Ethiopia ideal for Major International Brands and Investors – IMF Report
The relative absence of corruption, inexpensive labour costs, financial incentives and lack of security risks renders Ethiopia a strategic market with the possibility of attracting several investors from all over the world, according to a recent International Monetary Fund (IMF) report.
In October alone, Ethiopia welcomed pharmaceutical and agricultural companies from Asia and the Middle East while Standard Bank announced the opening of the first representative office in the country. Agriculture, infrastructure, manufacturing and energy sectors continue to draw Ethiopia considerable international investment while investment on the service sector is growing, attracting major international brands such as Jovago, Lamudi, Everjobs and Kaymu.
Among the giant investments in the country, Maersk Oil has agreed to buy half of Africa Oil Corporation’s shares in three onshore exploration licenses in Kenya and Ethiopia for an estimated investment of $845 million. The acquired licenses cover exploration areas in northern Kenya and South Omo in Ethiopia.
Ethiopia received over $1.8 billion investment in 11 projects from Asian companies who are increasing their presence in the country. In 2014, two major companies from India invested $550 million constructing Africa’s largest plant to produce cotton yarn for export. Similarly MNE, a Chinese company, built a $500 million textile plant estimating to create over 20,000 jobs. For non-metallic and mineral products, $2 billion worth of Foreign Direct Investment (FDI) was recorded in 13 projects. Private equity continues to drive many of the largest investments into Ethiopia. KKR, an American company made its first direct investment in Africa in 2014, investing $200 million in Ethiopia’s rose production company Afriflora. Foreign clothing and leather companies also invested over $2 billion propelling the industry into a new record height.
Investment in East Africa have become more concentrated on the top five economies which have increased the investment share from 62% to 71% of total flows. Ethiopia entered the top five for the first time, in terms of value of inflows, while Mongolia dropped out of the top five owing to a quick 76% fall in FDI flows according to the World Investment Report 2015. The largest investors last year came from developing countries which increased their share of flows from 44 % to 63 %, the same report reads.
Similarly the IMF recently reported that, in spite of sub-Saharan Africa’s slow economic forecast of 3.75% growth, Ethiopia is expected to grow by 7%. With the government plan to liberalize 80% of the country’s trade in order to stimulate growth, the forecast is expected to increase further.