Ethiopia Abyssinian Lion Roars Again: Ethiopia Is the Often Unsung Hero of Africa's Current Economic Upswing. It Is the Third Fastest-Growing Global Economy and Could Well Take the Lead This Year. A Combination of State and Private Enterprise Appears to Be the Motor Behind This Growth. Tom Minney Reports
Minney, Tom, African Business
Black-maned lions adorn Ethiopia's heraldry and history and still roar from the lion zoo in the centre of capital Addis Ababa, a strange echo through the city bustle. But Ethiopia is not on the list of 'African lion' countries selected by the Boston Consulting Group - the list included Tunisia and Egypt - nor mentioned by many other bullish reports on Africa in 2010.
They may have missed a king of the economic jungle. According to the International Monetary Fund, Ethiopia will be the world's third fastest-growing major economy for 2011-2015, lagging behind only China and India, with a GDP currently $30.9bn, forecast to grow by at 8.1% each year. The Economist Intelligence Unit in January forecast 2011 growth at 9%, ahead of both China and India. Ethiopia was Africa's fifth-largest economy in 2010, and its population of 80m is the continent's third largest. The IMF predicts that exports of goods will grow from $1.4bn in 2008/09 to $2.3bn in 2010/11 and $4.4bn in 2014/5. Imports of goods will grow from $7.7bn to $13.8bn over the same period.
The economy is transforming. Services - real estate, hotels, transportation, communication, banking, health and education - recently overtook agriculture as the main contributor at 45% of GDP and are forecast to become even more dominant. In the six months to January 2011, gold passed oil seeds as the second-biggest contributor to exports, providing more than $179m of the total $1.1bn exported.
Government growth forecasts are higher than the IMF. Berhanu Kebede, the Ethiopian ambassador to the UK, told African Business: "Ethiopia has registered an average GDP growth rate of 11% in the past six years. This growth is expected to be repeated in the coming five years where, in the best-case scenario, it could reach an average annual GDP growth rate of 14.9%."
Zemedeneh Negatu, managing partner of Ernst & Young Ethiopia, is another optimist: "Ethiopia's economy is projected to reach $472bn in 15 years," (GDP at purchasing-power parity exchange rates). He says by 2023 it will be sub-Saharan Africa's third-largest economy, with per capita GDP of over $4,000.
Much of the growth is driven by government and local private sector investment. Foreign investors joining the hunt include China, India and Middle Eastern firms, often backed by sovereign funds and state entities.
Chinese companies are important in infrastructure, mining, telecommunications, manufacturing and industrial parks. Foreign direct investment from India, including into manufacturing, totals $5bn, according to Ethiopia's Ministry of Trade and Industry. Karuturi Global, listed on four Indian stock exchanges, has leased 312,000ha of farmland to grow palm oil, sugar, rice, maize and roses for export worldwide and to neighbouring countries.
Growth was driven through the five-year Plan for Accelerated Development to End Poverty, which ran until mid 2010 (the fiscal year ends in July under Ethiopia's calendar) and focused on meeting the UN's MDG targets through agriculture, rural development, education, health, water and sanitation, roads, urban development, private sector and trade. Major progress has included infrastructure and closer links to world markets.
The new Growth and Transformation Plan 2011-2015 anticipates that industry will score the highest growth with a 20% annual average, boosted by favourable macroeconomic policies including a 16.5% devaluation in the exchange rate in September 2010, public investments in power and transport networks, new foreign investment in mining, and sector-specific incentive schemes such as two large industrial parks built by Chinese and Turkish investors.
Helaway Tadesse, senior vice president of Zemen Bank, commented: "Within industry, the main sub-sectors to be promoted are textiles (whose exports are to surpass $1bn in five years), cement (forecast to show a tenfold output increase), sugar, leather products, steel/metals, and mining. …