Import Substitution: The Key to Ethiopia’s Economic Resilience Amid Floating Exchange Crisis?

Import Substitution: The Key to Ethiopia’s Economic Resilience Amid Floating Exchange Crisis? On Tuesday, fuel prices surged, a sharp reminder of the turbulent waves unleashed by Ethiopia’s shift to a floating exchange rate. This unshackled currency now dances to the unpredictable tune of market forces, sending shockwaves through industries and households alike. Importers grapple with relentless cost hikes, while exporters cautiously savor the promise of a level playing field. Inflation relentlessly eats away at people’s money, reducing what they can buy and pushing them to make do with less. From small businesses fighting to stay afloat to families struggling to make ends meet, everyone is caught in a constant rise in costs, with no relief in sight. What was once a tightly controlled system has become an economic battleground, where resilience and adaptability are the only currencies of survival. Adding to the pressure, the government’s ambitious tax policies are shaking the business landscape, exacerbating the challenges caused by the floating exchange rate. “Although economic theory suggests that devaluation of the local currency should boost foreign currency generation for exporters, thereby encouraging them to ramp up production, this is not unfolding in Ethiopia’s context,” said Atlaw Alemu (PhD), an Economics Lecturer at Addis Ababa University. He added, “Whether the birr is devalued or not, our exports remain rigid. Meanwhile, imports continue to rise, which will only deepen the economic pain felt by society.” He added that structurally, there is no significant interest in substituting imports. As a result, importers are more inclined to import rather than focus on local production. “Import substitution needs to be treated as a priority, with increased incentives. The process of entering this sector should be simplified,” he emphasized. He also pointed out that import substitution is not just about commercial interests; it involves broader concerns, including technology transfer. “Policymakers must approach this with caution,” he cautioned, stressing the importance of addressing hindering factors such as ethnic politics. “For the shift to a floating exchange rate to yield results, both imports and exports must be responsive to its effects,” he added. He pointed out that what’s happening across industrial parks in Ethiopia resembles labor export, where the focus is solely on assembling final products. “If foreign direct investment (FDI) is limited to this, it’s meaningless. FDI should create jobs, transfer knowledge, and lay the foundation for import substitution,” he stated. He emphasized that import substitution requires robust capacity building, which demands expensive capital. To encourage private investors, the government should establish a fund to promote reverse engineering, enabling companies to develop their own designs in the long run. The country’s production capacity is only 38 percent. The remaining 62 percent is imported with a huge amount of foreign currency. The Import substitution strategy targets localizing key manufacturing within 3-10 years, targets 15 sectors critical to import independence, including vehicles, aircraft parts, chemicals, plastics, steel and sugar products. The Ministry of Industry has identified around 96 products, including telecom equipment and a range of construction materials, to be substituted with domestic alternatives within the next decade, according to Ethiopian Business Review.

House of Representatives Passes Law to Close Legal Loophole in Government and Public Property Restitution

House of Representatives Passes Law to Close Legal Loophole in Government and Public Property Restitution The House of People’s Representatives has approved a new Property Restitution Law, designed to close legal loopholes in the recovery of government and public assets. During its 14th regular session held today, the House reviewed the draft law and considered the report and recommendations presented by the Standing Committee on Legal and Justice Affairs. Following deliberations, the bill was passed with an overwhelming majority. The newly approved law establishes mechanisms for returning unlawfully acquired property, ensuring accountability, and closing legal gaps that have previously hindered restitution efforts. Legal Adjustments and Committee Insights According to the Standing Committee’s Secretary, Ezegnet Mengistu, the committee presented a report detailing modifications and additional provisions incorporated into the final draft before its submission for approval. The committee emphasized that its review process involved extensive stakeholder consultations, including public discussions and expert forums, to gather comprehensive input before finalizing the bill. The Property Restitution Law is designed to eliminate legal gaps in reclaiming misappropriated government and public assets. Key Provisions and Expected Impact Members of Parliament highlighted that the law will: Deter individuals from illegally acquiring public and private property. Hold accountable those who unlawfully benefit from stolen assets. Support national development by ensuring that public wealth is protected and utilized appropriately. However, some lawmakers raised concerns about the law’s enforcement. They stressed the importance of: Ensuring the implementation mechanisms are robust to prevent loopholes. Strengthening enforcement agencies responsible for asset recovery. Protecting citizens’ property rights to avoid unintended consequences. Addressing Constitutional Rights and Anti-Corruption Efforts Secretary Ezegnet clarified that the bill does not infringe on constitutional property rights, including inheritance and asset accumulation through legal means. The law is intended to reinforce anti-corruption efforts, enabling the recovery of illegally obtained national assets and preventing financial crimes. After an extensive debate on the bill’s significance and relevance, the House of Representatives passed the Property Restitution Law with a majority vote, with only three objections and four abstentions. This new legislation marks a significant step in strengthening accountability and governance, ensuring that unlawfully acquired assets are returned to their rightful owners while promoting national economic growth.

