With over 100 million inhabitants and strong economic growth, Ethiopia is on the rise. Several Swedish companies are beginning to realize the potential and their interest in investing in the country is increasing. “The need for new goods and services will grow continuously and opportunities are high,” says Ethiopia’s departing Ambassador Woinshet Tadesse.
In Ethiopia, the development is rapid. State-owned companies are privatized and in the capital Addis Ababa, infrastructure, housing, offices and hotels are being built with foreign investment.
Increasing confidence in the Ethiopian market attracts the number of foreign companies and investments to the country. Exclusively in 2016, the number of foreign investment increased by 46 percent, corresponding to a total of 3.2 billion dollars. The majority invested in infrastructure and manufacturing (UNCTAD 2017 World Investment Report).
In fact, economic growth in Ethiopia is among the highest in the world; The country’s GDP growth has been steady around 10.8 percent in the past ten years.
Even the latest UN and World Bank reports suggest robust growth. The Government of Ethiopian has a goal for Ethiopia that within ten years the country to be counted as a middle-income country conferring to the World Bank’s standards.
To realize this goal, the government has developed a two-step plan, the so-called “Growth and Transformation Plan”. The purpose is to transform the country’s market status into a low average income economy in 2025 by expanding the infrastructure and the number of industrial parks to attract investors in turn. The plan is now in its second phase.
The Swedish trade exchange with Ethiopia is developing well and both larger and smaller Swedish companies have established themselves in the country.
EXCEPT LARGER companies such as Ericsson, H & M, Scania and Volvo, which in various ways engage in Ethiopia and several smaller companies have also established themselves in the country. For example, Tylö, which is a sauna company that sells sauna, shower and steam bath in Ethiopia. Another is coffee and tea traders Johan & Nyström who buy coffee directly from the farmers’ own crops.
Departing Ambassador to the Nordic countries Woinshet Tadesse, hopes that more Swedish companies exploring the possibilities in Ethiopia.
Currently, between Sweden and Ethiopia relations are mainly in trade, investment and business contacts, environmental / climate and development cooperation.
Imports to Sweden consist largely of coffee, cut flowers and leather. The Swedish exports mainly consist of machinery, vehicles, telecom equipment, wood, paper and chemical products. Sauna, on the other hand, is somewhat unusual product to sell in Ethiopia. But that’s not an impossible product. With the construction of new hotels and private houses, the sale of Tylö’s sauna instillation has increased, says CEO Anders Dahl, and continues: We currently have a very good development in Ethiopia and are looking forward to the future as Ethiopia has good conditions for growth.
The challenges facing the country, political uncertainty and cheap Chinese imports are not unique to Ethiopia.
THE UPRIGHT trade relations between Ethiopia and the Nordic region are by no means something new. Trade relations with Sweden were initiated in 1866 when the first Swedish missionaries left for Ethiopia. In 1945, Ethiopia became Sweden’s first foreign aid receiving country and the bilateral relations have developed since then.
The strong economic development in the country means that the potential for increased economic relations is very good.
The population is growing rapidly in the country. Ethiopia is the second-most populous country of Africa after Nigeria. The population is growing by around two million a year and now exceeds 100 million. Ethiopia is certainly counted as the least urbanized country in Africa, but urban growth is expected to increase three-fold from 2012 to 2037 and reach 42.3 million. This opens up for new interesting opportunities.
ACCORDING TO ETHIOPEN departing Ambassador to Sweden, Norway, Finland and Denmark, Woinshet Tadesse, it is basically investment on infrastructure, rapid population growth and an ever-increasing middle class that contribute to the rapid growth.
The rapid population growth has contributed to a larger labor force that is cost-competitive. The government’s initiative to open up the market for foreign investment is therefore of great importance, says Woinshet Tadesse, and continues: Since Ethiopia is a Least Developed Country (LDC), we also have a duty-free and quota-free access to EU and US markets.
