Ethiopia’s $250mn Bitcoin Project, Rwanda’s Cycling Economy & Largest Airline in Africa

Good day,

Welcome to Africa Finance Today. 

This week the City of Kigali announced that it will demolish 28 houses in one of the estates based in Gasabo District which were found to be substandard after the completion of their development. 

The authorities say the investor should compensate the victims of the shoddy work he did. 

What happened is that the investor signed an agreement with the Government to develop affordable houses after which they were acquired from the developer by buyers. 

The houses were found to be substandard after a while when owners acquired them. Roofs were leaking, walls were cracking, plumbing was very poor, and sewerage systems were inadequate, to the extent that some houses started crumbling. 

The government sued the developer demanding he compensates homeowners and accused the developer of fraud and forgery. 

This case relates to business law, an interesting field of study but whose implementation or more precisely application and proceedings in court tend to be complex in nature.

Like in this case, it doesn’t seem to be clear to me whether this is a civil case or a criminal case. Going by what the government has advanced as defense in court (fraud and forgery), one would conclude that this is a criminal case since prosecution is seeking a specified imprisonment term.

You also wonder why the government would sue the investor instead of homeowners doing so. What interest does the government have in this case? Is it to protect the public or make the investor pay for the damage he caused for safety violations or building code infractions?

It is clear from court proceedings that the government is seeking imprisonment for the investor (typical of a criminal case), but again, one would have thought that homeowners needed to be compensated for the damage caused (civil remedies) by mistakes of the developer.

Anyway, I’m bringing up this case to shed light on the complex nature of business and business law in general.

Let’s get down to business!

IT’S A WRAP 🎁 
First, Ethiopia’s $250mn Bitcoin Mining Investment.

• 🇪🇹 🇭🇰State-owned firm Ethiopian Investment Holding (EIH) recently signed an agreement with Hong-Kong-based West Data Group's Center Service PLC to commence mining bitcoin. 

• 🪙 🌍️The agreement is part of a $250 million bitcoin mining project for purposes of infrastructure development for data mining and artificial intelligence training operations. With this, Ethiopia would be the first country in Africa to allow bitcoin mining, which is simply a process of creating new bitcoins. 

• 🔌The process is energy intensive. Stacks of powerful, energy-guzzling computers perform this job using high energy capacity. Bitcoin mining consumed 121 terawatt-hours of power in 2023, the Cambridge Centre for Alternative Finance estimates — similar to Argentina’s use.

• 💡Electricity can account for as much as 80% of miners’ operating costs, according to some analysts. One bitcoin lobby group, Project Mano, says 6000 megawatts could enable bitcoin mining activities in Ethiopia to thrive. Ethiopia’s energy per capita - average amount of energy consumed by an individual - is estimated to be 79 kilowatt hours.

• ⚡️🧑‍🤝‍🧑 6000 megawatts could potentially provide electricity to 1,822,784 Ethiopians, given their current per capita energy consumption. Recall, 40% of Ethiopia’s population don’t have access to electricity.

• 🫰🖥️Bitcoin proponents will argue that the economic benefits of bitcoin mining outweigh the negatives, although it is not so clear how much value can Ethiopia derive from bitcoin mining activities. 

• 🇪🇹 🤑Granted! Project Mano claims that the inclusion of bitcoin mining into the Ethiopian economy could contribute $2 - $4 billion to its GDP. It is not obvious how this value would be created except in some instances where these activities could generate some foreign exchange earnings to the country.

• 🇰🇿 🇮🇷Still, it is a risky gamble for Ethiopia to bet on bitcoin mining. A host of countries like Kazakhstan and Iran initially allowed bitcoin mining, only to turn on the sector when energy use threatened to fuel domestic discontent. 

DEEP DIVE
This week, the Airline that Put Africa on Global Map.

• 🌍✈️ Flying High: The Remarkable Story of Ethiopian Airlines ✈️🌍 In 1945, Emperor Haile Selassie had a vision – to connect Ethiopia with the world. Thus, Ethiopian Airlines was born, marking the beginning of a journey that would put Africa on the global map of aviation.

• 🇪🇹 🛩️ Today, Ethiopian Airlines stands as a beacon of success, defying odds and achieving milestones that have earned it a place among the world's leading carriers. From humble beginnings with five small aircraft to a fleet of 146 planes, the airline's growth trajectory is nothing short of remarkable.

• 💸 🧳 But Ethiopian Airlines isn't just an airline – it's a multifaceted business empire, encompassing airport services, hospitality, aviation training, and cargo operations. With a 360-degree business model, the airline generates significant cash flow, empowering it to invest in strategic acquisitions and expand its footprint across Africa.

• 🌍️ 💰️ Despite challenges like the Covid-19 pandemic and rising fuel prices, Ethiopian Airlines remains resilient, leveraging traditional and innovative financing models to fuel its growth. Strategic investments in African carriers and diverse business units position it as a key player in the continent's aviation landscape.

• 💹 As Ethiopian Airlines continues to soar, it faces competition and scrutiny. Yet, its commitment to excellence and innovation remains unwavering. With a steadfast focus on safety, sustainability, and customer satisfaction, the airline is poised to shape the future of African aviation.

BONUS 💸 
Rwanda’s Cycling Economy.

• 🇷🇼 🚴In Rwanda, cycling isn't just a sport – it's a national passion and a burgeoning economic powerhouse. The annual Tour du Rwanda isn't merely a race; it's a spectacle that unites millions, showcasing the beauty of Rwanda’s rolling hills and the spirit of its people.

• 🚴‍♂️ 🌐This year's Tour du Rwanda, with its diverse array of international riders spanning 15 countries, exemplifies the global appeal of Rwandan cycling. From Eritrea to Kazakhstan, cyclists converge on Rwanda, drawn by the challenge and camaraderie the race offers.

• 🚵 💲But cycling in Rwanda is more than just a sporting event – it's an industry valued in millions of dollars. Corporate giants like Bralirwa, MTN Rwanda, and TotalEnergies recognize the immense marketing potential of sponsoring such a prestigious event. With over one million viewers tuning in to witness the race, the impact on brand visibility and engagement is undeniable.

• 💰️ 🧭 As the Tour du Rwanda continues to grow, so too does its economic footprint. Last year alone, it took Rwf1.4 billion to organize the event, with a significant portion coming from government investment and corporate sponsorships. This investment fuels not only the race itself but also the broader cycling ecosystem, supporting professional riders, mechanics, entertainers, and hospitality services.

• 💹 The success of Rwandan cycling hasn't gone unnoticed on the global stage. The country's remarkable growth in the sport has earned it the honor of hosting next year's UCI Road World Championship – a historic first for Africa.

What Else We Know

• 🌍️ The National Bank of Rwanda maintained the policy rate at 7.5% to keep inflation in check. The Central Bank expects inflation to moderate within its benchmark rate of 2-8%.

• The Central Bank Monetary Policy Committee expects inflation to average 5% in 2024 and the decision to maintain the policy rate will stabilize inflation.

• Inflation decreased to 5% in January 2024 from 6.4% in December last year. This decrease is attributed to the ease in the prices of some imported commodities. The Central Bank in Rwanda has been tightening its monetary policy since late 2022 when inflation was at an all time high. 

• Meanwhile, the Rwandan franc is still struggling to keep with the dollar and other valuable currencies such as the British Pound, and European Euro. The Rwandan franc depreciated 18.05% year-on-year in 2023 against the U.S. dollar.

• Part of that is because of the tight financial conditions in the U.S. where the Federal Reserve kept tightening monetary policy in 2023, which saw borrowing costs rising relentlessly.