Ethiopian Business Review

The Emerging City How Dire Dawa is Creating a Post Contraband Economic Identity Featured

Located on the eastern edge of the East African rift valley, 515km away from the capital and 48km north west of Harar, Dire Dawa lies in the intersection of roads from Addis Ababa, Harar and Djibouti. For long a caravan center, Dire Dawa is an accidental city, developed as the chief outlet for Harar after 1904, when it became the terminus of the railroad from the port of Djibouti.

Dire Dawa city is currently organized under the Federal Democratic Republic of Ethiopia “Dire Dawa administration charter proclamation No. 416/2004”, with two tiers of administration-the municipality and kebeles. Divided in two (modern and old quarters) by the Dachatu river, the city’s growth has been more organic. It is the second largest city in the country with 384 000 inhabitants. In the 1960s, Dire Dawa’s economy was booming due to the railway line, and the emergence of small and medium scale industries. Since the beginning of the 1980s and 90s ,its economy has been highly dependent on contraband goods, according to a UN HABITAT report.

After the contraband trade slowly dried up in the last decade or so, due to tighter border control and stricter law enforcement, the vibrant trade and the economy that was dependant on contraband commodities was hard hit. Following this, business activities were dwindling in the city and Dire seemed to have lost the vibrancy once it was known for. Yet, since the last five or six years, the city and its economy seems to be waking up from the hibernation phase it sunk in to.

Sheriff Ibrahim, 23 lives with his parents in a village named Sabian, Dire’s Kebele 02. Failed to pass the 10th grade national exam in 2007, life had been very difficult for him. Had it been in the old days, he would have found himself somewhere in the chain of the contraband business, carving something to live on. However, in the present economic situation, Sheriff had to sit home idle for two years. In 2010, he could no longer stand being idle. Taking a three months training on mobile maintenance at Dire Dawa’s technical and vocational school, he applied at the Small and Medium Enterprises Agency (SMEA) of the City Administration for support. SMEA gave Sheriff another three months training on business and financial management training and lent him ETB10,000.

With this money, he opened Dire Mobile around his residence area. And he is doing well. “Many people have smart phones these days and they pay a good amount even for petty services,” says Sheriff.

Sheriff pays ETB1,000 for the small shop he rented and makes about ETB5000 per month on average. Having worked on his savings and servicing the entire loan he had taken, Sheriff is planning on buying a Bajaj, a three wheel vehicle that is the main means of transportation in the city. Once he saved 50Pct of the cost, which can reach up to ETB40,000, he hopes to secure the rest from the SMEA office of the administration.

Smart like the phones he maintains, Sheriff was succesful on cutting down his expenses. “Chewing Khat could cost you more than ETB100 every day,” says Sheriff. “But now I do it only once a week or so.” This can be taken as a great accomplishment for Sherif, a Dire Dawa native, where the act of chewing Khat is embedded in the culture of the society.

With Sheriff’s support and an income from a house they rent, Sheriff’s family tries to make ends meet. “My mother usually talks about the good old days, when she used to make a hefty sum trading contraband commodities like clothing and electronics”. The remnants of ‘the good old days’ are still visible in the family’s house in the form of graceful sofas and the different electronic appliances. The family also supports a younger brother who is attending his higher education at Debre Tabor University.

The story of Sheriff and his family is just one of the many stories in the new Dire Dawa, stories of people who are struggling to let go of the past, take advantage of the economic opportunities of the present and embrace the future.

“A lot of work has been done to change stories of the contraband with stories of small and medium businesses,” says Fikadu Beyene, government communication affairs official in an interview with EBR.

Now days Dire Dawans are engaging in small and medium businesses, making huge investments or many more others are hired in these businesses created by their own fellow Dire Dawans or others from elsewhere. In about ten years time, more than 20 thousand employment opportunities have been created for Dire Dawans through SMEs. The City Administration has provided more than ETB70 million for individual and association applicants, according to the information from the city’s SMEA.

