RO

• EU PEA
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ETHIOP

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NESS FOR

ETHIOPIA
AN ATTRACTIVE DESTINATION FOR
EUROPEAN DIRECT INVESTMENT
BizClim is a programme of the ACP Secretariat funded by the European Union. This document has been produced with the financial
assistance of the European Union. The views expressed herein can in no way be taken to reflect the official opinion of the European
Union nor the ACP Secretariat.
 CONTENTS 3

TABLE OF CONTENTS
4 Ethiopia at a Glance

5 Ethiopia’s open Economy

Seeks Investors
Major Infrastructure Projects

16 Why Invest in Ethiopia

18 Attracting Foreign
Investment

21 Strong European Presence

in Ethiopia
24 Cases of European Companies
Active in Ethiopia
29 The EU Business Forum in
Ethiopia (EUBFE)
4 ETHIOPIA AT A GLANCE

Photo: Wikimedia © Donald Macauley

ETHIOPIA AT A GLANCE
Population: Religion: Agriculture products: cereals,
95,000,000 (2014 Estimate) Ethiopian Orthodox 43.5%, pulses, coffee, oilseed, cotton, sugar
Muslim 33.9%, Protestant 18.5%, cane, potatoes, chat, cut flowers;
Life expectancy at birth: traditional 2.7%, Catholic 0.7%, hides, cattle, sheep, goats; fish.
60.75 years other 0.6% (2007 est.).
Industries: food processing,
Urban population: Literacy: 39% beverages, textiles, leather, chemi-
17% of total population (2011) cals, metals processing, cement.
GDP: $55 billion (2014 est.)
Ethnic Groups: Oromo Industrial production growth rate:
34.4%, Amhara (Amara) GDP - real growth rate: 9% (2013 est.)
27%, Somali (Somalie) 6.2%, Tigray 10.3% (2014 est.), 8.5% (2012 est.),
(Tigrinya) 6.1%, Sidama 4%, Gurage 11.4% (2011 est.) Labour force:
2.5%, Welaita 2.3%, Hadiya 45.65 million (2013 est.)
1.7%, Afar (Affar) 1.7%, Gamo 1.5%, GDP - composition, by sector of
Gedeo 1.3%, Silte origin: agriculture: 40%; Labour force - by occupation:
1.3%, Kefficho 1.2%, other industry: 14.2%; services: 46% agriculture: 85%; industry: 5%;
10.5% (2007 est.). (2014 est.). services: 10% (2009 est.)
 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS 5

ETHIOPIA’S OPEN
ECONOMY SEEKS
INVESTORS
Ethiopia is on the move - Investors will help
Ethiopia become a middle income country

E
thiopia’s Prime Minister, incentives to encourage foreign
Hailemariam Dessalegn, investment (p.19 - 20) When these
believes that Ethiopia’s incentives are considered alongside
rapid economic growth can reach the significant natural advantages of
even higher levels with the support of Ethiopia’s varied landscape, and the
foreign investments. abundance of unexploited water and
natural resources, we can appreciate
He stated that “Ethiopia should be why Ethiopia is rated by many interna-
assisted in its effort to introduce tional investors as an attractive
broad-based industrial development business destination.
and in attracting direct foreign invest-
ment […] the nation is under In addition, the government has dedi-
transformation from agriculture to an cated significant resources to make
industry-led economy in its endeav- the case for investing in Ethiopia.
our to become a middle income According to the Ethiopian Ministry of
country.” To support this major Foreign Affairs (MoFA), “Ethiopia’s
transformation, the government is economic diplomacy has made the country
encouraging Foreign Direct Invest- a desirable investment destination.”
ment (FDI) in various sectors, for the
mutual benefit of both local and inter- By taking advantage of the incentives
national investors. and of the real business opportunities
offered by this vast and beautiful
In order to advance its economic country, foreign investors make good
development strategy, the govern- profits while helping the country’s
ment has put in place several economic development.
6 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS

EU Delegation's foreword:
the time is right to boost the potential of private
sector as an engine for growth
growth rates in Africa, a large poten- investor in Ethiopia as was illustrated
tial market, cheap labor force, as well last year with the organization of the
as strong public investments in eco- first EU Joint Investment Mission.
nomic and social infrastructure. Yet,
while more and more EU companies EU investments generate the highest
show a strong interest in investing in permanent jobs ratio in the key GTP
Ethiopia, still too few of them actually sectors of manufacturing and agricul-
stay for the longer run. ture, they also work more with joint
ventures and they are renowned for
Addressing the key challenges faced the quality of their production as well
by the private sector requires a truly as for the technology and know-how
enabling business environment, an transfer they inject in the Ethiopian
enhanced coordination within the economy.
Ethiopian administration, an effective
forum for the private sector to voice I believe that the 300 EU companies
its concerns as well as some policy present and operating in Ethiopia
adjustments. But first and foremost, it should be listened to as they are the
requires a clear acknowledgement best ambassadors and in a position to
that private sector is indeed the influence the decision to invest of the
H.E. Ambassador Chantal Hebberecht engine of future economic growth. increasingly frequent trade and invest-
Head of the EU Delegation to Ethiopia ment missions coming from Europe.
I trust that the time is right and the
Ethiopia is at a cornerstone of its EU, as a key partner of the Govern- I have witnessed the efforts under-
modern development history and has ment of Ethiopia, is ready to work taken by the group of committed EU
set itself the ambitious aim of reach- further on these challenges in the entrepreneurs who, for the past two
ing middle income status by 2025. The framework of our longstanding com- years and together with Member
current GTP is coming to an end this mitment to Ethiopia with the aim of States Embassies, have worked to
year and a new one is being prepared contributing to the development and make the EUBFE a reality under the
for the period 2015-2020. transformation of this great country. effective and committed leadership of
its President.
While a lot has already been achieved, The work undertaken in the frame-
the next GTP agenda will undoubtedly work of the EUBFE is part of that I’m confident that this continuous,
require a significant contribution of commitment together with our devel- open and constructive dialogue with
the private sector which depends opment cooperation instruments, our the Government of Ethiopia placed
upon appropriate measures to deep and historical trade relations under the effective guidance of
encourage operating companies, and with Ethiopia, as well as our coopera- Deputy Prime Minister Dr Debretsion
SMEs in particular, to expand, as well tion in the areas of research, higher and with the active participation of the
as new private sector actors to settle education and science. Ethiopian Investment Commission
in Ethiopia and stay. will indeed lead to further improve-
From a trade point of view, the EU ments of the country’s business
We all agree that Ethiopia is a country remains the first trading partner of climate to the ultimate benefit of the
of opportunity with one of the highest Ethiopia as well as an important Ethiopian people.
 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS 7

A new country Ethiopia as a place to do business.

