The best Africa market advice and guidance is the one you get from those doing business on the ground right now. You simply can’t get this information on the Internet often enough and this is why I regular share such insights here with you.
During my recent visit to London I had again the opportunity to communicate with a couple of people who had African business insights to share – today let’s have a closer look at doing business in Ethiopia.
As you may know Ethiopia is Africa’s fastest growing non-oil producing country and it pursues a very ambitious and assertive growth and investment strategy, so much so that you will regularly find related local media coverage in this regard breaking down what the government’s set million Dollar amount was for a particular industry and if that target has been met.
It is for this reason that Ethiopia has become one of Africa’s most talked about investment destinations, but there are also several reports about the challenges one will face to implement a business plan on the ground.
I had the chance to sit down with a couple of people trying to start a business in Ethiopia right now and they shared their experiences and insights.
First of all, I was told how Ethiopia is buzzing with entrepreneurship , especially among the youth. “It is obvious across all social classes,” I was told. “Even the poorest in Addis are trying to make it work. They start by collecting rubbish and selling it, then they move up the ladder, at one point they become taxi drivers or they try to start some other business. And they are so fast.”
Overall however my colleagues confirmed what others have been saying before them. Starting a business in Ethiopia is no undertaking for the faint hearted, in fact you need so much patience and perseverance to get your business license that many simply give up – including Ethiopians coming from abroad. “You may have made calculations summarizing how much money you need to survive on until your business starts and how much you will need to invest in certain products or machinery. Be prepared to multiply that amount.”
A 2014 World Bank report about Ethiopia’s competitiveness as a business destination confirms something along those lines, it states: “Reducing start-up capital for enterprises may also have an immediate impact on facilitating greater firm entry into the formal sector. “
And it is not just the start-up capital that proves to be a major obstacle but the time it takes to get things to progress. Above all you need a very patient and determined mindset, as my colleagues let me know: “There are so many offices you need to visit for the registration process, and only if you return regularly and they get to know you and your business idea, are they really becoming supportive. That’s just how it is. Opening a business in Ethiopia takes so much longer, and everything is so much more expensive. You will need money, perseverance, and patience to see you through – but when you do it is worth it because there is so much room to do things and to succeed”
Lars Christian Moller, Lead Economist at the World Bank shares the optimism for doing business in Ethiopia, he says in a 2014 report: “Ethiopia does not have to look far for inspiration, it can replicate its own successes to boost exports. If we look at the flower industry, it grew from one single firm 14 years ago to about 100 firms today, earning $200 million per year from exports and employing an estimated 50,000 people.”
So the opportunity is there, but a business license which you can get in Rwanda in 1-2 days – the only place in mainland Africa where you can get a business registration as fast as in Great Britain – and which should actually only take 15 days to be issued in Ethiopia, can in reality take several months depending on your business area (and whom you know to help you get faster through the process, I guess).
One strategy that works in Ethiopia with added advantage for you is if you are producing for export and that coupled with agriculture is currently a powerful combination in Ethiopia’s current business climate. The government is keen to increase the export of goods and this is being visibly promoted and supported. But even here, some challenges remain. I thought I share these interesting recommendations from the World Bank Report with you, it gives you a head up of what may come or how to approach your export business. Here are a few tips and examples:
More than ‘what’ is being exported, it is the ‘how’ that is hindering potential, the report notes. Here are some recommendations that could help unleash Ethiopia’s export potential or increase your business success if you think among the same lines for any industry.
“Coffee: If Ethiopia exported more wet-processed green beans instead of sundried, it could earn a significant mark-up. Roasting coffee would also considerably increase its value.
Cut Flowers: Using higher quality packaging dramatically increases prices. Further value could be added with better management of the freight and cold chain.
Live Animals: Processed meat is more lucrative (while retaining hides and skins for the leather industry). However, more needs to be done to meet international standards.
Branding quality products would better enable Ethiopia to earn premium income. Examples include coffee from Yirgachefe, Harar and Sidamo, or Humera sesame seeds.”
Now, if you are ready to do business in Ethiopia, be prepared for a long distance run, and you can potentially become very successful.
And as always, we are grateful for any details and experiences you can share with our Africa Business JumpStart community in regard to doing business in Ethiopia. Take it away!
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Thank you for sharing these insights about doing business in Ethiopia Harnet. Great advice as always and this has been my experience as well with entrepreneurs that have current businesses too. I’d like to add that there are huge opportunities to work with current entrepreneurs and businesses to expand their current market segment from Addis, etc. to that in Europe and in America. I am currently working on that with a team of existing entrepreneurs already doing business in Addis and a few people in Nairobi. Many overlook the current success of existing small businesses and then proposing to them how they can expand to export markets that don’t currently exist for their products — especially through intellectual property. Once such market idea is growing the agricultural market for sweet potatoes, honey, cocoa. A collaborative approach is the only way with establishment of contacts in export nation countries to launch food products. We don’t export the agricultural product initially but we all develop one or many products for production in the export nation and the trademarked product royalties are shared across the board. Mama Fresh is one example of this approach of foreign investors growing the market in Addis with a $2 million US dollar investment earlier in 2014 to help them expand and export their bread (injera) products in addition to creating more for domestic production. There is room for more competition in this arena and I plan to enter it as well with new bread products once I find a small established partner willing to take on this challenge. The development process is also shared as well and you can’t buy Research & Development these days. We’ve created our own synergies with R&D and production quality. A virtual win in the real world! Branding ties it all together and that makes a lot of people look at how can this be done in such a short period of time. The advantages are obvious. More later…..a Networml model… your portal to the world.