Ethiopia Faces Fuel Distribution Crisis with Fewest Gas Stations Per Capita in Africa

Ethiopia Faces Fuel Distribution Crisis with Fewest Gas Stations Per Capita in Africa The House of Peoples’ Representatives has approved a draft proclamation aimed at regulating the trade of petroleum products in Ethiopia. The report, presented by the Standing Committee on Trade and Tourism Affairs, was reviewed and passed with two votes in favor and one against. During the session, Sahrela Abdulahi, Director General of the Petroleum and Energy Authority, stated, “Ethiopia has the fewest gas stations per capita in East Africa.” She attributed the shortage to justice-related challenges, such as disputes over land allocation and delays in regulatory approvals, which have hindered the construction of new gas stations. She also pointed out that existing stations are disproportionately located in areas with little economic activity, further aggravating the problem. “This imbalance not only limits access to fuel in high-demand regions but also disrupts supply chains, affecting vital sectors like transportation and agriculture,” the spokesperson added. The legislation aims to combat smuggling, hoarding, and fuel adulteration—issues that have long disrupted Ethiopia’s petroleum sector. Sahrela stressed the urgency of reform, noting that nearly 500 woredas across the country lack a single gas station, leaving many communities underserved. The newly approved proclamation also introduces stringent penalties for violations in the petroleum trading sector. Among its key provisions, individuals repeatedly trading petroleum products outside government-set prices or mixing them with foreign substances will face imprisonment for three to five years and fines ranging from 300,000 to 500,000 birr. Additionally, those storing petroleum products outside authorized locations, selling them outside designated areas, or using unsafe containers will have their products confiscated. These offenders will also face imprisonment for up to three years and fines between 350,000 and 500,000 birr.

Commercial Bank of Ethiopia Reports 5.3 Trillion Birr in Digital Transactions in Six Months

Commercial Bank of Ethiopia Reports 5.3 Trillion Birr in Digital Transactions in Six Months The Commercial Bank of Ethiopia (CBE) has announced that it processed 5.3 trillion Birr through its digital banking services in the first half of the current fiscal year, highlighting the growing adoption of digital financial solutions in the country. According to the bank, 79 percent of all money transfer transactions are now conducted via digital platforms, reducing reliance on physical branch visits and enhancing convenience for customers. CBE’s Expanding Digital Banking Ecosystem Bilen Hailemichael, Director of Merchant and Agent Management at CBE’s Digital Banking Division, emphasized the bank’s extensive digital reach. 30 million users are actively using CBE Birr, the bank’s mobile money service. 9 million customers are utilizing mobile banking services. 21 million cardholders are transacting through CBE’s banking system. Over 4,000 businesses are using Point-of-Sale (POS) terminals for cashless transactions. Bilen also noted that 910 million transactions were processed through the bank’s digital services in just the past six months. Record Growth in Digital Transactions CBE’s digital transactions have seen a 90 percent increase compared to the same period last year, signaling a strong shift towards digital banking among Ethiopian customers. To keep pace with this growth, Bilen stated that CBE is continuously expanding its digital services and introducing new innovations to improve customer experience and financial inclusion. As Ethiopia’s largest commercial bank, CBE’s digital transformation underscores the increasing reliance on cashless banking solutions and the country’s move towards a more digitized economy.

