Ethiopia

In-depth country-focused analysis on Ethiopia's economic, political and operational risk environment, complemented by detailed sector insight

Ethiopia

Our comprehensive assessment of Ethiopia's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Ethiopia, as well as the latest industry developments that could impact Ethiopia's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Ethiopia before your competitors.

Country Risk

Ethiopia Country Risk

BMI View:

  • Economic growth in Ethiopia will remain upbeat over the next 18 months despite adverse weather and social unrest presenting modest headwinds to growth. The government's commitment to the second phase of its Growth and Transformation Plan will see continued state infrastructure investment buoy growth.

  • Inflation in Ethiopia will reaccelerate over the remainder of 2016 and will remain elevated over 2017 as adverse weather likely raises food insecurity. In addition, continued high growth of money supply, as the central bank keeps policy loose, will drive non-food inflation over the next 18 months.

  • Ethiopia's fiscal balance will remain firmly in deficit over the coming quarters as the government continues to invest in improving its infrastructural backbone to promote economic diversification. That said, economic and manufacturing sector activity will increasingly support...

Ethiopia Operational Risk Coverage (5)

Ethiopia Operational Risk

BMI View:

BMI View: Investors face a high degree of threat from Ethiopia's internal crime environment, which reflects elevated crime rates and the low police force capability. Foreign investors and expatriates are likely to be targeted for criminal activities, from which businesses have limited protection due to the lack of an effective police force and high levels of endemic corruption. A growing security threat stems from the re-emergence of political violence and instability, which has the potential to spread throughout the country and disrupt business operations, discourage tourism and hinder infrastructural development. These threats are heightened by the regional instability in the Horn of Africa, the threat of interstate conflict and attacks from international terrorist groups. However, these risks are...

Ethiopia Operational Risk

BMI View:

BMI View: Ethiopia's burdensome and expensive trade procedures and the high risks of congestion and delays due to heavy reliance on few motorways and a single rail route significantly increase logistical costs for businesses. While fuel and electricity prices in Ethiopia are low, firms are vulnerable to power shortages due to the country's reliance on hydropower and poor transmission and distribution infrastructure. Businesses will face additional costs associated with a poor access to water resources and low internet speeds and penetration. Ethiopia receives a score of 30.6 out of 100 for Logistics Risk, ranking the country 29th out of 48 states in SSA.

The most significant logistical challenge for businesses in Ethiopia stems from its expensive and cumbersome trade procedures, a...

Ethiopia Operational Risk

BMI View:

BMI View: Ethiopia's large working-age population and low labour costs have attracted significant investor attention, particularly given the country's manufacturing potential. However, a lack of technical and advanced skills among the labour force, high labour turnover, low urbanisation and poor access to health care increases operational risks for businesses. Labour costs will therefore be heightened by the need to train employees and recruit foreign...

Ethiopia Operational Risk

BMI View:

BMI View: The main risks to Ethiopia's positive growth outlook include restricted access to credit for businesses, an over-reliance on government investment and threats to the agricultural sector, which dominates Ethiopian exports. Ethiopia's government is strongly committed to improving the operating environment to attract foreign investment, which will provide investors with more favourable incentives than in neighbouring countries, especially for the manufacturing sector. Currently, businesses face considerable operational risks, which are heightened by corruption. Ethiopia receives a score of 33.5 out of 100 for Trade and Investment Risk, ranking 26th out of 48 countries in...

Ethiopia Operational Risk

BMI View:

BMI View: Ethiopia is one of the most attractive markets in Sub-Saharan Africa on account of its promising economic outlook, large pool of available labour and abundant natural resources. Nonetheless, the country is currently operating well below capacity on account of an underdeveloped internal transport network, poor infrastructure, limited access to credit, over-reliance on foreign aid, a largely unskilled labour pool, widening regional and income disparities and a heightened political risk profile. In addition, the country remains exposed to regional insecurity in the Horn of Africa, aggressive rebel factions and growing inter-ethnic tensions that have been met with a...

