Economic Opportunities in Ethiopia

With an average GDP growth of 11% during the 2005-09 period, Ethiopia is Africa’s fastest-growing non-oil economy. It is projected to grow at double digits in coming years, and the country needs to add power capacity at a commensurate pace if it has to realise its growth potential. That offers many business opportunities for Indian power sector companies.

 According to estimates, Ethiopia has the potential to generate 45,000 MW from hydro resources alone. Ethiopia is the source of eight river basins. The Nile, the longest river in the world, gets about 85% of its waters from the Blue Nile which originates from Ethiopia. Almost all the rivers in the country are suitable for hydro power generation.

Besides, it also has the potential to generate over 10,000 MW from wind and 5,000 MW from geothermal resources. It also has significant potential in coal and natural gas power generation. Ethiopia opened the power sector

for private participation in 2003. However, its generation potential remains largely untapped due to the low demand of electricity in the country. For example, the country has so far harnessed just 2,000 MW of its hydro potential.

 Ethiopia has borders with five countries—Sudan, Kenya, Eretria, Somalia and Djibouti—and has the potential to be a major exporter of electricity in the region.

Traditionally, Ethiopia has been exporting raw materials. But in a recent change of strategy, it is focusing on developing the manufacturing sector in a bid to diversify its export basket and generate employment.

Ethiopia has been running huge trade deficits due to the small size of its export basket—which includes products like gold, coffee, oil seeds, livestock and leather products –on the one hand and its heavy dependence on imports for crude oil, transport equipment and engineering goods, on the other. Domestically, the country is beset with a high unemployment rate, which is officially at 30%.

But now the country is preparing to expand its industrial base. That calls for commensurate investment in the power sector. The Sub-Saharan country is looking to India for investment.

Indian power sector companies like NTPC, NHPC and Powergrid are well equipped to tap business opportunities emerging in Ethiopia.

Ethiopia’s installed generation capacity is expected to go up to 10,000 MW by 2015. Of this, at least 7,000 MW should be based on hydro sources and the rest on renewable sources.

Foreign investments in Ethiopia have the protection of World Bank Multilateral Investment Guarantee Agency (MIGA). Investors are allowed to repatriate profits and dividends from investment in Ethiopia. The country also offers tax sops to attract investment in its power sector….