Ethiopia, Africa\u2019s second-most-populous country and the continent\u2019s fastest growing economy, is inviting big business to cash in.<\/p>\n
For so long a closed shop, the Horn of Africa nation on Tuesday invited foreign investors to buy stakes in state-owned telecoms, shipping, power generation and aviation companies, a rare opportunity to access such a large market. The bonanza will extend to railways, sugar mills and industrial parks, with the top brass of the ruling party embarking on long-awaited market reforms.<\/p>\n
The move continues a breakneck push led by new Prime Minister Abiy Ahmed, who took office two months ago. As well as green-lighting the liberalization of state companies, he\u2019s taken steps to reduce the role of the military in the economy, agreed to the terms of a long-disputed peace deal with neighboring Eritrea, and lifted a state of emergency that followed the snap resignation of his predecessor, Hailemariam Desalegn.<\/p>\n
\u201cEthiopia\u2019s market size speaks for itself,\u201d Jacques Nel, an analyst at NKC Africa Economics, said by phone from Paarl, South Africa. \u201cAnd the sentiment surrounding the country\u2019s political environment has improved considerably with the appointment of Abiy. They want to signal to the world that this is a new Ethiopia.\u201d<\/p>\n
Market Liberalization<\/strong><\/p>\n It\u2019s a process started by Hailemariam, who proposed partial market liberalization to the ruling coalition\u2019s 36-member politburo last year. Most of Ethiopia\u2019s private businesses were nationalized in the 1980s under the former Communist Derg regime. That government was toppled by the Ethiopian People\u2019s Revolutionary Democratic Front, a party with Marxist roots that has shifted toward a market-based economy since it came to power in 1991.<\/p>\n Reforms introduced by the EPRDF along with investment in infrastructure projects like the $6.4 billion Grand Ethiopian Renaissance Dam helped the economy grow faster than any other in Africa over the past decade. It\u2019s expected to do that again this year, according to the IMF, which forecasts growth of 8.5%.<\/p>\n \u201cPoised with new dynamic leadership, economic liberalization, mega infrastructure projects, near-double digit growth, and attractive demographics Ethiopia may well be Africa\u2019s sleeping giant for foreign investors,\u201d Philippe de Pontet, a senior fellow at DaMina Advisors, said in a note.<\/p>\n Investor Deterrents<\/strong><\/p>\n Deterrents to potential investors lie in the long-running threat that led to Hailemariam\u2019s resignation: sporadic unrest against authoritarian rule and inter-communal violence. And the government has made clear that investors won\u2019t be able to take a majority stake, leaving them open to the vagaries of the state, while the banking sector remains firmly shut. At about $80 billion, the economy is the second-largest in sub-Saharan Africa not to have a stock exchange after Angola.<\/p>\n \u201cIt\u2019s still a difficult place to do business in,\u201d Nel said. \u201cForeign investors won\u2019t be able to independently make their decisions – they\u2019ll have to always consider the government\u2019s longer term development strategies. There won\u2019t be that much freedom.\u201d<\/p>\n As for the companies made available for investment, Ethiopian Telecommunications Corp is the most intriguing. The business dominates a phone market that\u2019s long been coveted by MTN Group Ltd and Vodacom Group Ltd, Africa\u2019s biggest wireless operators by sales and value respectively.<\/p>\n With about 60 million mobile and fixed-line subscribers, EthioTelecom is roughly the size of MTN\u2019s unit in Nigeria, its biggest market. However, it\u2019s market penetration is far lower, analysts say.<\/p>\n \u2018Attractive Market\u2019<\/strong><\/p>\n \u201cEthiopia is an attractive telecoms market and both MTN and Vodacom are likely to consider entering if a viable opportunity opens up,\u201d Peter Takaendesa, a money manager at Mergence Investment Managers in Cape Town, said by phone.<\/p>\n Ethiopian Airlines Enterprise is by far the most successful carrier on the continent, turning a profit and linking almost 70 global cities outside Africa with about 60 across the continent from its hub in Addis Ababa, Ethiopia\u2019s capital.<\/p>\n However, unlike fellow state-owned South African Airways, it\u2019s not in desperate need of investment. The airline generates business from Ethiopia\u2019s burgeoning flower-export business as well as from travelers, and plans to buy new regional jets in the next month or so, Chief Executive Officer Tewolde GebreMariam said last month.<\/p>\n Discussing the policy shift after his own company was put up for part-sale, Ethiopian Logistics & Shipping Services Enterprise CEO Roba Megerssa Akawak said the reforms are intended to \u201creally serve the economy.\u201d<\/p>\n \u201cI see it as an opportunity,\u201d he said. \u201cFor us to be competitive in the global market for transport logistics services, efficiency can only be achieved through introducing best practices, management practices, systems and facilities.\u201d<\/p>\n
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