- High demand for foreign currency by the Government of Ethiopia’s infrastructure projects is creating foreign exchange shortages. Businesses can expect delays of weeks or months to exchange currency because they must apply and be approved by the government.
- Accelerators and incubators have most of their operations in Addis Ababa, so innovative businesses outside of Addis Ababa do not get as much support as their city counterparts.
- Lack of access to finance is a major constraint for local businesses, especially for SGBs
- While the number of mobile subscribers and internet users has been increasing, only half of the population are mobile subscribers and less than 15 percent of the population have access to Internet, according to the CIA World Factbook.
- There is a lack of clear information on how foreign investors can invest in local businesses.
- Many organizations working to promote entrepreneurship in Ethiopia are duplicating efforts, creating inefficiencies in the entrepreneurship-support system.
- Entrepreneurship education and entrepreneurial activities are in their infancy at Ethiopian universities. The courses are more theoretical than practical and do not build entrepreneurs' abilities to innovate.
Ecosystem Snapshot
Ethiopia
Stakeholder Insights
Challenges
Opportunities
- Ethiopia is the second most populous country in Africa and has one of the fastest-growing economies in the world, which, with the right kind of policies and ways to ensure that growth is not just concentrated at the top, could result in an expanding middle class with more purchasing power.
- A relatively young population is an advantage that is yet to be fully utilized. Entrepreneurship programs could focus more on developing the entrepreneurship abilities of young people.
- Equity funds and venture capitalists are showing interest in the country. Many Ethiopians in the diaspora are also investing in the country.
- The Sustainable Development Agenda, adopted by the Ethiopian government, is a good road map for the government to work on various initiatives in the entrepreneurship sector, which would then lead to a conducive entrepreneurial environment.
- The Government of Ethiopia is committed to promoting entrepreneurship – a case in point is the roll-out of the 10 Billion Birr revolving fund that is administered by Commercial Bank of Ethiopia (CBE).
- The Government of Ethiopia is spearheading access to finance through lease financing.
- The government is also promoting entrepreneurial culture by introducing entrepreneurship courses in TVET institutions.
Recommendations
- The government should consider relaxing some foreign investment requirements. For example, reducing the cap on foreign investment, or creating space to negotiate sensible, mutually beneficial investment policies could encourage foreign investment in the country.
- More affordable capital should be made available to entrepreneurs by developing a national credit guarantee specifically for entrepreneurs.
- There should be an entrepreneurship curriculum that is entrenched in the education system, ideally starting from elementary education.
- The Government of Ethiopia could setup an independent entrepreneurship development agency or institution to address market gaps.
- Educational institutions should also shift from purely theoretical training to practical entrepreneurship training that promotes a culture of entrepreneurship.
Overall, the government together with other actors in the entrepreneurial ecosystem should continue supporting and building an entrepreneurship environment that will incentivize Ethiopians in the diaspora to invest in their country and make it easy for foreign investors to invest in the country.