Dire Dawa’s unemployment stood at 18Pct in 2009, below the national average of the same period which was 20.4Pct, according a 2009 national survey by the Central Statistics Agency (CSA). The rate of unemployment in Dire Dawa was 38Pct in 2003.

More than 167,000sqm of land has been availed by the administration for small and medium businesses. Six market centers, more than 800 shops and 1,335 kiosks have also been operational for various business purposes through the years.

“SMEs could be the future of Dire Dawa if banks in the city are willing to finance them,” says Wondessen Zeleke, president of the Dire Dawa Chamber of Commerce and Sectoral Associations in an interview with EBR. Wondessen says the banks in the city only hunt huge investors who already have strong foothold in the business.

For Adem Farah, deputy mayor and trade, industry and investment bureau head, it is all about how feasible business ideas are. “We can provide the finance as long as applicants could present feasible business proposals,” Adem says in an interview with EBR.

Dire Dawans are struggling to be tax payers, a big stride for a city that used to be famous for an economy that was counterproductive in tax collection.

Small and medium businesses are not the only development in town. Huge investments mainly in the service and manufacturing sectors both by the public and private sectors are booming in Dire Dawa. From an industry zone built at Melka, a once known contraband site eight km to the west of the main town, to investments in the health and hospitality sectors, the economic activity in Dire Dawa is getting better by each passing day.

Ras Hotel and Mekonninoch bar used to the only prides of the City when it comes to hospitality. Currently, Dire boosts six four star hotels and the demand for more is visible, and some are planning to join the sector.

Samrat hotel which is located in the iconic village of Kezira is owned by an Indian businessman K.S Nair, and was built in 2008. With 50 rooms, which are available for USD36 to USD110 a night, in a four storey building, the hotel rests on 3,510sqm facility giving livelihoods for about 138 employees.

“Even at such time when more hotels are being built and expansions are underway by the already existing hotels, the demand is still growing,” says Mesele Assefa, reception manager at the hotel.

Hospitality is not the only area that is attracting investors to Dire Dawa’s service sector. People are also investing in the health sector. Radiel Getema, pediatrician, CEO of Art General Hospital is one of the businessmen who took the initiative to improve the once doomed health services in Dire Dawa.

Art General Hospital, a ETB five million investment, has 35 beds and has crated jobs for 65 employees. Running on annual budget of ETB three million, people from Mogadishu, Djibouti and Nortern Somali are among the customers of the medical services of the hospital, according to Radiel.

The Hospital has also been undertaking expansion projects to move out to its own building in the locality known as Mariam Sefer. The expansion project is expected to consume up to ETB40 million upon completion in 2013/14. When the new facility becomes fully operational, the Hospital will avail more than 100 beds and double the number of its employees. The hospital also has a sister medical college.

Radiel is happy of the cooperation of the City Administration. “Your requests could take months to be processed at the Administration offices in the old days; they only take minutes these days,” he says. Radiel has good reasons to be happy. The 15,000sqm of land, on which the expansion project is being undertaken was awarded to him by the City Administration for free.

Sadly, this is not always the case. Kidist Theresa School; a privately owned school around Sabian village is one of the businesses complaining about the late delivery of the more than 11 thousand sqm of land it requested for expansion. “It has taken more than half a decade to secure the land we requested for expansion into preparatory level,” says Fikadesilassie Tesfa, school supervisor. Now the school is forced to house its more than 1,600 students from KG through 10th grades on a mere 1,100sqm of compound.

Boosting the confidence of the awakening city, the manufacturing is getting steam. Once the City of not more than four big factories, Dire Dawa now has more than 18 massive manufacturing plants run by the private sector. The 138 hectars of land availed by the City Administration as an industry zone at Melka is the whereabouts of these industries.

National Cement used to be Dire’s only cement producer; in the last five years though, Dire get two more cement factories: Pioneer Cement and Toure Cement. Other plants in the zone are mainly engaged in food, detergent, textile and steel production.

