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Ethiopia leverages infrastructure-led investment

By , Portals editor
Ethiopia , 08 Mar 2019

Ethiopia leverages infrastructure-led investment

Ethiopia's ICT market is showing significant growth and continues to attract investment which is being used mainly to develop infrastructure. Its progress has not gone unnoticed by analysts monitoring Africa's ICT and telecommunications landscape.

Mark Walker, Associate Vice President for Sub-Saharan Africa at IDC, said the East African country stands out because its ICT sector grew by 7%, and although the market is relatively small, the growth is significant because it came off a base of just US$2.4-billion.

Despite uncertainty over how investors will repatriate their investment and "move money around", there are opportunities as the countries government and state-owned enterprises look to develop their infrastructure.

"The biggest buyer in Ethiopia is still government ... that is still the most attractive sector within Ethiopia. There has been a lot of investment over the last couple of years, especially out of the Middle East into Ethiopia, with state-owned enterprises like Ethiopia Airlines making the most of the investment they've received for communications infrastructure. There is still a lot of infrastructure work to be done in Ethiopia... a lot of that investment will be infrastructure-led at this stage," said Walker.

He added that there is a strong 'Kenya element' to market entry into Ethiopia.

Privatisation of SOEs

A Reuters report in June 2018 stated that Ethiopia's Prime Minister Abiy Ahmed confirmed plans to sell a 30% - 40% stake in its state-run telecoms monopoly and split the company into two in order to encourage competition in the market.

The report suggested that by selling stakes in Ethio Telecom and other assets would open the country up to "huge potential investments by firms willing to work with a government still wary of private enterprise."

Reuters quoted Ahmed as saying: "There will be two telecom corporations and shares will be sold in both. Somalia, with a population of 12 million, has four telecommunications firms. Ethiopia - with 100 million people - has one. There needs to be competition in the country."

In August 2018 ITWeb Africa reported that Ahmed appointed an advisory council to oversee the process of privatisation of state-owned enterprises.

The 21-member council will study the breakup of Ethio Telecom into two units, mobile and fixed-line service providers in which shares will be sold to both domestic and foreign investors.

Ethiopia has lifted its international profile for opportunities within its FinTech market.

Akinwale Goodluck, Head of Sub-Saharan Africa, GSMA, recently described the country as one of the continent's "mobile money sleeping giants".

"In Ethiopia, restrictions on competition, low levels of internet connectivity, and limited consumer trust and financial literacy have created barriers to uptake and market entry. Only by creating a regulatory environment that encourages investment and provides a supportive environment for innovation can mobile money thrive in these markets. But change is coming," he said.

"...reforms and an ambitious financial inclusion strategy in Ethiopia have been attracting the attention of both mobile network operators and other industry players. Our research shows that these reforms could spark a wave of adoption in these three countries that leading to more than 110 million new mobile money accounts in the next five years, helping to achieve the financial inclusion targets set out in their respective national financial inclusion strategies."

Other key markets

Walker added that Ghana has also sparked interest, and also experienced growth off a base of US$2.6-billion, and markets including Botswana, Namibia and Tanzania feature "a fair amount of opportunity in 2019."

South Africa is projected to secure 3.8% growth in ICT for 2019, significantly slower than the 7.5% growth experienced in 2018.

Kenya is predicted to secure 5.4% growth in ICT, supported through continued investment and a positive outlook of the market among investors.

The IDC forecasts 2% growth in ICT in Nigeria this year. "Lots of opportunity by all means, but a market strongly dominated by the informal sector and the small-medium business sector, a lot of political uncertainty... and also in terms of repayment and payment, repatriation of property and so on, it kind of dampens the appetite for Nigeria," said Walker.

Tech trends for 2019

In early February the IDC recently hosted its IDC Directions 2019 event, to provide tech vendors, telecommunications operators and IT service providers with its insight and analysis of the Africa market.

At the event 5G was raised as among key tech trends for the year.

Walker said however, that while there is a great deal of hype around 5G, the company believes much of this is still just hype.

"A lot of it is still hype, we are not seeing major deployment coming out in any market but South Africa... it's going to be very much a couple of pilots maybe, a couple of test cases, use cases to test the market. Other than that we don't see major real 5G rolling out in 2019," he said.

There is continued interest in blockchain, IOT, AI and robotics on the continent.

"There are a lot of IOT use cases coming out of Africa, from critical supply of blood in Rwanda and agriculture application across most of Africa. IOT is a big discussion point at the moment, " Walker added.

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