WEBVTT - Ethiopia: An African Paradise For Crypto Miners ?

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<v Speaker 1>Bitcoin hasn't had the best couple of months, but is

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<v Speaker 1>well up on the lows of last year, and its

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<v Speaker 1>cheerleaders are bullish.

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<v Speaker 2>I think we're seeing more long term holders. Bitcoin has

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<v Speaker 2>a lot of value.

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<v Speaker 1>We can actually expect over one hundred K and pricing

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<v Speaker 1>by end of year.

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<v Speaker 3>You can learn a lot from watching what the miners

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<v Speaker 3>are doing. They've been investing, They've obviously been betting their

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<v Speaker 3>businesses on the price of bitcoin going up, and it

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<v Speaker 3>looks like they're about to win their bet.

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<v Speaker 1>With the renewed attention, focus has turned to mining of

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<v Speaker 1>the token and the best places to do it. In

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<v Speaker 1>years past, many cryptocurrency miners would have been investing in China,

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<v Speaker 1>but that's not an option anymore.

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<v Speaker 3>Minu is us shutting down they computer is.

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<v Speaker 1>In twenty twenty one, the Chinese government called a crackdown

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<v Speaker 1>on the cryptocurrency industry.

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<v Speaker 3>They said their own crypto related transaction will be considered

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<v Speaker 3>illicit activity.

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<v Speaker 1>And that's how some crypto miners left China and moved

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<v Speaker 1>their operations to places like Ethiopia, a stable economy, perfect

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<v Speaker 1>weather conditions, and some of the world's lowest electricity costs.

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<v Speaker 1>When we talk about crypto mining. It seems like Ethiopia

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<v Speaker 1>has it all, but in a country with power scarcity

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<v Speaker 1>and increasing climate change concerns, how viable is this industry Already?

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<v Speaker 2>The government started to receive a backlash from different people

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<v Speaker 2>from the country, saying supplying power to the mining company

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<v Speaker 2>is not right. Why half of the population doesn't have

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<v Speaker 2>access to power.

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<v Speaker 1>I'm Jennifer's Abasaja. This is the Next Africa podcast, bringing

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<v Speaker 1>you one story each week from the continent with the

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<v Speaker 1>context only Bloomberg can provide. In this week's episode, Bloomberg

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<v Speaker 1>reporter Fasika Tedessa speaks to us from Adis Ababab about

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<v Speaker 1>whether Ethiopia is really primed to be the new crypto

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<v Speaker 1>mining heaven. So how did Chinese miners set their hearts

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<v Speaker 1>on Ethiopia. Let's bring in Fisica Tedesa joining us from

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<v Speaker 1>Adis Ababa, Halfaska. So what are the reasons behind the

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<v Speaker 1>shifts and why miners are now looking to Ethiopia.

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<v Speaker 2>In twenty twenty two, the government has made a change

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<v Speaker 2>in the policy in letting it coin mining companies to

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<v Speaker 2>get registered and the start operating in Ethiopia. The second

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<v Speaker 2>one is the ideal or favorable climate Ethiopia has for

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<v Speaker 2>bitcoin mining, so basically bitcoin mining needs five to twenty

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<v Speaker 2>five said, Whichitopia has.

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<v Speaker 1>What are the other reasons then Pasica.

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<v Speaker 2>Another benefit lies in the abundance electricity power in Ethiopia.

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<v Speaker 2>So currently the country has a little over five thy

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<v Speaker 2>two hundred mega out of energy, so we possibly of

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<v Speaker 2>doubling that capacity in the coming few years once the

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<v Speaker 2>Ethopian Grand Renaissance m which is the largest in Africa,

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<v Speaker 2>becomes operational. The other major factor that attracted Chinese companies

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<v Speaker 2>to come to Ethiopia is the low electricity cost. Power

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<v Speaker 2>agencies charging bitcoin mining companies affixed rate that at three

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<v Speaker 2>point one for US and s per kilo at an

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<v Speaker 2>hour for electricity sources from the power sub stations connected

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<v Speaker 2>to coin mining facilities.

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<v Speaker 1>And you would think it might make more sense to

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<v Speaker 1>operate and mine in China, but how come they've chosen

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<v Speaker 1>not to.

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<v Speaker 2>The reason given by the Chinese government was that bitcoin

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<v Speaker 2>mining has impacts on the environment and also at the

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<v Speaker 2>same time, cryptocurrency trading can be used for fraudulent activities

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<v Speaker 2>and money laundering. So because of that, Chinese companies we're

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<v Speaker 2>looking for a better place to work or to operate

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<v Speaker 2>in Pasica.

