Eritrea Tensions drive Investors to Ethiopia

afewerki eritreaEritrea has long been in the spotlight, and not a particularly flattering one, for its tensions with neighbors such as Djibouti, Somalia and Ethiopia itself. The Eritrean government has not quite been able to shake off international accusations that it supported fundamentalist groups fighting against the Somali Transitional government and of backing rebel groups in the Ogaden region of Ethiopia. Nevertheless, for all the regional tensions, Eritrea has earned the reputation of a country with a poor human rights record. The grave violations of human rights include arbitrary detention of those perceived to be political enemies including opposition members (who have to operate in secret) journalists and even former allies of President – or rather dictator – Afewerki.

In a somewhat similar fashion to North Korea, Eritrea has found itself increasingly isolated at both the regional and the international level ever since it gained independence from Ethiopia in 1993 and came to be governed by one of the most repressive dictatorships in Africa. President Isaias Afewerki has encouraged the repression of opponents of the regime with thousands of arrests, most of which are in clear violation of international standards on human rights as denounced by Human Rights Watch.

The country has been described by some NGOs as a “state prison” or an “open air prison”, actually can boast about a huge number of prisons scattered throughout the country. The real or perceived (mostly the latter) threats to national security have continued to give the government a pretext to exert total control over the civil society through the repression of any form of dissent.

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One of the more subtle, but effective forms of repression, has been the strictly enforced military conscription regime. The country’s army is about 600,000 strong; this with a population of about 6 million. Few countries anywhere, other than North Korea or the Cambodia of the Khmer Rouge, have one tenth of their population in the army. Eritrean conscript actually account for a good majority of those who try to escape toward the Mediterranean shore or the Sinai in an attempt to reach Europe or Israel. It is estimated that every day, about a hundred people, Eritreans, fleeing the regime through the Sudan.

It was only a matter of time then, especially in the wake of the anti-government revolts occurring under the guise of the ‘Arab Spring’ that have affected much of North Africa, that Eritrea would start to feel some pressure. It is still unclear, given the difficulty of obtaining reliable reports from Eritrea, but it seems that on January 21, there was a coup attempt as a group of soldiers attacked the Ministry of Information, also taking control of TV and radio communications. The mutinying soldiers read a statement stating their intention to restore the 1997 Constitution and to release political prisoners (between 5,000 and 10,000 according to the UN). The Constitution allowed for elections and a parliamentary framework, but neither one has been implemented in years.

The message reportedly did not specify a request for President Isaias Afewerki to step down. In the 24 hours after the episode, the situation was said to have returned to calm after the army surrounded the government building forcing the rebels to surrender. The coup leaders were taken away in armored vehicles to a military base south of the capital but nothing is known about any possible negotiations or repercussions. According to the Eritrean opposition in the United States, the coup was led by Osman Saleh, commander of a hero of the war against Ethiopia the years 1998-2000. Nevertheless, an attempted coup, even a failing one shrouded in unclear information, in Eritrea suggests that more political and internal dissent is forthcoming.  Opposition activists in exile have confirmed that in recent times the Eritrean army has struggled to contain dissent largely because of the economic difficulties of the country.

Coups attempts are very rare in Eritrea and the most recent before the one occurring on January 21, 2013 took place about ten years ago; it was led by the so-called G-15 Group, whose members also appealed for a return to the Constitutional order. The armed forces, the backbone of Eritrean society, are clearly dissatisfied and even while this attempt has come and gone; it may well be simply the first of several more attempts to come. Afewerki may tighten his grip in response but this will only make matters worse. There have also been unconfirmed reports that the Eritrean minister of Information, and a close Afewerki ally, has defected to Canada last year.