Air Arabia Introduces Direct Flights to Addis Ababa

Air Arabia Introduces Direct Flights to Addis Ababa Air Arabia has announced the launch of its latest direct flight service to Addis Ababa, Ethiopia’s capital, further expanding its global network. Starting January 30, the airline will operate three weekly flights between Sharjah International Airport and Addis Ababa Bole International Airport, with departures scheduled on Tuesdays, Thursdays, and Saturdays. Adel Al Ali, Group Chief Executive Officer of Air Arabia, expressed enthusiasm about the new route, stating, “We are excited to add Addis Ababa to our expanding network. This addition underscores our commitment to strengthening connectivity and fostering economic and cultural ties between the UAE and Ethiopia. By increasing our destinations from Sharjah, we aim to support trade and tourism while continuing to provide affordable and convenient travel options.” Expanding Reach with Ras Al Khaimah-Tashkent Flights In addition to the Addis Ababa route, Air Arabia recently celebrated another milestone with the introduction of direct flights from Ras Al Khaimah to Tashkent, Uzbekistan. This new service connects Ras Al Khaimah International Airport to Islam Karimov Tashkent International Airport with weekly flights every Friday. The airline emphasizes that this route provides passengers with a reliable, convenient, and cost-effective travel option. Adel Al Ali highlighted the significance of this expansion, stating, “We are pleased to launch direct flights between Ras Al Khaimah and Tashkent, further extending Air Arabia’s reach and reinforcing our commitment to providing seamless connectivity.” Strengthening Trade and Tourism Growth With these latest additions, Air Arabia continues to play a pivotal role in enhancing regional and international connectivity. The expansion aligns with the airline’s strategic vision of supporting trade and tourism across key destinations while maintaining its reputation for affordable and efficient travel. Both the Addis Ababa and Tashkent routes reflect Air Arabia’s ongoing commitment to broadening its network, catering to growing demand, and contributing to the economic development of the regions it serves.

Ethiopia Adjusts Retail Fuel Prices Amid Market Changes

Ethiopia Adjusts Retail Fuel Prices Amid Market Changes Addis Ababa, Ethiopia – January 7, 2025 The Ethiopian Ministry of Trade and Regional Integration has announced an adjustment in the retail prices of petroleum products, effective from January 7, 2025 (Tahsas 29, 2017 Ethiopian Calendar), at midnight (12:00 AM). The revised prices apply to Addis Ababa and will remain in effect for the next one month. New Fuel Prices Per Liter: Gasoline (Benzene) – ETB 101.47 Diesel (White Naphtha) – ETB 98.98 Kerosene – ETB 98.98 Aviation Fuel – ETB 109.56 Light Black Diesel – ETB 108.30 Heavy Black Diesel – ETB 105.97 This price adjustment comes amid fluctuations in global fuel markets and the government’s ongoing efforts to regulate fuel pricing in response to economic conditions. The Ministry has urged fuel distributors and consumers to comply with the updated prices and warned against any attempts at price manipulation or hoarding. The government continues to monitor the fuel supply chain to ensure stability in the market. This latest revision is expected to impact transportation costs and inflation levels, with businesses and households likely to adjust their budgets accordingly.

WIDU.Africa: Unlocking Entrepreneurial Potential in Ethiopia through Diaspora Collaboration