Drawn by Ethiopia’s sustained eco-
nomic success, the size of its growing
market, and its potential as a location
Mark Lowcock, Permanent Secretary, In the last 30 years life expectancy for production, a range of industries
Department for International Develop- here has increased by 50%. Ethiopia are emerging that barely existed
ment, United Kingdom is on track to meet most of the Millen- when I first visited.
nium Development Goals. You have
“It’s always a source of wonder for me achieved the infant mortality goal 2 I have seen, for example, a successful
how much Ethiopia has changed. years early. Economic growth, in dou- vegetable producer, who exports pro-
Yours is a country of incredible achieve- ble digits, has been impressive. All duce to the EU. And I’ve met with a
ments and diversity. From the green the more so because, unlike other host of UK firms who are being drawn
and fertile plains of the highland parts of the continent, it hasn’t been here, from leather glove makers, to
regions. To the dry camel-filled Somali driven by commodities alone. Per clothes retailers to drinks manufac-
Regional State. From the almost super- capita income has doubled. turers. This is both to their benefit,
natural landscape of the Danakil. To and that of Ethiopia, which stands to
the jaw-dropping vistas of the Simien I spoke to farmers whose land tenure is gain from their financial investment,
Mountains […] One of the things that being made more secure, to small shop- creation of jobs and sharing of best
has brought this most diverse of keepers benefiting from micro-finance practice. I think that that the strides
nations together has been the singular- in Addis’s outskirts and to workers at a that you have made towards develop-
ity of vision. Ethiopia’s success, over state-of-the-art leather factory. ment and shared prosperity make
the past decade in particular, has been Ethiopia one of the world’s great
to maintain that vision. And turn it from I have heard first hand from a range of development success stories of the
a dream into a living, breathing, and for- Ethiopian firms and foreign investors last twenty years.” (From a speech
ward looking reality. about the increasing attraction of delivered in December 2013).

MACRO: getting to know Ethiopia

as a growing economy
Ethiopia is a large country with an Going forward, Ethiopia is planning to capital and social sectors and a dom-
area of 1.14 million sq.km. It is strate- develop its significant water resources, inant role for public enterprises in
gically positioned in the Horn of the largest in Africa. Indeed, 14 major undertaking critical infrastructure
Africa, close to important markets in rivers pour off Ethiopian mountains. investments. The authorities adopted
Sudan, Egypt and, across the Red Sea, While much remains to be done in a 5–year Growth and Transformation
Saudi Arabia and the Gulf Countries. order to develop the irrigation sys- Plan (GTP) in November 2010, which
With more than 90 million inhabitants, tems that will help agriculture in a aimed at average annual GDP growth
Ethiopia has the second largest popu- more significant way, the abundance of over 11 percent and achieving the
lation of any African country, after of water is a major strategic asset for Millennium Development Goals (MDGs).
Nigeria. The economy grows at a very Ethiopia. Among its main pillars are raising
fast clip; almost 9% GDP growth over agricultural output and productivity,
the last four years. This impressive As a recent IMF Report put it: promoting industrialization, and
record makes Ethiopia one of the “Ethiopia is pursuing a development investing heavily in infrastructure.
fastest-growing economies in the strategy focused on promoting growth
world. In fact, it was the fastest- through high public investment. The “Economic performance in recent
growing non-oil-dependent African strategy involves concentrating gov- years has been strong, with economic
economy in the years 2007 and 2008. ernment expenditures on human growth averaging in double-digits
8 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS

since 2004. Although initially led by tion Plan (GTP): 2011-2015 setting tar- “It has been truly remarkable that
agriculture, growth has been broad- gets for annual economic growth Ethiopia has achieved the growth lev-
based, with a rising contribution from rates of over 14% and concomitant els that it has realized thus far. The
the services sector and some degree rapid expansion of services and infra- opportunity exists to amplify more pri-
of export diversification.” structure. Achieving even a portion of vate sector investment in the
these targets would be commendable… economy, which would be instrumen-
Likewise, a USAID country report is tal in accelerating and reaching the
rather optimistic on Ethiopia’s future. “On economic growth, Ethiopia growth targets.”
“On the economic front, the last seven obtained commendable levels over
years have witnessed accelerated the last five years, and the govern- Last but not least, it should be noted
reduction of poverty and increased ment has developed comprehensive that Ethiopia in December 2014 suc-
economic growth…Growth figures agricultural and overall economic cessfully issued US $ 1 billion worth
reported by the World Bank and Inter- development plans, with the advan- of bonds. As Reuters commented:
national Monetary Fund of over 8% tage of low wage rates and untapped “The country’s debut dollar bond may
are very good. The Economist maga- savings outside of formal financial help fund future infrastructure projects.”
zine recently recognized Ethiopia as institutions to foster domestic and
one of the fastest growing economies export growth.
in the world.

“Progress is particularly occurring in

the critical finance and telecommuni-
“There has been
cations sectors: private banks have
grown to 40% of total financial assets tremendous growth in
held and are set to overtake state
banks in size. The state monopoly
telecommunications sector is tem-
the number, diversity
porarily handing over its management
to France Telecom, although improve-
and market share of
ments have yet to be achieved.
private businesses in
“A number of ambitious new pro-
grams have been launched, with the
new 5-year Growth and Transforma-
the Ethiopian economy.”
 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS 9

Major
Infrastructure
Projects
itself. The turbines and the equipment
related to them (about US $1.8 billion)
will be financed by China. Still, this
leaves about US $3 billion that will be
paid for by state, with the help of tar-
geted bonds aimed at Ethiopians at
home and abroad.

When completed, GERD will be the

largest hydroelectric power plant in
Africa and the eighth largest in the
world, sharing the spot with the Kras-
noyarsk Dam in Russia. At 63 billion
cubic metres, the reservoir will be
one of the largest of the continent.
When completed (estimated date July
2017), GERD will deliver 6,000
megawatts.

Combined with the expansion of other

power generation facilities, such as
Gilgel Gibe III, GERD will allow
Ethiopia to export power to its neigh-
bours, (Sudan, Egypt and Kenya).
Electricity exports will contribute in a

I
n order to meet the challenges civil-engineering firm headquartered significant way to offset the country’s
of growth, the government in Milan, with a long track record of trade deficit.
is engaged in major infra- infrastructure building all over the
structure projects. By far the most world, including other major projects It should be noted that Ethiopia is not
important is the Grand Ethiopian in Ethiopia. The estimated total cost is investing only in hydropower. There
Renaissance Dam, (GERD) hydropower US $4.8 billion. are also geothermal projects (with
project now under construction Reykjavik Geothermal), wind (Ashe-
(www.grandmillenniumdam.com). What is truly remarkable is that the goda farms with the French company
The builder is Salini Impregilo, a well- Ethiopian Government is planning to Vergnet) and also biomass ventures.
established Italian construction and finance almost the entire project by
10 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS

Water for agriculture its water resources have been devel- tion as well as manufacturing could
oped and adequately utilised. Doing be in part met through additional
If abundant water resources are criti- so will require significant investments hydropower.
cal to develop hydroelectric projects, in new, state-of-the-art technologies.
water is also a fundamental asset This represents an opportunity for Given all this, foreign companies with
that will allow the development of European and other firms specialised the necessary know-how in water
Ethiopia’s vast potential in agriculture. in this critically important sector. management and hydropower tech-
Ethiopia is very lucky in this respect. nologies will find major business
According to the Food and Agricul- Fully aware of this valuable asset rep- opportunities in Ethiopia, while at the
tural Organisations of the United resented by a large water potential, same time greatly contributing to the
Nations (FAO), “Ethiopia is endowed the Ethiopian Government is offering country’s economic development.
with a substantial amount of water incentives to foreign companies will- This is a classic “win-win” proposition.
resources. The surface water resource ing to invest in this high value,
potential is impressive, but little devel- promising sector. Indeed, through the In its efforts to support agriculture
oped. The country possesses twelve construction of new dams and mod- and economic development, the
major river basins, which form four ern irrigation systems there will be Ethiopian Government is planning to
major drainage systems.” new ways to exploit Ethiopia’s water build 5,000 km of railroad track. The
for various purposes, such as agricul- goal is to connect agricultural produc-
Indeed, Ethiopia has plenty of water. ture. For instance, the increasing tion areas and new planned industrial
However, only a small percentage of demand for electricity for crop cultiva- areas to cities and key regional ports.
 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS 11

