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Ethiopia, in the Horn of Africa, is a rugged, landlocked country split by the Great Rift Valley. With archaeological finds dating back more than 3 million years, it’s a place of ancient culture.
Ethiopia which is officially known as the Federal Democratic Republic of Ethiopia is the most populous landlocked country in the world.
Ethiopia has a total area of 1,100,000 square kilometers and over 117 million inhabitants. It is the 12th-most populous country in the world and the 2nd-most populous in Africa.
The country has 74.3 million hectares of arable land. Out of this, over 3-million hectares of land have been made available for investment.
Ethiopia offers one of the largest and most diverse agricultural investment opportunities on the continent.
Foreign Investment opportunities in Ethiopia are:
- Transport Infrastructure
- Industrial sector
- Agriculture
- Energy
- Minning
- ICT
In total, Ethiopia's FDI stock was estimated at 27.4 billion dollars in 2020.
During 2020 to 2021 Ethiopian budget year, 132 new giant investors from Europe and other countries have already licensed and commenced production in the country.
Now, let's take a holistic look at Ethiopia as a country, culture, and history.
Top Reasons Why You Should Invest In Ethopia
Ethiopia, in the Horn of Africa, is a rugged, landlocked country split by the Great Rift Valley. With archaeological finds dating back more than 3 million years, it’s a place of ancient culture. Among the important sites in Lalibela with its rock-cut Christian churches from the 12th to 13th centuries.
Aksum is the ruins of an ancient city with obelisks, tombs, castles, and Our Lady Mary of Zion church.
Ethiopia which is officially known as the Federal Democratic Republic of Ethiopia is the most populous landlocked country in the world.
It shares borders with Eritrea and Djibouti to the north, Somaliland to the northeast, Somalia to the east, Kenya to the south, South Sudan to the west, and Sudan to the northwest.
Ethiopia has a total area of 1,100,000 square kilometers and over 117 million inhabitants. It is the 12th-most populous country in the world and the 2nd-most populous in Africa. The national capital and largest city, Addis Ababa, lies several kilometers west of the East African Rift that splits the country into the African and Somali tectonic plates.
Ethiopia is a multi-cultural and multi-ethnic country. Religion is a major influence in Ethiopian life. Nearly half the population belongs to the Ethiopian Orthodox Church but there is a also large Muslim population.
Others adhere to an ancient form of Judaism. Different investment-related information indicates that Ethiopia is being considered a promising place for investment. The investment information providers assured that the country is a strategic destination for multinational investors following its diversified investment opportunities and various investment incentives by the government.
The Ethiopian government provides various investment incentives to local and multinational investors. This includes capital incentives, industrial raw material supply, construction and laboratory as well as effective transportation service provisions.
The Ethiopian government is aggressively working towards increasing transport, electric power, and telecom, among other infrastructure access.
Agriculture, textile and apparel, leather and leather products, pharmaceuticals, agro-processing, ICT, power generation, mining, and tourism, among others are the strategic sectors for investment as identified by the government.
Ethiopia's natural and various riches such as vast arable land, favorable climate, diverse agro-ecological zones that make it possible to grow almost everything, cheapest electricity per kilowatt-hours, and trained and affordable human power combine to make it an incredible hub for investment.
The country has 74.3 million hectares of arable land. Out of this, over 3-million hectares of land have been made available for investment.
Ethiopia offers one of the largest and most diverse agricultural investment opportunities on the continent.
The inauguration of numerous industrial parks across the country is also the other strategic opportunity to attract potential investors. The industrial parks are both government and private-owned.
Facilities in industrial parks include One-Stop Service, dedicated power sub-station, waste treatment facilities, commercial buildings and housing facilities, health stations, fire brigade, and 24/7 security service.
Currently, the country has given due priority to realizing smooth transitions to industrialization through promoting the private sector engagements and privatizing many of the state-owned businesses.
The new home-grown economic reform aspires to address foreign exchange challenges and sought to generate tangible revenue by boosting export volume.
The economic reform strengthens multinational investors to join investment in the country. Different investment incentives have been offered by the homegrown economic reform policy so as to attain well-established economic growth.
Experts applaud that having a well-organized homegrown economic policy will have a significant role in realizing Ethiopia's sustainable development by ensuring rapid economic growth.
Foreign Direct Investment In Ethiopia
According to the recent World Bank Report, Ethiopia tops East Africa in attracting FDI, with almost half of the inflows to the East African region.
