Re­al­is­ing Ethiopia’s po­ten­tial

Business Traveller - - CONTENTS -

Ethiopia claims many things dif­fer­en­ti­ate it from other na­tions, but top award goes to the coun­try’s use of its own cal­en­dar, which takes you back eight years on land­ing. And in­stead of num­ber­ing the hours one to 24, day­light runs from one to 12 (one is 07.00 BST), and dark­ness from one to 12 (from 19.00 BST). It means that when ar­rang­ing meet­ings, it’s best to as­cer­tain which clock is be­ing used.

The cap­i­tal, Ad­dis Ababa, has great en­ergy and Ethiopian warmth is present wher­ever you are, which helps mit­i­gate some of the dif­fi­cul­ties the coun­try presents. It’s a na­tion where old meets new; any­one with a yen for the for­mer East­ern Bloc, for in­stance, will feel at home in the blue Tra­bant taxis that brave the traf­fic-clogged streets. But you could also use an app to hail a yel­low cab. Which­ever style of taxi you take, be pre­pared to ne­go­ti­ate when it comes to the fare.

With a pop­u­la­tion of more than 107.7 mil­lion peo­ple, Ethiopia rep­re­sents a big op­por­tu­nity for busi­ness. The pop­u­la­tion is young, with a me­dian age of 18.8 years, and it is in­creas­ingly well ed­u­cated.

“A lot of op­por­tu­ni­ties have been cre­ated for our youth to get ed­u­cated, but the econ­omy could not cre­ate ad­e­quate em­ploy­ment open­ings for them. That is the chal­lenge,” says a spokesman for the Depart­ment for In­ter­na­tional Trade (DIT) Ethiopia. “For in­vestors, it is very promis­ing to come to an ed­u­cated work­force.”


Ethiopia has its prob­lems, but among its neigh­bours it is rel­a­tively calm. The new prime min­is­ter, Abiy Ahmed, ex­tended an in­vi­ta­tion of peace to Eritrean pres­i­dent Isa­ias Afw­erki, es­tab­lish­ing diplo­matic ties be­tween the two coun­tries and over­turn­ing ten­sions that had ex­isted since Haile Se­lassie an­nexed Eritrea in the 1960s. This is not the only way in which Ahmed brings a prom­ise of greater things. In ad­di­tion, he has in­tro­duced pop­u­lar re­forms in the hope of dis­solv­ing po­lit­i­cal and eth­nic ten­sions in­volv­ing the Oromo peo­ple, though these have not sub­dued dis­cord and fight­ing be­tween ri­val eth­nic groups, which has dis­placed 70,000 peo­ple since April, ac­cord­ing →

The pop­u­la­tion is young, with a me­dian age of 18.8 years, and they are in­creas­ingly well ed­u­cated

to UN agen­cies, with more than 40 be­ing killed, lo­cal me­dia re­port.

Within two months of tak­ing up of­fice, Ahmed opened the econ­omy for pri­vate in­vest­ment in two sec­tors: telecom­mu­ni­ca­tions and the Ethiopian Air­lines group. The air­line has gar­nered pos­i­tive re­views for its young fleet and its ser­vice, and is an at­trac­tive busi­ness propo­si­tion as it de­vel­ops an im­pres­sive hub-and-spoke net­work out of Ad­dis Ababa.

With an eye to the fu­ture, the air­line has “Vi­sion 2025”. This is, “To be­come the most com­pet­i­tive and lead­ing avi­a­tion group in Africa by pro­vid­ing safe, mar­ket-driven and cus­tomer-fo­cused pas­sen­ger and cargo trans­port, avi­a­tion train­ing, flight cater­ing, MRO and ground ser­vices by 2025”. Part of this is in­creas­ing the num­ber of air­craft from 100 to 140. The air­line cur­rently serves 120 in­ter­na­tional des­ti­na­tions and 20 do­mes­tic, and over the past seven years pas­sen­ger num­bers have grown from three mil­lion to eight mil­lion, with rev­enues see­ing al­most 153 per cent growth – the goal for 2025 is to hit US$10bn.

Although the air­line says that its mar­ket is the six bil­lion peo­ple liv­ing within a ten-hour flight of Ad­dis Ababa, the em­pha­sis re­mains on Africa: “For ex­pan­sion, Africa comes first,” says re­gional di­rec­tor for Eu­rope and pas­sen­ger mar­ket­ing de­vel­op­ment Girma Shiferaw. “And we have started to fly to se­condary cities be­cause the con­ti­nent is grow­ing.”

