Ethiopia Business Profile

Ethiopian Business Profile - This page is about many aspects of the East African country. Here you will find summarized information about Ethiopia's geography, economy and culture. It also presents useful economic and commercial information for foreigners interested in doing business in the country. This is a mini-profile; we expect the profile to grow and cover all possible areas of business in Ethiopia in the near future.

Overview

  • Official Name: Federal Democratic Republic of Ethiopia
  • Location: in the East of Africa, 8° 0' 0" N / 39° 0' 0" E
  • Area: 1,104,300 sq. km
  • Capital City: Addis Ababa
  • Other major cities: Adama (Nazret or Nazareth), Hawassa (Awassa), Dire Dawa, Jimma, Bahir Dar, Mekele
  • Sea Port: Ethiopia is landlocked but uses Djibouti port; Berbera Port in Somaliland and Port Sudan in Sudan are also used occasionally. There is plan to use Mombasa port in Kenya as well.
  • Major Airport: Bole International Airport located in Addis Ababa. It has two terminals: international and domestic. The domestic terminal serves domestic flights as well as Ethiopian Airlines flights to and from neighboring and some East African countries.
  • Currency: Birr (1 Birr = 100 cents, 1 cent, 5 cents, 10 cents, 25 cents, 50 cents and Br. 1 coins; Br. 1, Br. 5, Br. 10, Br. 50, Br. 100 notes available)

Demographics

  • Population: the last census was done in 2007. The population then was 73,918,505 (37,296,657 male, 36,621,848 female), Urban 16.1%, Rural, 83.9%
  • Population growth: According to the 2007 census, the population grew at an average annual rate of 2.6 percent between 1994 and 2007.
  • Life expectancy at birth: 59.3 years (based on UNDP - International Human Development Indicators). On the other hand, by 2012 World Bank Group raised the life expectancy in Ethiopia to 63.
  • The main ethnic groups: based on the 2007 census: Oromo 34.5 %, Amhara 26.9%, Somali 6.2%, Tigrie 6.1%, Sidama 4.0%, Guragie 2.5%, Welaita 2.3%, Hadiya 1.7%, Afar 1.7%,Gamo 1.5%
  • Religion (2007 census):  Christian (Orthodox: 43.5%, Protestant: 18.6%, Catholic: 0.7%), Muslim: 33.9%, Traditional: 2.6%, Others: 0.6%

Economy

GDP - 2013 estimate (CIA World Fact Book)

  • USD 118.2 Billion (Purchasing Power Parity)
  • USD 47.34 Billion (Official exchange rate)

Sectors:

Estimated contribution of sectors to GDP in year the 2013 is put as follows:

Agriculture: 

    • 47% of GDP ( based on CIA World Fact Book)
    • 45.8% of GDP (based on UNDP- this figure includes forestry, fishing and hunting)

Service:

    • 38 - 39% of GDP (based on information from the World Bank, World Development Indicators Database for the year 2009)
    • 42.2% of GDP (based on CIA World Fact Book)

Industry:

    • 10- 11% of GDP (manufacturing: 4.0%) (based on information from the World Bank, World Development Indicators Database for the year 2009)
    • 42.2% of GDP (based on CIA World Fact Book)

Average Annual Growth of the sectors for the year 2009 (based on information from the World Bank, World Development Indicators Database for the year 2009):

      • Agriculture: 6.4%
      • Service: 14.3%
      • Industry: 8.9% (Manufacturing: 12.3%)

Trade:

  • Import: USD 10.68 billion CIA, The World Factbook (2013 estimate)
  • Export: USD 3.214 billion CIA, The World Factbook (2013 estimate)

Payment systems for Import /Export:

  • Import: LC, CAD, TT (TT is allowed only for less than USD 5001 transactions)
  • Export: LC, CAD, TT

Finance:

  • Banks: The National Bank of Ethiopia is the central bank; there are 19 commercial banks. 
Abay Bank Abyssinia Bank
Awash International Bank Addis International Bank
Berhan Bank Buna Bank
Commercial Bank of Ethiopia
(state owned and the biggest bank in East Africa)
Construction and Business Bank (state owned)
Cooperative Bank of Oromia Dashen Bank
Debub Global Bank Development Bank (state owned)
Enat Bank Lion International Bank
Nib International Bank Oromia International Bank
United Bank Wegagen Bank
Zemen Bank  

 

  • Insurance Companies: Africa Insurance, United Insurance, Awash Insurance, Nyala Insurance, Nile Insurance, Global Insurance

Exchange Rate History: USD-ETB

Ethiopia’s currency is pegged to the US dollar. The National Bank, the country’s central bank follows a managed float exchange rate regime.

