How Ethiopia’s Economic Future Is Being Anchored in Its Peripheries











For decades, Ethiopia’s economy has been tethered to its central highlands. Addis Ababa’s industrial parks, Oromia’s coffee, and Tigray’s textiles once defined the country’s growth model. That geography now looks exhausted. Years of civil war, insurgency and political strife have hollowed out these “core” provinces, leaving shattered infrastructure, declining exports and weary investors.

The government’s new bet is on its margins. From the forests of Benishangul-Gumuz to the deserts of the Somali region, Addis Ababa is orchestrating a strategic rebalancing: harnessing neglected peripheries as anchors of growth. Three mega-projects dominate this experiment—the Grand Ethiopian Renaissance Dam (GERD), the Kumruk gold mine and a $2.5bn Dangote fertilizer complex.

Individually, each project answers a pressing national need: energy, hard currency, food security. Collectively, they represent a bold attempt to redraw Ethiopia’s economic geography and insulate growth from its unstable heartlands. The wager is clear: the periphery, long dismissed as Ethiopia’s hinterland, is now the stage for its economic future.

GERD: more than megawatts

Few projects capture Ethiopia’s defiant streak like the GERD. Built without World Bank loans and financed largely through patriotic bond sales, the dam has become a national talisman. As it prepares for inauguration in September 2025, it is set to generate 5,150MW of electricity—more than doubling current supply.

Cheap power (around $0.04/kWh) could lure manufacturers and miners. Already, Ethiopia sells surplus electricity to Kenya, Djibouti and Sudan, earning $338m in foreign exchange last year. With the GERD at full tilt, annual power revenues could hit $1bn, while raising domestic electrification rates from barely half the population today to nearly 80%.

But GERD’s significance is political as much as economic. In rejecting colonial-era Nile treaties that favoured Egypt, Ethiopia is using hydropower as diplomacy, offering energy trade instead of water allocation. Whether Cairo and Khartoum embrace that bargain remains uncertain. Closer to home, the project has displaced Gumuz and Berta communities and risks rapid sedimentation unless Ethiopia manages its eroded highlands. The dam is an engine of sovereignty—but also a test of environmental and social stewardship.

Gold at Kumruk: lifeline or curse?

If electricity is Ethiopia’s future, hard currency is its present pain. The birr has shed value amid chronic dollar shortages, undermining everything from fuel imports to medicine supplies. The Kumruk mine in Benishangul-Gumuz promises some relief. Allied Gold, a private operator, is investing $500m to extract nearly 290,000 ounces of gold annually, worth $600m–$670m at today’s prices. Royalties and taxes could funnel $100–150m to the treasury each year.

For a cash-strapped government, those sums matter. For locals, the mine could create 1,500 jobs and extend power lines around Asosa. Yet the risks are familiar. Open-pit cyanide mining in a fragile ecosystem threatens water and land. Artisanal mining has already scarred the landscape with mercury contamination and child labour. Governance is the hinge: without strict oversight, Kumruk could deepen grievances rather than ease them.

The question is whether Ethiopia can avoid the “resource curse” that has plagued so many African extractors. Kumruk will not decide the answer alone—but it will set an important precedent.

Fertilizer in Gode: food and influence

Few commodities matter more to Ethiopia’s 70% rural workforce than fertilizer. The country imports over 90% of its needs, leaving farmers hostage to global price spikes. Between 2020 and 2022, costs jumped 170%, squeezing harvests and widening food insecurity.

The Dangote Group’s plant in Gode, Somali region, aims to flip the equation. Backed by $2.5bn and Ethiopian Investment Holdings, the facility will churn out 3m tons of urea annually—four times domestic demand. Fed by local natural gas via a new pipeline, the plant promises to secure supplies, stabilize prices and boost yields.

Its surplus will not go to waste. Positioned on the Djibouti trade corridor, the plant could export to Kenya, Somalia and beyond, turning Ethiopia into a regional fertilizer hub. Much like GERD exports electricity, fertilizer diplomacy could give Addis a fresh lever of soft power.

Yet risks persist. The Somali region, though calmer than in past decades, remains underdeveloped and fragile. Locals may welcome jobs, but they will also watch closely how benefits are shared. And Ethiopia’s sovereignty play may come with a dependency twist: with Dangote holding 60% equity, Addis must guard against over-reliance on a single foreign conglomerate.

Interlocking ambitions

Taken together, GERD, Kumruk and Dangote form a triad of interdependence. GERD’s cheap electricity powers Kumruk’s energy-hungry extraction. Kumruk’s gold revenues help service debt and fund imports. Fertilizer from Gode sustains farmers and underpins food security. The three projects create a self-reinforcing loop: energy, hard currency and agriculture.

But they also expose a paradox. Ethiopia’s federal system grants regions autonomy, yet these mega-projects are firmly top-down, driven by state holding companies and political fiat. If peripheries perceive development as extraction without inclusion, old resentments could harden. Benishangul-Gumuz and Somali have histories of neglect; being turned into “resource provinces” may provoke backlash if not accompanied by visible local dividends.

The FDI mirage

On paper, Ethiopia remains an attractive investment story. FDI inflows reached $4bn in 2025, buoyed by large state-brokered deals. Yet beneath the headline lies fragility: announced greenfield projects plunged 75% in 2024, from $3.2bn to just $801m.

The message is clear. Foreign conglomerates will sign on for government-backed mega-ventures, but ordinary investors remain wary. Conflict in Oromia and Amhara, forex rationing, and bureaucratic red tape make Ethiopia a tough sell. Investors are watching to see if the government can deliver stability and credible reforms beyond headline projects.

High stakes on fragile ground

The pivot to peripheries is both pragmatic and risky. In Tigray, civil war destroyed factories and farms; Oromia’s insurgency has crippled exports; Amhara reels from violence. By contrast, Benishangul-Gumuz and Somali now appear relatively calmer. Yet their stability is shallow. Ethnic federalism, contested land and weak local institutions could all erupt if mega-projects breed inequality.

The government’s gamble is that jobs, electricity and fertilizer will pacify discontent. History, however, suggests that extraction without equity often fuels rebellion. Ethiopia’s centralised hand may bring swift progress—but sustainable peace requires local voice and ownership.

What must be done

Three priorities stand out.

Inclusion: Ensure benefit-sharing. Local communities must see tangible improvements—in jobs, services, infrastructure—not just promises.

Credibility: Reverse the collapse in greenfield FDI by addressing forex shortages, contract enforcement and investor red tape. Ethiopia’s digitalisation drive helps, but stability matters more.

Governance: Strengthen environmental and social safeguards. GERD sedimentation, Kumruk cyanide and fertilizer monopolies are manageable risks—if regulators act.

A new economic map

Ethiopia’s periphery-first strategy is a wager on geography. If successful, it could create a diversified, resilient economy: hydropower lighting up factories, gold filling the central bank, fertilizer securing harvests. It could also reshape the Horn of Africa, giving Ethiopia new tools of economic statecraft in energy and agriculture.

But it is a wager nonetheless. Ethiopia has staked its future on projects that are symbols of sovereignty but also seeds of potential conflict. The next decade will reveal whether the periphery becomes Ethiopia’s salvation—or its next fault line.

In Ethiopia, the centre no longer holds. The margins must.