Investment and Partnership Opportunities in Ethiopia
Privatization & Public Enterprises Supervising Authority PPESA

 

1. INVESTMENT


Ethiopia has adopted a free market economic policy in 1992, and in line with this has promoted private investment. With the introduction of market economy, Ethiopia has implemented a number of reforms including the privatization of state owned enterprises, liberalization of foreign trade, deregulation of domestic prices, and devaluation of the exchange rate. The Birr has been fairly stable undergoing a gradual devaluation from 6.8 Birr per U.S. Dollar. Ethiopia's exchange rate has remained fairly stable due to the government's appropriate monetary policies and considerable foreign exchange reserves.

With its enormous resources, the country has untapped investment opportunities, huge market access and low cost of doing business. The country has excellent climate, fertile soil and huge domestic raw material base. Its location is strategic that makes it close to the lucrative markets of the Middle East, Asia and Europe.

Ethiopia's current road density is 30% per thousand kilometers with a plan to further the road density by 41% between 2002 and 2007. This in effect brings about significant quality improvement in import-export routes and other all-weather roads on major national routes. The air transport and the shipping line are also providing efficient services. Air transport cost for general cargo export is about USD 4.26/kg and USD 5.26/kg to Europe and USD 8.35/kg to North America, whereas, for general cargo import the fare is USD 5.25/kg from Europe and USD 16.73/kg from North America.

The pre capita power production is 28 KWh and the government is planning to increase hydropower capacity of the country. The current tariff on electric power ranges between 0.41-0.57. Hydropower generation of electricity has also recently been opened up to private foreign investors. The state-owned telecommunication service envisages increasing the number of telephone lines over 760,000 with the aim of raising the lines to 12 lines per 1,000 persons.

The political situation of the country is stabilized. In Ethiopia, the labor force is estimated at 40 million, and labor remains readily available and inexpensive. The cost of labor is very low in Ethiopia with a wage of USD 1 a day for unskilled labor and average monthly salary of USD 90 for a fresh graduate. Ethiopia has enacted a liberal investment law and the Ethiopian Investment Commission has been established, which is making every effort in creating an enabling environment for investment. The conducive economic environment encouraged foreign direct investment. The data indicate that for the period between 1992 and 2005 a total of 13,125 investors with an aggregate capital of 151.5 billion Birr have been licensed; out of which 1,358 are foreigners with an aggregate capital of 38.9 billion Birr.

The country has currently reformed its investment code by broadening the sector coverage for foreign participation. Accordingly, the newly included sectors are telecommunication, power and air services. Thus, almost all sectors are open for foreign investors.

Nowadays, investors are no more expected to go to various government offices to get their applications approved. The Ethiopian Investment Commission (EIC) is now serving as one stop-shop facilitator, issuing investment permit, work permit, residence permit and allocation of land for investment.

1.1             Investment Protection & Guarantee

 

The Government encourages foreign investors to invest in a broad range of industries which allows foreigners to hold up to 100% equity ownership. According to the investment Proclamation, investors are legally protected against the expropriation and nationalization of assets. In addition to this, Ethiopia has ratified the convention establishing the Multilateral Investment Guarantee Agency (MIGA) of the World Bank Group. It has also signed bilateral investment promotion agreements with a number of OECD (Organization for Economic Cooperation and Development) countries.

The investment proclamation allows all foreign investors, whether they receive incentives or not, to freely remit profits and dividends, principal and interest on foreign loans, and fees related to technology transfer. Foreign investors may also remit proceeds from the sale or liquidation of assets, from the transfer of shares or of partial ownership of an enterprise, and funds required for debt service or other international payments. The right of expatriate employees to remit their salaries is granted in accordance with the foreign exchange regulations of the National Bank of Ethiopia.

1.2             Investment Laws


Both foreign and domestic private entities have the right to establish, acquire, own, and dispose of most forms of business enterprises.