From 1973 to 1992, Ethiopia’s official exchange rate remained fixed at Birr 2.07 per U.S. dollar. In 1992, the Birr was devalued to 5 birr per U.S dollar, and in May, 1993 a Dutch-type weekly foreign exchange auction was inaugurated. Since October 2001, however, the exchange rate of the birr has been determined by the daily inter-bank foreign exchange market, in which the NBE intervened to regulate excess volatility in the movement of the exchange rate.

The following is a historical USD-ETB exchange rate since 14 December 2002 – 17 February 2012. It’s a highlight of the major changes. But for detailed dates, one can see here.

Date    

Buy             Sell
14/12/00 8.3040        8.3870
03/07/2003    8.6005        8.6865
05/09/2006  8.7001       8.7871
13/06/2007  9.0272        9.1177
05/01/2009   10.4576  10.5622
16/01/2009  11.0001 11.1101
11/07/2009    12.4440 12.5684
30/01/2010     13.3096       13.4427
31/08/2010     13.6284       13.7647
01/09/2010     16.3514  16.5149
25/03/2011     16.7084       16.8755
16/08/2011  17.0010       17.1710
17/12/2014     20.0676 20.468952
09/06/2015 20.5054 20.9155

 (Source: National Bank of Ethiopia)

Business Travel

  • Business Visa, Residential Permit, Work Permit Requirements, Procedures and Regulation for foreign Investors in business travelers to Ethiopia

Any foreigner desiring to enter Ethiopia for business must first obtain a visa. Investment, employment, participation in symposia, exhibitions, workshops and training are among the activities which require business visa.

According to the new business visa regulation which became effective as of 19th January 2015, business visa applicants are advised to allow at least 2 weeks before the date of travel.

Applicants seeking to apply for a business visa to Ethiopia will require approval from the Main Department of Immigration and Nationality Affairs in Addis Ababa.

Applicants are encouraged to submit a formal application letter to the Immigration Office requesting visas, with details of their trip and once approved (normally within a few days), the Ethiopian Embassies will be able to issue a visa straight away.

Application for business visa is submitted to the Security, Immigration and Refugee Affairs Authority, or Ethiopian Embassies or Consular posts abroad. Application for visa should be accompanied with a valid travel document and health certificate.

Business visa may be issued for single or multiple entries. A multiple entry business visa is issued for a foreign national residing in Ethiopia for duration not exceeding the validity period of his residence permits.  This entry is sourced from council of Ministers Regulation No. 114/2004.

For foreign nationals coming from countries where the Ethiopian Mission is not represented, business visa may be issued on arrival at Bole International Airport and when approved by Immigration & Nationality Affairs.

Types of visas issued on arrival are;

  1. A single entry business visa valid for 3 months &
  2. A multiple entry business visa valid for 3 months

For any foreigner to acquire a residence permit, must first be registered at the Security Immigration and Refugee Affairs Authority. During registration, the applicant is required to provide a valid travel document, reason for residing and other information and documents as may be required.

A registered foreigner, upon payment of fee will be issued with either a temporary or permanent residence permit. The fee payable for residence permit is 900 birr for applicants from Western Europe or other countries, 800 birr for Eastern and Central Europe countries, 700 birr for Middle East countries, 500 birr for Latin and Central American and Caribbean countries, and 400 birr for African countries.

Foreigners engaged in investment activities are issued with a permanent residence permit irrespective of the waiting period required for other applicants.

A temporary residence permit is issued to any foreigner who is registered and not qualified for a permanent residence permit. Temporary residence permit is valid for one year from the date of issuance and is renewable whenever the foreigner presents the required documents, such as, renewed investment license or work permit. Dependents of a foreign national who has already secured a residence permit can also be issued with entry visas and are entitled to residence permits.

A foreigner who has obtained an investment or a work permia permanent will be issued residence permit.

The Ethiopian Investment Agency is delegated by the Ministry of Labor and Social Affairs to issue work permits for persons to be employed by a private investor. The applicant is required to submit a valid visa and investment license with his application form. A work permit for a foreign employee is issued for one year. And it can be renewed annually for a maximum period of three years.

Foreigners are obliged to present residence permit and identity card or travel documents whenever required by authorities.

Ministry of Foreign Affairs, Minilik Avenue
Tel: +251 11 5517345
Fax: +251 11 5514300
Website: mfa.gov.et
 

  • Foreign Exchange, Changing money

Any traveler arriving in Ethiopia should declare at customs any amount of cash more than USD 3000.

You can change your money into Birr at the banks located in the airports. You can find banks where you can change your money on the main streets and even in some hotels.

Tax

  • Investors are given duty free previlages for the importing of capital goods necessary for the establishment or operation of the enterprise. Tax incentives are applicable in certain investment activities, such as manufacturing.