gated agriculture. In Ethiopia, there

Agriculture are 18 major agro-ecological zones,
and 62 sub-zones. These areas are
suitable for planting 146 different
Agriculture, employing more than enhancing productivity and produc- crops, ranging from cereals to pulses.
80% of the population, plays a key role tion of smallholder farmers and
in Ethiopia’s economy, with great pastoralists, strengthening market However, out of the total potentially
opportunities for an even greater systems, improving participation and irrigable land, as of today, only 5% or
expansion. Agriculture accounts for engagement of the private sector, 107,265.65 hectares are irrigated.
more than 40% of national GDP and expanding the amount of land under Therefore there is a great opportunity
90% of exports. irrigation, and reducing the number for new foreign businesses interested
of chronically food insecure house- in developing this vast agriculture
Improved use of land and greater pro- holds. By collaborating with a potential.
ductivity mean higher standards of strategic array of related partners, the
living for all Ethiopians, and increased Agricultural Transformation Agency is More broadly, the Government of
food security for the poor. With sup- committed to helping achieve the tar- Ethiopia (GoE) is focusing on support-
port from the Bill and Melinda Gates gets of the GTP through its three ing agriculture by constructing
Foundation, the Ethiopian Govern- primary focus areas: value chains, sys- farm-to-market roads, by enacting
ment established the Ethiopian tems, and special initiatives.” laws aimed at securing title to land,
Agricultural Transformation Agency and by the creation of business pack-
(ATA) as the state agency in charge of The ATA strategy is articulated ages aimed at supporting export
spearheading agricultural growth and through Value Chain Programmes crops. This will include fruits and veg-
the introduction of innovative prac- and System Programmes. Projects etables, fresh cut flowers and a
tices in the sector. Here is how the include the Ethiopian Information Sys- variety of spices.
ATA describes its mission: tem, Public Private Partnerships
(PPPs) and Financial Inclusion
“Building on the impressive gains of initiatives. (For more details, see Main Agricultural Products
the preceding decade, Ethiopia’s Five www.ata.gov.et).
Year Growth and Transformation Plan Ethiopia’s main crops are cereals,
(GTP) established ambitious targets About 66% of the Ethiopian land is pulses, oilseeds, vegetables, root
for the agriculture sector for 2011- well suited for agriculture, and 3.7 and tubers, fruits, fibres, stimu-
2015. The Plan’s objectives focus on million hectares are perfect for irri- lants and sugar cane.

• Cereals include teff, wheat,

barley and maize.

• Pulses include faba bean, field

pea, chickpea, haricot bean and
lentils.

• Oilseeds include sesame, ground-

nut, linseed, noug and gomenzer.

• Vegetable, roots, and tubers

include onion, tomato, cabbage,
potato, pepper, carrot, enset,
sweet potato and yams.

• Fibre includes cotton.

• Stimulants include coffee and

tea.

Photo: © USAID Africa Bureau

12 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS

Ethiopia is Coffee
More than 90% of the nation’s harvested coffee
is organically produced. The inherently superior
quality of Ethiopian highland Arabica coffee is
unmatched, particularly in flavour and aroma.

Production unknown due to the fragmented

nature of the coffee farms. The way of
Ethiopia is the world's seventh largest production has not changed much
producer of coffee, and Africa's top since the 10th century, with nearly all
producer, with 260,000 metric tons in work, cultivation and drying, still done
2006. Half of the coffee is consumed by hand.
by Ethiopians, and the country leads
the continent in domestic consump- Regional varieties
tion. The major markets for Ethiopian
coffee are the EU (about half of total Ethiopian coffee beans that are grown
exports), East Asia (about a quarter) in the Harar, Sidamo, Yirgacheffe or
and North America. Limu regions are kept apart and mar-
keted under their regional names.
A Bloomberg news item (2014) indi- These regional varieties are trade-
cated that there are good prospects marked names with the rights owned
for export growth. In fact, “Arabica by Ethiopia.
Ethiopian Coffee: The has surged 71 percent in New York
First and Still the Best since January after a drought hurt Ethiopian Tea
plantings in Brazil, the world’s

T
he coffee plant, Coffea biggest exporter of the beans…” Ethiopian tea is perhaps less well
arabica is a species of known than coffee, but it is of equally
coffee originally indige- “Ethiopia earned $719 million from high quality. Currently tea plantations
nous to the south-western highlands sales abroad of the beans in the 12 cover 2,700 hectares and the annual
of Ethiopia. It is also known as the months through July 7…The country production is approximately 7,000
“coffee shrub of Arabia”, “mountain may produce about 500,000 tons of tons. The areas that have high poten-
coffee”, or “arabica coffee”. Coffea the beans this year, with about half of tial for the cultivation of tea are
arabica is believed to be the first that crop sold outside the nation… Southern Nations & Nationalities and
species of coffee to be cultivated, The exporters’ association wants to Peoples (SNNP), Oromiya, Amhara
being grown in southwest Ethiopia for bring in new buyers and start making a and Gambella25. Although only black
well over 1,000 years. Coffee grows bigger presence in the world market at tea is currently produced, there is
wild in Ethiopia and this is the reason its annual conference in Addis Ababa.” potential for growing all types of tea.
why there are many more varieties Tea production is supported by proac-
than those found in other producing The total area used for coffee cultiva- tive government action aimed at
countries, where coffee was intro- tion is estimated to be about 4,000 encouraging and increasing private
duced much later. square km. However, the exact size is investment in tea plantations.
 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS 13

Livestock and Fisheries

Ethiopian Livestock: that the total number of Ethiopian practical. Ethiopia's climate makes
Number One in Africa, livestock is more than 110 million this animal skin effective at withstand-
Tenth in the World (this includes cattle, sheep, and ing the winter chill - an essential
goats), creating leather products can selling point. This effective material
With the largest livestock population be a highly profitable business for any is in abundant supply. Ethiopia's 110
in Africa and the tenth in the world, foreign investors specialised in cloth- million cattle, sheep and goat popula-
Ethiopia has a total of about 55.03 mil- ing products. At present the EU tion is one of the largest in the world,
lion cattle, 27.35 million sheep, and imports 60% of the Ethiopian according to the United Nations
28.16 million goats. These figures do exported output. Industrial Development Organization.
not include poultry, camels, horses,
mules and donkeys, which are also A recent CNN (2014) story described Raw hides export ban
important resources. More than 70% the operations of a UK-based glove
of the Ethiopian population gains its manufacturer in Ethiopia: According to the same CNN story, in
income from livestock. Livestock a move to encourage value addition
accounts for 15-17% of total GDP and “The steady hum of sewing machines and increase revenue generated by
35-49% of agricultural GDP. fills the air inside a large glove-mak- the leather sector, the Ethiopian gov-
ing factory on the outskirts of Addis ernment banned all exports of raw
The investment opportunities in the Ababa, the bustling Ethiopian capital. hides and skins in 1989. Between
livestock sector are meat and milk Patches of leather move through an 2006 and 2012, the total value of
processing, dairy farming, livestock array of working stations as busy Ethiopia's exports of leather and
raising, fattening and livestock veteri- labourers work feverishly to meet the leather products grew from $66 mil-
nary products. company's export quota of 5,000 lion to $112 million.
gloves a day. The operation belongs to
Additionally, livestock also plays an Pittards, a UK-based company whose And it is not just Pittards that realised
important role in Ethiopia’s leather trading partnership with Ethiopia the opportunity to make gloves in
production, itself supported by a large dates back to the early 1900s. Here, Ethiopia. According to the Leather
number of tanneries. This potentially hardy, durable cowhide is made into Industry Development Institute, two
large sector attracted the attention of work gloves. These are ideal for other factories in the country are
foreign investors. builders and gardeners and are focused on creating handwear.
mainly exported to the U.S.”
Leather products Ethiopian leather is also used exten-
“And then there are the stylish sively for the creation of footwear
Between 2006 and 2012, the total designs -- created from a different products. The country is home to
value of Ethiopia’s exports of leather type of animal skin, these are made to dozens of shoemaking companies,
and leather products grew from $66 keep fingers warm in Tokyo, Paris and including local names such as Olib-
million to $112 million. If we consider Rome.” erte, and international players like the
Huajian Group, a Chinese company
"The fashion glove is made of sheep that has been exporting some 20,000
skin which is unique to Ethiopia," pairs of shoes a month since it
explains Tsedenia Mekbib, general launched its manufacturing facility
manager at Pittards Products Manu- outside Addis Ababa in 2012.
facturing. "The durability and the
strength make it popular for gloving Another growth area is represented
leather specifically. That has been by new domestic consumers. There is
the one strength of Ethiopia and the a growing number of Ethiopians
leather sector." entering the middle class who show
the desire to buy high quality clothes.
Sophisticated designs with decorative In a late 2014 report, the IMF said the
Photo: Wikimedia © United States Department
touches may be the hallmark of this country is on track to achieve its goal of
of Agriculture, Author: Scott Bauer type of glove, but they must also be reaching middle income status by 2025.
14 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS

