Good Reasons to Invest In Ethiopia

The Ethiopian Economy is predominantly agrarian, with agricultural produce contributing 45%of gross domestic product (GDP), 62% of total export and 85% employment. Manufacturing, mining, trade, tourism construction, services, etc, make up the remaining 55% of the GDP. Industry contributes only 11% of the GDP, and 16% total export of the Country.

Due to diverse weather conditions, a wide variety of crops are grown in different parts of Ethiopia. But Coffee Arabic, sold in Japan, as mocha is the main cash crop bringing the largest portion of the country’s foreign currency. Other cash crops include oil seeds (i.e. sesame, Soya beans), pulses (horse beans, lentils), cotton, fruits and sugarcane, to mention only a few. However agriculture remains largely in the hand of small holders who use less technology, making the sector more receptive to technological adaptations and attractive to investment.

Manufacturing is currently at its lowest level, only contributing 11% to National income. But it’s a sector, which is fast growing and presents an attractive opportunity for investors. Currently Ethiopia exports clothing and apparel, canned and frozen meat, semi-processed hides and skins, sugar and molasses, footwear and gloves, tobacco, beverages, oil cakes and bees wax to the world market.

Although only 3% GDP comes from mining sector at the moment, there are proven reserves of minerals like gold, tantalum, nickel, iron-ore, coal, marble, potash, copper, silica, etc, as well as oil and natural gas awaiting exploitation, making the Country very attractive to both foreign and domestic investors.

Following the fall of the military regime and the abolishing of the centrally command economy in 1991, the Government has embarked upon radical reforms to transform the economy to free market, speed up integration to the world economy and encourage wider participation of the private sector. The reforms include devaluation of local currency and introduction of inter-bank foreign currency market based on World market forces, deregulation of domestic prices, abolishing of all export taxes and subsidies, liberalization of foreign trade, reduction of taxes, privatisation of public enterprises, promulgation of a highly competitive investment code, etc.
As the result the reforms, the economy has shown a marked improvement with growth rate averaging 6.3% in the last several years. Inflation rate was brought down from 20% in 1992 to an average of 4% in the last ten years. The country’s foreign exchange has also stabilized and the budget deficit has declined to acceptable level. But above all private investment activities have flourished.

In the last nine months alone new investment amount to 10 billion Birr (roughly US$ 1.16), more than half of which belongs to foreign investors. Compared to previous years foreign investment has shown a capital increase of 28%. This is very significant and a clear indication of how fast Ethiopia is becoming one of the major investment destinations in Africa.

Out of several factors that can be sighted as good reasons for investors to consider investing in Ethiopia, four stand out as indicated by recent revised draft issued jointly by the United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organization (WTO).

Perhaps the most important of these is the security and stability of the Country. Though the Country is very much diverse in many aspects, it offers a very stable political and economic environment with very little crime and disorder. Secondly, the market is one of the largest domestic markets in Africa with 72 million consumers. Though currently limited by low purchasing power, it’s growing steadily with GDP growth rate averaging 6.3 in the last ten years.

The third reason is the Country’s exceptional climate. Forty Five percent of the landscape consists of highlands with pleasant temperature averaging between 15 and 20 degree Celsius. The climate offers an excellent opportunity for various agricultural activities. Anything can grow in Ethiopia. Lastly Ethiopia is exceptional among the least developed countries, in its virtual absence of routine corruption. This is true for both public sector and the broader society, making the cost of doing business cheaper. The moral value is being strengthened further by the on going civil service reform.

Ethiopia represents a unique business and Investment opportunity not found anywhere. We therefore hope the Japanese business community take this opportunity to go and invest in Ethiopia. The Country, the Government and the people are ready to receive them with the legendary hospitality.