In Ethiopia, Government Slowly Eases Off Control

In Ethiopia, Government Slowly Eases Off Control

When global drinks giant Diageo bought a government-owned brewery in Ethiopia, it joined a list of companies seeking a foothold in Africa’s second most-populous nation.

Once run by communists , Ethiopia now has an emerging middle class after a decade of double-digit growth. But the country, which until now relied on the government to run its economy, has seen growth rates slip to 7-to-8 percent, short of the level needed for its goal of middle-income status by 2025, according to a Reuters report in GlobalPost.

When you are starting from a very low base with a lot of donor support, it is easy enough to grow in a strong, robust way,” said Razia Khan, head of Africa research for Standard Chartered bank. “As the economy matures … it is going to become a lot more difficult.”

Opening up the economy, as many businesses at home and abroad want, could draw in new investment but may also loosen the controls that can be exerted by a government made up of ethnic and regional parties that has carefully managed development and kept a lid on rivalries.

That is the dilemma for Prime Minister Hailemariam Desalegn and his cabinet, the report said.

Asked if Ethiopia could open up its mobile network or banks – prime targets for foreign investors – Foreign Affairs Minister Tedros Adhanom told Reuters, “We are not ready now.”

Moving too slowly has not deterred investors, the report said.

“I was in India recently and the thing that caught me by surprise (when talking) to foreign investors (was) the country that kept being mentioned was Ethiopia,” Kahn said.

Diageo is not alone in seeing the potential. Heineken of Holland and France’s BGI Castel have snapped up breweries, which were among first state companies to be sold off.

The Ethiopian Investment Agency says Unilever and Nestle are interested, and South Korea’s Samsung told Reuters it was exploring Ethiopia as a place to assemble electronic goods.

Hennes & Mauritz, the world’s second-largest fashion retailer, submitted test orders as Ethiopia seeks to boost textile exports from $100 million in 2012 to $1 billion a year by 2016. If the tests are successful, production could start this autumn, said spokeswoman Marie Rosenlind.