Tigrai Online
May 16, 2012
Long benighted, Ethiopia is attracting attention for a better reason. It has become Africa’s fastest-growing non-energy economy (see chart). Investors have noticed. South Africa’s largest consumer-foods firm, Tiger Brands, expanded into Ethiopia last year with a big acquisition. Diageo and Heineken recently paid nearly $400m combined to acquire state breweries in the country.
The latest proof came on May 9th, when Schulze Global Investments, an American investment firm and family office, announced that it had launched a $100m Ethiopia fund, the first private-equity fund focused exclusively on the country. Anchored by at least $15m from Britain’s CDC, a government-owned provider of development finance, and $10m of the family’s own money, the fund will invest in sectors from agribusiness and cement to health care and natural resources.
Investing in Ethiopia is not for the faint-hearted, however. With a projected national income of $38.5 billion this year, its population of 85m still ranks among the world’s poorest. The government’s big spending carries risks, including high inflation (32.5% in March was near a nine-month low) and heavy state borrowing that has shrunk the credit available to private firms. Much more borrowing and spending is planned, and needed. The heart of the Ethiopian capital may be traversed by new concrete arteries and bridges, built by Italian and Chinese contractors with Chinese loans. But the rest of Addis Ababa is a patchwork of dirt paths lined by corrugated-tin dwellings that are the capital’s shantytowns and slums.
Source: Economist, Read more