Ethiopia: Africa’s Lion Economy Averaging 10.6% GDP Growth per Year

Interested in investing in Africa? While South Africa has been continuously attracting media and investment attention, the business community seems to be neglecting other promising investment destinations within the continent.

With the current article we’d like to highlight an African emerging market that is becoming one of the fastest growing world economies, Ethiopia.

Get an overview of why investing in Ethiopia might be worth considering. The analysis is prepared by a trusted partner of ours focused on sourcing and fostering business opportunities in the Sub-Saharan region, and is based on relevant statistical data and real life professional experience

Ethiopia's Economic Growth

Over the past decade Ethiopia’s economy has evolved to become the largest non-oil exporting economy in Africa, and one of the top ten fastest growing economies in the world. According to a World Bank report, Ethiopia averaged 10.6% GDP growth per year between 2004 and 2011. This compares to a 5.2% GDP growth in Sub-Saharan Africa as a whole.  Ethiopia is predicted to be the third fastest growing economy in the world in the period between 2011-15.

This impressive economic growth has been mainly attributed to agricultural modernization, the development of new export sectors, strong global commodity demand and government-led development investments. The Government of Ethiopia has been successful in tackling the persistently high inflation which affected the economy over the past two years through introducing more focused fiscal policies. As a result, inflation has decreased, falling from 33% in 2011 to 15.8% in 2012

Better regulatory and institutional frameworks, such as improved business registration procedures and requirements, have helped strengthen investor confidence and attract foreign investment. Large infrastructure investments have also helped fuel domestic demand and enhance the economy’s productive potential.

Investment Climate in Ethiopia

These developments have had the effect of reducing poverty and unemployment, creating a more attractive investment environment. As a result Ethiopia’s capital, Addis Ababa, has become a commercial centre and experienced a wealth of infrastructural development as well as a return of the Ethiopian Diaspora, greatly improving the strength of entrepreneurship in the country.

Ethiopia’s status as a leading centre for investment has been established through economic policies centred on creating a stable economic environment. In 2010 the Ethiopian government implemented the 5 year Growth and Transformation plan. This plan aims to achieve Ethiopia’s Millennium Development Goals (MDGs) through securing an average annual economic growth of 11 to 14.9%per year. The successful implementation of this plan will double the GDP of Ethiopia by the end of 2015.

In order to achieve the GDP goals an increase in foreign investment is required, and the government has taken steps to secure this valuable foreign investment. To this end the Ethiopian government has reduced the discriminatory tax, credit and foreign trade treatment of the private sector, simplified administrative procedures, and established guidelines regulating business activities. Although bureaucratic hurdles continue to affect project implementation, the Ethiopian Investment Agency (EIA) has improved its services and provides a "one-stop shop" service that has significantly cut the time and cost of acquiring investment and business licenses, which can now be obtained in one day if all requirements are met

As a result of these steps, FDI into Ethiopia has increased steadily. Major international companies currently participating in Ethiopia’s economy include Boeing, Coca-Cola, Pepsi-Cola, Caterpillar, John Deere, Proctor & Gamble, and Johnson & Johnson

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The data above outlines arguments for Ethiopia being an attractive investment destination. Of course, before making any final decisions it is important to explore in detail everything that may affect your business prospects. If interested in getting professional advice and support in finding and exploiting business opportunities in Ethiopia and other Sub-Saharan countries, please contact us at customer-service@merar.com