Ethiopia’S Investment Potential in the Agro-Processing and Light Manufacturing Sectors Is Clear
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INVESTMENT OPPORTUNITIES Ethiopia’s investment potential in the agro-processing and light manufacturing sectors is clear. INDUSTRIAL PARKS Ethiopia is building four industrial parks at a total cost of INVESTMENT PROFILE: US$ 2 billion, covering various industries such as textile and apparel, packaging, machinery and anything else Agro-Processing and Light Manufacturing that can be manufactured. Ethiopia is targeting US$ 1 billion of annual investment in industrial parks over the next decade to make it ETHIOPIA Africa’s top manufacturer. © shutterstock.com The parks are located in the eastern towns of Dire Dawa, Kombolcha and Mekelle in the country’s north, HORTICULTURE AND FLORICULTURE and Adama in the capital’s south. A textile park has already opened in Hawassa in April 2016. Only a decade old, Ethiopia’s cut flower business is already the second largest in Africa, with 120 high-tech COTTON flower growers generating US$ 265 million in revenues in 2014 from US$ 28.5 in 2005. The total potential area agroecologically sustainable for cotton production in Ethiopia is 2.57 million hectares, Ethiopia’s climate is its best comparative advantage, but only 125,000 ha is currently under cotton coupled with excellent export-oriented agricultural production. policies, comprehensive incentives, cheap electricity and affordable labour. Textile and apparel manufacturing is uniquely seen as Ethiopia’s step forward towards industrialization. PULSES Moreover, the country has a rich and vast cotton sector. Pulses make up a substantial share of Ethiopians’ diet, © thinkstock.com Ethiopia also has one of the lowest costs of energy in especially for peri-urban and rural consumers. © shutterstock.com the world at US$ 0.06/kWh. Relatively high productivity pulses gain. National pulses One industrial city, Hawassa, is chiefly designed and productivity on average was 15.6 quintals per hectare Ethiopia is the 3rd largest East African established for the textile industry. in 2014/15, which is above Sub-Saharan average. AN OVERVIEW and 6th largest Sub-Saharan economy. Good climate, endowed with abundant and diversified CONSTRUCTION The Federal Democratic Republic of Ethiopia is Africa’s natural resources and diverse agroecology suitable for oldest independent country, and is among the most stable Construction has been Ethiopia’s fastest-growing a variety of cereal production, including pulses. sector. In 2015, there were an estimated US$ 20 billion countries in the region. For 11 years (2004 to 2014), Key facts worth of construction projects in the pipeline, Out of 11.55 million hectares of land available for Ethiopia has registered an average economic growth of Capital: Addis Ababa farming, 3,274,469 10.9% per year. The per capita GDP in current prices has with an output of US$ 3.2 billion. Area: 1.14 km2 hectares of land are identified as potential areas for grown from US$ 341.9 in 2010 to US$ 573.6 in 2014 Population: 96.96 mm (2014) While most projects are financed by the public sector, pulses farming in SNNP, Tigray, Amhara, Oromiya, (with a population size of 96.96 million). Ethiopia (with the US$ 2.2 billion project in Huajian Group Industrial Gambella, Benshangul Gumuz, Somali and Afar. nominal GDP of US$ 55.61 billion) is the third largest Labour force 49.27 mm (15 years and above): Park was led by the private sector for textile factories Cultivated land for pulses in Ethiopia has been an economy in East Africa next to the Republic of Kenya and real estate and apartment projects. estimated 1,742,600 hectares (2014/15). Rural land and the Republic of the Sudan, and is the sixth largest Male: 47.5% rental prices are usually low. Sub-Saharan economy. Female: 52.5% PHARMACEUTICALS Youth literacy rate (15–24 years): Several factories in Ethiopia process pulses. Ethiopia, with an estimated population of 96.96 million (2014), The annual pharmaceutical market in Ethiopia is is Sub-Saharan Africa’s second most populated country Male: 63% (2008–2012) estimated at US$ 400–500 million, and is growing at after Nigeria. It is also predicted to reach 117.6 million by Female: 47% (2008–2012) an impressive rate of 25% per year. the year 2025. GDP (nominal): US$ 55.61 bn (2014) Ethiopia is aggressively investing in and expanding its The financial sector, mainly banking and insurance services, GDP (growth): 10.3% (2014) health sector. Health coverage increased from 30% in has been broadly stable and is growing in terms of FDI inflow: US$ 1.2 bn (2014) 2010 to 89% in 2015. The number of health posts and expanding its services. The sector continues to tap into new Exports: 11.6% of GDP (2014) centres increased from 4,811 in 2005 to 17,415 in 2012. opportunities