The trend is so clear that producers Cattle, Goat and Sheep Population
80
are now also targeting consumers
inside the country. With a potential Female
70
customer base of 90 million people, Male
there is good business potential for
60

Data Source: FDRE Central Statistical Agency

any company focusing on Ethiopia’s
growing domestic market.
50
Fish farming
40
Most of Ethiopia’s lakes create the
opportunity for fisheries’ development 30
for both the domestic market and

55.38%
44.62%

70.98%

29.02%

72.72%

27.28%
exports. The total fish catch potential 20
from these waters is estimated at
40,000 tons per year. 10

0
Cattle Goat Sheep
Horticulture farming over an area of 1,200 hectares. ers, such as H&M and Primark, are
Most of the workers are women. among the brands that are producing
and Flowers The principal export fruits are avo-
clothing in Ethiopia, while Tesco from
the UK is planning to do the same.
cado, banana, guava, lemon, mango, This opportunity to produce for Euro-
Ethiopia is an ideal place for the orange, papaya and pineapples. The pean markets is highly advantageous
production and export of flowers, veg- Ethiopian climate is suitable for all for the country’s 60 garment factories,
etables, fruits and herbs. It is now the types of vegetables. The main exports 15 mills, 28 leather tanneries and
fourth largest supplier of flowers to include green beans, okra, shallots, shoe factories.
the world market. A noticeable leeks, green chillies and lettuce.
growth has also been observed in the One of Ethiopia’s strategic objectives
export of vegetables, fruits and herbs. is to increase product diversity and
categories across various parts of the
Ethiopia has more than 122 billion
cubic metres of ground and surface
Textiles value chain to build the backward
integration and to open new market
water. There are millions of hectares The textile industry accounts for 36% access opportunities. There are sev-
of fertile land. The country has a of all manufacturing in Ethiopia. eral Ethiopian designers making it
trainable and disciplined working Ethiopia identified 3 million hectares into the regional and international
force, diverse agro-ecological zones, of land with good potential for cotton fashion stage. Expect to see "Made in
and supportive investment policy cultivation. However, the land cur- Ethiopia” emerging more and more
frameworks. Ethiopia also has afford- rently used to grow cotton is a very over the coming years.
able electricity rates. small percentage of the total deemed
to be suitable: only about 30 to 40,000
Besides, there is geographic proxim- hectares.
ity to Europe, the Middle East and
other markets. Due to the high vol- Ethiopia grows some of the world’s
Spices
umes, Ethiopian Airlines has cargo finest cotton. Ethiopia is now attract- The fertility of the Ethiopian land is
planes dedicated to flower exports. ing international buyers and investors highly suitable for a huge variety of
through several government incen- plants. Among the 6,000 types of
Many of the investors (a vast number tives, through a priority given to known plants and trees 12% are
of them European) engaged in the developing the textile and clothing found only in Ethiopia.
horticulture sector have seen their industry across the value chain, a
business grow substantially, while viable business environment, and Ethiopia is also particularly suitable
also contributing to the economic duty-free market access to both US for growing spices. The leading spice
development of the country. About 80 and EU. cultivation areas are Amhara, Oromiya,
companies are involved in flower Some of the world’s best known retail- SNNP, and Gambella regions. It is esti-
 ETHIOPIA’S OPEN ECONOMY SEEKS INVESTORS 15

curative practices that rely on indige- Ethiopia also attracts different types
nous medicine based on plants. of visitors. It hosts the headquarters
of the African Union (AU), of the
The growing demand in Europe, United Nations Economic Commis-
America and elsewhere for new ther- sion for Africa (UNECA) and other
apies that rely on spices and herbs major international organisations.
makes Ethiopia an ideal and prof- The large number of international
itable country for any company meetings and conferences organised
engaged in alternative medicine. by these institutions fuel an expand-
mated that the low lands have about ing hospitality sector. Likewise, a
200,000 hectares suitable for cultivat- growing number of tourists visiting
ing spices. Spices are amongst the cultural and historical sites will need
leading export products, with sesame
seed leading the pack. In 2013, the
Tourism the attention and care of many more
specialised tour operators.
International Fertility Development Ethiopia has a variety of attractions,
Center (IFDC) reported that “Ethiopia ranging from the natural beauty of the The Ethiopian Government is deter-
is the world’s second largest exporter Simyen Mountains to the historic rock mined to make tourism one of the
of sesame – exports are currently U.S. churches of Lalibela. country’s leading economic sectors,
$300 million per year and expected to and to make Ethiopia a top destination
increase to $500 million in the next Ethiopia has been ranked among the in Africa. It is currently implementing
two years. Ethiopian sesame farms top ideal tourist destinations for the a number of strategic measures to
employ over 500,000 workers during year 2014. Due to its mild climate and develop the country’s tourism sector
the peak season.” varied landscape, with mountains, further, including investment in
highlands, rivers and lakes, Ethiopia infrastructure, through the recently
In Ethiopia, the use of spices and has abundant wildlife and many vari- established Tourism Transformation
herbs is not only culinary; it is also eties of plants and trees. Council, a new promotion body spon-
medicinal. According to many experts, sored by the Government.
almost 80% of the Ethiopian popula- These natural gifts will bring into the
tion relies on traditional remedies country an even larger number of “Ethiopia is endowed with rich histori-
based on various medicinal herbs. visitors. Indeed, figures indicate cal relics which, combined with the
increasing number of tourists in hospitality of our people, make it viable
They also note that Western medicine areas such as the Simyen Mountains. for tourism. The government has lined
has become more focused on “well- Many foreigners travel there in order up abled (sic) professionals to work
ness” and preventative measures to see the Gelada baboons, found only within the industry and there is the
based on natural remedies. More and in that area. right political will in place to contribute
more people are seeking alternative towards tourism,” said President
Mulatu to an official gathering in 2014.

