Ethiopia - Planting the Seeds of InvestmentSituated in the North-eastern part of Africa - sharing the West border with Sudan, Eritrea to the North, Somalia to the East and Kenya to the South – Ethiopia has the potential to play a significant role in investment opportunity.
The most attractive things about Ethiopia are:
- A pro-investment government
- Politically stable and secure
- Macro-economic stability
- Strikingly improved service delivery
- Simple and transparent legal procedures
- The largest domestic market with a population of 80.9million
- Both regional and international market opportunity
- Competitive investment incentive package
- Investment guarantees and protection
- Exceptional climate
- A competent and cheap labour force by African standards
The country boasts a religious harmony between Christian and Muslim groups, which has been a long historical and cultural tradition of the country. Ethiopia is a venue for numerous conferences and seminars, for the United Nations and other international organisations. It is a home for thriving commercial communities.
Growth and Transformation Plan (GTP)
With a projected average growth rate of 11.2 per cent, the Ethiopian Government has formulated a five year GTP to maintain this fast growing economy in all sectors. By the end of 2014, the country's installed electricity generating capacity is expected to reach 10,000 MW, rising from the current level of 2000 MW and coverage across up to 75 per cent of the country.
All-important national access to a potable water supply is to rise from 73.3 per cent to a massive 98.5 per cent by the end of this year. This is part of a huge project to create safe water in the towns and rural areas. Additionally, the total road network reached 53,143km in 2010 and the Government has a target to increase the total road network to 64,500km in the next year.
Importation and Exportation
With a number of state-owned and private banks and insurance companies operating in Ethiopia, micro-finance institutions play an important role in providing credit and saving facilities for micro-enterprises.
Although the country does not have a coastline, it is linked by road to the port of Djibouti and the port of Barbara in Somaliland, and Port Sudan provides another external trade route for export-import trades. The Ethiopian Highlands link the country with over 63 destinations worldwide, with an additional 40 cargo destinations spread across Africa, Europe, Asia and the Middle East via its capital city Addis Ababa. Addis Ababa is linked by road to the port of Djibouti, at the Gulf of Aden.
With a large population of 80.9million, Ethiopia has plenty of market opportunities as it has potentially one of the largest domestic markets in the whole of Africa. Its close proximity to the Middle East means further promising market contingencies, plus it is part of the Common Market for Eastern and Southern Africa (COMESA), which embraces 19 countries with a total population coverage of 400million.
Foreign investors wishing to invest in Ethiopia are required to apply to the Ethiopian Investment Agency (EIA) on a designated form. The minimum capital required of a foreign investor is $200,000 per project. However, if a foreign investor invests in partnership with domestic investors, the minimum capital required of him is $150,000 per project. The minimum entry capital required of a foreign investor investing in areas of architectural, engineering works or related technical consultancy services, technical testing and analysis and publishing work is $100,000 where the ownership fully foreign owned, and $50,000 where the investment is made jointly with domestic partners. A foreign investor reinvesting his profits or dividends generated from existing enterprise is not required to allocate a minimum capital.
Areas worth Watching
The most promising areas for potential investment and development in Ethiopia today are agriculture, agro-processing, textile and garment, leather and leather products, sugar, cement, chemical and pharmaceutical industry, tourism, mining and hydropower. Ongoing privatization presents enormous investment opportunities to private investors, particularly in the agricultural, manufacturing, hotel and tourism sectors.
Ethiopia has extensive opportunities in the construction industry, in particular road networks, residential, commercial and industrial building.
With a GDP contribution of 13.4 per cent in 2010/11, the country manufactures food, beverages, tobacco, textiles and garments, leather goods, paper, metallic and non-metallic mineral products, cement and other chemicals. Under the Growth and Transformation Plan for 2010/11-2014/15, priority areas for investment include textile, leather, cement, metal and engineering, chemical, pharmaceuticals and agro-processing.
The growth of tourism in Ethiopia is increasing as a result of the Government's commitment to provide an enabling environment for the industry to thrive in. Specialised international restaurants and grade one tour operations mean foreign investors can take full advantage of these opportunities through direct investments or joint-ventures with Ethiopians. Jointly, this sector also has construction opportunities for the building of star-designated hotels and resort hotels all over Northeast Africa.
Geological studies have identified Ethiopia as a favourable geological environment, hosting a wide variety of mineral resources.
The private sector can participate in electricity generation from any source and without any capacity limit. Transmission and supply of electrical energy through the Integrated National Grid system is, however, exclusively reserved for the Government. However, private investors of both a foreign and domestic background are allowed to operate an off-grid transmission and distribution of electricity.
Although in the early stages, Ethiopia strives to attract internationally reputable educational institutions, including universities and training centres.
With the African technology industry booming, it comes as no surprise that the number of fixed line, mobile and Internet users will reach 3.05million, 40million and 3.69million respectively by the end of 2014. And, with the current number of Smartphone users in the mobile market expected to rise from 30per cent to 70 per cent by 2017, this sector is one to keep a close eye on.
Foreign investment exists in this sector for general hospitals and specialised hospitals, including the construction of these institutions themselves.
Ethiopia's biggest sector is agriculture. With altitudes ranging from 148 metres below sea level to 4620 metres above sea level, the country has 18 major and 49 sub agro-ecological zones, each with its own agricultural and biological potential. The country possesses one of the largest and most diverse genetic resources in the world. The soils and hot climate enable growth of a variety of food crops including cereals, pulses, oil seeds, coffee, cotton, tobacco, sugar cane, tea, spices and a broad range of fruits, vegetables and flowers. These are all fast-growing exports that produce the main commercial cash flow for Ethiopia.
Egyptian Firms Show Interest to Invest in Ethiopia
In February, the communication director of the Ethiopian Investment Agency said that more Egyptian companies are choosing to carry out projects in Ethiopia, with 22 currently managing projects worth a total of $41million.
The Egyptian projects have created nearly 5000 job opportunities for Ethiopians and 16 further projects worth $25 million has already been licensed. This is a promising sign for foreign investors wishing to invest in Northeast Africa.
By examining the Gross Domestic Product (GDP) for Ethiopia, we can determine crucial economic indicators for a country's prosperous future. The Ethiopian economy witnessed sustainable double digit broad based growth between 2009/10 and 2010/11 of 11.4 per cent. Agriculture is Ethiopia's main source of GDP, accounting for 41.1 per cent in the fiscal year 2010/11, 90 per cent of foreign currency earnings and 85 per cent of employment. Overall, the economic growth of the country has been associated significantly with the performance of the agriculture sector.