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Capital Markets

Ethiopia pushes its privatization agenda

Even though the banking sector remains off-limits, foreign investment in other state-owned enterprises will support infrastructure development.

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Ethiopia’s decision to allow local and international investors to buy stakes in some of its largest state-owned enterprises, or SOEs, marks an important U-turn given the state’s distaste for capitalism. 

Minority stakes in Ethiopian Airlines, Ethio telecom, Ethiopian Electric Power, and Ethiopian Shipping and Logistics Services Enterprise will be put up for sale; in addition, the government will seek the full or partial sale of railway projects, hotels, and sugar and other manufacturing industries.

Ethiopia’s potential will attract investors, says Jean-Pierre Chauffour, lead economist for Ethiopia at the World Bank. 

Economic growth in Ethiopia averaged 10.9% for the 10 years between 2004 and 2015 before slowing to an estimated average of 9.2% between 2016 and 2018 – high compared to average global growth of less than 4%.

“With the proper regulatory environment, international investors will be keen to invest in Ethiopia and there will be a lot of appetite for stakes in Ethiopia’s SOEs,” says Chauffour.

Drive

The government will have at least two years to iron out the terms and conditions around the privatization drive; it recently announced the establishment of a Privatization Advisory Council of prominent figures from opposition political parties, media organizations, businesses and academia.




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