Business Review, Q4 2020
During the first half of 2020 Ethiopia secured USD 1.1 billion in FDI creating 14,000 new jobs. Compared to other countries in Africa (and the world) that is relatively stable. Industrial parks and exporting remain the favoured activities - but business services such as BPO/KPO are also picking up pace. More recently, Ethiopia's Government have put measures in place to improve Ease of Doing Business (EoDB). It involves digitization, streamlining the flow of imports-exports, amendment/creation of new investment laws + plug and play. The ICT Park in Bole Lemi is the first of its kind and will do a lot to attract companies. It has serviced offices that are internet ready with generator, UPS and satellite. Some of the numerous factors which played a vital role in instituting India as an outsourcing destination are present in Ethiopia. They include languages and improving infrastructure.
Teseteo have a business account with Commercial Bank of Ethiopia (CBE) and are working with them, alongside the Jobs Creation Commission, to improve their FDI solutions. One initiative we have discussed is offering investors an account manager to fasttrack company formation with strong after-care too. CBE remain the most popular bank here but they need to streamline processes because there is a lot of paperwork and simple procedures take much longer than they should do. Thankfully, CBE are now hiring consultants to help them become a world class bank by 2025. There will be eleven main improvements in total such as mandate definition, corporate and functional strategy design, asset quality review, turnaround solutions, corporate governance and risk management. The new CBE HQ is a skyscraper under construction in Addis Ababa and upon completion it will be the tallest building in Ethiopia (46 floors). Other options include Zemen, Dashen and Bank of Oromia.
Ethio Telecom is well on the way to pivatisation. 40% will go to an outside company, 5% will be dedicated to Ethiopian citizens and 55% will remain in Government hands. The Communications Authority has announced new operators will get 10MHz of capacity in the 900MHz band and a further 20MHz in the 1,800MHz band. Companies will have to extend their network coverage to 25% of the population within 12 months of entering the market, 40% within 24 months, 55% within 36 months, 70% within 48 months, and 80% within 60 months. They must also cover 97% of the national territory in telecom services 15 years after launching activities. Telco providers will be required to provide free services to non-profit entities in the public interest and they will not be allowed to retail any mobile phones. Companies interested include Vodacom and Orange. A decision is expected early 2021.
Despite coronavirus and conflicts in the north - privatisation has gone full steam ahead since January. Connectivity Solutions company BringCom recently signed a new partnership with Ethio Telecom to complement and enhance its existing pan-African MPLS. The collaboration will increase connectivity routes in Ethiopia and strengthen innovative services such as SD-WAN and Edge Cloud. Infrastructure has been a bone of contention because Ethio Telecom argue they have spent billions on it already - so should have the opportunity to rent it out rather than give it away. Big names such as Helios Towers were interested in Ethiopia so they could build and then lease to service providers. It remains an ongoing discussion but the Communications Authority (ECA) will have final-say over disputes or issues like that. It will be interesting to see how future services improve (especially around customer service) for companies like Teseteo as privatisation takes hold.
Private sector news:
Marathon Motors is an official importer and distributor of Hyundai cars in Ethiopia. It is owned by previous Olympic athlete Haile Gebrselassie. Last year the company moved into manufacturing and opened a 10,000-a-year vehicle capacity assembly plant (Addis Ababa). Ethiopia produces around 10,000 commercial and other vehicles a year for its home market but continues to import far more than that. They are also making electric cars. Hyundai Chief Executive Won Hee Lee said the Korean firm was drawn by Ethiopia’s growth. “We have good opportunities in Ethiopia. We believe the economic growth will be faster than any other country in middle Africa,” he told reporters at an inauguration ceremony. An MoU regarding the assembly of parts was also signed between Germany's Volkswagen and the Ethiopian Investment Commission (EIC) last year - but not much has been reported since.
H&M are a well-known clothing-retail company with a strong presence in Ethiopia. Since they began operating from the country in 2013 they have created around 18,000 jobs. The business has a strong CSR/ESG agenda in place and believe their organisation continues to have a positive impact - contributing towards much needed economic growth. H&M have built long-term partnerships with local textile suppliers and pay fair wages with good career-progression to empower their garment workers. The company have also improved purchasing practices paving the way for a better industry nationwide - this includes collective bargaining agreements supported by responsible purchasing practices. H&M have a production office in Addis Ababa enabling them to regularly follow-up on sustainability standards. Other garment manufacturing companies here include PVH, Huajian, Hop Lun.
Isuzu are another automobile company with a strong presence in Ethiopia. They supply a range of products to the country - trucks in particular. “We've finalised preparations to open an assembly plant," said Taro Kunifusa, General Manger. "It's a huge market with great potential." Distributors in the country include Kaki and the National Motors Corporation.