The situation presents a conundrum for a host of Western mining companies that have been operating in Eritrea after Human Rights Watch (HRW) published a report (on January 15) accusing them (and the Eritrean government) of crimes against humanity. For the regime of Isaias Afewerki, this is just one of many accusations that it faces and few would disagree that it is one of the worst and most ruthless of the planet. However, for Western companies, with shareholders, Eritrea can be cause severe damage to their reputation and with social corporate responsibility having gone ‘mainstream’; the problem can promptly translate into severe business risk. The HRW report cites the case of the Canadian mining company, Nevsun Resources, which is developing a gold project in Eritrea.

Nevsun faces the problem that all Eritrean construction projects are by law contracted to the local Segen Construction Company.  Segen (and it must be stressed HRW has not accused Nevsun of any violation), is accused of using conscripts and of not paying them; in essence, it accused of using slave or forced labor.  Eritrean law has established that Eritrea conscripts can be sent either to military service or work for the government and those who refuse end up in custody (HRW hints they could face torture). Even if Nevsun wanted to improve the Eritrean workers’ conditions, in some way, offering food or other services, it is prevented from doing so since the places where the workers are literally locked up after work are off limits.

South Boulder Mines Ltd (ASX: STB) is developing a significant potash resource in Eritrea; it too faces the same risks as Nevsun even if it has not yet started mine construction, thereby avoiding accusations of using slave labor and dealings through contact with Segen Construction. Nevertheless, South Boulder, which has an ambitious plan to produce close to 1.08 billion tons at 17.97% KCl (potassium chloride or potash), including 114 million tons of very high grade sylvinite at 28.5% KCl at the Colluli project, will have to evaluate its risks more closely. The HRW report and the coup attempt have come in close succession. The Afewerki regime is under pressure while its neighbor Ethiopia has seen twenty years of significant economic growth, earning the reputation of being one of the leading emerging markets of the decade with evern more favorable prospects in the horizon. The lessons of Libya are instructive here.

The totalitarian Qadhafi regime did not have a policy of conscript labor (many Eritreans actually have migrated to Libya over the past 20 years in search of work and opportunities to leave for Europe); however, companies that got too cozy with the past leadership lost out on contracts after the new government took over (SNC Lavalin is an example). Should the current Eritrean leadership collapse – and hints of this have already materialized – companies that have cooperated with the Afewerki dictatorship would not be treated kindly. The Eritrean government is all too keen to invite foreign operators, since they bring much needed investment dollars (indeed it needs hard currency – literally as foreign reserves have dwindled); but the stakes have been raised for these companies have taken, especially the ‘one horse’ plays, that put all their effort into one resource. They risk being seen as accomplices of the regime.

There is a more hopeful scenario nonetheless. A stable peace with Ethiopia would help Eritrea pull back its martial, Spartan like, regime and open up to the world. In a bid to resolve tensions, especially within the armed forces, Afewerki might be persuaded to consider recent peace overtures from Ethiopia. He would not have to look too far because Ethiopia’s Prime Minister Hailemariam Desalegne clearly said  during an interview on Al-Jazeera last December he would be willing to travel to  Asmara to meet Afewerki and discuss the establishment of a lasting peace, an endeavor that has been pursued for decades without any results. Afewerki’s political survival has been compromised and peace may be his last option to save his government – even if it would imply a major political shift.


  1. The contents of the article and the title do not align at all! The author did not mention any investor (not even a sinsgle one) that diverted its investments to Ethiopia … nada! zilch! How can you substantiate the claim? I am not sure where the writer got his education, but no matter how many languages the author can translate this article to … it is the most disconnected and pointless business article I have read on the Horn region.

    The mutiny in -Eritrea just happened yesterday. How soon did that get refelected into an investment outflight from Eritrea and specifically to Ethiopia? No even a high caliber machine can calculate that within the last 24 hours?

    I realized its importance for investors such as Allana Potash that is exploring and working on the Ethiopian side the potash rich region of Dankalia. The stated company has a serious potential competitor on the eritrean side, South Boulder Mines. The later is hoping for an open pit mining which is way cheaper than how Alana is planning to mine the potash in Ethiopia, solution mining. In addition, the transportation cost for Allana is 10 folds more expensive than that of South Boulder. There is no match between the two. The onyl way one can bring down South Boulder’s Eritrean initiatives by hiring mouth pieces such as Alessandro. So sad to see an Allesandro being used by the deep pocketed rich in order to harm the poor.

