Ethiopia - Market Challenges Ethiopia - Market Challenges
The state-owned telecommunications company, EthioTelecom is undergoing changes with plans to partially privatize, establish an independent telecom regulator, and sell off licenses to third-party service providers announced in June 2018, and a new CEO, Frehiwot Tamiru, appointed in July 2018. EthioTelecom has a record of delivering slow, expensive, and unreliable phone and internet service.
Foreign exchange shortages, largely the result of weak export performance and high demand for foreign currency, notably for GOE infrastructure priority projects, will continue to present difficulties for firms in Ethiopia. Businesses can usually expect delays in foreign exchange supply extending up to a year, and it is especially common to expect slow-downs and down-time in manufacturing.
Electricity demand continues to outpace supply as new hydropower dams struggle to produce at full capacity. Power transmission lines and distribution facilities are inadequate to the demand. The GOE is investing significantly in construction of very large-scale hydroelectric generation projects, with the objective of doubling the current near 4000 MW power supply. If successfully completed, these projects could meet domestic electricity demand and produce a significant surplus of power for export. The GOE is open to proposals for power development projects using Independent Power Purchase (IPP) agreements for the sale of renewable energy resources (geothermal, solar, wind and biomass). USAID Power Africa is supporting the development of a regulatory framework for IPP agreements. The first 500 MW IPP geothermal power generation project agreement has been signed with the U.S. company, Corbetti, under a BOOT (build, own, operate and transfer) agreement. The Government of Ethiopia has signed a Power Purchase Agreement (PPA) with developers to build a second 500 MW IPP, at Tulu Moye.
The Ethiopian economy has grown at a rapid pace over the past decade, but the economy remains constrained by foreign exchange scarcity, as well as vulnerable to periodic droughts and commodity price volatility that impacts the demand and price of Ethiopia’s primary export commodities. The price of coffee, one-third of Ethiopia’s exports, has a pronounced impact on Ethiopia’s export earnings.
Government procedures and paperwork are usually bureaucratic and time-consuming, although some improvements have been made in recent years. While the customs clearance process is still very slow, the GOE is committed to improving its World Bank’s Ease of Doing Business (EODB) ranking and is currently engaged in redrafting its Commercial Code, which has remained unchanged for the past fifty years. Areas targeted for revision include the business tax code and the registration process.
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