The existing suitable development policies, the government's special attention to the sector, and the competitive and trainable labor force are among the major factors that enabled the country to become successful in attracting FDI.
As one of the largest recipients of FDI in Africa, Ethiopia has attracted several global brands highlighting competitive investment opportunities.
Ethiopian Investment Commission (EIC) Public Relations Directorate Director Henok Solomon told The Ethiopian Herald that the country has attracted 2.05 billion USD Foreign Direct Investments (FDI) within nine months of the recently passed Ethiopian budget year.
This FDI inflow has been registered amid the Covid-19, global inflation, and internal stability challenges in the investment sector.
Currently, E.I.C is undertaking massive investment reforms. The new investment proclamation had been ratified by the Council of Ministers during the past budget year.
Improving ease of doing business, expanding employment opportunities, promoting FDI inflow, and providing standardized infrastructural facilities, among others are the major priorities of the commission, the director said.
More importantly, the commission has done successful activities in motivating multinational investors to join investment in industrial parks and facilitating all the necessary preconditions timely.
It is pleased to satisfy the need of investors at any time and anywhere. The number of multinational investors joining investment in the country is increasing year after year following the government's measures to promote investment. The various international level has known manufacturing industries and other local companies are eyeing joining investment in various Industrial Parks throughout the country.
According to him, during the 2020/21 Ethiopian budget year, 132 new giant investors from Europe and other countries have already licensed and commenced production in the country.
12 local manufacturing investment projects have joined an investment in industrial parks following the government's efforts to support domestic investment. The industrial parks have generated 129 million USD only from leather and leather products.
Regarding job opportunities creation, 58,631 new jobs had been created by the industrial parks. Currently, 237 multinational and local projects have commenced operation and manufacturing by the reported Ethiopian budget year. For instance, the 600 million dollar giant cement factory, the Lemi Green Building Materials Company-operated and run by Ethiopians and British investors had been licensed by the same Ethiopian budget year.
An Indonesian company with over 100 million dollars has joined an investment in machinery and spare parts manufacturing.
Out of the total multinational investment projects, 58 percent are licensed in manufacturing, 37 percent in the service sectors, and the rest 5 percent in agriculture, he noted.
Foreign Direct Investment In Ethiopia According to United Nations Center For Trade And Development's World Investment Report 2021, FDI inflows to Ethiopia declined by 6 percent to 2.4 billion dollars in 2020, despite the fact that they accounted for more than a third of foreign investment in the sub-region.
In total, FDI stock was estimated at 27.4 billion dollars in 2020. Although the Ethiopian economy suffered from the Covid-19 pandemic, especially in hospitality, aviation, and other services, it still grew by a substantial 6.1 percent.
Investment Rate In Ethiopia
The manufacturing, agriculture, and hospitality industries attracted the highest shares of investment in 2020. The government has launched a program to facilitate foreign investment in the production of personal protective equipment, and several Chinese companies have already started production.
Most foreign investment is directed toward the oil refining, mining, real estate, manufacturing, and renewable energy sectors.
The country has also taken advantage of the crisis in Bangladesh's textile sector to attract foreign textile companies.
China is one of the largest investors, accounting for 60 percent of new FDI projects approved, with significant investments in manufacturing and services. The other main investor countries are Saudi Arabia, the United States, India, and Turkey.
Challenges Of Investment In Ethiopia
There are a number of constraints to foreign investment, namely the high interference of the State in the economy, poor condition of infrastructure, difficulties related to land acquisition, strict foreign exchange controls, very high transaction costs, and weakness of institutions.
The Ethiopian government keeps exercising full control over the services sector. Ethiopia has been ranked 159th worldwide, for the ease of doing business in the World Bank's 2020 Doing Business Report. This position was the same that the country occupied a year earlier. Nevertheless, Ethiopia made progress in registering properties. Among others, the country improved the quality of its land administration system by publishing the official list of documents required for property registration.
Significant progress has been made in terms of transport infrastructure and electricity production in order to improve Ethiopia's attractiveness.
The Grand Ethiopian Renaissance Dam which currently generates 6,000 Mega Watts on the Blue Nile aims at increasing its hydro-electric capacity to 37,000 Mega Watts by 2037.
