Why Ethiopia is the Fastest Growing Economy in Africa

Ethiopia is the fastest growing economy in Africa and arguably in the top 10 globally. According to the World Bank and International Monetary Fund (IMF), Ethiopia’s economy has elicited an increase of between 8.5% and 9.8% in the last ten years. Below are five contributors to Ethiopia’s fast-growing economy.

The fastest-growing support from foreign investors

27.6% of Ethiopia’s investment funds have been coming from foreign investors, as noted by the International Monetary Fund. Chinese, who dominate the construction industry in Africa, they are the brains behind most of the investment projects in Ethiopia.

By the end of 2019, Ethiopia had reached a bilateral trade agreement with China of a tune of over $12.1 billion. And on 20th December 2019, Ethiopia launched its first space satellite. This is a huge milestone since there are only 10 countries in Africa with satellites. They include Morroco, Rwanda, Kenya, Nigeria, Ghana, Algeria, Egypt, Angola, South Africa, and now Ethiopia.

  1. Fast-growing industrial parks

Ethiopia has been on a journey to fast-track its manufacturing industry. Thanks to the availability of cheap labor, global brands such as J Crew, H&M, and Naturalizer have already build manufacturing centers in the country. On the flip side though, Ethiopia’s Prime minister indicates that the country is not yet ready to welcome international banking and telecommunication companies.

However, the country is currently on a program to increase the productivity of its citizens. The program is called the Urban Productive Safety Net Project (UPSNP). This program targets about 600,000 Ethiopians, and its total allocation is $450,000.

  1. Fast class transport network and infrastructure

Addis Ababa, Ethiopia’s capital homes the first modern tramway in Sub-Saharan Africa. Another development project that gives Ethiopia an Edge in Africa is the construction of the Grand Renaissance Dam along the Blue Nile. Located 500 km north of the capital Addis Ababa, this dam stands 155 meters high. The dam also homes two hydropower stations which generate about 6000 megawatts annually. These dams have been significant contributors to cutting down electricity costs in Ethiopia.

  1. Good political governance

The Ethiopian government knows it too well that for a country to skyrocket its development agendas, there must be good political governance. As a result, the government has set up nifty strategies to fight the corruption regime. This continues to instill business confidence in a ton of foreign investors who previously feared to move into the country.

Similarly, owing to the fact that Ethiopia may find itself in deep debt distress, its authorities recently implemented a monetary policy stance. This policy aims at slowing down the implementation of projects with substantial external borrowing. It also looks forward to creating a flexible dollar exchange rate to its trading partners by sharing investment funding and responsibilities.

  1. Efforts to fight drought and civil conflicts

Ethiopia homes an estimated 94.3 million people. This high population makes the country battle with food scarcity. And being that it is in the Sub-Saharan region, famines are often extreme. Lack of pasture and water in some communities results in frequent civil conflicts among pastoralists.

Nevertheless, Ethiopia has been able to come up with drought recovery programs thanks to its corroborations with international development partners. In 2005, Ethiopia formulated the Productive Safety Net Program (PSNP) that aims at pumping in a tune of $500 million to curb drought. The country is now able to get donations of edible oil and wheat to feed its people.

Similarly, the country has been making tremendous efforts to distribute cattle feed to drought-prone areas. This significantly decreases the number of livestock that die every time there is a drought. Also, it improves the quality of meat and hides the country gets after slaughtering the animals. This has made the leather industry in Ethiopia to produce some of the best leather products in Africa.

While all this is true, a majority of people in the streets of Addis Ababa don’t feel the growing economy. According to Professor Adugna Lemi of the University of Massachusetts in Boston, this is so because much of the development in Ethiopia is happening in construction and infrastructure. The program like the launch of the satellite undoubtedly does not directly impact poor ordinary citizens. However,  Eritrea, Rwanda, and Libya are also countries to watch. Their economies are in a similar way first growing.