  • Common Tax types and Customs duties: VAT: 15%, TOT (turnover tax): 10% on services, 2% on goods, Profit tax for incorporated businesses: 30%, profit tax for individual businesses: 10-35% (progressive), payroll tax: 10 - 35% (progressive), import duties: 5-35%, surtax on goods imported (conditions apply): 10%,

  • Authority: Ethiopian Revenues and Customs Authority

Ranks

Doing Business Index (Doing Business Index, A copublication of The World Bank and the International Finance Corporation)

Ethiopia's ranking in Doing Business 2013: compared to global good practice economy as well as selected economies, Ethiopia is ranked 124 out of 189 economies.

Doing Business 2013 Ethiopia's rank in

    • Ease of Doing Business: 124

    • Starting a Business: 162

    • Dealing with Construction Permits: 55

    • Getting Electricity: 98

    • Registering Property: 107

    • Getting Credit: 105

    • Protecting Investors: 156

    • Paying Taxes: 103

    • Trading Across Borders: 165

    • Enforcing Contracts: 44

    • Resolvung Insolvency: 77

Communication

  • Telephone and Internet: The telephone and internet sector is monopolized by the state owned Ethio Telecom (formerly Ethiopian Telecommunication Corporation).

  • Ethio Telecom provides:

    • Landline phone service
    • Mobile Service (Roaming, Internet, 3G)
    • Internet
    • CDMA 1x Technology
    • Dial Up
    • Broaband (ADSL) 512Kbps to 4Mbps


Telecom Sector Subscribers

Telecom Service Type

Number of Subscribers until June 2013

Fixed Line

790,188

Public telephone

5,359

CDMA telephone

136,744

Dialup internet

76,504

Internet and data

221,000

Mobile Telephone

23,637,007

WCDMA Telephone

296,897

AgriNet

49

Multimedia

6,500

Roaming

444

CDMA 1X

104,003

GPRS

4,208,989

EVDO

76,445

Gota

1,010

Internet bandwidth

8.686 Gbps

Source: Ministry of Communication and Information Technology  

 

Ethiopia’s Energy output and potential, power plants under construction

Ethiopia is a country with huge potentials in energy production. The state run power utility, Ethiopian Electric Power Corporation, provides electricity. The power system is dominated by hydropower where it accounts for 99.4 percent of the total power generation. The remaining is covered by thermal and geo thermal power generation.

We used the following sources/references to write/compile the section on energy

  • EPPCo 2010/11 Annual Performance Report.
  • Sustainable financing of Ethiopia’s energy infrastructure: an economic analysis, Zenebe Gebreegziabher, 9th International Conference on the Ethiopian Economy July, 2011, Addis Ababa.
  • National Bank of Ethiopia, 3rd quarter report 2010/2011

In the year 2010/2011, the country has produced 1.26 billion kWh. The country has been able to develop its electric power generation capacity to 2000 MW until now. According to the National Bank of Ethiopia 2nd quarter report of 2010/2011, hydro electric power generation has increased by 29.1 percent. The Growth and Transformation Plan proposes to expand electricity generation capacity from current 2000 mega watt to 8000 to 10,000 Mw by 2015. This will increase coverage and access to electricity to 75 percent from the current 41 percent.

Current Output

Currently running hydropower generating plants are:

  • Tis Abay I Power Station - 12 MW
  • Tis Abay II Power Station - 73 MW
  • Koka Power Station - 43 MW
  • Awash II Power Station - 32 MW
  • Awash III Power Station - 32 MW
  • Fincha Power Station - 100 MW
  • Melka Wakena Power Station - 150 MW
  • Sor Power Station - 5 MW
  • Gilgel Gibe I Power Station - 184 MW
  • Tekeze Power Station - 300 MW
  • Gilgel Gibe II Power Station - 420 MW
  • Beles Power Station - 460 MW
  • Fincha Amerti Neshe Power Station - 97MW

Projects under construction

In recent years government investment in energy has increased substantially in response to growing demand. The Gibe III hydro electric power project, currently under construction, has a capacity of 1870 MW. Ashegoda Wind Power Project has a capacity of 120 MW. When completed, Aluto Langano Geothermal Electric Power project has a capacity to generate 70 MW.

Hydro power will continue to be the primary energy source in Ethiopia.  Currently there are 7 hydro-power and wind power plants which commenced construction in 2011. The Grand Renaissance Dam, which is being constructed on the Blue Nile River with estimated cost of 4.8 billion dollar, is expected to generate 5,250 MW after its completion in 4 years. The construction of 3 dams on the Blue Nile River, with a combined generating capacity of 5,800Mw is also in the pipeline. The other projects are:

  • Chemoga Yedas hydro power plant has a capacity of 250 MW,
  • Hallele Worabessa - 422 MW,
  • Genale Dawa - 254 MW,
  • Gebba - 371 MW.

The remaining are wind power plant projects, Adama I with a generation capacity of 51MW and  Aysha 100MW wind power. Planned investments over the next 5 years seek to generate over 5000 MW of energy.