Land for investment purposes is obtained on lease and with prices set by periodic auctions. Land leasehold regulations vary in form and practice from region to region. Nonetheless, they all are best in attracting investments. Land could be obtained by paying nominal or fair charges. In some priority investment areas, land could be availed even free of charges. There are also industrial zones with adequate infrastructure facilities.

Ethiopia works hard to combat corruption through a combination of social pressure, cultural norms, and legal restrictions. Although corruption exists, it is not a significant hindrance to investment or trade in Ethiopia.

1.3 Labor Law


Ethiopia enjoys labor peace. The right to form labor associations and to engage in collective bargaining is granted by law. Workers who provide critical services like health care are not permitted to strike. The labour law has been revised to provide for strong work culture, discipline and efficiency while safeguarding basic labour rights.

1.4 Investment Incentives


Investors are eligible for investment incentives. Special incentive sectors and sub-sectors include agricultural development and agro-processing, agricultural production, manufacturing of equipment and machinery, spare parts, components and supplies, vehicle bodies, other products and assembly plants, and publishing of printed goods; large-scale road and building construction and other related works. Rural transportation facilities; and the purchase of spraying machinery, trucks fitted with refrigeration facilities, or other equipment for support services are also eligible for special incentive facilities.

An investor in one of these specified areas who meets the conditions for a qualifying investment certificate, and who produces evidence showing the exact amount of the capital invested within 30 days of commencement of operation, may qualify for incentives.

Incentives include: -

*       Exemption from payment of income tax for the period between 2 to 7 years depending on the area of investment, volume of exporting and the location of investment;
100% exemption from payment of import custom duties on all investment goods;

*       Duty-free imports of spare parts up to 15% of the value of capital goods imported;

*       Capital goods imported without the payment of import duties and other import taxes may be transferred to another investor enjoying similar privileges;

*       Exemption from custom duties or other import taxes are granted on raw materials that are required in the production of export goods. Taxes and duties paid on raw materials are drawn back at the time of export of finished products. The duty drawback scheme applies to all taxed at the time of import, as well as those paid on local purchases.

*       Exemption from any export taxes and other taxes levied on exports for Ethiopian products and services destined for export;

*       Carrying forward of losses during a tax exemption period for half of the tax holiday period after the expiry of the tax holiday;

Export products from Ethiopia to the European Union are entitled to duty reductions or exemptions and are free from all quota restrictions under the Lome Convention. Trade preferences include duty-free entry of all industrial products and a wide range of agricultural products including fruits, vegetables, pulses and oil seeds. Under the Generalized system of Preference (GSP), a wide range of Ethiopia's manufactured products are entitled to preferential duty treatment in the USA, Canada, Switzerland, Norway, Sweden, Finland, Austria and Japan, as well as most European Union countries. Furthermore, no quantitative restrictions are applicable to Ethiopian exports on any of the 3,000-plus items currently eligible for Act (AGOA) & Everything But Arms (EBA) are the respective US and Europe export market opportunities open for exports from Ethiopia. The country has also access to 23 African countries through COMESA.

2. PARTNERSHIP


Foreign firms are welcome to invest in privatization efforts of the Ethiopian government.Since Ethiopia has launched the new market-oriented Economic Policy in 1992, it has embarked upon the privatization of state-owned enterprises as an integral part of the broader macro-economic reform.

Domestic and Foreign investors are encouraged to participate in the privatization process. In order to accomplish the privatization process, the former Ethiopian Privatization Agency is fused with the Public Enterprises Supervising Authority and has been re-established as Privation and Public Enterprises Supervising Authority (PPESA) since August 2004. Under PPESA there are well over 110 public enterprises for partnership and privatization in almost all sectors of the economy.

PPESA is also working towards attracting foreign private partners for joint venture, management contract and lease arrangements with public enterprises. This is in addition to sale option for public enterprises.

