AFRICANGLOBE – Foreign direct investment into Ethiopia will reach a record $1.5bn this year, on the back of successful efforts by the fast-growing and populous African country to attract overseas manufacturing companies.
Only seven years ago, the country with a population of 94m drew only $108.5m in inward investments from overseas. But it has been growing at double-digit rates, thanks to increased relocation of factories, attracted by low wages, cheap power and supportive government policies.
“This year will be a record for foreign direct investment,” said Fitsum Arega, head of the country’s investment agency, up 25 per cent from last year’s $1.2bn.
The inflow of foreign investment marks a stark turnround from the 1980s, when the country was hit with a severe famine that made the eastern African country infamous for lack of development.
While several key sectors of the economy — including the much sought-after banking and telecoms — remain closed to outside investment, several industrial zones have seen investment in production facilities of textiles, leather and garments.
Mr. Fitsum said China was providing the largest number of investments, although by value, the biggest investors were Turkey and India. The country was also seeing investment from Europe and the US, he said.
Although Ethiopia is landlocked, power prices and labour costs are both extremely low, security is tight and state-owned Ethiopian Airlines runs the biggest global network of any African carrier.
“We are still making huge investments in electrical power, building a railway, and the government offers investors so much support,” said Mr Fitsum, adding it is still building industrial parks and offers tax breaks to foreign exporters that help lure much-needed dollars to the economy.
Ernst & Young, which has an office in the capital Addis Ababa, forecasts FDI into Ethiopia will average $1.5bn each year for the next three years and predicts the country will rank among Africa’s top four manufacturing hubs by 2025.
Zemedeneh Negatu, head of transaction advisory services at E&Y, said his team had seen “a big surge” in dealmaking since 2011, including from the US and Europe as well as China, Turkey and India.