Ethiopia Industry Coverage (7)

Agribusiness

Ethiopia Agribusiness

BMI View:

BMI View: Production prospects look broadly favourable for Ethiopian agriculture over the long term. This will largely be due to more investment in the sector, along with higher incomes contributing to consumption growth. We believe the sugar sector has the most potential, as investments in new sugar refineries will make sugar one of the few reliable agricultural exports over the forecast period. In terms of grains, the country's food security will remain in a precarious situation due to recent droughts linked to El Nino. Moreover, even with recent multinational interest in the country's farmland, Ethiopia is most likely to remain a...

Autos

Ethiopia Autos

BMI View:

BMI View: Ethiopia will remain one of the smallest new vehicle markets in the SSA region to 2020, limited by high taxes and weak consumer spending power. The growth of domestic assembly will alleviate some pressure but not until the latter years of the forecast period.

Passenger Car Sales
(2014-2020)
f = BMI forecast. Source: Renault

Key Views

  • The new vehicle market will contract in 2016 and 2017 as prohibitively high vehicle import taxes burden consumers, who already...

Infrastructure

Ethiopia Infrastructure

BMI View:

BMI View: Over our 10-year forecast 2016-2025, Ethiopia's construction industry will record the highest growth in Sub-Saharan Africa as the government directs key expenditure to infrastructure development to facilitate economic growth and improve the country's attractiveness as a business destination in the region. China's large market share and a reported lack of transparency in the tendering process remain chief deterrents to operating in the country.

Forecast And Industry Developments

  • We 18.5% real growth over 2016 as investments flows into...

Insurance

Ethiopia Insurance

BMI View:

BMI View: The insurance market in Ethiopia is underdeveloped on both a regional and global basis. With foreign investors barred from the investment sector, development in the market has been reliant upon domestic providers,which frequently lack the capital and/or expertise to expand. Distribution channels are also narrow while products ranges remain heavily reliant upon basic lines. That being said, the market does offer substantial growth potential. Ethiopia is a highly populous countrythatis experiencing rapid urbanisation and economic growth, as well as gradual improvements to life expectancy, and these factors will all support expansion of the life and non-life insurance sectors over the longer term.

...
Headline Insurance Forecasts (Ethiopia 2013-2020)

Power

Ethiopia Power

BMI View:

BMI View: Ethiopia's state-driven investment model raises the likelihood of successful project delivery - particularly hydropower megaprojects that will dominate our forecast to 2025. At this stage, our forecasts are conservative based on the huge scale of the country's hydropower expansion plans and concerns that disputes over water rights could lead to delay, but we do expect to upgrade the forecast as projects move into the construction phase owing to robust government support.

...
Headline Power Forecasts (Ethiopia 2015-2021)

Telecommunications

Ethiopia Telecommunications

BMI View:

BMI View: The Q1 2016 East Africa report analyses the latest industry, regulatory and macroeconomic developments within the telecommunications markets in Burundi, Ethiopia, Malawi, Rwanda, South Sudan and Sudan. These six markets are characterised by several challenging business dynamics, including low consumer spending power, high infrastructure costs, large rural populations with poor access and, some cases, politically volatile environments. Limited competition in several of these markets, along with unfavourable fiscal regimes, creates considerable downside risks to market growth. 3G and 4G subscriber penetration rates, as well as their share of total mobile subscriber bases, are expected to remain among the lowest in the world for the foreseeable future.

3G And 4G Subscribers to Increase Share of Total Mobile Market
East Africa Mobile Market Forecasts
...

Ethiopia Telecommunications

BMI View:

BMI View: We maintain a largely subdued outlook for the three markets surveyed in this report: Eritrea, Ethiopia and Djibouti. All three of these markets display growth potential, but market development dynamics have been hampered by poor government policies and state-owned monopolies that have been unable to successfully develop the markets. Djibouti, Ethiopia and Eritrea share certain common characteristics including low penetration rates, a low rate of technological uptake, government-backed sole-services providers and the absence of healthy competition necessary to drive the market forward. Ethiopia, the largest of the three, has witnessed the government actively invest into network infrastructure upgrades to...

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