During a recent visit, a World Tourism

Organization official commended
Ethiopia for the political support
awarded to the tourism sector.
“Tourism is a key tool to lift people out of
poverty and create new opportunities,”
he said. “The steps being taken by
Ethiopia, namely enhancing the protec-
tion and conservation of tourist
attractions, expanding the tourism infra-
structure, establishing a tourism
marketing organization and a national
tourism council as well as increasing
education and training institutions in the
field of tourism, will surely make tourism
Holy Trinity Cathedral, Addis Ababa a pillar of the development of Ethiopia.”
16 WHY INVEST IN ETHIOPIA

WHY INVEST IN
ETHIOPIA
Ethiopian Airlines

Additionally, Ethiopian Airlines, Africa’s

biggest airline, provides modern con-
nections with the entire world. The
airline has been operating for more
than 67 years. It flies to more than 80
international and 20 domestic desti-
nations. Its impressive cargo service
moves goods to about 40 destinations.
Photo: Flickr © 401(K) 2012
This broad connectivity, ensured by a
modern airline with extensive passen-
ger and cargo services, makes it easy
for Ethiopian businesses and for
foreign corporations operating in
When these factors – a large internal Ethiopia to be ever more important
Large population, low labour market, low labour costs and an players in the global economy.
cost, huge opportunities expanding economy – are combined
with the significant array of natural A very safe country

E
thiopia has a popula- resources and the considerable amount
tion now exceeding 95 of available land (arable land alone In addition, compared to other coun-
million. This creates a accounts for more than 66% of the tries in the African continent and also
huge market, with a very large number entire country), it becomes clear that many other emerging markets,
of consumers. Besides, because of there is room for additional growth. Ethiopia is a very safe country. Visi-
its very large workforce, the Ethiopian tors feel safe.
cost of labour is much lower than in Ethiopia’s economic boom has led to
the rest of Africa. In fact, it compares new demand for goods and services, Safety is one of the reasons why
favourably with many Asian countries. affecting all sectors, thereby increas- Ethiopia has become a preferred
On top of that, the Ethiopian economy ing the need to bring to fruition venue for many international confer-
is expanding at a rapid pace, with existing natural resources. All these ences and conventions. Foreign
growth rates around 9%. trends create ideal opportunities for visitors feel comfortable and at home
new investors. while in Ethiopia.
 WHY INVEST IN ETHIOPIA 17

Local Welcome and Support:

Strong policies to enhance investment climate

Ethiopian Foreign Minister, Dr. Tedros Adhanom Former MoFA Spokesperson, Ambassador Dina Mufti Former MoFA Diplomacy Director General,
Kebede Abera

Eight good reasons Ethiopia’s main Foreign leaders are

for investing in advantages accompanied by
Ethiopia investors
Ethiopia has opened its doors to for-
According to the Ethiopian Foreign eign investors, and the government Additionally, former MoFA Diplomacy
Minister, Dr. Tedros Adhanom, there has rolled out several attractive incen- Director General Kebede Abera stated
are eight reasons why foreigners tives to encourage foreign investment that, in order to facilitate foreign
ought to invest in Ethiopia: in Ethiopia. direct investment, MoFA is working
closely with the Ethiopian Investment
“Political and social stability, a sup- Former MoFA spokesperson, Ambas- Commission (EIC) and the Ethiopian
portive macroeconomic policy, sador Dina Mufti explains that Chamber of Commerce and Sectorial
strategic geographic position, abun- Ethiopia’s main advantages are based Association.
dant labour force, appropriate legal on “export, investment, tourism, tech-
framework, competitive incentives, nology transfer, and development He also highlighted that the very fact
lowest corruption levels, and a sup- assistance.” that various world leaders come on
portive environment for foreign direct official visits accompanied by groups
investment.” of investors is evidence that Ethiopia’s
diplomatic efforts are working, and
the figures prove this. As Mr. Abera
indicated, the number of foreign
investors in Ethiopia was about 365 in
2012; but in 2013 it had increased to
more than 1,000.
18 ATTRACTING FOREIGN INVESTMENT

ATTRACTING
FOREIGN
INVESTMENT:
The Ethiopian Investment Commission

T
he Ethiopian Investment ture funded by foreign investors off The main services
Agency (EIA), a government the ground. As a story in Addis For- provided by the EIC
agency, was established tune stated: “Besides having better include:
in 1992 to promote private investment, promotional value, the EIC also offers
primarily foreign direct investment. never-before-given services, such as • Promoting the country’s investment
work permits to foreigners, duty free opportunities and conditions to for-
The EIA mission was stated as follows: privileges, centralised trading services eign and domestic investors;
and additional notarisation services
“To enhance investment, both foreign that lessen the strenuous process of • Issuing investment permits, business
and local, in the country by promoting investing. This means that processes licenses and construction permits;
its resource potentials and invest- that previously took weeks, even
ment opportunities, initiating policy months, will now take a week or less.” • Notarizing memorandum and articles
and implementation measures to cre- of association and amendments;
ate conducive investment climate and The EIC aims to increase its invest-
providing efficient services to investors ment promotion efforts, so that • Issuing commercial registration
so as to bring fast and sustainable Ethiopia will soon become one of the certificates as well as renewals,
economic development in the country.” ten leading investment destinations in amendments, replacements or can-
sub-Saharan Africa countries. cellations;
The new Ethiopian Investment Com-
mission (EIC), launched in October A brand new website for the EIC has • Effecting registration of trade or
2014, will continue the good promo- been developed, with technical firm name and amendment, as well
tion and marketing work performed assistance provided by the European as replacements or cancellations;
by the EIA, but on a larger scale. Union through BizClim. (See:
www.investethiopia.gov.et ). The new • Issuing work permits, including
Indeed, the EIC has an expanded site provides easy to use information renewals, replacements, suspen-
mandate that includes broader mar- about Ethiopia and about investment sions or cancellations;
keting strategies and serving as a opportunities. The new site will
“one stop shop” for foreign investors, attract more visitors and additional • Grading first grade construction
this way expediting all procedures investments. contractors;
necessary to get a new business ven-
 ATTRACTING FOREIGN INVESTMENT 19

• Registering technology transfer third largest recipient of foreign direct

agreements and export-oriented investment (FDI) in Africa in 2013,
non-equity-based foreign enter- with a 240% increase from the
prise collaborations with domestic amount in 2012. The report released
investors; by the United Nations Conference on
Trade & Development (UNCTAD),
• Negotiating and, upon government stated that the FDI inflow to the coun-
approval, signing bilateral invest- try had reached 953 million dollars in
ment promotion and protection 2014, up from the 279 million dollars
treaties with other countries; and a variety of issues linked to FDI and it was in the previous year.
the domestic “business climate” were
• Advising the government on policy discussed by Government representa- “The net sales value of cross border
measures needed to create an tives, investors and international merger and acquisition (M & A) in the
attractive investment climate for experts. country has also increased by more
investors. than double to 366 million dollar in
The Ethiopian Investment Commis- 2013, from 146 million dollars in 2012.
In addition, the EIC provides the sion’s investment promotion efforts
following free, confidential and cus- will further strengthen Ethiopia’s “Though the amount of FDI inflow in
tomized services to investors: good results when it comes to attract- the form of M & A has increased a
ing foreign investments. According to considerable amount in the year, the
• Provision, through our website, var- Addis Fortune, “The World Investment major part of the country’s invest-
ious publications, or through direct Report released on Tuesday, June 24, ment inflow comes from green field
response to investor’s inquiries, of 2014, revealed that Ethiopia was the projects, according to the report.”
information on sector-specific
business opportunities, business
incorporation procedures and Public Led Economy
related regulations, employment
regulations. • Specific sectors are liberalised for investment and marketing

• Hand-holding and supporting the • Remittance out of Ethiopia from invested capital is permitted.
investor during the acquisition of
land and utilities (water, electrical • Remittance for principal and interest payment on external loans, pay-
power and telecom services); the ments associated with technology transfer, proceeds from sales or
processing of loans and residence liquidation of an enterprise, salaries and other payments are permitted.
permit applications; the approval of
environmental impact assessments Basic conditions
studies for investment projects; and
the issuance of a tax identification • 100% foreign ownership - $200,000 minimum initial investment required
number (TIN). for a 100% foreign investment.

