The Ethiopian Economy is predominantly agrarian, with agricultural produce contributing 40% of gross domestic product (GDP), 90% of foreign currency earning and 85% employment. Manufacturing, mining, trade, tourism construction, services, etc. make up the remaining 60% of the GDP – industry 14% & service 46%.
According to the World Bank, Ethiopia has been growing at 10.6 percent for the last eight/nine years, which places Ethiopia among the top performing economies in Sub-Saharan Africa despite world economic meltdown and global financial crisis. All sectors contributed to this relatively high economic growth. Accordingly, agriculture, industry and services grew by an annual average of 9, 15 and 12.5 percents, respectively during the indicated period. Ethiopia’s economy is still young with a vast untapped resources and a range of investment opportunities. The areas, with most promising potential for investment in the country, are agriculture, agro-processing, textile and garment, leather and leather products, sugar, cement, chemical and pharmaceutical industry, tourism, mining and hydropower.
With its market oriented economic policy, a liberal investment law, one-stop-shop service delivery by the Ethiopian Investment Agency (the responsible body dealing with foreign investors) and with the number of opportunities stated below, it is the right time to invest in Ethiopia. The Embassy of the Federal Democratic Republic of Ethiopia in Canberra is always ready to render support for those who have interest to invest in Ethiopia.
Why Invest in Ethiopia
There are a number of reasons why potential investors would find it well worth their while to consider Ethiopia as a location for investment:
- Stable political Climate
- Free market economy
- Conductive macro economic policies and stable foreign exchange
- Excellent climate and fertile soils
- Huge local market of 70 million people
- Access to 23 African countries through the Common Market for Eastern and Southern Africa (COMESA)
- Preferential treatment to the European market under the ACP-EU Convention
- Beneficiary of market access to the USA through the African Growth and Opportunity Act (AGOA)
- Favorable export market status under the US Generalized System Preference (GSP)
- Huge domestic raw material base Abundant, easily trainable and inexpensive labour force
- Strategic location with proximity to the lucrative markets of the Middle East, Europe and Asia
- Attractive incentive packages
- Participation in the privatization opportunities
Agriculture is the main stay of Ethiopia’s economy providing employment to 85% of the population. It contributes about 45% of the GDP and 62% of total export. Ethiopia has the soil and climate for the production of a variety of food crops. About 146 types of crops are grown. The major ones are cereals, pulses and oil seed.
Coffee, cotton, tobacco, sugar, tea, spices, flowers, fruits, and vegetables are the main commercial cash crops grown in Ethiopia.
The livestock population of Ethiopia is one of the largest in the world comprising of 35 million cattle, 11.4 million sheep, 10 million goats and 38 million poultry.
The potential annual fresh water fish production is estimated at about 45,000 tons, of which only 20% are exploited at present.
Potential activities for investors in commercial forestry include the production and marketing of gum and incense; large-scale plantation for timber; the establishment of integrated forest based industries and the establishment of rubber plantations. Ethiopia is the largest honey producing country in Africa and the fourth largest beeswax producing country in the world. There are around 10 million bee colonies and over 800 honey source plants in the country.
Agro-ProcessingThis includes processing and preserving of meat products; integrated production, processing and preserving of fish and fish products; processing and preserving of fruits and vegetables; integrated production and processing of dairy products; manufacture of sugar, brewery and bottling of mineral water, etc.
The manufacturing sector accounts for about 7% of GDP and 5.3% of employment. It covers about 145 state owned and 643 private manufacturing industries of all sizes.
The industrial policy, based on the Agricultural Development Led Industrialization (ADLI) Strategy, aims for the gradual structural transformation of the economy from agricultural to industrial development, using the country’s human and natural resources.
Manufacturing opportunities for prospective investors exist in food and beverages, leather and leather products, textiles and garment, chemicals and paper, building materials and metallurgy, etc.
Ethiopia offers excellent opportunities for mineral prospecting and development. Ethiopia’s green stone belts offer one of the finest areas for gold mineralization anywhere in the world and already more than 500 metric tons of gold deposits have been identified by Government exploration efforts. In addition to gold, Ethiopia is blessed with good deposits of tantalum, platinum, nickel, potash, and soda ash.
Included in the construction and industrial minerals are marble, granite, limestone, clay, gypsum, gemstone, iron ore, coal, copper, silica, diatomite, bentonite, etc. With regard to fossil energy resources, there are significant opportunities for oil and natural gas in the four major sedimentary basins, namely the Ogaden, the Gambella, the Blue Nile and the southern Rift Valley.
Ethiopia has a unique historical and cultural heritage, magnificent scenery, a surprisingly cool climate, rich flora and fauna, important archaeological sites and hospitable people, which put it among the leading tourist destinations in Africa. The northern tourist circuit known as the “Historic Route” comprises the most important tourist sites in Ethiopia. The main attractions include: the ancient city of Axum, the medieval city of Lalibela, Al Negashi Mosque at Wukro, the medieval city of Gondar, and the island monasteries of Lake Tana. Other tourist attractions include: the walled city of Harar, a wide variety of wildlife and bird species (both endemic and common), and the magnificent Tis Issat Fall on the Blue Nile (Abay) River are some of the interesting sites.
Income Tax Holiday
Any income derived from an approved new manufacturing and agro-industry investment or investment made in agriculture shall be exempted from the payment of income tax for the periods ranging between 2 to 8 years depending upon the area of investment, the volume of export, and the location in which the investment is undertaken.
Customs Import Duty
100% exemption from the payment of import customs duties and other taxes levied on imports is granted to an investor to import all investment capital goods as well as spare parts worth up to 15% of the value of the imported investment capital goods.
Investment capital goods imported without the payment of import customs duties and other taxes levied on imports may be transferred to other investor enjoying similar privileges.
Exemptions from customs duties or other taxes levied on imports are granted for raw materials necessary for the production of export goods.
Exemption from Payment of Export Customs Duties
Ethiopian products and services destined for export are exempted from the payment of any export tax and other taxes levied on exports.
Loss Carried Forward
Business enterprises that suffer losses during the tax holiday period can carry forward such losses for half of the income tax exemption period following the expiry of the exemption period.