Ethiopia, a land in motion, a land in Transition.

Following my participation to the Business France 2019 workshop on Ethiopia, it is clear that the land of Ethiopia promises a bright and prosperous future for who will part take in the development of this huge country. 

Being twice the size of France for over 110 million inhabitants, it manages an economy of just over 80 billion USD with an annual growth rate of 7 to 9%. 

One could think this is low but one must remember that Ethiopia’s GDP was around 10 billion USD 30 years ago ! In other words there was hardly any economy… conflict, war, famine, had ravaged this once proud kingdom until it fell into an Abyss of poverty and suffering … But the dark days have lifted, and Ethiopia is becoming an emerging market :

Economic growth started from 2004 onwards, with a peak in 2007-2008. Here you can clearly see the strong progression confirmed as a tendency.

So one could ask: what's going on?

Answer : A transition to an economy of 200 billion USD.

But how!?

Well it’s quiet simple, the Ethiopian economy is very much under control of the government, a very protective, sovereign, at times isolationist government, and they have taken a 180 degree turn to work at opening up their economy to foreign investments, in order to build a sustainable economy and industry. The objective is clear and simple: become a self-sufficient, goods exporting, regional economy. 

In other words, Ethiopia decided that they will raise the overall standard of living by producing locally all prime necessity goods, at high levels of quality, in order to export excess production and generate currency, instead of cropping currency reserves.  

The government has gradually moved from an ethnical federal model (which generated a lot of conflict) to a centralized government model, generating debt in order to develop the country through major investments in health systems, schools, infrastructure, and concrete liberalization measures that stimulate the economy such as industrial parks, privatization of key sectors, land lease agreements to foreign entities etc. 

Note that this is quite a novelty in what many can say was one of the most protective economy in Africa.

In terms of peace and security, they are doing their best to reduce tensions in the country through reconciliation. They are tackling head on the displaced population’s crisis: once at 3 million displaced persons it has dropped past the 1.8 million. Relations with Sudan and Djibouti are at an all time high, and we are witnessing a warming of relations with Eritrea.

But is it safe to go on about your business in Ethiopia?

Well, the overall population’s view on foreigners has improved positively as projects bring prosperity to the local economy and the speakers agreed that it is safe for foreigners to go about, you just want to avoid going alone to the shady parts of town especially at night..! But that’s true for every big city… you can discuss this personally with people who actually live there, they will give you the best advice, but one thing is for certain,

The Ethiopian government has a very clear course of action which is in motion:

There first objective is to develop and diversify their agro-production in order to cover and exceed the needs of the population for all goods. Imports should be limited to products that cannot be produced locally or that reflect luxury such as French wines and cheese. Agro-production suppliers, machinery, transformation plants, distribution, the table is set.

Diversification is key, but with perhaps some specializations in order to become world renowned for some products like coffee. Ethiopian coffee… a mythical icon on its own… 

The second objective is to develop its industry through industrial parks, subsidies, tax facilities (tax exemption vary from 7 to 20 years depending on how critical the goods produced are for the local economy and or its capacity to attract foreign currency), development of infrastructures, power generation, roads, telecom, etc. 

Clearly any investor will feel extremely enthusiast and welcomed in Ethiopia. The market is in full growth, salaries are increasing, but remain low compared to world standards, nonetheless, purchasing power is increasing, and the government is very much open to all projects and ideas that will benefit all parties. 

This map gives you an overview of the wealth of the land,

Thirdly, in order to develop so much industry, and possibly mining, energy generation must be developed. Currently at 4.3 GW*, most industries still rely on power generators to maintain activity smoothly. The successive governments have however in this sector also opened to foreign partnership and expertise, with a target production plan of 17 GW in progress (4 times more than currently within the next 5 to 10 years!).

Also note that public electricity is sold at a ridiculously low price(residential rate is 2 to 3 cents/ MW), so as to stimulate exports of power to neighbors including KSA ! 

But what is even more amazing is that Ethiopia is going to become a world leader in renewable energy since they have decided to completely renounce to other forms of power generation. 

* : The government has invested in hydraulic production with the construction of the The Grand Ethiopian Renaissance Dam it represents over 95% of the country's capacity, and should be fully operational between 2020 and 2022 with a target production of 6.45 GW.

The government wants to develop the use of wind turbines, solar farms, but its main projects to increase power generation is through geothermal power plants. 

They are currently building the biggest such power plants in Africa.

The representatives of these partnership were present at the workshop, hence it was fascinating… Ethiopia, a country powered by the African rift… truly visionary… and very encouraging.

If you’re into Agro-productions, equipment, logistic and supply chain solutions, small to middle size industry, that provide goods at a regional / provincial level, especially in food products and daily products, or in power generation then check out Ethiopia… you can contact me to further discuss possibilities, and perhaps make your project happen.

“It can’t all be bleu… what’s the catch?” One could say…

The difficulty you’ll find in Ethiopia is that things move relatively slowly. As I mentioned, the economy is managed by the government, hence there is a lot of bureaucracy, and it takes time to go through a complete process, get all authorization and be able to work properly.

Moreover, due to the huge growth of the economy, and its dependence on imports, the country faces a daily shortage of foreign currency. In other words, when you want to deliver equipment, machinery, seeds etc. to Ethiopia, the local importing entity will have to have accounts in multiple banks, and queue for their turn to get some foreign currency allocated to their need, such as pay foreign suppliers.

So yes this can be a bit of a set back as it means you need to have a strong treasury at some point in the process… 

In order to reduce the devastating effect of this lack of currency, the government has decided to privatize telecom sector, rail roads, high ways, logistical assets, and Ethiopian airlines.

This will replenish the central bank and provide a more optimal economic environment capable of attracting more investors and suppliers such as mid-sized European companies and manufacturers. Please read the above article for a more detailed insight on this measure.

The following short article clearly illustrated the mindset:

Their is hope and their is light...

Elections are coming up in 2020, there was an attempted coup a few weeks ago, and there still needs to be a buyer for Ethiopian Airways, but these are all so many reasons to keep an eye on Ethiopia, and one can only hope that current authorities maintain their position and continue on this prosperous path… 

The time is now, Ethiopia will become a continental leader over the next 10 to 20 years, not just politically (currently the seat of the African Union and of a number of regional UN offices), but economically, with targeted exports to Djibouti, Sudan, Egypt, KSA, the Middle East and other regional partners. The Lion is coming back and roaring !

This article is a call to cooperation, a call to friends, and neighbors of Ethiopia, to France and other partners, to show interest and invest in Ethiopia, one of the oldest nation in the world, a proud and diverse land, and a very rich land from which we have a lot to learn. 

I would like to thank the team at Business France for organizing what was an amazing workshop, meeting a great number of participants, with a special thanks to Amilcar Cabral, director of Business France for Sudan and Ethiopia,

As well as the all Business France team with special thanks to Mme Catherine Corlobé, Mme Maryse Aziza, and Mme Virginie Botcazou. I invite all readers to follow business France, and keep track of their agenda, what they do is great ! :)

Feel free to contact me should you have any interest on investing in Ethiopia, Africa and the Middle East in general, and please feel free to like and share this article. Thank you,

Frédéric Blanchon