The EIC is actively engaged in a fruit- • $150,000 for foreign investor in a joint venture with a domestic partner.
ful dialogue with foreign investors.
Most notably, the EIC is now leading a • $50,000 for foreign investor in a joint venture with a domestic partner for
high level Technical Committee with consultancy or publishing businesses.
representatives from both the Ethiopian
Government and the European Union • $100,000 for 100% foreign investment in the areas of engineering,
Delegation in Addis Ababa aimed at accountancy, architecture, auditing related consultancy services or pub-
identifying and correcting impedi- lishing businesses.
ments that may hinder the activities
of European investors. On a related • $50,000 for foreign investors working in partnership with a local investor
note, with the support of a BizClim in the areas of engineering, accountancy, architecture, auditing related
funded project aimed at strengthen- consultancy services or publishing businesses.
ing the European Business Forum in
Ethiopia (EUBFE), a public event was • $100,000 for a Trade Representative Office (TRO), an entity with a scope
held in Addis in October 2014 in which limited to market studies, marketing and promotional activities.
20 ATTRACTING FOREIGN INVESTMENT

Other benefits
Security of Investment
In addition, by investing in Ethiopia, a
• Investment protection and guarantee. foreign company will also benefit
from international trades agreements
• Constitutional protection from expropriation. that Ethiopia is a party to. These
include: Everything But Arms (EBA),
• Ethiopia is a signatory and member of the Multilateral Investment the African Growth and Opportunity
Guarantee Agency (MIGA). Act (AGOA), the Generalized System
of Preferences, and soon the free
• Ethiopia is a signatory of the Convention on the Settlement of Investment trade agreement within COMESA.
Disputes between States and Nationals of Other States. This would allow Ethiopia based com-
panies to reach 19 African countries,
• The Ethiopian Investment Commission (EIC) provides a professional with more than 400 million potential
one-stop-shop. consumers.

Sectors
Conducive Tax Environment
Many economic sectors are open to
• Corporate income tax (tax on profit) is 30%. investors. Among them the Ethiopian
Government stresses the relevance of
• Excise tax is levied (minimum 10%) on selected local or imported products. manufacturing. Here is a broken
down list drawn from an Ethiopian
• Turnover tax at 2% for priority sectors such as tractors, combine harvest- Government internet portal:
ing, grain mill etc. and 10% on other sectors.
• Food and Beverages
• Customs duty on non-exempted imports ranges from 0-35%.
• Tannery, Leather Goods
• Income tax ranges from 10-35% on monthly incomes of $16.50 and above. • Textiles

• Withholding tax is payable on imports at 3% of cost, insurance and freight. • Glass and Ceramics

• Chemicals and Chemical Products

• 15% VAT is payable on businesses with a turnover above $54,000.
• Drugs and Pharmaceuticals
• Dividend tax (on income derived from dividends from a share company or
• Paper and Paper Products
withdrawals of profits from a private limited company) at 10%.
• Building Materials
• Royalty tax (on income derived from technology and intellectual property
rights) at 5%. • Electrical and Electronic products

• Metallurgy
• Capital gains tax - share of companies 30%; business, factory or office
buildings 15%; residences 0%.
Manufacturing
• Rental income tax (on annual rental income) between 0% and 35%
dependent on level of rental income. Manufacturing is now at an early
stage of development. It covers about
• Stamp duty - Leasing 0.5% of value; registering title to property 2% of 145 state owned and 643 private man-
value; contract of employment 1% salary; bonds 1% of value, etc. ufacturing industries of all sizes.
These industries are mainly engaged
• Tax treaties to avoid double tax payment are signed with several countries, in the production of food products and
along with bilateral treaties for the protection and promotion of investments. beverages, tobacco products, textiles,
wearing apparel, tanning and dress-
• Foreign contractor withholding tax ranging from 10% to 30%. ing of leather, footwear, luggage and
handbags, manufacturing of wood
and its products, manufacturing of
 STRONG EUROPEAN PRESENCE IN ETHIOPIA 21

rubber and plastic products, manu-

facturing of chemicals and chemical
products, manufacturing of other
non-metallic mineral products, man-

STRONG
ufacturing of basic iron and steel,
manufacturing of fabricated metal
products, assembling of motor vehi-
cles, trailers and semi-trailers. As
part of the government effort to
re-invigorate and revitalise the

EUROPEAN
manufacturing sector, a new Industri-
alisation Development Strategy has
recently been adopted. The Strategy
clearly identifies the priority areas of
the manufacturing sub-sectors and
put in place strategies that ensure the

PRESENCE
development of vibrant industries in
the country. Major manufacturing
opportunities offering attractive
potential benefits to prospective
investors exist in the textile and gar-
ment, food and beverage, leather and

in Ethiopia
electronic, building materials and
non-metallic mineral and metallic
industrial sub-sectors.

Challenges

Ethiopia is a country undergoing rapid

change. While there is a clear policy
consensus about the benefits of

E
attracting and welcoming more and urope has a strong President Manuel Barroso said that
more foreign investors, the country’s presence in Ethiopia. It “Europe is very proud of its contribu-
institutions are still in the process of is a key partner in tion to Ethiopian development.”
being modernized. This shows in terms of economic and trade rela-
international rankings in which tions. It is the first export market and Many Europeans recognise that
Ethiopia does not get high marks the second import market for Ethiopia offers major business oppor-
when it comes to the easiness of Ethiopia, making it the first trading tunities. It has one of the highest
“doing business”. (See the World partner as well as an important rates of growth in Africa, a large
Bank Doing Business Annual Report). investor. potential market, an inexpensive
labour force, and strong government
That said, the Government is aware of Ethiopia’s exports to the EU are over investments aimed at improving eco-
these shortcomings that affect 43% of its total exports, and more nomic and social infrastructures.
Ethiopia’s “business climate”, and it than 21% of its imports. Through this
is in the process of addressing them large economic and trade partnership Investments by EU companies gener-
through necessary reforms. At the there have been significant technol- ate many permanent jobs in the key
same time, The Ethiopian Investment ogy transfers that have been mutually GDP sectors of manufacturing and
Commission is proactively working beneficial. This high level of EU agriculture. EU companies often
with investors in order to minimize investment has led to the creation of work with Ethiopian counterparts
any inconvenience or delays that may more than 100,000 new jobs for the within joint ventures. They bring to
result from red tape and/or bureau- Ethiopians. On a visit to Brussels in Ethiopia important technologies and
cratic bottlenecks. April 2013, Ethiopian Prime Minister modern management systems. At
Hailemariam Desalegn stated that this time, there are about 300 EU com-
“the quality of European investment is panies operating in the country.
very good.” Then EU Commission
22 STRONG EUROPEAN PRESENCE IN ETHIOPIA

ment, much has been done to

improve the relationship which is get-
ting stronger every year.

Even more will be achieved through

appropriate measures to encourage
private sector development and to
create an environment conducive to
additional FDI from Europe, so that
even more European firms will con-
sider establishing or expanding
business activities in Ethiopia.

Many European observers expect that

a strengthened business environment
and enhanced coordination with
Ethiopian public administration will
encourage even more European com-
panies seriously to consider Ethiopia
as a good place to invest.

From this perspective, an effective

forum for the private sector to voice
its concerns and advocate some pol-
icy adjustments and other practical
measures will help the Government
and the private sector in the ongoing
effort to create an even better environ-
ment for foreign investors.