PPESA is looking for domestic/foreign public/private partners for most of the public enterprises it is supervising. In this regard, textile and garment, leather & leather products, food processing, construction and agro-industries are given priority for partnership. Those who are capable, experienced and committed investors are seriously looked for partnership. It is believed that working with the existing enterprises would reduce investment requirement and risks to new partners. There is also huge profit potential to be earned by proper utilization of time and resources. Of course, there is a challenge to be overcome.

Ethiopian Tannery

Ethiopian Tannery

Privatization of public enterprises through competitive bidding and transparent negotiated sales are options available. Due considerations are given to expedite the process of privatization with ensuring transparency, fairness and public accountability. The sale option could be full or partial sale of shares as the case may be (see the annexed list of public enterprises for partnership and/or complete sale out options for shopping).

Cotton Plant

Cotton Plant

For Management Contract (MC), Joint Venture (JV), Lease or Export Partnerships, what you have to do is just apply expressing your mode of participation, interest and the enterprise that you want to partner with. Afterwards, you would be required to produce business plan for the chosen options & chosen enterprise. We always demand that you be dependable, committed, realistic and capable to initiate and effect partnership and privatization.

3. LIST of State-Owned Enterprises to be Privatized

No.

Name of Enterprise

Location

 

FOOF INDUSTRY

1

Addis Modjo Edible Oil S.C

Addis / Modjo

2

Kality Food S.C

Addis Ababa

3

Dire Dawa Food Complex S.C

Dire Dawa

4

Fafa Food S.C

Addis Ababa

5

Hamaressa Edible Oil S.C

Harar

6

Ethiopia Spice Extraction

Addis Ababa

7

Yerer Flour S.C

Nazareth

8

Bahir Dar Edible Oil S.C

Bahir Dar

9

Tigray Flour S.C

Quiha

10

Ada Flour & Pasta Factory

Debre Zeit

11

Awassa Flour S.C

Awassa

12

Addis Candy Factory

Addis Ababa

 

BEVERAGE INDUSTRY

13

Bedele Brewery S.C

Bedele

14

Harar Brewery S.C

Harar

15

Meta Abo Brewery S.C

Sebeta

16

National Alcohol Liquors S.C

Addis Ababa

17

Addis Ababa Bottle & Glass S.C

Addis Ababa

18

Babile Mineral Water Factory

Harar

 

GARMENT INDUSTRY

19

Addis Garment S.C

Addis Ababa

20

Akaki Garment S.C

Akaki

21

Gulele Garment S.C

Addis Ababa

 

LEATHER & SHOE INDUSTRY

22

Ambessa Shoe S.C

Addis Ababa

23

Addis Ababa Tannery S.C

Addis Ababa

24

Modjo Tannery S.C

Modjo

25

Kombolcha Tannery S.C

Kombolcha

26

Tikur Abay Shoes S.C

Addis Ababa

27

Rubber & Canvas Shoes

Addis Ababa

 

ENGINEERING INDUSTRY

28

Akaki Spare part S.C

Akaki

 

COFFEE

29

Coffee Plantation & Dev't Enterprise *

Jimma

 

PUBLIC TRANSPORT

30

Abay Technical Serv. Enterprise *

Addis Ababa

31

Walia Public Transport Enterprise *

Addis Ababa

 

FREIGHT TRANSPORT

32

Addis Mechanical Enterprise *

Addis Ababa

33

Bekelcha Transport Enterprise *

Nazareth

34

Shebele Transport Enterprise *

Addis Ababa

35

Woyre Transport Enterprise *

Addis Ababa

 

CONTRACTORS

36

Awash Construction Enterprise

Addis Ababa

37

Batu Construction Enterprise

Addis Ababa

38

Blue Nile Construction Enterprise

Addis Ababa

39

Water Works Construction Enterprise

Addis Ababa

 

CONSTRUCTIONS DESIGN

40

Building Design Enterprise

Addis Ababa

41

Transport Construction Design Ent..

Addis Ababa

 

HORTICULTURE

42

Horticulture Development Ent.

