Ethiopia’s new economic revolution
ETHIOPIA aspires to become a carbon-neutral lower middle-income country by 2025. And with its developmental policies, more than 100 million people, a fast-growing economy, strategic location and holistic tourist destinations, it is indeed a country of great opportunities.
Ethiopia is known for its history of ancient civilisation, all-time independence on African soil, and as a cradle of human beings.
It was after the downfall of a brutal and oppressive military regime in 1991 and through the 1995 constitution that Ethiopia was brought to its proper renaissance, by endorsing the fundamental democratic principles of sovereignty of the people, supremacy of the constitution, human and democratic rights, separation of state and religion, and accountability of government.
Since then, a free market economy has been introduced to enhance competitiveness, quality and private sector development.
As a developmental state, the government has been heavily engaged to improve infrastructure, trained human resources and technology advancement, and to intervene in market failures. An agriculture-led industrialisation policy optimised inclusive growth and development among those of all walks of life.
There are many favourable factors for investment in Ethiopia, and among these, the political and legal environmental ones could be seen as crucial.
Ethiopia’s investment environment is governed by the supreme law of the land, a constitution of 1995 Article 40, and the Ethiopian Investment Proclamation 769/2012.
These laws protect any domestic and foreign investment from expropriations or nationalisation.
Ethopia is a signatory and member of the main international investment treaties: the Multilateral Investment Guarantee Agency, the Convention on the Settlement of Investment Disputes between States and Nationals of other states and the World Intellectual Property Organisation. Ethiopia has furthermore concluded bilateral investment and double taxation treaties with a number of countries.
The other important factor is market access. Ethiopia’s population of more than 100 million is the second largest on the continent next to Nigeria.
Its membership of the Common Market for Eastern and South Africa, embracing 23 countries with a population of 420 million, brings a huge market opportunity, where Ethiopia enjoys preferential tariff rates on exports to these countries.
Above all, as Ethiopia is located in the horn of Africa: one could easily access the African continent, Europe, the Middle East and Asia.
The duty- and quota-free access to US (Africa Growth and Opportunity Act) and European markets (everything but arms) enables it to export all industrial manufactured products with preferential treatment to the US, Canada, Japan and most EU countries.
Ethiopia provides interesting investment incentives to domestic and foreign investors.
In its regulation Number 270/2012, 100% exemption is offered from the payments of customs duties and other tax levied on imports of capital goods, such as plant, machinery and equipment, and construction materials.
Income tax exemptions are also granted for eight to 10 years, with even more preferential provision in disadvantaged parts of the country.
Export incentives include no export tax on export products, a duty drawback scheme, voucher scheme, bonded factory and manufacturing warehouse scheme, bonded input supplies warehouse schemes and industrial zone schemes.
There are also land lease terms for 60 to 80 years at zero charge for factories and residential quarters.
There is a provision of exemption from income tax for 10 years in and around Addis Ababa and 15 years outside of Addis Ababa for investors joining the parks.
Convenient industrial and integrated agro-industrial parks are one of great opportunities for investors in Ethiopia. The government introduced government and private sector-owned industrial parks at various development corridors. This is an initiative to build Africa’s light manufacturing hub in Ethiopia by 2025.
The Industrial Parks Development Corporation is the responsible authority to develop the parks and is led by a board chaired by Prime Minister Abiy Ahmed Ali.
Bole Lemi, Addis industrial village, Kilinto mixed-use industrial park, and Hawassa industrial park are currently operational parks to “plug and play” in their respective concentration areas. Other parks under development include Diredawa, Mekele, Kombolcha, Adama, Bahir-Dar and Jimma.
Private investors such as the Eastern Industrial Zone, George Shoes cluster industrial park, and Huajian Group Shoes cluster industrial park are also operational.
The Integrated Agro Industrial Parks (IAIP) are a geographic cluster of independent firms grouped together to gain economies of scale and positive externalities by sharing infrastructure and taking advantages of the opportunity for bulk purchasing and selling.
