Ethiopia: Discover and Invest in Africa’s Newest Lion Economy

By Moin Siddiqi, Economist

Ethiopia, one of the world’s oldest civilisations, is a fine example of how sub-Saharan Africa has changed in the last two decades, both in the political and economic spheres and where good governance is nurturing a new era of prosperity. The successive liberalisation of trade and investment regimes undertaken in the last 23 years, has resulted in marked increases in economic growth rates, human development indicators and infrastructure improvements, including capacity building at national and local levels. Those policies have been instrumental in attracting foreign direct investments (FDI).

Ethiopia is projected to rank third among the world's fastest-growing economies and first in the African continent over the medium-term. It is a nation with tremendous untapped mineral wealth, fertile land, a huge, young population (14th largest on earth), whose median age is around 20, vast water resources, and Africa’s largest bovine population.  Ethiopia’s strategic location in the Horn of Africa and its concessional trade agreements also make it an ideal base for re-exports to buoyant consumer markets in the Gulf Cooperation Council (GCC), particularly Saudi Arabia and Asia. It also has preferential market access to the USA and European Union markets through the AGOA and EBA arrangements. The country’s foreign policy of economic diplomacy plays a key role in promoting trade and investment from advanced (OECD) and emerging/developing economies.

Ethiopia and Britain enjoy strong bilateral ties – the UK is both a major development co-operation partner and investor. Today, opportunities for British companies to invest either individually or as a consortium in Ethiopia abound in areas like dam construction and hydropower plants, agro-based industries and light manufacturing, mineral extraction, railway/road construction and airport infrastructure, chemical and pharmaceuticals, as well as higher education and industrial training, hotel services, architectural and engineering works

The Seeds of Growth 

The economy has grown at a robust pace in the past decade, averaging 10.8% per year during 2005-2014 (comparable with China) – and exceeding the sub-Saharan Africa average of 5.7%, according to the International Monetary Fund (IMF). The expansion of infrastructure, services and agricultural sectors accounted for most of this growth; while the manufacturing sector performance was relatively modest. Private consumption and public investment fuelled domestic demand with the latter assuming an increasingly pivotal role in recent years.

Agricultural and industrial production, investment (including domestic and foreign) and exports have grown steadily over recent years both in terms of variety and volume. This achievement is the highest among non-oil producing sub-Saharan African economies. The basis for accelerated industrialisation is being laid, reflected in higher educational attainment, improved health services, and a quantum leap in infrastructure capacity in terms of access to power, transportation, and telecommunications. Ethiopia’s economic structure is gradually shifting from agriculture to industry and services, which bodes well for future growth.

Ethiopia’s growth ‘miracle’ is mainly the product of shrewd national planning and an ambitious development strategy to address structural problems in measurable and meaningful ways by creating hard and soft infrastructures that will facilitate job and wealth creation, by tapping into the country’s comparative advantages in natural resources and trade, and by ensuring progress towards achieving the Millennium Development Goals (MDGs). As a result, Africa’s second most populous nation (after Nigeria) has witnessed consistent double-digit broad based growth and poverty-reduction.

With the most dramatic expansion of infrastructure ever seen on the African continent, Ethiopians are poised to enjoy universal access to public services in the coming years. “Over the past decade, the public-sector led development strategy, with its focus on heavy investment in infrastructure, has underpinned the country’s strong economic growth. This high rate of growth has been inclusive, spanning different economic sectors and benefiting both urban and rural communities. Growth has been inclusive and widespread and a large number of new jobs have been created in both the public and private sectors, particularly through a boom in construction (covering infrastructure, housing and commercial developments),” stated the African Development Bank (AfDB), a major multilateral partner.

Excerpt taken from The Ethiopia Investment Report 2015 published by DMA and soon to be available here and was presented at the UK-Ethiopia Trade & Investment Forum, London, on 21st October 2015.