16 Sept 2019
Manufacturing in East Africa: Ethiopia
Despite the fact that Ethiopia's manufacturing industry currently remains underdeveloped compared to other sectors, and peers such as Kenya and South Africa, it will emerge as the key growth driver and one of the top recipients of foreign direct investment (FDI). The government has embarked on an ambitious industrial parks programme and is offering generous incentives that are meant to encourage resource reallocation, away from agriculture.
Businesses can capture the large unfilled gaps in the domestic market as Ethiopia relies on imports for nearly all its manufactured products. Companies can also export competitively to international and regional markets by taking advantage of the country's low labour costs and the improving connectivity of transport networks in East Africa. While the Ethiopian government is specifically targeting the light-manufacturing sector, mainly garments and textiles, there is also nascent interest and investment in more advanced manufacturing such as autos, as well as train and aircraft parts for domestic use and export.
Integrated five-year plans are guiding state-led industrial development. The second of these Growth and Transformation Plans (GTP II), covering 2016-2020, is currently being implemented. The state is investing heavily in large-scale social, infrastructure and energy projects. GTP II includes incentives for international investors such as: 1) facilitation of profit; 2) ease in hiring expatriate personnel; 3) temporary income tax exemptions for investments in selected sectors; and, 4) duty-free imports of capital goods, components, and raw materials for exporting industries and manufacturers in priority sectors.