companies only operated because the actual price was less than a quarter of this. They achieved this quite simply by paying out massive bribes to the local politicians. Paying such bribes in Ethiopia was obviously much more problematical.
This also raised the moral issue for me since about this time RTZ said to me "What you want, a 10 percent commission or 5 percent commission". The project would have cost around a billion pounds, RTZ never invested in a project of less half a billion. This meant that my personal gain from the project could have been between £50 million and £100 million. You begin to realise why there so many very rich people around the world, when this sort of commission is paid. It put me in a real dilemma. It is difficult to ever consider turning down £100 million. On the other hand the Ethiopian government were my friends, and I felt I would be betraying them if I took such a commission. Believe it or not, I finally said I would take no commission since they were my friends. Later on, when the project fell through, I felt good about it -- but for a while it was a real temptation.
My meeting with the board of RTZ was a classic series of errors. I had noted in my diary that I had a meeting with someone. But I couldn't remember who. I assumed that they were to come to me at the OU, so I went in there to work in my office. About 11 o'clock in the morning I received a frantic phone call from RTZ who said “Why aren't you here to meet the board!” I suddenly realised that the cryptic comments in my diary were meant to tell me that I had to meet their board in Newbury. I was dressed in my usual work clothes, sports jacket etc., so I had to get home and change into a suit and then get down to Newbury. Unfortunately, it was a day when Pat had the car and she was non-contactable. Accordingly I had frantically to find a taxi to ferry me Newbury and then to wait for me there. The final taxi bill was something like £150.
I presented my pitch to a rather disgruntled RTZ exploration board. But, despite my lateness, they did seem to accept it. Unfortunately, later on, the whole project fell through -- even after the RTZ team had visited Addis Abeba to meet with the various ministers -- quite simply because their project in Burundi, not far away, collapsed because of local riots. On such that slender foundations are fortunes built; or not, in my case!
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