Addis Ababa

43

Upper Awash Agro. Industry

Merti-Jeju

44

Etfruit

Addis Ababa

 

PHARMACEUTIAL

45

PHARMID

Addis Ababa

46

EPHARM

Addis Ababa

 

BASIC METAL ENGINEERING INDUSTY

47

Ethio-Iron & Steel

Akaki

48

Kality Metal

Kaliti

49

Kotebe Metal

Addis Ababa

50

Kolfe Household

Addis Ababa

51

Nazareth Tractor

Nazareth

 

HOTEL & TOURISM

52

Ethiopian Tourist Trade Enterprise

Addis Ababa

53

National Tour Operators (NTO)

Addis Ababa

54

Ras Hotels

Addis Ababa

55

Ethiopian Hotels

Addis Ababa

 

SHARE COMPANIES

56

Pulp & paper Factory S.C

Wonji

57

Crown Cork S.C

Akaki

58

Ethio-Japan Textile S.C

Modjo

59

AMCE (Truck Assembly) S.C

Addis Ababa

 

AGRI SERVICES

60

Coffee Technology Development

Addis Ababa

61

Fish Product & Marketing Enterprise *

Addis Ababa

62

Natural Gum Marketing Enterprise *

Addis Ababa

63

Agricultural Equipment & Technical

Addis Ababa

 

CONSTRUCTION

64

Addis Block S.C

Addis Ababa

65

Water Wells Drilling Enterprise

Addis Ababa

66

Building Materials Supply Enterprise

Addis Ababa

67

Bole Bulbula Construction Material

Addis Ababa

68

Housing Construction Enterprise

Addis Ababa

69

Ethio-Marble

Addis Ababa

70

Prefabricated Building Production

Addis Ababa

71

Tabor Ceramics S.C

Awassa

72

ECAFCO

Addis Ababa

73

Ethiopian hard & Soft Board Fact

Addis Ababa

74

Sawmill & Joineries

Addis Ababa

 

MINING

75

Abijata Soda Ash S.C

Abijata

76

Ethiopian Mineral Dev't Enterprise

Addis Ababa

 

TEXTILE

77

Debre Berhan Blanket

Debre Berhan

78

Adei Ababa Yarn Factory

Addis Ababa

79

Ethio-Fiber Factory

Akaki

80

Meher Fiber Factory

Akaki

81

BahirDar Textile S.C

BahirDar

82

Dire Dawa Textile Factory

Dire Dawa

83

Edget Yarn & Sewing Thread

Addis Ababa

 

AGRICULTURE

84

Dairy Development Enterprise

Addis Ababa

85

Middle Awash Agricultural

Awash

86

Bale Agricultural Dev't Enterprise

Robe

87

Abobo Agricultural Dev't Enterprise

Abobo

88

Arsi Agricultural Dev't Enterprise

Arsi

89

Awassa Agricultural Dev't Enterprise

Awassa

90

North Omo Agricultural Devt'

Arba Minch

91

Tendaho Agricultural Devt'

Assaita

 

PRINTING

92

Yekatit Paper Convert

Addis Ababa

93

Artistic Printing

Addis Ababa

94

Bole Printing

Addis Ababa

95

Commercial Printing

Addis Ababa

 

CEMICAL

96

Nefas Silk Paint Factory

Addis Ababa

97

Ethiopian Plastic S.C

Addis Ababa

98

Addis Ababa Foam & Plastic Factory

Addis Ababa

 

TRADE

99

M'S Whole Sale & Import Trade

Addis Ababa

* Restricted for local investors

5.LIST of Enterprises in search of Strategic Partners

No.

Preferred Modality

Sector

Name of Enterprise

1

JV-Equity

Textile

Akaki Garment S.C.

2

JV-Equity

Textile

Akaki Textile S.C.

3

JV-Equity

Textile

Kombolcha Textile S.C.

4

JV-Equity

Textile

Bahar Dar Textile S.C.

