Message To Corporate America From Ethiopia: Be In For Long Haul

Message To Corporate America From Ethiopia: Be In For Long Haul

One of the poorest countries in the world, Ethiopia has the greatest water reserves in Africa, and U.S. business leaders need to look at the country in terms of its potential rather than its accomplishments, says Chicago business consultant and professor Harold L. Sirkin in a Bloomberg report.

Ethiopia is also the most populous landlocked country in the world with a population of more than 91 million. But its economy, with a gross domestic product of about $41 billion, is not much larger than Wyoming’s (population around 577,000), the report said.

Africa’s greatest asset is its people, David Michael said recently in The National Interest. It has more than 1.1 billion people, including 60 percent under age 35. These workers and consumers, Michael said, “highly value American products and are among the most brand-loyal customers anywhere in the world. If you win them over today, they might stay with you for life.”

Known as the “water tower” of Eastern Africa, Ethiopia is home to 14 major rivers including the Blue Nile. Its leading cash crops including corn and coffee always seem to be in demand, Sirkin says.

“Just think what Ethiopia might be able to accomplish if it could harness the power of its rivers to produce electricity. This is not pie-in-the-sky: the multi-billion-dollar Grand Renaissance Dam is currently under construction,” Sirkin says.

The Pan African Chamber of Commerce and Industry is headquartered in Addis Ababa, as are the African Union and the United Nations Economic Commission for Africa.

The largest hydroelectric power plant in Africa is under construction there, signaling that boom times lie ahead, Sirkin says.

Ethiopia is experiencing a mini investment boom, according to the news site, allafrica.com. It now ranks number two, after South Africa, in foreign direct investment.

Still, as The Economist points out, investing there “is not for the faint-hearted,” Sirkin says. Not surprisingly, the country ranks near the bottom in the Wall Street Journal’s “Index of Economic Freedom.” Cronyism is a way of life.

Ethiopia is just one example of a success story in Africa. “We’re starting to see the same dynamic in Africa that we’ve been seeing elsewhere, as poverty-ridden families that were barely able to scratch out a subsistence living a few years ago are becoming first-generation consumers,” Sirkin says.

The rise of an African middle class is attracting business to Africa. Boston Consulting Group projects an increase in the middle class from 172 million in 2011 to 233 million by 2017 for Africa as a whole. This will encourage further foreign investment, which will transition in coming years from infrastructure to consumer goods, Sirkin says.

Once nearly absent from the continent, Hyundai is an example of a company that wants to become the leading auto brand in Africa. Its strategy is simple: “all in.” It already has surpassed Toyota in five countries – Algeria, Angola, Egypt, Morocco and South Africa – representing 70 percent of the market, Sirkin says.

That’s the message for corporate America, he says. By 2020, the African market will be worth more than $1 trillion. If you want to be part of it, go early and plan to stay long.

Sirkin is a Chicago-based senior partner of The Boston Consulting Group, a professor at Northwestern University’s Kellogg School of Management, and co-author of  “The U.S. Manufacturing Renaissance: How Shifting Global Economics Are Creating an American Comeback.”