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

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  • Policy continuity has characterised the rule of Prime Minister Hailemariam Desalegn, after taking over from the late Meles Zenawi in 2012, and this will remain the case following the 2015 general election landslide victory. The governing Ethiopian People's Revolutionary Democratic Front will retain control, but ethno-religious divisions and social unrest will become an increasing source of tension over the coming years.

  • Ethiopia will be among the fastest growing economies in Sub-Saharan Africa over the next few years, but growth will be slower than the double-digit rates experienced over the last decade. Heavy public investment into infrastructure and agriculture combined with an increasingly buoyant consumer segment will be the main drivers.

  • Inflation in Ethiopia has moderated in recent years since reaching a peak of 40.6% year-on-year (y-o-y) in August 2011; however we expect...

Ethiopia Operational Risk Coverage (5)

Ethiopia Operational Risk

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BMI View: Investors face a high degree of threat from Ethiopia's internal crime environment, which reflects both elevated crime rates and the low police force capability. Foreign investors and expatriates are also 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 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 and the significant threat of interstate conflict and attacks from international terrorist groups. However, these risks are partially counterbalanced...

Ethiopia Operational Risk

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BMI View: Ethiopia's burdensome and expensive trade procedures and the high risks of congestion and delay 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, owing to lengthy transport lead times and inefficient...

Ethiopia Operational Risk

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BMI View: Ethiopia's large working age population and low labour costs has attracted significant investor attention, particularly for its manufacturing potential. However, a lack of technical and advanced skills amongst the labour force, high employee rotation and poor access to health care increases operational risks for businesses. Labour costs will therefore be heightened by the need train employees, recruit foreign workers and lower productivity due to absenteeism. Ethiopia receives a score of 43.3 out of 100 for Labour Market Risk, ranking the country 15 thout of 48 states in Sub-Saharan Africa.

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Ethiopia Operational Risk

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BMI View: The main risks to Ethiopia's positive growth outlook include the restricted access to credit for businesses as the banking sector remains under state control, an overreliance on government investment and risks for 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 37.2 out of 100 for Trade and Investment Risk, ranking 18th out of 48 countries in SSA.

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Investors Still Facing Considerable Trade Barriers
Ethiopia & SSA Regional Average - Trade & Investment Risk

Ethiopia Operational Risk

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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 a crumbling internal transport network, poor infrastructure, restricted access to credit, over-reliance on government investment and foreign aid, a largely unskilled labour pool, pervasive corruption and a heightened political risk profile. In addition, there has been a considerable increase in security risks in due to regional insecurity in the Horn of Africa, aggressive rebel factions, growing terrorism threats and a concomitant heavy-handed crackdown on dissent and opposition-led insurgencies. Investors also face a high degree of threat from Ethiopia's internal crime and security environment, which reflects both elevated...

Ethiopia Industry Coverage (3)

Agribusiness

Ethiopia Agribusiness

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BMI View: Production prospects look broadly favourable for the Ethiopian agriculture sector 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...

Infrastructure

Ethiopia Infrastructure

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BMI View : We have adjusted our forecasts upwards for 2016 to 18.5% real growth following revisions to the historical data showing strong activity between 2011 and 2014. Primary drivers of growth up to 2025 will include expansion in the non-residential sector, supported by an improved transport infrastructure network, and developments in electricity generation capacity. Investors may be discouraged by China's dominance of the competitive landscape and the lack of transparency in the tendering process.

Ethiopia's construction sector is forecasted to grow at 13.6% y-o-y in 2016 before moderating over our 10-year forecast. The main drivers of growth will be developments in critical infrastructure and expansion in the non-...

Telecommunications

Ethiopia Telecommunications

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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
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