    • The transportation may be more expensive; the problem is more, however, whether or not Eritrea will be led by Afewerki by the time the mine gets to production stage. If Afewerki manages to consolidate power – under the current ideological scheme – South Boulder itself has to worry about government takeover. Many Eritreans like to compare Afewerki to Qadhafi. There are differences. Eritreans are well trained and Eritrea, thanks to its lack of major resources, has learned to become self sufficient like Cuba. However, it is risky for foreign investors, especially becasue the government needs hard curreny to keep going. Political change might come; the question is, if does come, will the new Eritrean government honorthose companies that did business with the current dictatorship? It’s risky. So for thoe considering the resources of the Horn of Africa, Ethiopia is a far safer bt – even without direct port access

      • Name a single publicly traded mining company in Ethiopia that pays the same amount of dividens as Eritrea’s Nevsun? Name a single mining company the generates the same amount of cash as Nevsun? Nada! Regardless of our political opinions about Eritrea and its government, Eritrea has been a great cash cow for these companies. That is why investors will flock to Eritrea. As much as board rooms’ hunger for cash, Eritrea is hungery for their activities as well. As long as these two needs persist and the undeground wealth is in place, they will both work together. That doesn’t dry up the investment flow to Ethiopia. The world is flooded with explorers, miners, and bargain hunters. The competition is among these bargain hunters, not between Eritrea and Ethiopia. That is why your article is lopesided and a little narrow. You need to see take the skyrocketing metal prices and the extent of idle capital out there. The world is no longer dependent on the West alone. There are super hungry investors all over Asia who are willing to pour their capital to risky locations and whose risk appetite is way higher than that of the US, Europe, and Canada. Do you know the majority of the companies exploring in the Horn are from Asia?

  2. I found the article posted in Allana’s website. I was surprised to see that. The artcile has nothing to do with Allana and yet it was on its website. That explains how threatened they are with the ongoing potash mining on the Eritrean side. Had that not been the case they would have just minded their own business as usual and care less abou this politically motivated article.

    • Eritrea was not long ago part of Ethiopia and tensions have built over the 20 year period of independence. The conditions in Eritrea are unsustainable and the criticism I cite – especially as far as the companies doing business in Eritrea – was not prompted by me but by human Rights Watch. Regardless of your political leanings, many boardrooms from South Boulder to Nevsun will be privately discussing how best to handle a reputation risk potential that can only get worse, while Ethiopia’s has been improving considerably. Don’t shoot the messenger. The coup attempt is but a first sign of trouble; Afewerki’s chair, like those of so many other African leaders in the past few years is wobbly

      • I do not have a love affair with the Eritrean government, my friend. All I am saying is, the title of your article doesn’t correlate with the contents. Where is the evidence of the investors that di-invested or shifted their capital to Ethiopia? Who are these companied? Remember your title reads “Eritrea Tensions Drive Investors to Ethiopia”. I have an advise for you, change the title to ” …will Drive Investors” or show us the evidence of capital out flight.
        As far as, Ethiopia improving goes? My friend, they are my brothers and sisters and I hope all the statistics you are reading on Ethiopia are true and reflective of the realities of the greater public. I am not too keen in comparing Ethiopia versus Eritrea. It is about those in the boardrooms and their mail men, bloggers and journalists. I hope you understand what I meant.

        Again, what really caught my attention was Allana Potash posting your article on its front page. There is no mention of Allana in your articel except my comments. It is a company the publishes news artciles once in a blue moon. And yet the company found the virtual estate to post a link on its page. Interesting!

      • I care less about the Eritrea president, my friend. What I am for is for fair minded board rooms. Qadafi was an animal, so were their protectors in boardrooms.

