MFA: Strategic opportunities for foreign exporters
In the case of Ethiopia, the largest contributor to GDP and source of foreign currency are services, especially transportation (Ethiopian Airlines) and tourism. The tourism industry was very badly affected by the epidemic, only a minimum number of visitors came to the country in the high season. Ethiopian Airlines, the largest and most successful carrier in Africa, was able to adapt to the new situation and significantly strengthened cargo transportation (according to weekly turnover, it became one of the TOP 10 airlines in the world).
From the point of view of agriculture, which accounts for up to 84% of exports, it was initially a good year due to abundant rains, an increase in cultivated area and a higher use of fertilizers, however, the subsequent invasion of locusts and disruption of the harvest due to armed conflicts returned yields to the level of previous years. The country’s economy is affected by significant inflationary pressures caused by the reduction of government fuel subsidies, the gradual devaluation of the Ethiopian birr and overall political uncertainty.
Economists are worried about the loss of confidence of foreign investors due to the political situation in the country and the gradual reassessment and delay of large privatization projects. The new investment rules introduced by the Ethiopian Investment Commission expand the sectors in which foreigners can invest, but do not include new stimulus tools.
The Ethiopian government released financial packages in response to the affected economy. USD 140 million went to support measures against covid-19 and another USD 400 million went to the health sector in general. In order to prevent job losses in industry, construction and services, the government released 305 million USD, the government distributed 1 billion USD to small entrepreneurs, small and medium enterprises and large companies, and another 540 million USD was set aside to support food and WASH programs. In total, the amount of financial packages rose to 2.85% of GDP.
At the same time, the Ethiopian government undertook fiscal measures (significant tax breaks) and monetary measures (the Central Bank of Ethiopia released 435 million USD to private banks for debt restructuring and bankruptcy prevention).
The Government’s Growth and Transformation Plan II ended in the 2019/2020 financial year. During 2020, the government prepared a new economic plan, “Ethiopia: An African Beacon of Prosperity”, the details of which it published in December 2020. In addition to macroeconomic consolidation goals, priorities are focused on export diversification, better integration into the global value chain, and structural change of the Ethiopian economy ( strengthening the role of the private sector).
The government intends to mobilize domestic resources and reduce dependence on foreign inputs. The plan focuses on sustainable urbanization, the business environment, the investment climate and the environment.
Transport industry and infrastructure
According to allcountrylist, the potential for Czech manufacturers is especially in Ethiopian domestic air transport. Ethiopia is the second most populous country in Africa and the importance of domestic routes is growing. There is an opportunity to participate in the construction and upgrade of existing regional airports and the supply of small aircraft.
Part of the ten-year plan of the Ministry of Transport of Ethiopia is also an increase in road safety and compliance with higher environmental standards. Opportunities exist thanks to plans to significantly expand the public transport network, both in larger cities and between individual regions.
Mining, mining and oil industry
Further development of mining, its modernization, efficient use of minerals, search for export opportunities and support of domestic demand is, according to the Ministry of Mines and Petroleum of Ethiopia, a government priority. The mining sector also plays an important role in the newly released ten-year economic plan. One of the goals is to increase mineral export income up to the level of USD 17 billion in 2030. Favorable tax packages and special customs conditions for importing machinery etc. are prepared for investors.
The government is also trying to support the mining sector through more intensive cooperation with academia. Priorities include strengthening the extraction of materials that can be further used in agriculture (e.g. potash) and construction. Ethiopia has, among other things, quality sources of glass sand, but drinking glass and window panes are imported. As a follow-up to mining and in connection with the development of the beverage industry and construction, opportunities are opening up for the supply of technology for the production of bottles and industrial glass.
In 2017, Ethiopia had an installed electricity generation capacity of GW, ranking it third in Africa. Ethiopia is also one of the few African countries that export electricity. According to national plans, Ethiopia should continue to strengthen its role as a regional energy center. The demand for electricity is also rising due to the development of industrial parks and a growing population. The potential of hydropower plants is 45 GW and geothermal energy 7 GW, over 80% is unused. The country has an ambitious “National Electrification Program” to make electricity available to people living off the main grid in rural areas by 2025. There is potential for the supply of generators, transformers and other components for transmission networks.
However, competition from both Asia and Europe is intense, most companies importing these products have a permanent presence in Ethiopia. In the case of large government tenders for the supply of transmission systems, a turnkey supply is usually requested. More than 90% of Ethiopia’s electricity comes from hydropower, with wind power the second largest source. In addition to large hydropower projects, there is also growing investment in smaller hydroelectric and solar power plants that would complement the national energy structure without the need to connect to the national electricity grid and that would supply remote communities.
Bilateral cooperation in the field of defense industry has almost a hundred years of successful tradition, and the reputation of Czech companies in the country is very positive. Despite the complexity of current political developments, Ethiopia is a security stabilizing element in the Horn of Africa and the de facto military hegemon of the region. The need to modernize the army and purchase the latest technology was only underlined by the military operations in the north of the country.
Military expenditures occupy an important place in the state budget, so their financing is ensured. The opportunity for cooperation is mainly in military aviation, in the renovation and upgrading of previously delivered equipment of Eastern provenance, in aircraft guidance systems and air traffic monitoring, in radar protection of airports and in radio communication, in the supply of training centers and simulators.
Healthcare and pharmaceutical industry
The poor state of the Ethiopian health system is long-standing. Nevertheless, it was highlighted and publicly revealed by the covid-19 epidemic. There are no medical gas production plants in the country, hospitals do not have stationary medical oxygen generators, and there are no usable mobile oxygen units. Ethiopian healthcare is largely state-owned, and the Ministry of Health will try to equip at least major hospitals in the regions with oxygen generators and, preferably, comprehensive gas distribution systems. Oxygen is currently a priority for Ethiopian healthcare.
Ethiopia has a bad experience of receiving low quality goods from some East Asian suppliers and prefers higher quality for some more technologically complex medical devices. There is a lack of at least standard equipped intensive care units and laboratory equipment in the country. In addition to healthcare, the pharmaceutical industry is also among the priorities of domestic development. Favorable customs and tax conditions are prepared for investors and equipment suppliers.
Agricultural and food industry
There is a demand for tractors, field machines, dryers, cleaners and sorters of agricultural crops. Processing units aimed at food production, beverage production, textile industry and leather processing industry up to final products will be needed. Specifically, there is a demand for chicken farms, slaughtering technology and equipment, fruit beverage production lines, textile machinery, leather technology and leather processing machinery. Related to this industry is the demand for packaging technology, not only for the domestic market, but one that will enable export, including glass technology especially for the production of bottles that Ethiopia buys.
A weakness of Ethiopia’s agricultural and downstream processing industry is that local quality raw materials are not processed in the country to meet EU standards. They are therefore re-exported to their final destinations via, for example, India and other countries, where they are refined and reprocessed. This robs Ethiopia of its value added profit, something the government is working hard to change. The agro-industrial complexes being built are to be mammoth production zones into which raw agricultural inputs will flow and finished products with higher added value will emerge, including textiles, footwear, food semi-finished products and beverages.