Ethiopia offers its state assets
• Africa’s fastest-growing country invites foreign investors to buy stakes in a range of state-owned companies
Ethiopia, Africa’s most populous country after Nigeria and the fastest-growing economy, is inviting big business to cash in.
For so long a closed shop, the Horn of Africa nation on Tuesday invited foreign investors to buy stakes in state-owned telecoms, shipping, power generation and aviation companies — a rare opportunity to access such a large market.
The bonanza will extend to railways, sugar mills and industrial parks, with the top brass of the ruling party embarking on long-awaited market reforms.
The move continues a breakneck push led by Prime Minister Abiy Ahmed, who took office two months ago.
As well as green-lighting the liberalisation of state companies, he has taken steps to reduce the role of the military, agreed to the terms of a long-disputed peace deal with neighbouring Eritrea, and lifted a state of emergency that followed the snap resignation of his predecessor, Hailemariam Desalegn.
“Ethiopia’s market size speaks for itself,” said Jacques Nel, an analyst at NKC African Economics. “And the sentiment surrounding the country’s political environment has improved considerably with the appointment of Abiy. They want to signal to the world that this is a new Ethiopia.”
It is a process started by Hailemariam, who proposed partial market liberalisation to the ruling coalition’s 36-member politburo last year. Most of Ethiopia’s private businesses were nationalised in the 1980s under the former communist Derg regime. That government was toppled by the Ethiopian People’s Revolutionary Democratic Front, a party with Marxist roots that has shifted towards a market-based economy since it came to power in 1991.
Reforms introduced by the party, along with investment in infrastructure projects like the $6.4bn Grand Ethiopian Renaissance Dam, helped the economy grow faster than any other in Africa over the past decade. It is expected to do that again this year, according to the IMF, which forecasts growth of 8.5%.
Deterrents to potential investors lie in the long-running threat that led to Hailemariam’s resignation: sporadic unrest against authoritarian rule and intercommunal violence. And the government has made clear that investors will not be able to take a majority stake, leaving them open to the vagaries of the state, while the banking sector remains firmly shut. At about $80bn, the economy is the second largest in sub-Saharan Africa not to have a stock exchange after Angola.
“It’s still a difficult place to do business in,” Nel said. “Foreign investors won’t be able to independently make their decisions. They’ll have to always consider the government’s longer-term development strategies. There won’t be that much freedom.”
As for the companies made available for investment, Ethiopian Telecommunications is the most intriguing. The business dominates a phone market that has long been coveted by MTN Group and Vodacom Group, Africa’s biggest wireless operators by sales and value, respectively. With about 60million mobile and fixed-line subscribers, EthioTelecom is roughly the size of MTN’s unit in Nigeria, its biggest market. However, its market penetration is far lower, analysts say.
“Ethiopia is an attractive telecoms market and both MTN and Vodacom are likely to consider entering if a viable opportunity opens up,” Peter Takaendesa, a money manager at Mergence Investment Managers in Cape Town, said by phone.
Ethiopian Airlines Enterprise is by far the most successful carrier on the continent, turning a profit and linking almost 70 global cities outside Africa, with about 60 across the continent from its hub in Addis Ababa.
The airline generates business from Ethiopia’s flowerexport business as well as from travellers. It plans to buy new regional jets soon, CEO Tewolde GebreMariam said last month.