      • Mr Allesandro, you clearly have no clue about Eritrea. Certain people of interest may have coerced you one way or another that lead you to disseminate unsubstantiated “news” in favor of your clients. But, if you are a journalist / analyst, there is a great deal of professional ethics you are violating just in this Article. Eritrea is a nation that survived quite a lot of conspiracy you could never fathom. Study Eritrea carefully, and you might as well learn a thing or two on how not to turn one’s natural resources into natural curse!

  3. Focusing on the political situation in order to embellish and prop up ones efforts in Ethiopia is not a lasting solution. The situation in Ethiopia may be quiet but a time bomb for sure. One doesn’t have to go far to learn the truth of the gravity of the explosive nature of conditions in Ethiopia. It is suppressed, for sure. The opposition in the Afar region where Allana is heavily invested in can serve as just a small example. Not only that, but the fact that the potash resource base sits a few miles away from the Eritrean border is one that calls for heavy prayers for peace on both sides of the border. Anyone who thinks lack of peace in Eritrea will benefit Allana and Ethiopia must be a fool and narrow minded. Remember the doctrine of Mutual Assured Destruction?
    In addition to the Afar region and the Eritrean factor, the number of hopeless and politically destitute communities in Ethiopia can not be explained the highly embellished statistical facade. One has to listen intently and attend Friday prayers in order to grasp the gravity and explosiveness of the situations among Ethiopian Muslims. Recent Friday riots through out Ethiopia can serve as a small window to learn about the situation. Talk to the Amara’s, Oromo’s, Ogadeni’s, Benishangul’s, etc.
    All I can say is, watch what you pray for. The Lord can surprise you one day and make it happen. And don’t let carefully cooked national statistics fool you. There may be dimensions those numbers are not providing. One may need to carefully explore those hidden and clouded faces of the state of the host country.

  4. I am confused by the commentators as they seem to be debating issues from their portfolios not from the article above, which is an inciteful and well written update on Eritrea. The only person that integrates Allana into this story is the commentator who claims to be an Allana investor, and insures that he/she clubs us with this point by utilizing this pseudonym.

    This piece discusses clearly how the Eritrean and Ethiopian governments working together would benefit everyone. So let’s consider equally peaceful commentary and/or solutions for what is an area with alarming human rights issues at play.

    • The commet regarding the title makes sense. The author did not present evidences regarding Eritrea Tensions driving Investors to Ethiopia. That is legitimate comment. The title of the article is a bot off.

      • Title Fix –

        Would you like to explain to our readers how you have the same IP Address as the person claiming to be “Allana Investor”?

        So you are either the same person or share the same laptop or computer… clearly you give out criticism with greater ease than you take it.

  5. I bet Mr. Allessenadro have never set foot in Eritrea. The title and the content are not in one line. Besides the connections with Allana, the very fact that the author fails to mention a single company who fled Eritrea to Ethiopia makes his attempt to diminish the ongoing mining investment opportunities in Eritrea futile. try harder Mr. Allesandro. Eritrea is not Libya.

  6. Alessandro Bruno,
    The foregoing comments on the economic aspects of your article have been well and amply covered. I would have expected a more qualitative and rational analysis on the political statements you make on Eritrea, especially coming from someone of Italian ancestry! Instead I see you are an embarrassment to the institutions who donned you with their BA, MA and your various employers.
    Almost as though you came up with a brain wave you throw in the possibility of Eritrea accepting an Ethiopian “olive branch”. Have you heard of the UN, US, EU, AU brokered, Algiers Agreement of 2002 to which they all are guarantors? FYI Ethiopia is currently illegally occupying Eritrean territory and your paymasters have gone deaf and dumb on Ethiopian breach of the final and binding agreement. Desalegn’s offer to travel to Eritrea does not include an action plan towards vacating Eritrean territory as delineated by the EEBC. You fail to see the offer as being a mere political whitewash. A balanced writer would agree with Eritrea’s rightful stand in demanding the return of her territories first and foremost. That’s when real peace and mutually beneficial trades and cooperation would flourish.

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