The impending privatization of the state-owned railway, maritime, air transport, logistics, electricity, and telecommunications sectors, is expected to boost private investment, as is the creation of special economic zones.
The new investment law adopted in 2020 should further strengthen the business environment. The country benefits from abundant and low-cost trainable labor and enjoys a strategic location giving access to lucrative markets in the Middle East and Europe.
However, it depends on Djibouti for its access to the red sea and Suez Canal.
What to consider if you invest in Ethiopia
Ethiopia is one of the fastest-growing economies in the world, with GDP growth averaging 10 percent in the last decade according to the IMF, Ethiopia is the second-largest market in Africa, with a population of around 102 million people and a rapidly growing middle class a relatively stable climate for investors.
The country has lower levels of corruption compared to the regional level which is a widespread territory.
Ethiopia is rich in natural resources and extremely fertile.
Foreign investors have the right to make remittances out of the country in convertible foreign currency at the prevailing rate of exchange.
The country has the second-largest labor force in Africa in terms of the number of people.
The manufacture of weapons and ammunition can only be undertaken in joint ventures with the government. Procedures Relative to
Both foreign and domestic private entities have the right to establish, acquire, own and dispose of most forms of business enterprises except for a few strategic sectors.
All land is owned by the State but can be leased for up to 99 years.
A majority holding interest in a local company by a foreign investor is legal in Ethiopia.
A foreign investor intending to buy an existing private enterprise or buy shares in an existing enterprise needs to obtain prior approval from the Ethiopian Investment Commission (EIC).
Ethiopia’s Investment Code prohibits foreign investment in banking, insurance, and financial services, along with the following sectors: broadcasting, air transport services for up to 50 seat capacity, travel agency services, forwarding and shipping agencies, retail trade and brokerage, wholesale trade with some exceptions and most import trade.
Foreign Investment Opportunities In Ethiopia
We have identified six major sectors of investment opportunities in Ethiopia. These are:
Transport Infrastructure:
Many national and regional projects are currently being undertaken to improve the transportation system for land, air, or sea travel.
Industrial Sector:
One main focus of the country now is to increase the production of sugar, textiles, leather products, and cement. The industrial sector is expected to be a major contributor to the economic output of the country by the year 2025.
Agriculture:
Despite being the largest contributor to the economic output of Ethiopia, the agricultural sector still looks for methods to present opportunities for better farming technology. In fact, 8 million acres are now being offered to commercial farming investors.
Energy:
The country’s aim to be the regional exporter of energy is very evident with all the wind, solar, hydropower, and geothermal projects underway.
Mining:
Due to its rich resources of minerals including gold and tantalum deposits, there’s no doubt that Ethiopia will double its exports in the years to come.
ICT:
The innovation of 4G and 3G will increase the demand for advanced technologies such as telemedicine, video conferencing, and distance learning. With all these developments that Ethiopia prospers and projects that are still ongoing, this country will certainly emerge as one with immense business opportunities. However, if you plan to venture into business in a country like Ethiopia, utilize our export developers to enable you to be familiar with the kind of market and people you’ll be dealing with.
Before we draw the curtain on this topic, let's also inform you that The multiparty elections opened many great doors for Ethiopia. One of its effects was the realization of the Growth and Transformation Plan which was adopted to fulfill and achieve the aspirations of the future. The plan specifically aims to guide Ethiopia in attaining development in many areas such as agriculture, rural development, infrastructure, and good governance. Among the many objectives of the plan, a major one is to ensure that the country maintains its average GDP growth rate for it to achieve its millennium development goals. In line with this plan, some infrastructure development projects are ongoing, making Ethiopia more attractive to foreign investments. One of these projects is the improvement of various airports specifically the Bole International Airport, the reconstruction of some domestic airports, and the construction of the fifth international airport which is expected to accommodate a larger amount of passengers in 2020. Road and railway projects are also ongoing which will, of course, improve the transportation sector of Ethiopia. A 6GW-generated power plant is also anticipated to realize in 2017. This project will not only benefit the country but also its neighboring countries such as Sudan and Egypt. The development of Dire Dawa and Adama industrial zones is also in a process that will definitely improve the industrial sector of the country.
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Conclusion
Ethiopia is one of the fastest-growing economies in the world, with GDP growth averaging 10 percent in the last decade. The country has 74.3 million hectares of arable land for investment. Manufacturing, agriculture, and hospitality industries attracted the highest shares of investment in 2020.
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