Something that has previously been a challenge for the companies that have been dependent on international trade is, the fact that Ethiopia lacks access to the sea and its own port. To solve the problem, the Ethiopian government, along with Djibouti and with the help of the Chinese state, has invested a 750-km long railroad which runs from Addis Ababa directly to Djibouti’s Doraleh port. The railway was opened in early 2017 and it made possible for freight to be transported between Addis Ababa and Djibouti port in 12 hours compared to 3 days by truck. This infrastructure enhancement is of tremendous importance to both Ethiopia and Djibouti, which are economically dependent.
In addition to the railway investments, Bole, the international airport gets a $300 million advance to handle a capacity of 20 million passengers. It is also going to be invested in a new international airport that will be Africa’s largest. It is estimated to be able to handle 70 million passengers and the construction is scheduled to begin in 2020.
OTHER infrastructure investments include road projects under construction to link larger cities and villages, and investments are also made in a number of industrial parks to attract companies to establish themselves in Ethiopia.
The main opportunity for international companies is in the manufacturing sector and it focusing on leather and leather products, textiles and fabrics as well as drug manufacturing, says Woinshet Tadesse.
Among the major recently opened parks is the Hawassa Industrial Park, located at 275 km outside of Addis, and is a 300-hectare ecological park adapted for textile-related manufacturing.
Other favorable investment opportunities are in the energy sectors and can be done by hydro, solar, wind and geothermal energy, off-grid generation or by providing electricity to local electricity grids. Even within agriculture, which is one of the country’s most important sectors, there is a great opportunity.
Buying and exporting locally produced goods has become easier and production quality has increased with local manufacturers, says Woinshet, but because many workers are still in the process of learning, it is therefore a sensible investment to train staff and to continuously review products meeting the quality requirements.
COMPETITION in building, telecom, textile and leather manufacturing has just become tougher in recent years, not to mention that of China’s major investments in Africa, but the market is far from saturated and continuously the potential of new opportunities are there.
Although the future of Ethiopia looks bright, there are few Nordic companies investing in the country. One reason may be that Ethiopia is located within an area known as “The Horn of Africa” the area consisting of Djibouti, Ethiopia, Eritrea and Somalia. This region has previously been classified as a high-risk area for investment and tourism because of, among other things internal armed conflicts, famine disasters and lack of democracy. The situation today, however, is completely different, at least as regards to Ethiopia and Djibouti.
The Chinese-established Hawassa Industrial Park has already attracted several International textile industry companies that have begun their manufacturing.
One of the reasons is that the government ambitious plan to reduce poverty and the success of it. According to the United Nations Development Program (UNDP) the country is one of those countries whose development in human Rights improved most in recent years and in particular education and health have several projects that led to significant progress for the country’s many poor.
THE GOVERNMENT has also taken vigorous effort against corruption which have given results in the country. In the Global Report Competitiveness (2016-2017) Ethiopia is ranked to number 34 when it comes to impartial decision making – significantly higher than most the other countries in the region.
Overall, Ambassador Woinshet is optimistic and she believes in a stable future of Ethiopia.
The need for new goods and services will grow endlessly and the possibilities are great. The state wants to attract investors and it is therefore not impossible to meet high-level leaders, which may constitute a valuable network of contacts whenever it’s time to start. It is about to take advantage of Ethiopia’s growth phase and review how to get their business to grow in the new Ethiopia. The Embassy in Stockholm informs gladly about the possibility of investment in Ethiopia and will be happy to help to establish contacts in the country, concludes Woinshet.
Against the contextual of the powerful economic development in the country, population expansion and the many government initiatives, corresponding aims to strengthen and improve the conditions for investors, Ethiopia can be seen in start-up phase. The companies that take the opportunity now will have an advantage before anyone else when international investments begin to increase in Ethiopia.
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TEXT GREGORY SOROKOURS
PHOTO ETHIOPIEN EMBASSY