Out the 17 potential corridors studied by the United Nations Industrial Development Organisation and Ethiopian government, four have been selected for phase one investment. These include Bure IAIP, Baeker IAIP, Bulbula IAIP, and Yirgalem IAIP. There are more governmental and private parks coming into operation in few years time. These parks will provide one-stop-shopping for all government services, including land and shades with modern waste disposal systems and environment friendly infrastructure.
In addition to the existing opportunities for investment, the government recently declared the decision to partially privatise the stateowned operational mega companies. These include Ethiopian Airlines, Ethio-Telecom, Ethiopian Electric Power and the Ethiopian Shipping & Logistics Service Enterprise.
State-owned railways, sugar factories, industrial parks, hotels and manufacturing companies will also be privatised. Most of the latter are under construction while the former are operational.
One of the foremost priority areas for Ethiopia is agriculture and agro-processing investment. Ethiopia can grow cereals, pulses and oilseeds. A broad range of fruits, vegetables and cut flowers are among fast-growing export agro products. Organic coffee, cotton, sugar cane, tea and spices are the main commercial cash crops grown.
Livestock farming and apiculture are the most available resources for investment at a large scale.
Ethiopia considers manufacturing the crucial area for its development. Manufacturing priorities include textiles and clothing, food and beverage products, tannery and leather goods, glass and ceramics, chemicals and chemical products, medicine and pharmaceuticals, paper and paper products, plastic products and building materials.
Investors with financial power and experts with rich experience from South Africa could explore untapped the mining sector.
Ethiopia has substantial deposits of gold, tantalum, nickel, potash and soda ash. Among construction and industrial minerals are marble, granite, limestone, clay, gypsum, gemstone, iron ore, coal, copper, silica and diatomite.
In addition to the availability of geothermal energy sources, there are significant opportunities for oil and gas explorations and development in the areas of Ogaden, Gambella, the Blue Nile and the Southern Rift valley.
Ethiopia is also striving to attract investors to boost its social services. Investment in the areas of general and specialised secondary and tertiary level health-care services in Ethiopia will attract local and neighbouring countries’ markets with better access and affordability for beneficiaries.
Higher education in the areas of science and technology, engineering, medical sciences and information communication and technology are highly encouraged.
Ethiopia welcomes investors to develop and invest in information and communication technologies infrastructure. Opportunities abound in software, content, application and data base development, system integration and data centre services, information technology services and manufacturing of ICT equipment.
In the construction services sector, Ethiopia is aspiring to become a carbon-neutral, lower middleincome country by 2025, and Africa’s light manufacturing hub. It would like to use natural resources for about 10% of the GDP, so the construction industry calls for General Contractor Grade One, Building Contractor Grade One, Road Contractor Grade One, Water Well-Drilling Grade One, and Mineral Exploration Drilling Grade One.
When we think about Ethiopia’s tourism potential and opportunities, it’s important to note that Ethiopia is home of the earliest remains of human ancestors ever found – the first being to routinely walk on two feet, named “Lucy”. It is the birthplace of coffee. It is the only African country to never be colonised. And it is origin of the Blue Nile, the longest river of the planet.
In the area of renewable energy generation, Ethiopia’s commitment to climate-resilient green economy strategy has strong pillars. These are smart agriculture, including livestock, forestry development, fenewable energy and climate-friendly transport, urbanisation and construction.
Ethiopia has hydropower capacity of 45000MW, geothermal capacity of 5 000 to 7 000MW, average solar energy of 5KWh/m2/day, and wind energy of 5-6m/s. There are grid and off-grid arrangements where prospective private investors could participate.
In conclusion, Ethiopia is truly a land of great opportunities for investment, tourism and trade in the continent. I, and the Ethiopian Embassy in Pretoria, will provide all supports and facilitate those who are interested to invest, visit and trade with Ethiopian people and government. We welcome you all!