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The image of Ethiopia as a thriving and exciting investment destination is not what necessarily springs to mind, but for those looking at Africa as in investment destination then Ethiopia should be one of their first points of call. The Horn of Africa and Ethiopia in particular is becoming one of the most attractive destinations among emerging markets of Africa.
This should come as no surprise for those who have been keeping an eye on the country. With it’s largely agrarian economy and labour force and modern economic policies pursued by the government, the last 10 years have seen large-scale public investment projects, which have proved so successful that the economy has been growing at an average of 10% over the last 11 years.
The effect of the economic policies pursued by the Ethiopian government in the past 10 years has led to tremendous growth in different sectors of the economy. Sectors of the economy which have lain dormant since the mid-70s (when a disastrous experiment in socialism was introduced by the military government led to two decades of constant decline) are finally bursting with growth. The construction sector, which has been one of the major beneficiaries of the public investment projects in road and rail infrastructure, power and public housing, has witnessed growth in excess of 20% per year in the past four years.
The Grand Ethiopian Renaissance Dam, a hydropower dam on the Blue Nile River at a cost of US$4.8-billion, and the Gibe III, a US$2.2-billion hydropower dam on the Omo River, both being constructed by the Italian construction company, Salini are expected to quadruple the electricity production capacity of the country in the coming three years.
This year construction is expected to start at what would be the world’s largest geo-thermal plant in Corbetti, Ethiopia at a cost of US$4-billion by a joint venture of an Icelandic company and a local company with the support of President Obama’s Power Africa initiative. Such mega power projects are expected to provide much needed electricity to fuel a growing manufacturing sector at home, and be exported to neighbouring countries such as Kenya, Sudan, Djibouti and even Yemen across the Red Sea to bring in much needed foreign currency.
At the same time, the government is encouraging the growth of its textile and leather sectors, by inviting foreign direct investment in these sectors, with the hope of capitalising on its cheap and abundant labour, Africa’s largest livestock population and huge potential in cotton production. Following direct government lobbying in 2010, one of the world’s largest shoe manufacturer’s, Shenzhen based Chinese footwear company – Huajian, has set up a large factory outside of the capital Addis Ababa, where it manufactures shoes for global brands such as Gucci and Tommy Hilfiger. Huajian aims to expand its manufacturing capacity to reach US$1-billion by 2020, and has recently submitted to develop what it has termed a shoe-city south of the capital city. Similarly, Ayka Addis, a Turkish textile company has established and operates one of Africa’s largest vertically integrated textile factories outside of Addis Ababa.
Local companies in the textile and leather sector are also contributing to the growth of the manufacturing sector. Small and medium sized companies such as Sole Rebels, which makes shoes made from recycled rubber and hand woven textiles are making their own mark in the sector. Large sized local companies are also expanding with growing exports to African and Middle Eastern market.
Ethiopian Airlines is perhaps the company that most reflects Ethiopia’s unique origin as where Africa meets Asia, and its unique location of being mid-way between Asia and America. Since its establishment in 1945, Ethiopia’s national carrier, has been a successful airline and continued to grow and expand even when the country’s civil war took a toll on its economy in the 1980s. Today, the airline with its young and modern fleet of Boeing 787 passenger planes and Boeing 777 cargo planes serves as the backbone of a growing horticulture industry that exports Ethiopian roses direct to as far as Washington DC in the west and Moscow in the east.
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