A packed room of investors and others assembled in London on 16 October to hear about business opportunities and the investment climate in Ethiopia. The occasion was the UK-Ethiopia Trade & Investment Forum 2018. The planned delegation had some changes, due to 16 October dramatic cabinet announcement where 50% of posts went to women, including top jobs such as Defence and Peace (Home Affairs). The conference was organized by Developing Markets Associates with WAFA Promotions.
Leader of the delegation was Arkebe Oqubay, Economic Advisor to the Prime Minister, who gave a detailed overview of events of the last 6 months and the big ambitions driving Ethiopia:
“Vision 2025 is to make Ethiopia the leading manufacturing hub for Africa, to sustain GDP growth of 11% for next 25 years, and 35% of exports for every year for coming years. This has created enormous opportunity for investors, including many opportunities for UK firms.
“We have been focused on human resources” he said. There are 50 public universities with 600,000 students, annually there are 100,000 graduates mostly form science, technology, engineering and mathematics.
“We need to build manufacturing capacity, every year our population increases by 2.3m, we need to create minimum of 1m jobs for the youth, including at least 100,000 jobs for university graduates. We need to generate more forex earnings and need to focus on exports, that is why we focus on manufacturing.
“For the last 15 years we have been able to grow at 11% a year and for 2018 we will witness same rate of economic growth. For rapid economic growth to be sustained, it needs to be equitable. Ethiopia has increased average life expectancy, which is linked to poverty reduction. In 1990 the average Ethiopian lived for 44 years, and the African average was 50 years, but in 2016, the last year for which there are figures, the Ethiopian average life expectancy was 66 years and the Africa average was 60 years.”
Harriet Harman MP, Minister of State for Africa, UK Foreign & Commonwealth Office “Total trade in goods and services between UK and Ethiopia last year grew by 80%”
“In 2017 Ethiopia was recognized to show the highest growth rate of foreign direct investment (FDI) inflow with $4.2bn, of which 89% went into manufacturing, in line with the Government’s focus on industrialization. Ethiopia has been allocating more than 50% of federal budget to roads, railway lines, the largest air-cargo hub in the continent, and our largest focus on clean and renewable energy.” The FDI is expanding the industrial parks, which are being developed on principles of sustainability.
Arkebe focused on political progress made since Abiy became Prime Minister in April:
1) Political reforms – ensuring all political parties come to the table, ensuring there is loyal opposition within the system to encourage and strengthen. This has been a rewarding process, all the opposition groups trying to work with the Government, political leaders who advocated violence have come back to peace and all have come to Addis and joined the dialogue.
2) Political and public dialogue, Abiy has listened to complaints and voices in all the regions.
3) Peace in the region is one of the major breakthroughs. Abiy approached President Issayas, the 2 countries are establishing diplomatic missions, people are moving in both directions, they are sharing infrastructure, ports and building communications. This was achieved without any intermediary. The aim is to make the Red Sea one of the most dynamic regions, all the countries, Ethiopia, Egypt, Sudan, Djibouti, Somalia, Yemen, Oman, UAE. Geopolitical peace will cut the cost of business and make it attractive to investments.
4) The internal process in the ruling EPRDF party. The Congress which happened in the last 2 weeks,fully backed the PM who was elected chair of the party with unanimous vote.
He also highlighted 3 challenges
1) “We have to create jobs for the youth, it’s a major factor of political turmoil, the only solution is to focus on job creation and new industries”.
2) “Our society is diverse, we are Christian but we are one of oldest Muslim countries, we have 80 diverse nationalities and our languages are completely different, like Japanese to English. We have to manage this diversity, and we set up the system of federalism, based on ethnic diversity. We are trying to make this more perfect from time to time.”
3) “The challenge is to make the political system pluralist and to build democracy. Democracy is fragile, look at Europe with 2 world wars and rise of fascism. Our 1995 Constitution allows all rights to be exercised. This is work in progress, we believe we are making good progress.”
Ready for business
The statement at the first industrial park opening after the successful EPRDF Congress: “We have been in political process and reforming, we are now back to business”.
One change is to open the logistics sector 49% to foreign investors, Ethiopian Airlines is linking with DHL Global Forwarding and there are huge opportunities as Ethiopia aims to become Africa’s logistics hub. Other sectors opening to foreigners include telecommunications.
Electricity costs 3 UScents per KwH, one of the cheapest prices in the world. Other attractions for manufacturers include duty free access to the EU and opportunities under the African Growth and Opportunity Act (AGOA) renewed for 10 years.
Advice for #FDI investors from Dr #Arkebe Oqubay “#Ethiopianization has been a good word, that was the motto in #EthiopianAirlines when managed by TWA in 1950s and 1960s”.
Buy Arkebe’s highly reviewed book on Amazon with this link (affiliate), published by Oxford University Press, and get details of his next book on China-Africa and Economic Transformation, due in 2019 also from OUP.
UK investors’ experience
UK firms talked of their investments
Saad Aouad, Founder and Chief Investment Officer, 54 Capital: Said they made their first investment in Ethiopia in 2014. They have invested $120m including: Addis Pharmaceutical Factory employs 1,000 at its factory in Adigrat, producing 80 pharmaceutical products to the $600m-$700m domestic market and set to expand, creating another 500 jobs; Aquasafe is a leading water bottling company, based in Debre Birhan; Bluebird platform takes stakes in food companies, personal care and Tena edible oil. With 168 investors on their books, 80% of them from UK, they have potential to make much more investment.
Reg Hankey, CEO, Pittards: Employs 1,600 with a “highly motivated, highly skilled workforce improving productivity every day”. Gloves made with Pittards leather, including at the Ethiopia factories, are sold to top professionals worldwide including 9 out of 10 top golfers and baseball players. The target is still to get to 5,000 employees, despite a road that is “not smooth”.
Harry Anagnostaras-Adams, Managing Director, KEFI Minerals: There is $1bn of gold exports sitting in the ground at the Tulu Kapi gold project in Western Ethiopia. His company has already invested $60m in infrastructure and community projects and has top partners to bring in to make it work. “I desperately love my wife but she drives me crazy, that is Ethiopia. It’s a very alluring long-term game”.
Darrell Boyd, CEO of Tulu Moye Geothermal: Says geothermal 24 hour base load power is ideal for industrialization. They are planning £1.5bn investment to generate 520 MW geothermal over 4 phases in the coming 8 years. Now focused on phase 1 for 50MW with £200m investment in debt and equity. They are busy at site to get ready for geothermal drilling for 2nd quarter next year. “Ethiopia has done a lot of work over last few years to change its regulatory framework”.