Hop Lun are a Hong Kong-based garment manufacturing company installing machinery in the Bahir Dar Industrial Park. This site has 8 sheds spread over 75 hectares of land and is expected to create 6,000 jobs in the near future. An MoU (memorandum of understanding) was signed with the IPDC (Industrial Parks Development Corporation). Established in 1992, Hop Lun is the leading international fashion lingerie and swimwear company. Hop Lun prioritise sustainability and put a lot of emphasis on the environment, health & safety, worker engagement and wages/compensation. The company already employs close to 30,000 worldwide people and are committed to full transparency of salient issues related to CSR. Environment - continuously evaluating how they can become more energy efficient, cut greenhouse gas emissions, reduce waste, demonstrate water stewardship and design products for a circular economy. Health & safety - follow all relevant laws/regulations and create a strong culture to constantly look for improvements. Worker engagement - strive to be the employer of choice for people in the garment industry across all locations. Wages/compensation - provide wages above local minimum levels + reward performance.
Unilever are currently the leading supplier of food, home and personal care products in Ethiopia. Last year they opened a state-of-the-art Signal toothpaste factory in Dukem. It comes as an additional investment to soap, detergent and Knorr manufacturing plants. Unilever has a strong commitment to continue expanding across Ethiopia and create more job opportunities. The factory has a 100% female workforce which is a symbolic statement reflecting Unilever’s high commitment to drive diversity. Well-known Unilever brands in Ethiopia include Signal, Lifebuoy, OMO, Sunlight, Knorr, Geisha, Lux and Dove. The habit of brushing with toothpaste and a toothbrush ranks lowest in Ethiopia compared to other countries in the world. Tooth cavity is the most widespread global disease and over the years, it has become an issue prevalent in Ethiopia. Unilever hopes to change these statistics and the new plant will go a long way to improving the overall health/wellbeing of citizens.
Huajian Group are major Ethiopia-investors. During 2011 they established the International Shoes City creating 7,000+ jobs. 2015 saw them begin construction of the International Light Industrial City in Addis Ababa. This company manufacture shoes for the likes of Guess and CK (www.huajian.com). Earlier in the year Huajian donated over 100,000 face masks and other anti-epidemic supplies in Ethiopia towards the fight against COVID-19. The International Shoe City currently accounts for 50% of Ethiopias shoe exports (5 million pairs annually). The company offer good career progression and many floor-staff have been promoted to management positions. Employees are also given the opportunity to train in Huajian's China Headquarters and learn about the corporate culture/management skills. Benefits include a free shuttle bus service to and from the factory + free meals. The newer Huajian International Light Industrial City in Addis Ababa is a 126-hectare park and costs $480 million. It is expected to generate revenues of USD 2 billion and create 45,000+ jobs.
In Q4 of 2020, four new data centre companies secured land in the Ethio ICT Park. They have signed a memorandum of understanding (MoU) with the EIC to provide storage, infrastructure, cloud computing, webspace, domain hosting, virtual private centres and colocation services. Companies - Wingu.Africa (15,000Sqm) - East Africa’s first truly carrier and cloud neutral data centre group. World-class data & cloud services. Scutix (6,386Sqm) - a technology company using renewable energy to power containerized data centres. Their goal is to build a network of mobile data centres powered by local cost efficient, clean energy (i.e. solar). Redfox (4,000 Sqm) - global integrator of tech-based solutions built on products from the world’s top companies. Solutions installed, configured and supported by their team of highly certified experts and consultants. Raxio (1,000Sqm) - Ethiopia's 1st Enterprise Grade data centre. Services include cross connect, security, remote hands, shift & stack + customer spaces. All good news for companies considering the park.
Eagle Hills are an Abu Dhabi based real estate company who launched their first Addis Ababa project in 2018. La Gare (named after the derelict but recently restored Legehar train station) offers 4,000 residencies spanning a 360,000sqm site. It is an integrated community comprising residential, commercial, hospitality, retail and leisure facilities in a single, secure and exclusive setting surrounding a park. Mohamed Alabbar, Chairman of Eagle Hills, said: “As one of Africa’s hidden gems, Ethiopia is rich in history, culture and natural beauty. Our vision is to bring attention to such locations across the globe, revealing the charm and potential within them and inviting future residents and tourists to consider making new homes for themselves there." The development is also set to contribute to the local market by creating job and energizing the economy. La Gare’s retail district is placed amid elegant plazas and open spaces, with a focus on being pedestrian friendly. It will have a wide range of indoor and outdoor food/beverage choices and offer organised parking for visitors.
In this last quarter, Ethiopia have done a lot to improve EoDB and general working conditions for FDI/start-ups. The Government also issued new currency for denominations of 5 (coin format), 10 and 100 notes + a never seen before 200 bill. Over 3.6 billion ETB ($97 million) was been spent on printing alone and Ethiopia hope it will radically curb any illegal activities, corruption or contraband. Due to coronavirus - 2020 has been quiet for the world as a whole. It's been difficult to get anything done when the majority of people have been stuck at home or self isolating. That being said, Ethiopia are clearly still very active towards making the country an attractive place to do business. Privatisation of Ethio Telecom is still very much going ahead and job creation has become a top priority too. Hopefully as the health crisis improves so will the economy here, and we'll see it boom again. Keep an eye out for our 2020 Report (out December) to read more on these subjects.