5

JV-Equity

Leather

Blue Nile Shoe S.C.

6

JV-Equity

Construction

Tabor Ceramics S.C.

7

JV-Equity

Food

Kaliti Food S.C.

8

JV-Equity

Food

Dire Dawa Food Complex S.C.

9

JV-Equity

Cement

Dire Dawa Cement Factory

10

JV-Equity

Agriculture

Upper Awash Agro-Industy Enterprise

11

JV-Equity

Beverage

Assela Malt Factory

12

JV-Equity

Agriculture

Dairy Dev't Enterprise

13

JV-Equity

Textile

DebreBrhan Blanket Factory

14

JV-Equity

Chemical

Addis Ababa Bottle & Glass S.C

15

JV-Equity

Food

Addis Modjo Edible Oil Complex S.C.

16

JV-Equity

Food

Fafa Food S.C.

17

JV-Equity

Mining & Mineral

Ethiopian Mineral Dev't S.C.

18

JV-Equity

Chemical

Awash Aluminum sulfate & sulfuric Acid Co

19

JV-Equity

Chemical

Adami Tulu Pesticide Processing S.C. *

20

JV-Equity

Agriculture

National Veterinary Institute

21

JV-Equity

Others

Industrial Project Service

22

JV-Equity

Agriculture

Horticulture Dev't Enterprise

23

JV-Equity

Textile

Ethiopian Fiber Products

24

JV-Equity

Textile

Meher Fiber Products Factory

25

JV-Equity

Construction

Ethiopian Marble Industry

26

JV-Equity

Food

Ethiopian Spice Extraction Factory

27

JV-Equity

Pharmacy & Health

Ethiopian Pharmaceutical Manufacturing Co

28

JV-Equity

Beverage

Babile Mineral Water Factory

29

JV-Equity

Agriculture

Coffee Plantation & Dev't Enterprise

30

JV-Equity

Chemical

Caustic Soda S.C.

31

JV-Equity

Textile

Adei Ababa Yarn S.C.

32

JV-Equity

Textile

Addis Garment S.C.

33

JV-Equity

Textile

Dire Dawa Textile Factory

34

JV-Equity

Textile

Arba Minch Textile S.C.

35

JV-Equity

Leather

Anbesa Shoe S.C.

36

JV-Equity

Leather

Ethiopia Rubber & Canvas Shoes Factory

37

JV-Equity

Textile

Gullele Garment S.C.

38

JV-Equity

Textile

Nazareth Garment S.C.

39

JV-Equity

Leather

Modjo Tannery S.C.

40

JV-Equity

Leather

Addis Ababa Tannery S.C.

41

JV-Equity

Leather

Kombolcha Tannery S.C.

42

JV-Equity

Textile

Edget Yarn Factory

43

Lease

Transport

Shebelle Transport S.C.

44

Lease

Transport

Walia Liter-City Bus Service Enterprise

45

Lease

Transport

Woyra Transport S.C.

46

Lease

Transport

Bekelcha Transport S.C.

47

Lease

Wood

ECAFCO S.C.

48

Lease

Wood

ETHARSO Factory

49

Lease

Wood

Ethiopia Ply Wood Factory

50

Lease

Food

Kokeb Flour & Pasta Factory

51

Lease

Food

Misrak Flour & Bread Factory

52

Lease

Food

Bahir Dar Edible Oil S.C.

53

Lease

Food

Yerer Flour S.C.

54

Lease

Food

Tigray Flour & Edible Oil Sh. Co.

55

Lease

Food

Adama Edible oil Factory

56

Lease

Food

Ada Flour & Pasta Factory

57

Lease

Food

Nazareth Edible Oil Factory

58

Lease

Wood

Sawmills & Joineries Enterprise

59

MC

Agriculture

Coffee Technology Dev't & Engineering Enter

60

MC

Construction

Awash Construction S.C.

61

MC

Construction

Batu Construction S.C.

