Entrepreneurship in Ethiopia
Ethiopia is the ninth largest country in Africa. The population was estimated at over 60 million with a growth rate of 2.9 percent. The rural to urban population ratio is 4:1. The Ethiopian economy is largely based; agriculture on average accounts for about 40 percent of GDP, 85 percent of exports, and 85 percent of total employment.
Ethiopia’s private sector is increasingly connecting to foreign markets. Export is promoted, foreigners are encouraged to invest in the country and joint ventures are becoming attractive business modalities. Especially in the flower and horticulture farming industry there is an influx of investors and farmers from abroad over the past few years.
All importers and exporters must be registered with the Ministry of Trade and Industry and obtain a trading license. The Ministry regulates imports. Foreign exchange permits are required for all importers. Ethiopia’s main imports include petroleum products, civil aircraft, vehicles, spare parts, construction equipment, medical and pharmaceutical products, industrial equipment and machinery, both agricultural and industrial chemicals, agricultural machinery, hybrid seed, fertilizers, irrigation equipment, and durable and non durable consumer goods.
Ethiopia’s main exports are coffee, chat, leather and leather products, pulses, gold, live animals and processed meat, oilseed cake, and fruits and vegetables. Among these products, coffee is by far the most important, constituting an average of 55 percent of total exports by value during the last twenty three years and reaching as high as 60 percent in 1999/2000.
The major manufacturing sub-sectors in Ethiopia are food, beverages, textiles, clothing, and leather, all of which are also related to the agricultural sector.
The unit of currency in Ethiopia is the birr (ETB). As of November 2000, the exchange rate is 8.23 birr to 1 US dollar.
Production and export to the USA are encouraged through AGOA. Tourism is promoted and the number of visitors from abroad is expected to increase. These developments are well supported by the Ethiopian Government, notably the Ministry of Trade & Industry, as well as by bilateral and multilateral donors.
A growing number of investors, traders and producers are entering complex value chains that cross borders and continents while risks need to be kept at a minimum. Flowers and vegetables for example must reach the auctions in Europe fresh and in excellent condition. There are indeed many other opportunities to export products from Ethiopia to the European and American markets.
The Commercial Office of the U.S. Embassy in Addis Ababa assists in exporting goods and/or services to Ethiopia. The office assists businesses with the following:
- Local markets for the general category of goods and/or services businesses wish to export.
- Put you in touch with possible agents or business partners, often ones who have indicated an interest in the kind of products you make;
- Give you basic commercial and financial information;
- Introduce you to local banking and business officials;
- Provide information on how business is conducted in this country and on the requirements and restrictions which apply to trade in your products; and
- Give you information on possible sources of financing for export and investment.
Ethiopia requires all importers to be channeled through Ethiopian nationals who are registered with the government as official import or distribution agents. The importers or agents are required to apply for an import license with the Ministry of Trade and Industry for a line of foreign exchange with the controller of exchange and the National Bank of Ethiopia.
In Ethiopia it is not difficult to find experienced and reputable agents and distributors. To conduct business effectively and participate in local tenders, it is advisable for the U.S. firms to appoint local agents to represent their products in Ethiopia. The Embassy’s Economic/Commercial Office also maintains a list of experienced local representatives willing to work with U.S. companies in bids on major projects. Due to the shortage of foreign exchange in the country, franchising and direct marketing are difficult.
The National Bank of Ethiopia (NBE) is the central bank of the Government responsible for foreign exchange control. Foreign exchange permits from the NBE are required for all imports. The Commercial Bank of Ethiopia (CBE), also Government-oriented, and the newly established private banks deals in commercial activities, including the arrangement of letters of credit, bid bonds, and performance bonds, etc.
Highly protective tariffs are applied on certain items such as textile products, leather goods, etc. to protect local industries.
Ethiopia, being a member of the Customs Co-operation Council, ratified the harmonized Commodity Description and Coding System in August 1993. Duties are levied on C.I.F. value. A maximum of 12 percent sales tax is also imposed on all imports. A few import commodities such as cigarettes, alcohol, etc. are further liable to an excise tax.
Regulations for the registration of patents and trademarks do not exist in Ethiopia. Some protections can be secured through registration of patents and trademarks with the Ministry of Trade and Industry and the publication of cautionary notices in local newspapers in Ethiopia. Two copies of the newspaper notices should be sent to the Ministry of Trade and Industry.
Business infrastructure: Ethiopia’s surface transport infrastructure, primarily consisting of roads, is inadequate and underdeveloped. In fact, Ethiopia has the lowest road density per capita in the world. Only 21 percent of the highway network is paved, with few interconnecting links between adjacent regions, and a grossly insufficient feeder road network. As a result, large parts of Ethiopia remain isolated and largely dependent on pack animals or human carriers for transport. Limited rail service links Addis Ababa with Djibouti via the eastern Ethiopian city of Dire Dawa. Passenger and cargo air transport service is provided by Ethiopian Airlines. Its international flights link the country with 44 cities on three continents, and its domestic service links 43 airfields and 21 landing strips with Addis Ababa.
There are more than 80 major language groups in Ethiopia, although the national language, Amharic, is spoken throughout the country. Oromiffa and Tigrigna are other widely-used Ethiopian languages. English is the second official language and is understood in most towns and among the educated sector of the population.