Ethiopia is an ancient African country one of the oldest states in the world. As Abyssina its culture and traditions date back over 3,000 years and as the Kingdom of Cush beyond time immemorial. Through out the centuries, Ethiopia had always been a symbol of ancient African civilization and statehood – one that can boast the most remarkable achievements and glorious past from long bygone times.
Today, Ethiopia is undergoing unprecedented economic expansion accompanied by rapid growth of the private sector and underpinned by increasingly market-orientated economic policies. With annual GDP growth of over 10% between 2005 and 2007, and over 7% in 2008 and 2009, in 2017 the GDP growth had grown to 10.9%, the potential of the Ethiopian economy has begun to capture international investors’ attention.
Ranked ninth among 46 sub-Saharan African countries in the recently-published Doing Business Report, Ethiopia has attracted investors due to the combination of its increasingly stable political landscape, significant infrastructure development, emerging middle class and rising income levels.
As the second most populous country of Africa, Ethiopia is a multilingual and multi-ethnic society. The language of Ethiopia is predominantly Amharic, but English is widely spoken in business circles.
The population is split Christian and Muslim and they have their own calendar that is 7 years behind ours. The population is around 125 million with 28 million living in urban areas, it is estimated that by 2030 this will increase to about 45 million urban dwellers.
Ethiopia is becoming an industrial hub for East African manufacturing and in 2015 it had the 5th largest GDP in Africa (behind Nigeria, South Africa, Angola and Kenya).
Ethiopia has made considerable progress in economic and social development since 1992 as a result of the implementation of favourable policies and strategies that are instrumental in improving the national economy.
Ethiopia has the lowest level of income-inequality in Africa and one of the lowest in the world, making it comparable to that of the Scandinavian countries. Yet despite progress toward eliminating extreme poverty, Ethiopia remains on of the poorest countries in the world, due both to rapid population growth and a low starting base with 60% of it’s population living below the poverty line.
The state is heavily engaged in the economy. Ongoing infrastructure projects include power production and distribution, roads, rail, airports and industrial parks. Key sectors are state owned, including telecommunications, banking, insurance and power distribution. Under Ethiopia’s constitution, the state owns all land and provides long-term leases to tenants.
Title rights in urban areas, particularly Addis Ababa, are poorly regulated, and subject to corruption.
Ethiopia’s foreign exchange earnings are led by the services sector – primarily the state-run Ethiopian Airlines – followed by exports of several commodities. While coffee remains the largest foreign exchange earner, Ethiopia is diversifying exports, and commodities such as gold, sesame, Khat, livestock and horticulture products are becoming increasingly important. Manufacturing represented less than 8% in 2016, but manufacturing exports should increase in future years due to a growing international presence.
The key sectors that are state owned are restricted to domestic investors, but Ethiopia has attracted roughly $8.5 billion in foreign direct investment, mostly from China, Turkey, India and the EU; US FDI is $567 million. Investment has been primarily in infrastructure, construction, agriculture/horticulture, agricultural processing, textiles, leather and leather products.
There is not a lot of formal retail in Ethiopia, but it’s Capex for 2019 was US$5 Billion. Recently the road between Addis Abba and Kenya has been completed and subsequent trade between these two countries has increase by some 400%.
As with many other African countries there are issues with cash and cash flows, but they have made a deal with the World Bank.
Ethiopia can produce power cheaper than South Africa and are exporting to other East African countries.
South Africa’s export to Ethiopia are estimated at R2.8 million and this is mostly coal, the country is very bureaucratic and there are significant delays with forex.
ETHIOPIA’S GROWTH AND TRANSFORMATION (GTP) PLAN (236 pages available on request)
Ethiopia first GTP covered the period 2010 – 2015 and in developing the second GTP covers the period 2015 – 2020. The core of GTP II is the modernisation in the development of the agricultural sector, expansion of industrial development with a primary focus on light manufacturing, a significant shift in export development, and it is an important milestone towards realising Ethiopia’s vision of becoming a lower middle income country by 2025.
“ETHIOPIA, SOUTH AFRICA TO ELEVATE BILATERAL RELATIONS” Ethiopian Herald 13 May 2018
Ethiopia and South Africa are working to boost trade and investment and integrate their economies, says Ambassador Dr. Shiferaw Teklemariam.
The Ambassador was approached by The Ethiopian Herald and said that the total trade volume between Ethiopia and South Africa stood at more than $166 million in 2016, a figure much lower in relation to the potential. “Growth in bilateral trade exchanges of Ethiopia and South Africa has not seen concomitant increase both in terms of volume and capital.” He added.
According to Dr. Shiferaw, in terms of FEDI flow from South Africa to Ethiopia in the past years, up until September 2017, Ethiopia had licensed 58 South African investment projects with a total capital of more than 1 billion Birr (R500m). Some of the companies operating in Ethiopia and PPC, Tiger Brands, Mckinsey and Company, Group Five and Standard Bank.
The Ambassador mentioned that the two countries had signed a Declaration of Intent in March 1998 and a General Co-operation Agreement in March 2004. Also, they had managed to stage five Senior Experts’ Meetings and three Joint Ministerial Commission Meetings.
Hence, getting the best out of signed economic related agreements and exploring more areas of cooperation in this sphere is a timely agenda in the bilateral relations of the two countries. “In terms of setting priorities, both countries need to cooperate in the areas of energy, education and science and technology.
There are also joint interests to elevate the Joint Ministerial Commission forums to Higher Level Commission forums where leaders of both countries will play a guiding role in terms of shaping and strengthening relations and laying the ground in a bid to get the people-to-people relations to gain momentum.
Given South Africa’s immense experiences in mineral extraction, Ethiopia has initiated a draft agreement on Exploration, Mining, Geology and Minerals Beneficiation Cooperation between the two countries.
Ethiopia’s mining sector is undergoing an enormous transformation with an increase in opportunities for investment. A wide variety of mineral resources are available in Ethiopia, according to a recently conducted geological study. Gold is considered to have huge potential.
Meanwhile, additional explorations have confirmed the presence of deposits of platinum, tantalite, soda ash and phosphate rock. Petroleum and other metallic, industrial and chemical minerals have also been identified. Ethiopia’s mineral wealth provide the makings for a thriving and profitable mining sector.
Agriculture is the main stay of Ethiopia’s economy providing employment to 80% of the population. Endowed with a wide ranging agro-ecological zones and diversified resources, Ethiopia grows all types of cereals, fibre crops, oil seeds, coffee, tea, fruits and vegetables. Ethiopia also has the largest livestock resources in Africa and fishery and forestry resources are also significant.
Considerable opportunities exist in the production and processing of the above agricultural resources.