62

MC

Construction

Water Well Drilling Enterprise

63

Lease

Agriculture

Abobo Agricultural Dev't Enterprise

64

MC

Agriculture

Agricultural Equipment & Technical Service

65

Lease

Agriculture

Agricultural Mechanization Service Enterprise

66

JV-Equity

Agriculture

Arsi Agricultural Dev't Enterprise

67

JV-Equity

Agriculture

Awassa Agricultural Dev't Enterprise

68

JV-Equity

Agriculture

Bale Agricultural Dev't Enterprise

69

JV-Equity

Agriculture

Coffee Processing & Warehouse Enterprise

70

JV-Equity

Agriculture

Ethiopian Fruit & Vegetable

71

JV-Equity

Agriculture

Fish Production & Marketing Enterprise

72

JV-Equity

Agriculture

Kaliti Animal Feed Enterprise

73

JV-Equity

Agriculture

Middle Awash Agricultural Dev't Enterprise

74

JV-Equity

Agriculture

Natural Gum Production Marketing Enterprise

75

JV-Equity

Agriculture

Semen-Omo Agricultural Dev't Enterprise

76

JV-Equity

Agriculture

Tendaho Agriculural Dev't S.C.

77

JV-Equity

Beverage

Ambo Mineral Water Factory

78

JV-Equity

Beverage

Bedele Brewery S.C.

79

JV-Equity

Beverage

Harar Brewery S.C.

80

JV-Equity

Beverage

National Alcohol & Liquor Factory

81

JV-Equity

Chemical

Addis Ababa Foam & Plastic Factory

82

JV-Equity

Chemical

Alkyd Resin S.C.

83

Lease

Chemical

Chora Gas & Chemical Factory

84

Lease

Chemical

Nazareth Soap Factory

85

Lease

Chemical

Nefas Silk Paint Factory

86

JV-Equity

Construction

Addis Block Production S.C.

87

JV-Equity

Construction

Blue Nile Construction S.C.

88

JV-Equity

Construction

Building Materials & Supplies Enterprise

89

JV-Equity

Construction

Prefabricated Building Parts Construction

90

JV-Equity

Construction

Residential Houses Construction Enterprise

91

JV-Equity

Food

Hamressa Edible Oil S.C.

92

JV-Equity

Hotel & Tourism

National Tour Operation Enterprise

93

JV-Equity

Hotel & Tourism

SPA Service Enterprise

94

JV-Equity

Mining & Mineral

Abijata Soda Ash S.C.

95

JV-Equity

Mining & Mineral

Bole Bulbula Construction Stone Production SC

96

JV-Equity

Mining & Mineral

Adola Gold Dev't

97

MC

Pharmaceutical

Pharmaceutical and Medical Supply S.C.

98

Lease

Printing

Artistic Printing Enterprise

99

Lease

Printing

Bole Printing Enterprise

100

Lease

Printing

Commercial Printing Enterprise

101

JV-Equity

Printing

Educational Materials Production & Distr.

102

JV-Equity

Printing

Ethiopian Pulp & Paper Factory S.C.

103

Lease

Printing

Gonder Printing Enterprises

104

JV-Equity

Printing

Yekatit paper Converts Enterprise

105

Lease

Sugar

Addis Ketema Candy Factory

106

MC

Trade

Procurement Service Enterprise

107

MC

Trade

Merchandise Wholesale & Import Trade

108

Lease

Transport

Comet Transport S.C.

109

JV-Equity

Hotel & Tourism

Ethiopian Tourist Trading Enterprise

110

MC

Hotel & Tourism

Ethiopia Hotel

111

MC

Hotel & Tourism

Ras Hotel

112

JV-Equity

Sugar

Wonji/Shoa Sugar-Baker Yeast Project

113

JV-Equity

Chemical

Abjiata Soda Ash S.C.

114

JV-Equity

Textile

Ethio-Japan Synthetic Textile S.C.

* Enterprises under partnership process.