Ethiopia's Energy Potential

The country has also vast potential for indigenous alternative energy resources. In a recent study by Ethiopian Electric Power Corporation, the country has the potential to generate 60,000 megawatts of renewable energy. This will allow the country to generate:

  • 45,000 megawatts from hydroelectric power
  • 10,000 megawatts from wind energy
  • 5,000 megawatts of geothermal energy
  • 7,455,232 Kwh from solar energy and
  • 119 MW from bagasse overall.

Address of EEPCO

Ethiopia Electric Power Corporation
Pizza, Electric Building
Tel:  +251 11 1559567
Fax:  +251 11 1560028
eepco.gov.et 

Ethiopia's mining potential, existing mines and production

Ethiopia’s mineral potential is not fully explored. Metallic, industrial, construction, and gemstone occurrences and deposits have been discovered in many parts of the country. The country is endowed with various types of metallic minerals such as gold, platinum, cooper, lead, zinc, manganese, tantalite-columbite, molybdenum and potash.

Systematic and modern mineral exploration was started in the late 1960s. Surveys were carried out in the Precambrian terrain of the country by both government and the private sector.

The Ethiopian Institute of Geological Survey has carried out exploration for metallic and industrial minerals. 51 percent of the surface area of the county has been geologically mapped and 50 percent of this has been geochemically surveyed.

Important discoveries of mineral deposits and occurrences in different parts of the country include:

  • Adola placer gold (3.8 tons),
  • the Lege Dembi primary gold (62 tons),
  • the Kenticha columbotantalite (25,000 tons), Kenticha feldspar (300,000 tons), Kenticha quartz (300,000 tons),
  • Bwambwawiha kaolin (500,000 tons),
  • the Yubdo platinum (12.5 tons),
  • the Bikilal phosphate (4,000,000 tons P2O5),
  • the Dallol potash (160,000,000 tons),
  • the Gewane Mille bentonite (70,000,000 tons),
  • the Lakes Region diatomite (40,000,000 tons), soda ash (400,000,000 tons)
  • the Daleti marble (50,000,000 tons) and some new developments which will be added

Lega Dembi gold mine is the only modern primary gold mine existing in the country. This medium to large scale mine produces 4000 kg of gold per year using CIP processing plant. Other mining activities include the production of tantalite (250 ton per year) and soda ash 20,000 tons per year), mining of kaolin, dimension stone (limestone, marble, and granite), cement row materials (limestone, gypsum, clay, silica sand & pumice), salt and artisanal mining of precious metals, gemstone, industrial minerals and construction materials.

Foreign companies, such as Nyota Minerals Limited are in the process of acquiring a large scale mining license for gold and associated minerals. ASCOM, NMic, Midrock Gold plc, Sheba Exploration Ltd. and Aberdeen INC and others are in advanced stage of Exploration and drilling for gold and associated metals.

One foreign (Canaco Ethiopia (Barbados) Inc.) joint Venture with a local company is doing advanced exploration and development of Gold and base metals.

  • Some other foreign companies are in exploration of tantalum-Niobium.
  • A number of other companies are on follow up and detailed gold and other minerals Exploration stage.
  • Some Companies (like BHP Biliton, G&B Central Africa Resources, Saink Potash Mining, Canadian companies, etc…) are on development and mining stage of various industrial minerals like potash, cement raw materials and others.

(Source:  Ministry of Mines,  mom.gov.et/AboutMLAP.aspx )

Business Etiquette

  • While you present yourself, you should be careful not to over-talk and you need to be attentive to what the person says.
  • When you visit business offices, you will usually be offered coffee, tea or bottled water. Do not refuse the offer.
  • While discussing, be careful not to hurt the feeling of your client especially by speaking negatively about the country. Focus on the positives - and there are plenty.
  • You usually need to have appointments before being able to meet managers or executives. And be on time. On the other hand, if the person offers to come to your hotel, expect that they may not be on time. But they will arrive eventually - so wait for them. And this is the reason why you should put this into consideration while planning your visits and meetings - always have a buffer time in between two visits/meetings.
  • If a client invites you for lunch or dinner, do not decline it unless you have another invitation. And if you do have another invitation, offer to make it the next day.
  • You should expect business lunches or dinners to take longer time than you have planned. And people may not discuss business during lunch. But they will get to the point eventually.
  • Your clients will be eager to take you to traditional restaurants where there will be live folk dances. Don't miss the experience. You will enjoy it.

Exchange Rates

Selling Buying
USD US 23.4241  22.9648 
EUR EU 26.1577  25.6448 
GBP UK 29.9898  29.4018 
CAD CA 17.4041  17.0628 
CHF CHE 24.005  23.5343 
AED UAE 6.3772  6.2522