Investment Guide: Ethiopia
Summary
Ethiopia has succeeded in becoming one of the world’s fastest growing economies. Over the 2008-18 period, Ethiopia recorded an average real GDP growth rate of 9.9 percent. This broad-based high growth rate has been supported by structural reforms that have been introduced through industrial sector development.
Ethiopia remains the largest Foreign Direct Investment (FDI) recipient in East Africa & among top five in Africa. FDI stock in Ethiopia grew exponentially from under USD 1 billion in 2000 to around USD 4 billion in 2010 & and USD 27 billion in 2020. Ethiopia’s cheap and abundant labour, privileged access to high-income markets and growing domestic and regional markets add to its attraction as an FDI host country. Addis Ababa, the capital of Ethiopia, is the headquarters of the African Union.
The sectors in Ethiopia that continue to attract foreign investment are:
Agriculture
The agricultural sector constitutes approximately 32.7 percent of GDP and approximately 72.7 percent of total employment. Approximately 65.62 percent of the labour force is involved in subsistence agriculture as farmers or herders. Ethiopia’s main crops are coffee, pulses, oilseeds, cereals, sugarcane, potatoes and vegetables. Horticulture and floriculture are popular areas for foreign direct investment. Ethiopia is Africa’s; second largest maize producer, leading producer and exporter of coffee Arabica, the 2nd largest flower exporting country in Africa and a continental lead in honey and beeswax production.
Since 2009, the Ethiopian Government has been focusing on encouraging investment in large-scale commercial farms. The Ministry of Agriculture has been given the responsibility of providing support to private investors investing in agriculture. The support ranges from providing land above 5000 ha, provision of information, technical support, and facilitation for other public services.
Energy
Approximately 90 percent of Ethiopia’s electricity is produced through hydropower. Apart from the use of water and wood in electricity production, the Ministry of Water, Irrigation and Energy is seeking investment in the energy sector in order to promote the development of energy in the country. The Ministry is particularly interested in renewable energy sources and a draft feed-in tariff Bill, establishing rates and conditions for private entities to supply power to the national grid, is being finalised. A number of high- profile energy projects are also expected to be completed. Ethiopia is currently exporting electricity to Sudan, Kenya and Djibouti.
The potential of Ethiopia’s renewable and non-renewable energy resources is large, with the economically feasible hydropower potential estimated at 45,000 MW. It also has large potential for geothermal energy generation. The private sector can participate in electricity generation from any source and without any capacity limit.
Tourism
Known as ‘Land of Origins’, Ethiopia is among the world’s best destination for tourism with strong service industry to support the sector. Ethiopia is home to several cultural and historical heritage sites, nine of which are included in the UNESCO list of world heritage.
Ethiopia commands a large and untapped potential for the tourism and hospitality business. The increasing number of tourists and the evolving profile of today’s traveler demand a host of new tourism offerings and infrastructure projects.
In addition, Addis Ababa’s significance as the political capital of Africa brings a high representation of international and regional organizations, including the seat of the African Union and the United Nations Economic Commission on Africa.
Healthcare
Ethiopian health-care sector is a largely untapped market. Ethiopia has a population of more that 110 million people. . However, the health-care facilities and health posts are around 29,000. This indicates the high demand for health-care in Ethiopia. Ethiopia is expected to become a middle-income country by 2025 with an average economic growth of 10 percent per year resulting in the disposable income of the population. This increase in disposable income is expected to influence spending on healthcare and pharma products.
With plans of expanding healthcare coverage to its large rural population, the Ethiopian government is undertaking taking a Health Extension Programme. This program is a community based strategy that aims to deliver health promotion and awareness creation among the public. A social health insurance scheme has been introduced to the public aiming to increase access to health care. Except primary and middle level health services, all other healthcare institutions are opened to foreign investors. Moreover, investment in speciality clinics, centres, and hospitals are allowed to foreign investors.
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