WIDU.Africa: Unlocking Entrepreneurial Potential in Ethiopia through Diaspora Collaboration In a world increasingly focused on harnessing technology to bridge economic divides, WIDU.Africa stands out as an innovative platform transforming how diaspora communities contribute to the development of their countries of origin. Launched in Ethiopia in August 2021, WIDU.Africa connects Ethiopian entrepreneurs with members of the African diaspora in Europe, creating a collaborative framework that transcends the traditional model of remittances. Addressing Challenges with a New Approach Ethiopia’s entrepreneurial ecosystem is ripe with potential, yet many small businesses struggle to secure the financial and strategic resources needed to grow. According to the World Bank, diaspora communities send billions in remittances annually, but only a small fraction is directed toward investments in productive ventures. WIDU.Africa seeks to address this gap by channeling these funds into entrepreneurial projects while providing  business coaching to ensure sustainability. The platform that is financed by the German Federal Ministry for Economic Cooperation and Development (BMZ) and implemented by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, combines financial grants with professional mentorship. This dual approach aims to create jobs, increase incomes, and foster economic resilience—a mission aligned with the Africa-Europe Joint Vision for 2030. How It Works WIDU’s model hinges on a co-investment structure. Entrepreneurs and diaspora donors register on the platform and jointly commit funding to a proposed business project. For every euro invested by the pair, WIDU matches the investment, offering grants ranging from €250 to €2,500. The program’s focus on transparency and accountability is evident in its requirement for detailed investment plans and proof of spending, ensuring funds are used effectively. What sets WIDU apart is its integration of coaching services. Entrepreneurs receive tailored guidance from local partners to refine their business strategies, improve operations, and manage finances. This mentorship addresses a critical gap often overlooked by traditional funding models: the need for operational expertise to complement financial support. Measurable Impact Since its launch in Ethiopia, WIDU.Africa has supported about 400 small businesses, contributing to the creation and sustaining of 900jobs—64% of which are held by women. This emphasis on gender inclusivity aligns with global development goals and underscores the platform’s commitment to empowering underrepresented groups in the entrepreneurial landscape. These results are not limited to Ethiopia. Across six African countries, including Ghana, Kenya, and Cameroon, WIDU has facilitated over 7,000 business projects since its inception in 2019, mobilizing millions of euros in combined private and grant investments. Success Stories from Ethiopia The impact of WIDU is best illustrated through individual success stories. Take Lula Design, a small sewing business in Addis Ababa. With a WIDU grant, owner Azeb Temesgen expanded her operations, purchasing new equipment and hiring skilled staff. This growth not only improved her income but also contributed to job creation in her community. Another example is Beta Blockers PLC, a social enterprise addressing child malnutrition through fortified crackers. With the help of WIDU, the founders acquired essential equipment, scaled production, and created four new jobs. These stories highlight the diverse sectors and challenges WIDU addresses, from fashion and food security to renewable energy and education. Beyond Funding: Building a Digital Ecosystem WIDU’s impact extends beyond direct financial support. Its digital platform promotes inclusion, scalability, and efficiency, enabling entrepreneurs and donors to collaborate seamlessly. The platform’s data-driven approach ensures that resources are allocated effectively, while its user-friendly interface encourages broader participation from both the diaspora and local entrepreneurs. WIDU has also demonstrated adaptability by launching thematic funding calls tailored to pressing societal needs. For instance, Ethiopia’s #FoodSecurity initiative supported sustainable agricultural projects, underscoring the platform’s role in addressing critical challenges through targeted interventions. The Role of the Ethiopian Diaspora A key strength of WIDU is its reliance on the Ethiopian diaspora as both funders and mentors. By involving the diaspora in project selection and development, WIDU leverages not just financial contributions but also the expertise and networks of individuals with a deep understanding of both local and global markets. This model creates a feedback loop of knowledge transfer, enhancing the success rate of funded projects. The Road Ahead As WIDU.Africa scales its operations, its potential to reshape Ethiopia’s entrepreneurial landscape is immense. By combining financial support with strategic mentorship, the platform offers a replicable model for leveraging diaspora contributions to drive sustainable economic development. With plans to expand its reach and refine its approach, WIDU.Africa is well-positioned to continue fostering innovation, creating jobs, and empowering communities across Ethiopia and beyond. For Ethiopian entrepreneurs and their diaspora supporters, WIDU represents more than a funding opportunity—it’s a platform for shared growth and long-term impact. For more details, visit WIDU.Africa. 1 COMMENT Unlocking Entrepreneurial Potential in Ethiopia through Diaspora Collaboration - Ethio Diaspora Hub Service January 7, 2025 At 8:14 pm […] Click here to read more […] […] Click here to read more […] Comments are closed.

Eight Public Development Organizations Officially Join Ethiopian Investment Holding

