Faith Nyasuguta
Ethiopia has firmly established itself as the premier destination for foreign direct investment (FDI) in East Africa, according to the latest World Investment Report by the United Nations Conference on Trade and Development (UNCTAD). The report highlights Ethiopia’s remarkable economic progress and its ability to attract significant foreign investments.
In 2023, Ethiopia secured an impressive $3.3 billion in FDI, outpacing its regional competitors, Kenya and Uganda, which attracted $1.5 billion and $2.9 billion respectively. This achievement underscores Ethiopia’s growing appeal to international investors and its strategic economic policies.
Hanna Arayasellasie, Chief Commissioner of the Ethiopian Investment Commission (EIC), announced that Ethiopia had already attracted $3 billion in FDI during the first ten months of the current fiscal year (2023/24). She expressed optimism that the country would reach $3.5 billion in FDI by the end of the fiscal year.
A significant portion of Ethiopia’s FDI can be attributed to China, which accounts for nearly half of all FDI projects in the country. China’s investments span various sectors, contributing substantially to Ethiopia’s economic landscape. The EIC highlighted that Ethiopia’s strategic embrace of public-private partnerships (PPP) has been crucial in achieving this economic milestone.
One notable example of such partnerships is the UAE’s AMEA Power, which has committed $600 million to the Aysha wind power project. This project, located in the Somali Regional State, covers 18,000 hectares and represents a significant investment in Ethiopia’s renewable energy sector. The signing ceremony for this project was held at the end of last year, marking a key milestone in Ethiopia’s FDI journey.
Additionally, Ethiopia has opened its doors to foreign investment in digital payment systems, further diversifying its economic portfolio. Safaricom Ethiopia, a subsidiary of the renowned Safaricom, was granted the Payment Instrument Issuer License last year. This move propelled the number of M-Pesa users to an impressive 3.1 million by January 2024, nearly tripling in just four months. Transactions through M-Pesa reached a remarkable $115.3 million, demonstrating the significant impact of digital financial services on Ethiopia’s economy.
Despite the global economic challenges, Ethiopia’s FDI inflows remain robust. In comparison, UNCTAD’s report reveals a 3% decrease in FDI inflows to Africa overall, totaling $53 billion. Egypt and South Africa follow Ethiopia in the rankings for FDI inflows within the continent.
On a global scale, the United States remains the largest recipient of FDI, accounting for nearly a quarter of the global total. China and Hong Kong together account for an additional 21%, highlighting the competitive nature of global investment flows.
Ethiopia’s emergence as a leading destination for FDI in East Africa reflects its strategic economic policies, commitment to public-private partnerships, and openness to foreign investment in diverse sectors.
As the country continues to attract substantial foreign investments, it sets a benchmark for economic development in the region, showcasing the potential of strategic investments and partnerships in driving economic growth.
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