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<v Speaker 1>You mentioned the environment. Bigcoin absolutely is an industry that

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<v Speaker 1>consumes a lot of energy.

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<v Speaker 3>A single ledger entry and bitcoin consumes enough energy to

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<v Speaker 3>power your house for almost to day.

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<v Speaker 1>What's a climate crisis? Surely being in Ethiopia, there are

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<v Speaker 1>still a number of environmental concerns. So why then was

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<v Speaker 1>Ethiopia so willing.

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<v Speaker 2>The government highly leads these companies to come to Ethiopia

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<v Speaker 2>because the government can directly generate income in foreign currency.

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<v Speaker 2>So the other part is from the investment perspective. Because

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<v Speaker 2>of the deadly war that happened in the northern part

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<v Speaker 2>of the country, most of the investors lost confidence in

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<v Speaker 2>investing in to Okay. So these are the two major

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<v Speaker 2>reasons that the government is allowing companies to come to

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<v Speaker 2>topid despite the butlers and the environment.

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<v Speaker 1>What can you tell us about the bilateral relations between

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<v Speaker 1>these two countries. There must be some political elements to

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<v Speaker 1>this as well.

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<v Speaker 2>China stands as one of the major bilateral creditors to Ethiopia,

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<v Speaker 2>and also Chinese companies are known for holding the first

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<v Speaker 2>place in FDI or foreign investment flows into Ethiopia, and

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<v Speaker 2>also several Chinese companies has held construction of the largest

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<v Speaker 2>dam of Ethiopia and also they built the major railway

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<v Speaker 2>that Connectsopia with Dawooty. They also built the major or

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<v Speaker 2>the main airport of Ethiopia. This economic and political activity

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<v Speaker 2>shows that there is a strong tie between Ethiopia and China.

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<v Speaker 1>So, Piska, earlier you mentioned the dam and how China

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<v Speaker 1>helped build it. The four point eight billion dollars dam,

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<v Speaker 1>and it's one of the largest on the continent, as

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<v Speaker 1>you mentioned, can you talk to us about its significance,

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<v Speaker 1>especially when we think about that dam in relation to

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<v Speaker 1>now what's happening with bitcoin mining.

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<v Speaker 2>Yes, Jennifer, as you said, it's one of the largest

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<v Speaker 2>dums in Africa. Is the capacity of generating five two

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<v Speaker 2>hundred megallards of energy. So the government highly relies on

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<v Speaker 2>this term since it will help the country to boost

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<v Speaker 2>its power generating capacity with the aim of exporting more

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<v Speaker 2>power to never in countries including Djibouti, Sudan, Kenya, and

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<v Speaker 2>also they are planning to move sell power to Tanzania.

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<v Speaker 2>And also not to forget that they are signing deals

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<v Speaker 2>with bitcoin mining companies which require intensive power supplies.

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<v Speaker 1>So how can Ethiopia grow an industry that needs intensive power. Well,

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<v Speaker 1>half of its population doesn't actually have access to electricity.

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<v Speaker 1>That's after the break welcome back. Fifty percent of the

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<v Speaker 1>Ethiopian population and live without electricity. So it feels a

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<v Speaker 1>bit contradictory to then bring something that is power intensive

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<v Speaker 1>into this country. How do you explain that?

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<v Speaker 2>Yeah, that's right. Basically, the government is trying to give

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<v Speaker 2>to justification. One, they say that they can't generate additional

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<v Speaker 2>income by sailing power to bitcoin mining companies, so that

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<v Speaker 2>they will build transmission lines and enable the people that

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<v Speaker 2>are not connected to power to get more power supply.

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<v Speaker 2>So that's one of the justification that government is giving.

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<v Speaker 2>The second one is they are saying that they are

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<v Speaker 2>sailing surplus power from the local demand and the deal

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<v Speaker 2>is not impacting the domestic power availability.

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<v Speaker 1>Is there any evidence that that's actually happening, that this

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<v Speaker 1>deal and the miners are not actually affecting local supply.

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<v Speaker 1>Do we have any indications at this point whether or

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<v Speaker 1>not it's having an impact? Maybe is it just too

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<v Speaker 1>early to tell.