As a key partner, the EU stands ready

to continue to support Ethiopia in
reaching its objectives throughout
development cooperation instru-
ments. The EU together with its
member states is a key donor, con-
tributing about 30% of the total
development assistance to Ethiopia.
The EU remains strongly committed
to continue supporting the Govern-
ment efforts to unleash the enormous
power potential of the private sector.
Their success stories are among Business Forum in Ethiopia, (EUBFE),
Ethiopia’s best marketing tools to an organisation that brings together More specifically, the EU is now fund-
attract other potential investors. hundreds of European companies, ing a project worth €35 million that
Indeed, by incentivizing a flow of trade large and small, that are currently
missions from EU countries, these operating in Ethiopia. started in 2014. It is aimed at helping
investors are in a position to influence to trigger Ethiopia’s economic trans-
future investment decisions. By and large the Europeans working formation by policy fine-tuning and
in Ethiopia believe that they have capacity building, as well as by sup-
The EU engages the Government and established an open and constructive porting intermediary organisations
the private sectors via the EU Delega- dialogue with the Government of and SMEs. The goal of this initiative is
tion, the Embassies of Member Ethiopia at many different levels. In to help change the way in which the
Countries, and through the European part because of this ongoing engage- public and private sectors interact.
 STRONG EUROPEAN PRESENCE IN ETHIOPIA 23

Recent examples of active in Ethiopia. They have mas- “The EUBFE was established in 2012
sively invested in the economy in response to the need for both a plat-
positive interactions generating economic growth, quality form for networking and information
between Europe and employment and technology transfer. exchange between EU businesses
Ethiopia and a systematic dialogue channel
“To further promote and enhance our with the Ethiopian authorities. This
Here are recent examples of the rich economic ties, an EU Business Forum exchange is on-going and has already
Europe – Ethiopia relationship. Dur- to Ethiopia was established in May led to some concrete improvements
ing the British Business Group (BBG) 2012 under the patronage of the EU in the business climate in the country.
meeting, Greg Dorey, the United King- Delegation to Ethiopia. The EUBFE believes that a continua-
dom’s Ambassador to Ethiopia, said tion and further deepening of this
that “Ethiopia has developed into our “The EU Business Forum has since constructive relationship of coopera-
biggest bilateral development partner become a respected unified platform tion, exchange and better mutual
in the world. And, from a low base, of EU investors in Ethiopia, an excel- understanding between the public
we have seen our trade and investment lent source of information for existing and private sector, will further
relationship take off dramatically too.” and potential EU investors, and has improve the business enabling envi-
become increasingly engaged in an ronment, and ultimately allowing the
Furthermore, Ethiopia’s Prime Minister open and constructive dialogue with society to prosper.
Hailemariam Desalegn and Ireland’s the Ethiopian government on sys-
President Michael D. Higgins signed temic issues affecting the business Ethiopia has ambitious economic and
several agreements in November climate in the country. social development targets, including
2014 aimed at increasing bilateral the transformation of its economy.
business relations. One is on avoid- “Indeed, the EU Business Forum The EUBFE wishes to actively support
ance of double taxation in order to allows EU investors to pool forces and and contribute to the country's devel-
improve the investment relationship speak with one voice and, as such, is opment endeavour by bringing in and
between the two countries. Then fully in line with the vision of the EU to expanding high quality investments
there is a separate trade agreement maximize synergies between EU from EU companies and individuals,
that will come into force in June 2015. Member States and strengthen the therewith creating jobs, transferring
There will also be direct Ethiopian EU collective impact. knowledge, earning foreign exchange
Airlines flights linking Addis Ababa and accelerating growth.”
and Dublin.

Local support
structure: The EU
Business Forum in
Ethiopia, EUBFE
The significant and growing EU busi-
ness presence in Ethiopia has led to
the creation of the EU Business
Forum in Ethiopia, an important initia-
tive promoted by the EU Delegation in
Addis Ababa. As the EUBFE website
explains:

“Economic relations between Ethiopia

and the EU are strong, diversified and
expanding. The EU has been, and con-
tinues to be, one of the main foreign
investors in Ethiopia. There are cur-
rently several hundred EU companies Photo: Wikimedia © Zaareo
24 CASES OF EUROPEAN COMPANIES ACTIVE IN ETHIOPIA

CASES OF
EUROPEAN COMPANIES
ACTIVE IN ETHIOPIA
Ethiopian Steel Profiling &
Building Plc (ESPBC)

1. COMPANY NAME
Ethiopian Steel Profiling & Building
Plc - (ESPBC)

2. COUNTRY OF ORIGIN
The Netherlands

3. BUSINESS SECTOR- COMPANY

PROFILE
Ethiopian Steel Profiling and Building
Plc. (ESPBC) was established in 2003 In 2010, ESPBC invested in a slitting customers’ needs. Main products:
by a Dutch foundation called World line, which is able to slit steel coils columns, rafters, purlins, flat sheets,
Wide Employment. ESPBC operates into small steel strips or to make any formworks, roof sheets, EGA sheets,
in the steel sector. It started with the size flat sheet in full automatic mode. corrugated sheets and hydraform
production of hydraform blocks and Throughout the years many advanced blocks are amongst ESPBC’s products.
pre-painted corrugated sheet. Later, machines have been added to the fac-
cold formed profiles were added for a tory floor in order to meet the
4. WHAT PROMPTED THE DECISION
wide range of industries. Among all customers’ need for high quality prod-
TO INVEST IN ETHIOPIA?
other applications of the cold formed ucts. Two years later an investment
profiles, they fit perfectly with the in an 'EGA line' was made in order to The main desire was to create job
hydraform blocks in such a way that meet the demand for EGA sheets. opportunities in Ethiopia and to transfer
ESPBC is able to supply all building Now the company produces a wide valuable technology and know-how,
materials that are necessary for a variety of roofing sheets as per the while stimulating the local economy.
building up to G+1.
 CASES OF EUROPEAN COMPANIES ACTIVE IN ETHIOPIA 25

5. SIZE OF THE COMPANY business operations in the future.” A Walhout is very positive about this
ESPBC is one of the top ten steel com- plan to establish additional invest- investment in Ethiopia. “I am opti-
panies and manufacturers in Ethiopia. ment is currently under review. And mistic about the Ethiopian business
The company’s initial capital invest- there is a high probability of doing this environment,” he emphasised. “The
ment was $2.5 million; currently its in the future. For starters, it will be economy and the market are growing,
total investment is $20 million and its about adding capacity to the existing and the construction sector is boom-
profit after tax is 6-7% per year. plant. There is no immediate plan to ing. Our relations with government
open new factories in other parts of agencies are good. We are not con-
the country in the near future. cerned about other firms operating in
6. NUMBER OF EMPLOYEES our sector. There is plenty of room for
There are 90 employees. There are more competition. I would definitely
8. OVERALL IMPRESSION ABOUT
three managers, excluding the Gen- recommend investing in Ethiopia to
DOING BUSINESS IN ETHIOPIA
eral Manager. Mr. Hans Walhoot is companies from other EU countries,
the only foreigner. For the time being Ethiopia is a good market, “with a especially in the manufacturing sec-
the company is fully staffed, but new promising number of potential cus- tor, because almost everything is
hiring is possible depending on mar- tomers,” says Walhout, “An important imported here. There is tremendous
ket conditions. aspect about investing in Ethiopia is economic growth, and when you con-
that the government has a good atti- nect growth with 90 million potential
tude towards foreign investors.” customers, business activities hold
7. GROWTH PROSPECTS Besides, there is a very good lifestyle huge promise. Besides, compared to
“If we could go back,” says the Gen- in Ethiopia. “I have four children,” he other African countries, in Ethiopia
eral Manager, Mr. Hans Walhout, “we continued, “and here in Debrezeit you can run your business without any
would have started on a much bigger there is an international school that concerns about corruption. In the
scale, and we would have invested meets international standards; there- end, the Ethiopian economy and mar-
more. The boom started 5 years ago. fore, it is very good for my children. ket are growing, and the construction
Due to Ethiopia’s high business poten- The business is very good and it is sector is booming. Therefore, for us
tial, I would probably establish more growing. We are very satisfied!” Ethiopia has an enormous potential.”
26 CASES OF EUROPEAN COMPANIES ACTIVE IN ETHIOPIA