for mobilizing savings through establishment of Imports: 29.1% of GDP (2014) new banks and expanding their branch networks, as well as Govt. expenditure: US$ 11 bn (2015 est.) introducing new financial instruments. As of 2013/14, KEY CONTACTS: Ethiopia has 19 commercial banks, three of which are Govt. revenue: US$ 9.11 bn (2015 est.) Currency: Ethiopian birr (ETB) Ethiopian Investment Commission government owned. Tel.: +251 115 510 033 Language: Amharic, Oromiffa, Tigrigna, E-mail: [email protected] English (major) Produced under Partnership for Investment and Growth in Africa (PIGA). *Source: EIC, 2015; World Bank, 2015; UN, 2013; CIA, 2016 A project funded by the Department for International Development, Government of the United Kingdom and implemented by the International Trade Centre. ECONOMY OVERVIEW The Government of Ethiopia has devised a strategic plan to build a 5,000-kilometre-long national railway network, AGRO-PROCESSING AND LIGHT which is anticipated to increase Ethiopia’s export and MANUFACTURING import trade. Ethiopia has one of the fastest-growing economies in the Ethiopia has two dry ports, at Semera and Modjo, world. The economy is still largely based on agriculture, which 588 km and 73 km from Addis Ababa respectively. accounts for an estimated 45% of its GDP and employs 85% It also operates another four sub-terminals, which are of its active population. located at Dire-Dawa, Mekele, Kombolcha and Gelan, 515 km, 783 km, 376 km and 34 km With its population of 96.96 million, it constitutes Africa’s respectively from Addis Ababa. Addis Ababa is linked to second biggest market. The fact that 40% of the population is the Port of Djibouti (910 km) by road at the Gulf of Aden. under the age of 15 and 70% is under the age of 30 suggests significant place for growth in all sectors. Air transport is a key part of Ethiopia’s transport network. Ethiopian Airlines offers both cargo and passenger One of the government’s objectives is to make Ethiopia © shutterstock.com © shutterstock.com transport in its domestic and international flights. Africa’s number one manufacturer, in particular through the Domestic flights are offered to 17 destinations construction of industrial parks. countrywide. Ethiopian Airlines connects the country to Opportunities in agro-processing include cereal crops (wheat, more than 63 destinations across the world, with more From 2015/16 to 2020, the government has plans to ADVANTAGE ETHIOPIA barley, corn, rice and teff), pulses (soy beans, haricot beans, than 40 cargo destinations throughout Africa, Asia, construct power-generating projects in hydropower chickpeas, beans and lentils), horticulture and floriculture, the Middle East and Europe. (11,237 MW to 51,706 GWh), solar energy (300 MW to Agro-processing and light manufacturing investors in Ethiopia oilseeds (sesame, Niger seeds, canola, linseed, groundnuts 525 GWh), geothermal energy (1,200 MW to 9,461 GWh) can benefit from the following: and sunflower), cotton and textiles, livestock, dairy and poultry. MANPOWER SCENARIO and gas turbine stations (420 MW to 2,940 GWh) (National Planning Commission, 2015). Political and social stability Opportunities in light manufacturing include leather and There is abundant availability of a relatively well-trainable Preferential market access (Africa, Europe, Asia) leather products, pharmaceuticals, industrial and construction population. materials, agrochemicals and fertilizer industries, agricultural GOVERNMENT SUPPORT FOR AGRO-PROCESSING Young, competitive and trainable labour force machinery and packaging. The monthly average wage (labour, agriculture, forestry AND LIGHT MANUFACTURING Excellent climate and fertile soils; abundant and fishing) is 1277.50 birr (2014). Incentives are available upon the following minimum irrigable land WHY ETHIOPIA? investment: US$ 200,000 for a single investment project; Improved infrastructure POWER SCENARIO US$ 150,000 for a joint project with a domestic investor; Competitive incentive packages US$ 100,000 for technical consultancy if wholly owned or ETHIOPIA’S GLOBAL AND REGIONAL Ethiopia has huge potential for geothermal and hydropower Stable business operating environment MARKET ACCESS US$ 50,000 jointly with a domestic investor. energy generation. The country’s installed power- Conducive investment policy Due to its large population, Ethiopia has the potential to be generating capacity is an estimated 2000 MW, out of which Fiscal incentives for investments in approved sectors among Africa’s biggest domestic markets. The country’s hydropower plants generate 1,980 MW (99%). The balance include: Establishing your SCM credentials can be a stepping-stone proximity to the Middle East presents further prospective market of 8 MW (0.4%) and 12 MW (0.6%) is generated by to a satisfying career and enhances the