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<v Speaker 2>Now the companies signed the power perponse agreement with the government,

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<v Speaker 2>a few of them have imported the marsionaries they will

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<v Speaker 2>be using for mining and the installation process, so not

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<v Speaker 2>many of them started operating, so it would be hard

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<v Speaker 2>to say the power supply or the power demand has

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<v Speaker 2>been affected by this company, so it's a bit too early.

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<v Speaker 1>So then Fasika, what's the benefit here for Ethiopia? You

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<v Speaker 1>walked us through a lot of the different reasons as

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<v Speaker 1>to why China is looking to this country. But on

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<v Speaker 1>the contrary, what's in it for Ethiopia.

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<v Speaker 2>One of the significant advantages is revenue generation from the

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<v Speaker 2>sale of power, so which the country will be getting

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<v Speaker 2>paid in dollars, So this will help severe for its

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<v Speaker 2>crunching that in the economy. Okay is exporting commodities that

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<v Speaker 2>is not more than three point one billion dollars a

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<v Speaker 2>year while the import value is three times hired, so

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<v Speaker 2>this will help the country to get more income in

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<v Speaker 2>foreign currency.

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<v Speaker 1>A succession of developing countries like Kazakhstan and others initially

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<v Speaker 1>embraced bitcoin mining, only to then turn on the sector

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<v Speaker 1>when they realized its energy use actually threatened to fuel

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<v Speaker 1>discontent among its population. I mean, is that something that

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<v Speaker 1>could also happen in Ethiopia.

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<v Speaker 2>Yes, there are risks. The first one is the country's stability,

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<v Speaker 2>So considering the nature of bitcoin mining, which requires intensive

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<v Speaker 2>power supply and the capital in most of the power

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<v Speaker 2>substations are located in CONFLICTWN areas, so.

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<v Speaker 1>That's right physica. For context, it's important to note the

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<v Speaker 1>civil war that happened in Ethiopia back in twenty twenty

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<v Speaker 1>and just how recent that was.

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<v Speaker 4>The conflict between the Tagrii region and its political entity

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<v Speaker 4>that to Grive People's Liberation Front and the Ethiopian government

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<v Speaker 4>run by Prime Ministers Abby Ahmored began on November four

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<v Speaker 4>after the Prime Minister accused the tpof of attacking a

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<v Speaker 4>federal military base.

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<v Speaker 3>We estimate that two point three million people are in

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<v Speaker 3>urgent needs of humanitarian assistance in Tiger, including one point

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<v Speaker 3>three million additional people due to conflict, and.

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<v Speaker 2>He still was broken by the African Union in twenty

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<v Speaker 2>twenty two, so the country is relatively stable now, even

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<v Speaker 2>though there are conflicts in different parts of the country.

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<v Speaker 2>Another risk arises if there is a persistent backlash and

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<v Speaker 2>an increase in local demand. This could be potentially leaved

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<v Speaker 2>to a change in the government's policies because, as I

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<v Speaker 2>previously mentioned, half of the population currently experiencing blackout conditions

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<v Speaker 2>and at some point the government will leave to provide

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<v Speaker 2>power to this segment of the population. And additionally, if

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<v Speaker 2>more industries require additional power, and if there are concerns

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<v Speaker 2>about the environmental infower of bigcoin minings and the current

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<v Speaker 2>flexibility from the government side may not be sustainable in

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<v Speaker 2>the future. So this scenario could lead to the situation

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<v Speaker 2>in Kazakhstan where lack of available partly to the imposition

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<v Speaker 2>of additional taxes on coin companies, which we're forced to

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<v Speaker 2>leave Kazakistan and to find that another locations to reside on.

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<v Speaker 1>Thanks so much to Fasika, a reporter from Addis Ababa,

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<v Speaker 1>for your insight and your reporting there. As Fasika mentioned,

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<v Speaker 1>bitcoin mining is a risky gamble for both Ethiopia and

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<v Speaker 1>the companies alike. Is there sufficient enough energy for mining

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<v Speaker 1>to expand in the country and give miners that competitive

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<v Speaker 1>advantage that they're seeking, but also is it even going

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<v Speaker 1>to be welcomed by the public. Perhaps the only guarantee

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<v Speaker 1>for all parties involved is the volid utility in which

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<v Speaker 1>crypto continues to operate in And that's it for this week.

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<v Speaker 1>If you like the Next Africa podcast, please follow and

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<v Speaker 1>review it wherever you usually get your podcast. It helps

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<v Speaker 1>new followers find the show. I'm Jennifer Zabasaja. Thank you

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<v Speaker 1>so much for listening. We'll see you next week.