In the dynamic landscape of East Africa, Ethiopia stands out as a beacon of economic progress. In 2023, it managed to secure an impressive amount of $3.3 billion in foreign direct investments (FDI), surpassing its neighbors, Kenya and Uganda.
The Ethiopian Investment Commission (EIC), led by Chief Commissioner Hanna Arayasellasie, revealed that Ethiopia had already attracted $3 billion in the first ten months of the 2023/24 fiscal year. According to EIC data, China played a crucial role, accounting for nearly half of all FDI projects in Ethiopia.
The EIC report highlights that the strategic adoption of public-private partnerships (PPP) has been the cornerstone of this economic success, with notable projects such as the $600 million investment by UAE’s AMEA Power in the Aysha wind power project.
Furthermore, Ethiopia has opened its doors to foreign investment in digital payment systems. Last year, Safaricom Ethiopia, a subsidiary of the renowned Safaricom, obtained the payment instrument license, propelling the number of M-Pesa users to a remarkable 3.1 million.
In January 2024, Safaricom Ethiopia announced that the number of M-Pesa users had nearly tripled in four months to reach 3.1 million, with transactions worth $115.3 million.
Compared to last year’s figures, the Unctad report reveals a 3% decrease in FDI flows to Africa, totaling $53 billion. Egypt and South Africa follow Ethiopia in the rankings, while developed countries still attract the majority of greenfield projects.
Significant economic reforms
Ethiopia’s rise as a preferred destination for FDI in East Africa can be attributed to several factors. The country has implemented significant economic reforms and improved its investment climate by reducing bureaucratic barriers and offering attractive tax incentives.
Additionally, improvements in infrastructure, particularly in the energy, transportation, and telecommunications sectors, have created a favorable environment for foreign investors.
Ethiopia’s success in attracting FDI is also supported by its young and dynamic workforce, which offers a competitive advantage to investors seeking to exploit the potential of the African market. By focusing on sustainable development and integrating responsible business practices, Ethiopia strives to create a resilient and inclusive economic model.
However, despite these advances, challenges remain. Political stability and regional conflicts can potentially affect investor perceptions and hinder FDI flows.
For now, Ethiopia emerges as a leader in East Africa for foreign direct investments, illustrating the tangible benefits of well-designed economic reforms and strategic partnerships.
