Once known for its series of devastating famines that affected millions of people in the 1980s, Ethiopia is today portrayed as an attractive investment destination with immense potential. It is Africa’s second most populous nation with 91m people and one of the fastest growing economies in the region with a booming middle class.
Ethiopia is also well endowed with resources. One of its key attractions is the agriculture industry thanks to the country’s large and fertile tracts of land.
Investors and companies looking to expand in East Africa have their eyes set on Ethiopia, but many complain about the difficulties of entering and doing business in the country. For starters, Ethiopia is landlocked and relies on sea access from the port of Djibouti, described as one of the most expensive ports in the world. Investor concerns also include bureaucracy, difficulty in accessing foreign currency and government control on many processes.
The World Bank’s 2014 ease of doing business report ranks Ethiopia 125 out of 185 economies. According to the report, Ethiopia has adopted reforms in areas such as access to electricity and in the legal realm. However, it is still a difficult place in which to do business when it comes to accessing business licences, establishing a company and trading across borders.
Brooks Washington is the principal at business development fund Roha Ventures, which is setting up a glass bottle manufacturing plant in Ethiopia. For the last 18 months, Washington has been concentrating on setting up Juniper Glass Industries. He tells How we made it in Africa that Ethiopia was an attractive investment destination for the fund because the beverages industry there is “growing insanely”, driving demand for glass bottles.
A lot of curiosity
Washington says he sees more and more investors keen on doing business in Ethiopia, but there is a big gap between those who are curious about the country and those who actually invest.
He explains that there are a lot of unknowns about Ethiopia which make people “sceptical”.
“I have worked and set up businesses all over the continent. I don’t know if it’s harder or easier [to do business in Ethiopia compared to other African countries]. I would say it is just different,” he says.
“The government has a vision for where that country is going and I think their vision is exciting and it’s right, but it also means that they are very clear and prescriptive about what you do and how you do it. So wading through some of the bureaucracy can be challenging, but I think it is very rewarding at the end of the day.”
Worth the trouble
Doing business in Ethiopia can be a “pain” because of the processes, but Washington says it is “worth” the trouble. For instance, he explains, the Ethiopian government owns all the land in the country and people have to lease it. Getting a lease can be a time consuming process that involves negotiations with the federal and local governments.
“It took us a long time to get the land… but now we have over 10ha in a great industrial area with a long-term lease and very attractive rates. So it is completely worth the process. If you follow the process and you have patience and you are very persistent, then I think it is completely worth it.”
The language barrier can also be a challenge for foreign investors. Washington explains that in other parts of Africa people speak English, French or Portuguese, languages that “westerners are more comfortable with”. In Ethiopia, however, people speak Amharic. Although a good number of the population is also fluent in English, Washington says communication can be difficult.
He advises people interested in doing business in Ethiopia to have “a change in mindset”.
“The rigidity of processes in Ethiopia is surprising to many people. There are no shortcuts [and] there is not a way to make [things] faster. I think that can be really challenging. You need a different perspective.”
Washington notes that many difficulties of doing business in the country are possible to work around with a little bit of “creativity and persistence”. On the plus side, he adds, Ethiopian authorities “really go out of their way to help” investors.