Toure Cement, with a capital investment of ETB308 million, has a production capacity of 1,500 quintals per day, according to Abdu Selam, the company’s finance head. Using its 300 employees, Toure Cement distributes its produce to Harar, Jigjiga, Somali Land and Djibouti.

“We are not producing with our full capacity,” says Abdu. He attributes the shortfall to power interruptions and poor road infrastructure. As much as Abdu appreciates the active cooperation from the administration on infrastructure issues, he has a serious reservation on the administration’s attention on the road that goes across the industry zone.

The issue of improving infrastructure should also be the job of the private sector, according to Adem. “We are of course paying attention on infrastructure; the whole job cannot be done by the government alone, though.”

Major stakeholders of the business community in Dire Dawa agree on the significant role of the private sector in the new economic development. “Government involvement is limited to building the necessary infrastructure,” says the City Chamber President. “There is no serious challenge these days for anyone who wants to establish business in Dire Dawa.” He appreciates the cooperation of the City Administration, especially that of the Office of the Deputy Mayor.

The compliment also goes the other way, a trend rarely witnessed at a national level. “We really appreciate the involvement of the private sector,” says Adem. “They are helping us a lot in promoting Dire Dawa for further investment beyond worrying about their own businesses.” The City Administration is also making its own investments as well. The construction of Dire Dawa Referral Hospital is among the major examples.

While urbanization has been slow in Ethiopia, the recent growth rates have been spectacular. This rapid urban growth is also witnessed in Dire Dawa city. In 1995 the population of Dire Dawa was 180, 000. By the year 2000, it grew up to 229,000 an increase of 27Pct, by the year 2005 it went up to 284,000 an increase of 24Pct. It is currently estimated at 384, 000 people, an increase of 35Pct. Dire Dawa’s urban population is expected to grow nearly by 50Pct by the year 2015, according to CSA.

The Dire Dawa Administration area covers nearly 130,000 hectares, of which only 2Pct constitute built-up urban areas. About 74Pct (284,160) of Dire Dawans live in urban area while the remaining 26Pct live in rural Dire Dawa. The majority of the Dire Dawa population derive their livelihood from trade activities.

Electricity supply in Dire Dawa has reached 75Pct while more than 119 thousand people use mobile phones. Dire Dawans’ annual average household consumption is ETB4,727, according to Finance and Economic Development Bureau of the city.

The Ethio-Djibouti railway has always been one of the prides of Dire Dawans. After many years of shutdown, the railway service from Dire Dawa to Djibouti was back on truck in July 2013.

“We believe the resumption will give boost to small and big businesses like the business of hotels,” says Ayele Wolde-Yohannes, regional representative director general of Ethio-Djibouti Railway Enterprise. “Small businesses are already activating all along the way of the railway.” Former employees of the Enterprise are also back to their work.

As much as Dire Dawa’s economy and business activities have come a long way in a short time, the City is not without challenges. There is a backlog of demand for 24,000 houses, and the demand is expected to grow annually by 2,900 houses. The huge gap between demand and supply is increasing informal settlements and more than 200,000 people are living in slums or sub-standard housing, according to UN HABITAT.

Only 48Pct of the solid waste is being collected, and the waste collected is simply dumped outside the city. 22Pct of houses have no toilet facility whatsoever, and poor sanitation is evident from the mass of informal dumping sites. Water supply coverage is only 56Pct, according to a research by the same organization.

There is also growing number of social problems. The increasing practice of prostitution is among these problems, that is worrying the society. “These days you can see people having sex by the corners of some streets, this is unheard of Dire” Tadesse Reta, a business man working in the transport sector, who has lived in Dire Dawa for more than 30 years told EBR. Tadesse was referring to places like Dechatu, a village which is becoming known for its commercial sex workers. University students are among those that are engaged in providing clandestine commercial sex services to out of towners. Bureau of Labor and Social Affairs was not available to comment on the issue.

With all the challenges though, the city is set to become the economic star of the eastern part of the country. And the momentum seems picking up pace for the realization of this.

Addisu Deresse

EBR Special Contributor

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