Eight Public Development Organizations Officially Join Ethiopian Investment Holding Eight public development organizations have officially joined Ethiopian Investment Holding. The newly added companies include Ethio Post, Ethio Engineering Group, Ethiopian Industrial Resources Development Corporation, Ethiopian Railways Corporation, Industrial Parks Development Corporation, Ethiopian Development Bank, Ethiopian Electric Power, the National Animal Health Institute, and ShieldVax, which is part of the Ethio Pharma Group. The official meeting and introduction program, held today, was attended by Brook Taye, CEO of Ethiopian Investment Holding; Frehiwot Tamru, a board member of the holding and CEO of Ethio Telecom; as well as the heads of the development organizations. Brook Taye, CEO of Ethiopian Investment Holding, explained that the holding, established as part of Ethiopia’s economic reforms, now owns and manages 40 development companies. He emphasized the successful efforts to improve corporate management and profitability within public development organizations. Brook Taye further stated that Ethiopian Investment Holding operates on the principle that the nation’s wealth should outweigh its debt. With this in mind, the holding is dedicated to recognizing, managing, and utilizing the assets of public development organizations for the benefit of the country. Frehiwot Tamru, Ethiopian Investment Holding board member and CEO of Ethio Telecom, highlighted the critical role of public development organizations in generating income, building infrastructure, and creating jobs. She noted that these organizations contribute significantly to the country’s development by improving citizens’ lives, streamlining public services, and enhancing both revenue and expenditure management. She also stressed that for development organizations to remain competitive, profitable, and sustainable in both local and international markets, they must strengthen their operations, institutional organization, and policies. Habtamu Hailemichael, Deputy CEO of Ethiopian Investment Holding, stated that the holding has been entrusted with enhancing the effectiveness of development organizations by focusing on commercial considerations and the efficient management and development of government resources. As part of this mandate, the eight development organizations previously under government management have now joined the holding. He emphasized that these public development organizations should receive special attention to expand investments across various sectors, products, and geographic areas. He reassured that the holding would provide the necessary support to help government development companies generate income, increase profitability, and strengthen their public image. Fisa Yedegesu (Dr.), CEO of Industrial Parks Development Corporation, expressed excitement about the corporation’s inclusion in Ethiopian Investment Holding, calling it a significant opportunity. He noted that the development of industrial parks will offer great potential for boosting industrial productivity. He particularly highlighted that providing integrated infrastructure to investors would attract more investment. The CEO of Ethio Post also spoke about the benefits of managing development organizations under one umbrella, stating that this would enhance the effectiveness of the companies and ultimately benefit the country and its people. He added that Ethiopian Post’s inclusion in Ethiopian Investment Holding would help sustain its profitability while fostering closer collaboration with other companies under the holding.

MIDROC Investment Group to Build $200 Million Gold Processing Plant in Benishangul-Gumuz, Ethiopia

MIDROC Investment Group to Build $200 Million Gold Processing Plant in Benishangul-Gumuz, Ethiopia MIDROC Investment Group, owned by Ethiopian-born Saudi billionaire Mohammed Al-Amoudi, is investing over 26 billion Ethiopian birr (approximately US $200 million) to build a modern gold processing factory in Ethiopia. This move is aimed at enhancing the country’s gold production capabilities and supporting the broader economic growth of the region. The factory will be located in the Bullen District of the Metekel Zone, part of the Benishangul-Gumuz region. The area, known for its natural resources, has faced security challenges in recent years, with ethnic violence affecting local communities. However, reports suggest that the security situation has stabilized, particularly following efforts by local groups such as the Fano forces. These efforts have been aimed at addressing concerns related to the protection of ethnic groups in the region. MIDROC representatives have reportedly engaged with senior regional government officials in Gelgel Beles town, where they received assurances of full support for the project from local authorities. This includes providing the necessary security and ensuring a favorable environment for the factory’s development and operation. Surafel Lakew, the Mining Sector Director at MIDROC Investment Group, outlined that the new facility will employ modern techniques for gold extraction and processing, moving away from traditional, small-scale mining practices. This shift is expected to improve efficiency, reduce resource wastage, and increase the revenue generated from gold production in the region. The company aims to bolster Ethiopia’s gold sector with more advanced technology and operational practices. Once operational, the factory is expected to create over 1,500 jobs, contributing to local employment and offering training opportunities for workers. The plant is also expected to help curb illicit gold mining activities, which have historically undermined the formal sector and resulted in financial losses. MIDROC’s investment follows the company’s previous setback in 2018 when its mining license for the Lega Dembi gold site in the Oromia region was canceled. The license revocation came amid protests and allegations of environmental pollution due to chemicals used in gold extraction. Despite this, MIDROC continues to play a significant role in Ethiopia’s economy and maintains a diverse portfolio across multiple sectors, including mining, construction, and manufacturing. With a reported turnover of over US $25 billion and more than 70,000 employees across Ethiopia, MIDROC’s new project is seen as an important contribution to the country’s growing gold sector. The factory is expected to enhance the country’s position as a leading producer of gold in Africa, while offering a model for modern, large-scale mining operations. The development of the gold processing factory in Benishangul-Gumuz represents a significant investment for MIDROC Investment Group, with potential long-term benefits for Ethiopia’s mining industry and economy. The project is expected to create jobs, boost revenue, and improve the sustainability of gold extraction practices in the country. 1 COMMENT Lucha Woyessa Aga January 7, 2025 At 1:34 pm I want to get such news and notification from Addis Insight. I want to get such news and notification from Addis Insight. Comments are closed.