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A Look Beyond the Boom Despite the many complications associated with manufacturing in Ethiopia, the future certainly looks bright for the country dubbed “the China of Africa” By Ina Sondermann, Associate Director, Investigations and Disputes, Kroll his year will be the first full year of the Ethiopian Government’s Growth and Transformation Plan II (GTP II), its second five-year plan ultimately aimed at making Ethiopia a middle-income country by 2025. One of GTP II’s key focuses is manufacturing which has already attracted significant foreign investment into Ethiopia. Combined with internationally impressive growth figures, does GTP II translate into booming opportunities for foreign investors? Perhaps, but successful investment execution in Ethiopia calls for a look beyond the headlines. Ethiopia’s annual GDP growth rate - estimates range from seven to 12 percent - is one of the most tangible indicators of a booming economy. Foreign direct investment figures have largely followed this trend. According to the United Nations Conference on Trade and Development, Ethiopia’s inward FDI totalled US$1.2 billion in 2014, up from US$953 million in the previous year. Manufacturing in particular has benefitted. It was the top recipient over the past six years, and has accounted for 76 percent of total investment for operational projects, as reported by the World Bank. The majority of
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manufacturing FDI has come from Turkey, China and India; with the textile, footwear, and food and beverage industries specifically targeted.
Weighing up the positives
A major draw for foreign investment in Ethiopia is comparatively low labour costs and a large workforce, although some investors have noted the relative lack of skilled workers and lower levels of productivity. Wages in manufacturing for garments and leather products for instance are significantly lower in Ethiopia than in other East African markets, as well as Asia. Market size and potential in Ethiopia - Africa’s second-most populous country with a population of close-to 100 million people - is considerable. Unionisation rates are currently low in Ethiopia but labour and local community relations will require careful planning for the future as part of an investment. Against the positives, a lack of infrastructure is frequently cited as a key constraint for foreign investment in Ethiopia. Although the Government continues to invest heavily in large-scale infrastructure and energy projects, logistics and telecommunications remain
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