Feleg Tsegaye is an American-born Ethiopian who previously worked in IT at the US Federal Reserve. He recently moved to Addis to found ArifMobile, a phone and sim card rental service for tourists, and knows these challenges well.
“People aren’t always sure of the laws. They seem fluid and changing depending on who you talk to,” he says of Ethiopia’s regulatory environment.
For example, only after multiple trips to the Ministry of Business to register his company did he discover business names cannot be adjectives.
Then, it took months to get an internet connection in his office thanks to notoriously slow state-owned Ethio Telecom.
In the World Economic Form’s Global Competitiveness Report 2012-2013, Ethiopia ranks almost dead last.
Of 144 countries, it’s ranked below 130 in technological readiness, competitiveness, and access to financial services and loans.
Perhaps one of the reasons for such a dismal competitive environment is when it comes to technology, the government is often both the biggest competitor and biggest client.
Most large companies are either state-owned, or partially state-owned, and there is a certain degree of distrust between private and public sectors resulting in the government taking a very security-conscious approach, according to Mr Tsegaye.
“Government is the prime consumer for services in IT, but they are frustrated, in part because their policies are inhibiting private sector growth,” he says.
Adam Abate, founder of Apposit, an information technology services company based in Addis Ababa, says that the government is by far his biggest client.
“We looked at private sector for a while and realised it’s not worth it,” he says. “Collecting, digitising, and maintaining information for consumers at scale is not easy.”
Mr Abate also notes the difficulties posed by the telecoms monopoly.
“It’s good for investing in infrastructure and for the future, but from an individual or business point of view, trying to get services out of them is a nightmare.”
All told, Ethiopia has a weak ecosystem for start-ups, says Mr Abate, making it difficult for young, inexperienced entrepreneurs with little capital. The odds are stacked against them.
Yet, he says, for those who manage, there is enormous opportunity.
“Infrastructure is … expanding at a rapid rate, and the most obvious opportunity in Ethiopia is that there’s still very little here,” he explains.
“Any business you can think of, you can start.”
Start at the Beginning
One as yet unnamed startup is trying to develop an appstore specifically for Ethiopia that will charge users via premium SMS services, which will hopefully open up a space for local app developers.
Another company, Utopia, is developing an Android app for tourists that can be used offline.
Mekina, one of iceaddis‘ most successful startups, has built an online marketplace for Ethiopians to buy, sell, and rent cars locally, a big coup given the government levies five different taxes for importing vehicles.
Still, like the current market itself, these efforts are small.
“People just aren’t consuming things online. They aren’t connected, and those who are, are just using Facebook,” says iceaddis’s Markos Lemma.
Yet entrepreneurs remain hopeful things will change.
The government is planning to build a $250 million technology park, Ethio ICT, although critics worry it’s another of Africa’s pipe-dream tech cities.
“There is high potential for techies to develop applications and technical solutions,” says Mr Lemma. “But we need more support, resources, knowledge.” A tech park probably won’t offer that.
With 85 million Ethiopians slowly becoming connected, if the government loosens its grip and becomes serious about supporting entrepreneurship, an Ethiopian tech boom may be on the horizon.
Even if internet penetration increases to cover even just 2-3% of the population, Mr Lemma says, “opportunities to improve business will improve greatly.”
By: Jonathan Kalan