Ethiopia has one of the fastest growing economies in the world and is ranked between 7th and 14th depending on how growth is measured. This East African country is the second most populous country in Africa after Nigeria, with a growing population of over 120 million, approximately two-thirds of whom are under age 30. According to the US Department of State, these figures, as well as low-cost labour, a national airline with over 100 daily passenger flight connections, and growing consumer markets, are key elements attracting foreign investment.
Economic Growth
The African Development Bank Group states that Ethiopia’s economy grew 7.1% in 2022/23, up from 6.4% in 2021/22 and growth is projected at 6.7% during 2024–25 due to fiscal consolidation.
An envisaged slowdown in investment, due to protracted debt restructuring negotiations, could hold back access to development financing. Tighter monetary policy is expected to reduce inflation to 21.0% in 2023/24 and 15.4% in 2024/25.
Opening the economy to foreign investment
On 18 April 2024, the Ethiopian Investment Board (EIB) introduced Directive No. 1001/2024 to regulate foreign participation in export, import, wholesale, and retail trade, areas previously restricted to domestic investors.
The country has been gradually opening its controlled economy, aiming to allow customers, and companies, from other geographical areas, to operate in the region.
They list investment opportunities in export, import, wholesale, and retail trade, usually reserved for domestic entities. The directive also outlines eligibility requirements for foreign investors to enter these previously restricted sectors.
Electrification
According to the World Bank, Ethiopia has made significant progress in energy access in recent years with a 94% electrification rate in urban areas. However, around 60 million Ethiopians, half the population, remain without electricity access.
The World Bank-supported Ethiopia Electrification Program (ELEAP), which was launched in 2017, has facilitated over 1.6 million on-grid connections, providing electricity to more than 8 million people, and more than 19,000 public facilities such as schools, healthcare centres, and administrative government buildings, across Ethiopia.
The program also aims to supply 35% of the population with off-grid solutions by the end of 2025.
Economic and structural problems
The World Bank also reports that multiple shocks since 2018 have affected nearly all households across the country, with about 91 percent of the population either experiencing persistent droughts, floods, locust infestations, conflict, or some combination of them.
Ethiopia has a 10-year infrastructure plan that includes targets for rail, road, and airport capacity and include the Addis Ababa-Djibouti railway project. However, the road network to rural areas is underdeveloped and in a poor state.
Despite these problems, Ethiopia’s economy continues to grow rapidly.
The status of Ethiopia’s retail sector
Ethiopia’s retail market is valued at around $23 billion and, while experiencing growth, remains largely traditional and underdeveloped. Apart from a few modern retail shopping centres in Addis Ababa, the capital city, traditional markets and small grocery stores dominate.
The Ethiopian government has opened the retail sector to foreign investors, aiming to attract investment and modernize the sector. E-commerce is growing thanks to a wider internet penetration, and this is expected to have a rapid expansion thanks to the deregulation of many of Ethiopia’s industries and the effects of more sophisticated technology being introduced.
Entering or expanding operations in the Ethiopian retail sector
Frontline Research Group, who have three decades of experience in conducting market research in developing economies and traditional trade, have a number of ongoing projects across Ethiopia.
Steve Johnson, Managing Director at Frontline Research Group, says, “FMCG and CPG companies wanting to understand the Ethiopian retail sector will find it difficult without the assistance of field researchers, and an experienced research company who can provide analysis, insights and direction.”
Because of the overwhelmingly dominant traditional trade where few, if any, records are kept and where limited retail outlets have registered addresses, gathering information is not easy.
“We have developed tools and methodologies for the collection and analysis of data regarding market trends, consumer behaviour, and the competitive landscape. Our market intelligence is second to none,” says Steve.
Entering or expanding operations in the Ethiopian retail space promises significant returns and now is a good time to invest. Rapid economic growth and development of infrastructure are forecast, and, at present, competition is limited but also expected to become more aggressive thanks to the recent opening of the economy.
“We have the skills and experience, as well as research teams, in place to help your company become a significant player in the Ethiopian retail sector,” concludes Steve.
For more information or to obtain a quotation contact Steve Johnson, Managing Director at Frontline Research Group on Tel: +230 5493 6376 or email: steve@frontlineafrica.com