Ethiopia is the fourth largest economy in sub-Saharan Africa. It is predicted to be the third largest by 2025, overtaking Angola. Ethiopia is five times the size of the United Kingdom and strategically located in the Horn of Africa, near to the Middle East and Europe and major ports. Ethiopia is bordered by Sudan in the west, Somalia and Djibouti in the east, Eritrea in the north and Kenya in the south.
The country has a high central plateau that varies from 1,800 to 3,000 metres (6,000 ft.-10,000 ft.) above sea level, with some mountains reaching 4,620 metres (15,158 ft.). Addis Ababa at 2,300 metres (7,546 ft.) is the third-highest capital in the world.
Strengths of the market
Ethiopia’s population of 96 million (2014 est. CIA World Factbook) makes it one of the largest markets in Africa. Since the 1990s, Ethiopia has pursued a development strategy based on a mixed economy of both state and private enterprises. It has eliminated discriminatory tax, credit, and foreign trade treatment of the private sector and simplified bureaucratic regulations and procedures.
Agriculture employs more than 80% of the population and generates more than 90% of the export revenue, though its share of total GDP is declining, which is now around 41% compared to 46% for services and 13% for industry.
The economy is expected to maintain the rapid growth it has experienced over the past ten years. This is because Ethiopia has:
a large natural resources potential which offers opportunities for expansion of agriculture, fisheries and hydroelectric power generation
an abundant human resource base – low-cost labour which can support the expansion of labour-intensive manufacturing
a market of over 90 million people – with rising incomes
an established regional aviation hub – Addis Ababa has become a regional air transportation hub, ideal for expanding trade links.
Free trade agreements
Ethiopia has duty and quota free market access to the US under the African Growth and Opportunity Act (AGOA).
It also has duty and quota free market access to the European Union (EU) under the Everything but Arms (EBA) initiative. However, this is a non-reciprocal agreement. It is an incentive given by the EU allowing duty free import of goods from Ethiopia to enter its member countries markets.
Trade between the UK and Ethiopia
British companies trading with or operating in Ethiopia include Nyota Minerals, Pittards, Altus Strategies, Tullow Oil, GlaxoSmithKline, Stratex International, Deloitte, Mott MacDonald, British Airways, East African Pharmaceutical, Gellatly Hankey & Co, Cambridge University Press, HSBC, WSP International, Macmillan Education and Delonex Energy.
Investment between the UK and Ethiopia has increased considerably in recent years, and UK exports to Ethiopia have grown by 135% from £80 million in 2010 to £108 million in 2014.
A number of British firms have invested in sectors such as mining, food and drink, the leather industry and renewable energy.
The top UK exports to Ethiopia are:
power generating machinery and equipment
general and specialised industrial machinery
miscellaneous manufacturing articles
chemical materials and products.
Benefits to British businesses exporting to Ethiopia:
access to European and Middle Eastern economies
low-cost and trainable labour force
stable political and economic environment
low crime rates
one of the largest domestic markets in Africa, with 96 million consumers.
Politics and the economy
Ethiopia has enjoyed a decade of peace and relative prosperity that has put increasing focus on economic growth and achievement of the Millennium Development Goals. The macro-economic stability, excellent climate and fertile soils, strategic location at the cross roads between Africa, the Middle East and Asia, zero tolerance for corruption, and attractive incentive packages, are some of the reasons for attracting investment in Ethiopia.
The current government has embarked on a cautious program of economic reform, including privatisation of state enterprises and rationalisation of government regulation. While the process is still ongoing, so far the reforms have attracted some foreign investment, and the government remains heavily involved in the economy.
Ethiopia is currently the fastest growing non-oil producing country in Africa, with an annual average Gross Domestic Product (GDP) growth rate of 10% over the past few years. In terms of economic performance, Ethiopia has shown not only impressive growth but, more importantly, remarkable consistency. [Source: National Bank of Ethiopia]
Ethiopia does have problems with inflation and foreign exchange shortages, but the issues are now being addressed and inflation is on a declining trend. Ethiopia’s primary exports are coffee, flowers, fruits and vegetables, khat, hides and skins, sesame seeds, pulses, live animals, honey and beeswax, spices and natural gum.
Coffee is by far the most important export commodity, constituting between 35 and 40% of exports by value. The country’s main imports include motor vehicles, petroleum products, civil and military aircraft, spare parts, construction equipment, medical and pharmaceutical products, agricultural and industrial chemicals, agricultural machinery, fertilisers, irrigation equipment and food grains.
Politically, Ethiopia has had a relatively stable government for the last 20 years. While Ethiopia has been involved in recent regional security operations in neighbouring states, there have been no major threats to the country’s stability.
British companies wishing to enter the Ethiopian market are advised to research the market prior to engaging in business so as to establish the opportunities and competitiveness of the market for their products and services.
With a population of about 96 million, Ethiopia represents a melting pot of ancient Middle-Eastern and African cultures evident in the religious, ethnic and language composition of its Semitic, Cushitic, Omotic and Nilotic peoples.
The Ethiopian people comprise about 78 ethnic groupings, of which the Amhara and the Oromo constitute the majority with about 60% of the total population. Approximately 85% of the population lives in the rural areas.
The annual population growth rate is about 2.6%, and the economically-active segment, between ages 14 and 60, is about 50% of the total population.
Source - UKTI
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