For those look­ing to in­vest in or trade with Ethiopia, other ob­vi­ous prospects for busi­ness are oil and gas. Un­ex­plored ar­eas such as the So­mali re­gion and the south and south-west of the coun­try pro­vide a mas­sive op­por­tu­nity; min­ing, agro-pro­cess­ing and man­u­fac­tur­ing, in­clud­ing tex­tiles and leather prod­ucts are also ripe for in­vest­ment. The gov­ern­ment has plans for around ten in­dus­trial parks to at­tract man­u­fac­tur­ers. Euro­pean or­gan­i­sa­tions al­ready op­er­at­ing in Ethiopia in­clude Unilever, Di­a­geo and Pit­tards, which pro­duces leather and leather goods.

Pit­tards has been buy­ing raw skins from Ethiopia for more than 100 years and has had a pres­ence there since 2005. It now has five fac­to­ries, four in Ad­dis Ababa and one two hours south near Mojo. “We have 1,500 em­ploy­ees, all Ethiopian,” says CEO Reg Hankey. “Ethiopia has a lot of ad­van­tages: it is duty free to Eu­rope and the US, it speaks English as a sec­ond lan­guage, it is in the Euro­pean time zone, it has the raw ma­te­rial, a well-ed­u­cated work­force and it is hun­gry to de­velop.”


The main weak­ness is a lack of ex­pe­ri­ence. Pit­tards is de­vel­op­ing Ethiopian man­age­ment and em­ploy­ees, and has Chi­nese train­ers. “To­day, the ma­jor­ity of the world’s man­u­fac­tur­ing is based in China, there are many more peo­ple there with hands-on op­er­a­tional ex­pe­ri­ence than else­where,” says Hankey. “Com­pa­nies that flood the se­nior man­age­ment with ex­pats some­times get quicker re­sults, but if you in­vest in peo­ple, they see they have a ca­reer path; it may take a bit longer be­cause you have to train them but, in the full­ness of time, it is bet­ter value for your com­pany to do it that way.”

“There is grow­ing in­ter­est in Ethiopia,” says the DIT spokesman. “We have or­gan­ised a cou­ple of trade mis­sions from the UK in the past two years and Rolls-Royce

Six bil­lion peo­ple live within a ten-hour flight of Ad­dis Ababa

sold £1.2bn worth of en­gines to Ethiopian Air­lines; it was the first time in East Africa that such a big or­der was won by a UK com­pany.” For or­gan­i­sa­tions that know which sec­tor they can in­vest in prior to ar­riv­ing, the gov­ern­ment will give “a host of in­cen­tives” and a lot of sup­port.

GDP per capita reached more than US$706.06 per an­num in 2017 from US$120 15 years ago and na­tional GDP is US$73bn. As the econ­omy grows, so does the spend­ing power of the peo­ple and this is re­flected in grow­ing beer con­sump­tion and sup­ply: both Di­a­geo and Heineken pro­duce their brands lo­cally.

The dereg­u­la­tion of the econ­omy does not, un­for­tu­nately, re­move bu­reau­cracy, which is en­trenched in Ethiopia, but the DIT is adept at nav­i­gat­ing the maze and com­pa­nies plan­ning to do busi­ness there would do well to con­tact the depart­ment.


In­fra­struc­ture in Ethiopia is also a ma­jor draw­back. The Chi­nese are de­vel­op­ing wind farms, dams for hy­dro­elec­tric­ity, rail­ways and more but with mixed ef­fect. “There are qual­ity is­sues, but the Chi­nese are fill­ing a lot of gaps in the

in­fra­struc­ture deficit, which is a good thing. But the coun­try has to move from projects built through Chi­nese loan to PPP projects and the re­cent gov­ern­ment leg­is­la­tion is to im­ple­ment this,” says the DIT spokesman.

As a re­sult, lo­gis­tics are a chal­lenge. The rail­way from Ad­dis to Dji­bouti’s main port, which opened in Jan­uary, has im­proved things a bit, con­nect­ing land­locked Ethiopia with the sea, but trans­port­ing goods from land to port is still dif­fi­cult be­cause the road is not great and the few trans­port com­pa­nies are not enough for the grow­ing de­mand.

The Light Rail­way, built by the Chi­nese, runs east-west and north­south across Ad­dis Ababa and is a qual­ity case in point – about 50 per cent of the trains do not work, so they run ev­ery 30 min­utes rather than ev­ery ten, and are packed solid.

There is a charm and a frus­tra­tion to do­ing busi­ness in Ethiopia. How­ever, this na­tion is em­brac­ing democ­racy and de­vel­op­ment. Busi­nesses look­ing to en­hance their pres­ence in Africa would do well to book a flight with Ethiopian Air­lines and see for them­selves.

The con­struc­tion site of the Grand Ethiopian Re­nais­sance Dam

ABOVE FROM LEFT: Ad­dis Ababa Light Rail sta­tion; gar­dens at the Sher­a­ton Ad­dis Ababa; the Simien Moun­tains are a World Her­itage Site; cel­e­brat­ing Genna, the Ethiopian Christ­mas

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