Abyssinia Essential Oil Plc

1. COMPANY NAME
Abyssinia Essential Oil Plc

2. COUNTRY OF ORIGIN
Germany and Ethiopia

3. BUSINESS SECTOR- COMPANY

PROFILE
Abyssinia Essential Oil produces
essential oils from eucalyptus, rose-
mary, citronella, lemon grass and
more. The company is a joint venture the German shareholder. The com- cated, state-of-the-art technologies
formed between two Ethiopians and pany is planning to hire more people, and better “know-how”. Foreign com-
one German. They have been success- especially skilled workers who can panies that are at the cutting edge in
fully working together for seven years. operate the machineries. this essential oils business could
make a very positive contribution,
4. WHAT PROMPTED THE DECISION while doing well for themselves.
7. GROWTH PROSPECTS
TO INVEST IN ETHIOPIA? With 90 million people, the Ethiopian
“The business is growing and the gov- market is very large. “Working condi-
The partners saw a good business ernment is cooperative; we are very tions in our company are very good,”
opportunity in this sector, because happy, stated Mr. Kedebe. “We says Kedebe. “Overall,” he concludes,
most oils used in Ethiopia are started with a 200 distillation unit and “we also have good relations with gov-
imported. Due to very high demand due to increasing demand we are ernment agencies. Besides, ours is a
for its products Abyssinia Oil is very going to increase the distillation unit rather labour intensive business, and
profitable. to 500,” he continued. “There is a huge labour costs in Ethiopia are fairly low.”
market for oil in the country. There
5. SIZE OF THE COMPANY are very few essential oil producers
and these products’ potential is high.”
Abyssinia Essential Oils is one of the
biggest essential oils producers in the
country. It ranks third in Ethiopia. 8. OVERALL IMPRESSION ABOUT
The company’s initial investment was DOING BUSINESS IN ETHIOPIA
€25,000. According to management, Abyssinia
Oil is doing very well. All its products
6. NUMBER OF EMPLOYEES are quickly sold out, while there is still
unmet demand. There is room for
Abyssinia Oil currently has seven other companies operating in this
employees. It is run by Mr. Behailu sector in Ethiopia.
Kebede, the General Manger. There
are no expats working directly for the In fact, this sector could benefit from
company, except for Mr. Felix Ahelars, the introduction of more sophisti-
 CASES OF EUROPEAN COMPANIES ACTIVE IN ETHIOPIA 27

New Wing Addis Shoe

Factory Plc/ New Wing
Addis Shoe and Tannery

1. COMPANY NAME
New Wing Addis Shoe Factory Plc/
New Wing Addis Shoe and Tannery

2. COUNTRY OF ORIGIN
Italy

3. BUSINESS SECTOR- COMPANY

PROFILE
Shoe and leather products from sheep,
goat and cattle skins. There are two
factories: one is located in Addis Ababa
and the other in Akaki. They have been pany has invested about three hun- the best in the world. We are plan-
operating for four years. dred million Birr so far (1 USD = 21 ning to buy and open a third factory.
Birr). The operation is still rather The right time for investment in
new. More machinery will be pur- Ethiopia is now!”
4. WHAT PROMPTED THE DECISION
chased to expand operations.
TO INVEST IN ETHIOPIA?
The owners have their shoe factory in 8. OVERALL IMPRESSION ABOUT
China; they contacted Mr. Evano Mes- 6. NUMBER OF EMPLOYEES DOING BUSINESS IN ETHIOPIA
fin, now the General Manager, and There are 900 employees. Amongst “The current opportunities offered by
they decided to get the operation these there are five Managers and a the Ethiopian government are attrac-
started. Mr. Mesfin has nine years of total of 25 foreign nationals working tive. The tax holiday (for green field
experience in this field. Moccasins at the factories. Once the expansion new investors there is a five year tax
are not produced in China. When the is completed, there are prospects of exemption), and the duty free opportu-
owners saw how they are made in hiring between 300 and 500 more peo- nity we have for all the materials we
Ethiopia, they decided to buy a factoryple in the second factory. There is a import for our productions are amongst
and set up machineries to produce good ongoing relationship with all the the incentives we enjoy,” added Mes-
shoes for women. Currently the facto- employees. fin. “The government agencies are
ries undertake the finishing and very cooperative. Furthermore, the
production of shoes for women. Leather Development Institute and
7. GROWTH PROSPECTS the Industry Minister are very helpful.
“Manpower and electricity costs are Ethiopia has a great potential in
5. SIZE OF THE COMPANY
low,” says Mr. Mesfin. “Furthermore, leather products. There are compa-
This is one of the biggest shoe facto- the leather in Ethiopia is not expen- nies that operate on an even larger
ries in Ethiopia and its ranking is sive and the fibre’s quality is one of scale than we do in this field.”
between second and third. The com-
28 CASES OF EUROPEAN COMPANIES ACTIVE IN ETHIOPIA

The EU Business A
RO
• EU PEA

NU
ETHIOP
Forum in

NION B
Ethiopia (EUBFE)

UM

U
SI
NESS FOR

T
he EU Business Forum Services to Members • Advocacy – the undertaking of spe-
in Ethiopia aims to cific studies on identified investment
assist EU companies EUBFE services to members fall into impediments and the development
active in Ethiopia to do business in the following discrete but intercon- of position papers specifying the
the country, through: nected areas: concerns of members and lobbying
for mitigating actions to be taken.
• Improving the exchange of informa- • Information – members are provided Facilitating high level discussions
tion on the Ethiopian business and with standard and member-specific with senior government officials
regulatory environment, information on how to establish and from relevant ministries and agen-
operate an enterprise in Ethiopia – cies and representatives of the EU
• Developing a platform for network- incentives, licensing, taxation, Delegation and EU Member States.
ing and forging business linkages employment and customs issues Commenting on proposed draft leg-
between EU companies, and etc. In addition, members are kept islation and regulatory changes.
informed about developments,
• Being an effective channel for dia- progress, initiatives and events • Events – the EUBFE organises reg-
logue with the various Ethiopian through a quarterly EUBFE newsletter. ular networking and issue-specific
authorities. events, discussion forums, round
• Dialogue – a platform for members tables, consultation meetings, work-
to debate specific issues and to agree shops, seminars and conferences
on the most effective strategies and throughout each year. Facilitation
actions to mitigate the negative of inward investment and business
impact upon investment of sector- missions to Ethiopia from EU
specific or horizontal impediments. Member States.

Contact EUBFE secretary at: [email protected]

Alternatively, visit: www.eubfe.eu
 REFERENCE 29

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 www.eubfe.eu

THIS PROJECT IS FUNDED BY THE EUROPEAN UNION. THE VIEWS EXPRESSED HEREIN CAN IN NO WAY BE
TAKEN TO REFLECT THE OFFICIAL OPINION OF THE EUROPEAN UNION NOR THAT OF THE ACP SECRETARIAT.