Ethiopia – cracking the local code

According to many local and international business leaders, the government differs from other African governments in that it delivers on many of its promises. It has created various industrial zones, given preferential treatment to investors keen on producing locally, such as access to land and tax exemptions. The amount of infrastructure being built across the country is nothing less than remarkable.

The government also wants to keep a tight grip on the economy. It will only allow foreign companies to invest in sectors that have a true need. As Minister of Foreign Affairs Tedros Adhanom Ghebreyesus told me: “Multinationals need to bring something we don’t already have, either technology or innovation.”

As a result, some sectors are still closed to international companies. These include retail, telecommunications and banking, among others. The government wants to protect local industries and strengthen them before international players come in. There is nonetheless mounting pressure for these sectors to open up and, as many say, it is only a matter of time.

Some companies are in fact already sneaking in through the back door. Leading international telecommunication providers are allegedly acquiring stakes in BelCash and M-BIRR, two companies that provide the technology infrastructure for mobile banking. Telecom giants are therefore already positioning themselves for preferential access to the market.

Great potential for multinationals

Ethiopians want international brands, and they want them now. The odd coffee shop uses a similar logo to Starbucks, and I saw several shoe shops that call themselves Aldo and Clarks. “But Ethiopia was long closed to foreign influence, and they don’t have a direct association with international brands. So, a no-name brand from Turkey for example, can become very successful here, because consumers don’t know the multinational brand. Companies are on a level playing field, and it all comes down to marketing,” a distributor whose Turkish nappies enjoyed a much larger market share than P&G’s Pampers, told me.

Understanding the “local code” is crucial when trying to reach the consumer, as I have been told repeatedly. To give you an example, an international consumer goods company endorsed a local musician. However, it turns out this musician was not well-liked by the 30m-strong Oromo people because of his praise of a former emperor who committed manslaughter of the Oromo many decades ago. The company had planned to send this musician on a tour into the Omoro tribal area, which caused a massive outcry. The marketing mishap reveals how companies must understand cultural sensitivities to succeed in Ethiopia.

Several international companies are already tapping into Ethiopia’s opportunity very successfully. They include the typical pioneers for doing business in Africa; namely Coca-Cola, Pepsi, Diageo and Heineken. General Electric (GE) has already paid various visits to the country and is planning to set up an assembly factory. Coca-Cola has a long history of being in the country; apparently Emperor Haile Selassie owned shares in the company – and at a time, Coca-Cola was traded for gold.

The pioneers are already here. Their success partly rides on the back of what the head of GE for East Africa described: “In Africa, we are working backwards, we create the infrastructure that will lead to the demand for our products.”

I can see that this approach takes time and is expensive, but ultimately, the “working backwards approach” leads to success not just for the companies, but for the socio-economic development of countries.

Given the realities I have seen in Ethiopia, this model makes perfect sense to me.

Anna Rosenberg, head of sub-Saharan Africa at Frontier Strategy Group, is currently on a research trip to Kenya, Uganda and Ethiopia.