Ethiopia’s Incentives To Investors Attracts Foreign Firms, Grows FDI

Written by Kevin Mwanza

Ethiopia, one of the fastest growing economies in the world, has seen an increase in foreign direct investment (FDI) as more foreign companies set up in the horn of Africa nation attracted by government incentives to investors in various sectors.

The country expects about $1.7 billion in FDI flows in 2016, surpassing East Africa’s leading economy, Kenya, that has projected about $1.1 billion this year.

Last year, Ethiopian government had predicted a record $1.5 billion in FDI, Financial Times reported.

The nation is reaping the fruits of providing an investor-friendly environment that has low wages, cheap power and tax holidays such as 100 percent tax exemptions on capital goods imports and income tax exemptions for nine years in the horticulture sector.

Some of the foreign companies that have set up there in recent years include Asian Paints, one of the largest paint manufacturers in India and Unilever, one of the global giants in manufacturing of consumer goods, which opened a factory in Dukem in June, targeting the South Sudan and Somalia markets, Fbc reported.

Others are Dangote Cement, the leading pan-African cement manufacturer, Chinese shoemaker, Huajian Group and US private equity firms, KKR and Blackstone have also set up operations in the nation.

The Ethiopian government has indicated that the increase in foreign companies in the country was responsible for boostint the nation’s FDI by about 20 percent, Geeska Afrika Online reported.

The nation’s horticulture industry is the second-fastest growing in the world, behind Lithuania. It is on the brink of overtaking regional giants like Kenya, whose flower companies have flocked into Ethiopia, mainly due to a friendly tax regime, The Star reported.

The cost of power is $0.06 per kWh, which is less than half the average cost of energy in many Sub-Saharan Africa nations.

The incentives to investors in the horticulture industry will help the nation become one of the biggest player on the global market, Berhamu Ludamo, the head of promotion and information services at the Ethiopian Horticulture Producers Exporters Association, said.

Ethiopia is also the leading textiles and leather manufacturer in Africa. It recently completed construction of the Hawassa Industrial Park at a cost of $250 million. The park was initially built primarily for the textiles industry.

The park will generate about $2 billion in annual exports by 2020, according to government estimates, reported. It will create about 83,000 jobs and 16 similar parks will be built across the nation.

The nation is on its way to becoming a key manufacturing and industrial hub on the continent.