Learn about the economic history of Ethiopia and its investment potential.
Read about some of the most significant investments made in this African country.
Economic History in Brief
The economic history of Ethiopia began centuries ago. Even before the year 270 when minted coins were first issued, metal coins were used as currency. One of Ethiopia’s initial major exports was introduced around the 5th and 8th century when coffee was introduced to the Arab world from Ethiopia. During this time other food crops like teff, millet, castor beans and sorghum were also cultivated in the country. But after foreign investors were expelled when Ethiopia was taken over by a military government and nationalised, the economy began deteriorating. Further deterioration occurred during the 1970s and 1980s because of widespread famine and civil war.
In 1991, Ethiopia began economic reform which included privatisation of state enterprises. Although this process is ongoing, it has generated significant foreign direct investment. By 2015, Ethiopia had 2,700 millionaires, more than double the amount since 2007. Most of these fortunes were built through economic rents like mines and banks. The government makes a continuous effort to attract foreign investment through various development initiatives.
Through Prime Minister Abiy Ahmed’s leadership and economic reforms, Ethiopia became an attractive African investment destination. The growth and transformation plan aims to help Ethiopia develop in areas like infrastructure, rural development and agriculture. It is hoped that these developments will make Ethiopia even more attractive to foreign investors.
The following six sectors have been identified as having major investment opportunities:
Industrial Sector – One of Ethiopia’s main areas of focus is to increase industry production of products like textiles, sugar, cement and leather products. It is expected that the industry will be a major contributor to Ethiopia’s economic output by 2025.
Transport Infrastructure – Several regional and national transport projects are currently underway with the aim of improving land, sea and air travel.
Energy – Ethiopia has a goal of being the main exporter of energy in the region and has several projects underway including hydropower, solar, wind and geothermal energy.
Agriculture – Although the Ethiopian agricultural sector is one of the largest contributors to the country’s economic output, they are continuously exploring opportunities for improved farming technology. Millions of acres are available to investors interested in commercial farming.
ICT – As 3G and 4G are increasing the demand for advanced technologies like distance education, video conference facilities and telemedicine. All of this technological development is driving a wealth of business and investment opportunities in Ethiopia.
Mining – Ethiopia is a resource and mineral-rich and has large gold and tantalum deposits. It is expected that exports will double in years to come.
In addition to these main sectors, there are also opportunities in other areas, for example, leather and leather products, textiles and garments, horticulture, construction, tourism and pharmaceuticals. There has been a particular focus on the textile industry.
Companies Investing in Ethiopia
Ant Financial, an affiliate of the Alibaba Group announced that its expansion beyond China will include Ethiopia. Known as one of the largest digital payment platforms in the world, Ant Financial is valued at $150 billion and serves more than 650 million people every day.
The China Civil Engineering Construction Corporation (CCECC) constructed the Adama Industrial Park southeast of Addis Ababa, the capital of Ethiopia. The investment amounted to around $146 million and began attracting further foreign investment before its completion in October 2018. One of the foreign companies to invest in Ethiopia through the industrial park is Antex, a top Chinese textile production group who began producing export-oriented textiles in the park with an initial investment of U$10 million.
In 2011, one of China’s largest shoe exporters, Huajian, set up a factory in Ethiopia. This was part of their plan to invest $2 billion into developing manufacturing clusters over a period of 10 years. The company manufactures shoes for brands like Calvin Klein and Guess.
Investors with Interests in Ethiopia
One of the most prominent investors in Ethiopia in recent times is Jack Ma, founder of Alibaba. It was announced in August 2019 that Getahun Mekuria, the Ethiopian Minister of Innovation and Technology, had met with Jack Ma to discuss building the digital economy of Ethiopia together. During an earlier meeting between Ma and the Ethiopian premier, Ma announced his plans to potentially invest in a tech city based in Ethiopia.
Other investors who are interested in Ethiopia include:
Kester Goh – A Belgium-based investor and startup specialist with an interest in clean technology.
Jack Herrick – A Palo Alto-based entrepreneur and founder of WikiHow focused on bridging online and offline startups.
Don Wyper – A Chicago-based investor in the financial technology industry.
Dan Sutera – A Brooklyn-based investor and product advisor with an interest in robotics.
Sajid Rahman – An Indonesia-based investor and the CEO of Telenor focused on crowdsourcing.
Ankur Nagpal – A San Francisco-based entrepreneur focused on technology, including Facebook applications.
As the oldest independent African country, Ethiopia is one of the most stable economic regions. It offers an unwavering macroeconomic environment and a growing economy with a firm average of around 11% growth in annual GDP over a period of at least 14 years. Because of growth forecasts of over 7%, and potentially as much as 8.5%, from the African Development Bank and the International Monetary Fund, Ethiopia is considered as one of the world’s top medium-term growth leaders. Furthermore, the country has fertile soil and an excellent climate suitable to the production of highly sought-after food crops like pulses, oilseeds, cereals, coffee, tobacco, sugar cane, tea, spices and a wide range of vegetables and fruit. Ethiopia is known as one of the top coffee producers in the world.
In addition to its continuously improving economic infrastructure and investment opportunities in a wide range of industries, Ethiopia also has strong protection and guarantees for investors, a young labour force and competitive incentive packages for investors. The government is committed to growth and improvement and has made more than 30 bilateral agreements that promote investment and protection with countries and regions including China, Russia, South Africa, Israel, Sudan, Egypt and a range of individual EU Member States.