5 Ethiopian Industries with the Most Foreign Investment Potential

5 Ethiopian Industries with the Most Foreign Investment Potential Facebooktwittergoogle_pluspinterestlinkedin

At one time, Ethiopia was associated with famine and poverty. Now, the country has one of the fastest-growing economies in Africa. In fact, Ethiopia is attracting a number of foreign investors from Nairobi, Johannesburg, London, and cities throughout the United States. These investors have recognized the incredible potential of the Ethiopian economy as it continues to grow. Over the past seven years, the country has experienced between 10 and 11 percent growth in gross domestic product on average according to the Ethiopian government. While the International Monetary Fund (IMF) suggests that the actual number is closer to 7 percent, this is nonetheless impressive growth for a country on the horn of Africa.

With competition increasing in the domestic venture capital landscape, more people are deciding to invest in foreign countries, and Ethiopia has earned a great deal of attention. Many investors are wondering which industries in Ethiopia are most ripe for investment. Following is a look at some of the country’s most promising industries:

  1. cell towerTelecommunications services: According to industry experts, as of a few years ago only about 10 to 15 percent of Ethiopians had mobile phones, and Internet penetration was under 1 percent due to a poor infrastructure. With much of the success of Kenya and Nigeria built on mobile phone and Internet access, the demand for these services will increase. In addition, the Ethiopian government has introduced mobile payment capabilities for utilities, which has further driven demand. Ethiopia’s rising population has also boosted demand. As incomes increase and the population grows, the upper limit of customers in the telecommunication services industry remains largely unknown. The Ethiopian government invested in fiber optic cable for better Internet service and is still looking to recoup that money, making telecommunications a primary sector for investors.
  1. Agriculture and livestock: Agriculture and livestock account for more than 50 percent of the gross domestic product. These industries provide jobs for more than 80 percent of the Ethiopian workforce. Ethiopia, which has the largest livestock population in Africa, exports large numbers of animals to the Middle East. The creation of the Agricultural Transformation Agency (ATA) is evidence of the Ethiopian government’s focus on agriculture and livestock. The ATA, which is headed by a former Wall Street banker and Gates Foundation staff, provides local farmers with cutting-edge planting information, as well as tips on improving irrigation and creating cooperatives. Since Ethiopia has some of the best coffee and tea in the world, opportunities to increase exports are growing, especially as farmers become increasingly connected through the Internet. The sale of products abroad could triple income on agricultural products.
  1. Construction: The percentage of the gross domestic product spent on infrastructure is higher in Ethiopia than in any other country in Africa. The Ethiopian government has made transportation, energy, and other industries related to infrastructure an important part of its development plans. As the infrastructure expands, ancillary services such as cement, steel, and other heavy construction sectors are in high demand. Investment in construction represents an investment in the future of Ethiopia. By fueling this industry, roadways are expanding and new buildings are dotting the landscape of Addis Ababa and other major cities. Wealthy people in the city are investing in property, as evidenced by the many non-government buildings appearing in cities. In many ways, the capital feels like a large construction site, and this is not about to change as development continues to gain momentum.
  1. financesFinancial services: International banks have played a key role in the expansion of financial services throughout Africa, but similar investments have largely been absent in Ethiopia despite the fact that it has one of the largest populations and economies on the continent. The Ethiopian population, which remains largely unbanked, is primed for foreign investment in more economic infrastructure. As of 2012, it was estimated that 85 to 90 percent of Ethiopians were unbanked. As the economy expands globally, and as the importance of agricultural goods increases, more financial infrastructure will be necessary to ensure fair, equitable growth. Financial services will need to target underserved communities through initiatives such as mobile banking, which makes financial services available even in rural areas.
  1. Education: Throughout Ethiopia, there are more than 30 universities that aim to train new generations of employees. Most villages have schools largely due to government intervention. Primary school enrollment rates will continue to increase, driving literacy rates up and making secondary education more accessible than ever before. As the demand for universities and vocational schools increases, these institutions will become more attractive to foreign investors. Importantly, education is a scalable industry. Since Ethiopia is not very urbanized, the demand for institutions will grow across the region. Demand will most likely cross national lines as other countries begin to demand better secondary education options. One Ethiopian university has already expanded to Somaliland. However, investors in this sector will face the challenge of providing services for a consumer base that is relatively poor, even in comparison to the sub-Saharan average.
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