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The EUBFE & BizClim working together to improve Ethiopia’s business climate

Ethiopia has one of the highest growth rates in Africa. It has a large population, now above 90 million, and thus a large potential market. Labour is not expensive, and the country has significant resources (fertile land, livestock, minerals, unique culture and low crime rates). The country has benefited from strong government investment in economic and social infrastructure, Ethiopia’s Growth and Transformation Plan, the country’s development strategy, targeted agriculture modernisation, manufacturing growth, and increasing FDI flows.

Europe is Ethiopia’s most important trading partner. Indeed, in 2011, 43% of Ethiopia’s exports had the EU as their final destination. Furthermore, European private investment into Ethiopia is quite substantial. Currently there are around 300 EU companies active in Ethiopia, with total investments up to 23.6 billion birr. EU companies are mostly active in services, followed by manufacturing and agriculture.

There are, however, some bottlenecks that may hinder an even greater FDI flow, precisely at the time when additional foreign capital could help support the national development agenda. Investors have to deal with some challenges, such as a complicated regulatory environment, opaque rules, limited administrative capacity at key governmental agencies and the gap between the progressive spirit of government policies and their uneven implementation. There is also a need for more channels to conduct a productive dialogue between the private sector and the governmental authorities.

In 2012, EU companies active in Ethiopia created the EU Business Forum to Ethiopia, (EUBFE). The EUBFE works in close cooperation with the EU Delegation. Its purpose is to make it easier for EU companies to do business in Ethiopia by providing a platform through which EU companies can exchange information, while facilitating business linkages between companies. The EUBFE also aims to create a comprehensive dialogue with the government, aimed at easing legal and regulatory impediments affecting businesses.

BizClim currently supports the EUBFE via a two year project (2014 – 2015) implemented by an EQUINOCCIO team of consultants. The project’s objective is to contribute to an improved business climate in Ethiopia by identifying specific problems that hamper companies’ operations, while proposing constructive solutions.

More specifically, the EUBFE project produced a Road Map process that will hopefully allow the GoE and the private sector to work together in order to develop a reform agenda leading to streamlined regulations, a simplified licensing and permits regime, and the adoption of best practices in taxation and customs policies.

The project’s main activities and products to date are:

1. A comprehensive mapping of EU investors in Ethiopia.
2. A survey conducted among these investors aimed at understanding their motivations, goals and what they view as legal/bureaucratic impediments to business operations.
3. A study of the business environment in Ethiopia, with special reference to key laws, regulations and directives that affect investments, taxation and other rules that impact the way corporations conduct business.
4. The development of eight case studies through in-depth interviews with companies. These case studies illustrate, in some detail, concrete problems faced by some investors in the main problem areas identified by the survey.
5. The creation of a brochure that describes the EUBFE and the services it offers to members.
6. The creation of another brochure that describes Ethiopia’s economy and the investment opportunities it offers, and also features a sample of companies funded by EU investors.
7. In October 2014, an event was convened to disseminate and discuss, in a public forum, the information gathered through the research and analysis activities described above.
8. A roundtable, held in December 2014, provided the opportunity to present to the stakeholders the structure of the proposed Road Map that could lead to an improved investment climate.