Ethiopia and Eretria Peace Agreement jackpot for Swedish companies

H.MH & M, ABB, Ericsson – Many Swedish companies benefit from the new peace agreement between Ethiopia and neighbouring Eritrea. Access to ports is crucial for Export companies.

H & M’s factory in Addis Ababa has a reason why the company should rejoice in Monday’s agreement between Eritrea and Ethiopia. Photo: Yvonne Åsell, Henrik Montgomery/TT

Ethiopia and Eritrea are no longer formally in conflict with each other. This week the neighbouring States announced that the state of war is over. “A new era of friendship and Peace has begun”, the Eritrean Information Minister Yemane Gebremeskel tweeted when Monday’s agreement was signed.

The agreement is long overdue, not only among the populations but also the Swedish companies established in the region. Ethiopia, in particular, has a long history of Swedish company presence – and there are good reasons for that.

The strategic situation combined with a population of over 100 million  and the country is Africa’s second most populous, moreover, it contributes to its position as the continent’s fastest-growing economy.

“The lack of its own port has meant that it has previously been both cumbersome and time-consuming to transport goods to Ethiopia.” Ericsson established itself in Ethiopia already in the 1990 century and several Swedish companies have since then followed in their tracks. The largest are today H & M and ABB, but around 15 smaller Swedish companies also have their business in the country.

Ludvig Hermansson is Business Sweden’s trade commissioner in Nairobi and has had a lot of contact with the Swedish companies in Ethiopia.

“This is positive in many ways. Increased stability and security is important but also that it opens up for well-needed infrastructure solutions, he says.

According to Ludvig Hermansson, however, Ethiopia’s lack of port  position has created major problems for many companies. Because of the conflict with the coastal country of Eritrea, the companies that wanted to transport goods into Ethiopia had to use the port of the small neighbouring country of Djibouti, which proved far from simple.

“The lack of a private port has meant that it has been both difficult and time consuming to transport goods to Ethiopia, which has led to the cost of transport and logistics in the country being high in international comparisons,” says Ludvig Hermansson.

In concrete terms, what has been the consequence of the harbour shortage for Swedish companies?

The Swedish company that we had contacted  with stated that their growth was hampered by over 10 per cent as a result of the infrastructure problems. Do you think that this will lead to more companies wanting to establish themselves now?

Ethiopia has Africa’s fastest growing economy at the moment, it is a region that is very hot. Among Swedish companies that want to establish themselves in Africa, I would say that Ethiopia is the top ten already.

What do the Swedish companies say?

One of the companies with Swedish connection on the ground is Derba transport that transports goods all over Ethiopia since almost eight years back.

“At the moment, there is a lot of wheat, cooking oil, sugar and fertilizers that are going to be sold on the Ethiopian market,” says Per Lai, manager of Derba Transport, from his office in Ethiopia.

What was the first thing you thought of when you were told about agreement?

– Finally Port! We are currently entering everything via Djibouti, but if we could take it through the port of Eritrean Assab it would be easier to reach the whole of northern Ethiopia.

Per Lai, who has lived in Addis Ababa for more than seven years, tells us that the announcement of the agreement was also emotionally large:

“We see the agreement as a positive development for both countries and we follow the further development closely.

I remember that we sat and watched the World Cup when the news came, people left their television screens to go out. Peace is amazing. Everyone talks about this and is very excited, “he says.

H & M and Ericsson, who together with ABB, are responsible for the largest Swedish presence in Ethiopia, announce that it is still too early to express an opinion on how the agreement will affect their activities in the country.

“We see the agreement as a positive development for both countries and we follow the further development closely,” says Iñigo Sáenz Maestre, press spokesperson for H & M Group to Svenska Dagbladet.

SVD          Published July 15,2018