A perspective by AFTS
Ethiopia Investment Landscape
With a population of over 109 million people (2018), Ethiopia is the second-most populous nation in Africa and is home to the fastest growing economy on the continent. Ethiopia currently has a per capita GDP of $865, with ambitions to reach $2,219 and lower-middle-income status by 2025. Building on the success of double-digit economic growth for more than a decade, the Ethiopian government has unveiled a US $10 billion new economic reform blueprint, dubbed Homegrown Economic Reform. The blueprint presents widespread reforms that pave the way for job creation, poverty reduction, and economic growth.
The reform agenda’s priority sectors are ICT, agriculture, manufacturing, mining, and tourism.
Cultural and Economic Success Story – “The Ethiopian Way”
Ethiopia has several unique characteristics that make it a hot spot for future investment activity.
From a cultural perspective, Ethiopia prides itself on many factors, most notably: being 1 of only 2 African countries that were never colonized; use of the Julian calendar; the origin of coffee; home to the oldest remains of human beings every discovered; and having ethnic cuisine that’s known and enjoyed worldwide.
Economically, Ethiopia’s unrivaled growth acceleration over the past decade is attributed to a number of factors including restrained government consumption, investment in public infrastructure, and a conducive external environment. It was Ethiopia’s particular mix of policies, however, that allowed it to achieve an unprecedented growth rate that averaged 10.9% from 2004 to 2014. Ethiopia is anticipated to retain the fastest growing economy title, yet again, with a forecasted growth rate of between 7.7-10% for 2019/2020. The growth acceleration was part of a broader and very successful development experience. Poverty, as measured by income of less than US $1.90/per day, for example, declined substantially from 55.3% percent in 2000 to 33.5% percent in 2011 and down to 23% in 2016. And despite rapid growth, Ethiopia remained one of the most equal countries in the world with a Gini coefficient of consumption of 0.30 in 2011. Life expectancy has increased by 1-year annually since 2000 and is now higher in Ethiopia than the other low-income and Sub-Saharan Africa averages. The country has made similar advances in other key development indicators, such as reductions in child and infant mortality. As a result, the country has attained most of the Millenium Development Goals and has made early progress towards meeting the targets set out by the Sustainable Development Goals.
For a more in-depth analysis, read the World Bank’s report ‘Ethiopia’s Great Run’HERE.
The International Community Has Set their Sights on Ethiopia
Investment Risk & Rewards in Ethiopia
As Paul Gabriel, Senior Analyst for Africa at London-based Control Risks explains, ‘experienced investors – not only in Africa, but around the world – know that risk and reward are close companions. While no serious investor should overlook the economic giants of the continent, real competitive edge can only be achieved when investors manage to stay ahead of the pack in knowing what’s next.’ In this regard, Ethiopia outperforms every African peer for consecutive years with its high reward score. Read more on this subject HERE for 2019 & HERE for 2018 reports.
Sampling of Past Investors and their Successes
- $7.4 BILLION DOLLARS WORTH OF DEALS.
- 33 DEALS IN NUMBER.
- 2 INVESTMENT EXITS.
- AFRICA’S SINGLE LARGEST FDI INVESTMENT.
- 50+ INTERNATIONAL INVESTORS.
- 25+ LOCAL JV PARTNERS AND INVESTEES.
To learn more, check out the report from Ibex Frontier, our co-organizer for AFTS Addis, on Ethiopia’s 2017 FDI, M&A and Exits HERE.
Forex Crunch & Profit/Capital Repatriation – Ethiopia’s Achilles Heel?
With a wide trade deficit gap and economic transformation phase, aimed at export-driven and import-substitutions industrialization, entrepreneurs and investors face a forex shortage in Ethiopia. As the digest Demystifying ETHIOPIA: Repatriation of Profit & Capital – Perception and Reality by AFTS Co-organizer Zekarias Amsalu outlines, an understanding of the Ethiopian forex regime is crucial. This understanding and proactively planning for compliance can save lots of headaches in repatriations at later stages.
To learn more about investors’ experiences in Ethiopia and hear some mitigating advice, please download the report HERE.
Tech Investment in Africa – Where is Ethiopia?
Tech investors are noticing Ethiopia lately. The combination of massive infrastructure investment, including more than 21,000.00 fiber optics availability, a growing population of 44M mobile subscribers, and an increasingly tech-savvy young generation of more than one million students in universities and colleges, with 300,000+ graduating every year, is certainly attracting attention. Tech investors are finding an early entry advantage to the awakening giant that is Ethiopia. It is no wonder Ethiopia was the 7th-largest tech investment recipient, with $11.3M disclosed tech investment in Ethiopia. Read full reports of 2019/18 Tech investment reports HERE & HERE.
Why Ethiopia is an Alluring Fintech ‘Dreamland’
The numbers are revealing – Ethiopia is largely a cash-based society with only 22% of it’s 109+ million population being current bank account holders. Additionally, there are 18,000 saving & credit cooperatives and 44 million active mobile phone subscribers. The current digital/electronic banking penetration is estimated at only 6% with ambitious targets to reach 40% penetration in digital banking by 2020. This substantial potential for growth is a dream scenario for investors interested in fintech.
Listen to the Africa Fintech Rising Podcast discussion HERE for a rare insight into Ethiopia’s fintech, e-commerce & tech investment opportunities.
We encourage you to visit the Ethiopian Investment Commission’s dedicated page HERE for more information. At the Africa Fintech Summit, EIC will have a dedicated booth and will have expert investment staff available to answer any questions you may have. Until then, Selam!