The Role of the Government to Support & Promote Private Sector Development in

AfricaThe Case of Ethiopia

Entrepreneurship and Economic Development in Africa

Embassy of Ethiopia 10 march 2012SOAS, London

The National Development Path • Ethiopia is a country endowed with diverse natural

resources, 2nd largest populous country in Africa;• Ethiopia is on a fast track development, it has

registered 11 % GDP growth over the past 7 years;• It aims to join middle income countries by 2025- meet

MDGs Goals by 2015;• The country’s successive 5 year development plans

have given due emphasis to Private sector development;• Ethiopia has advanced a free market economy in the

past two decades;• Private sector is an engine of the economy;

• Agriculture is the main stay of its economy, which constitutes 40 % of employment and more than 60 %

of exporter earner; • It is the major source of private sector development;• Ethiopia is a country of small holder farmers

managing their own private property;• Hence, entrepreneurship is a deep rooted culture; • The current 5 year plan emphasises on SME and

industrialization; • This constitutes of an expansion of the private

sector both in the urban and rural areas;

Legal and administrative frameworks

• The constitution protects Private property;• Ownership of multiple businesses is allowed;• Relaxation of quota and tariff restrictions on trade;• Investment Code – with a number incentives;• Micro finance – one of the largest micro- finances is

found Ethiopia (provision of seed money for small businesses and farmers)

• Protection of local businesses;• Intellectual Property Rights; • Almost non-existent corruption;

Support structures• Associations: leather, textile, major exporters

association, Chambers of Commerce;• Centres of Excellence: metallurgy, Leather, textile,

agriculture, horticulture support centres, commodity exchange market• Privatization: more than 60 companies are out there

for privatization• Education: TVET #253and higher learning institutions

#32; • SMEs: from MSEs to SMEs;• Dialogue: high-level dialogue with the private sector;

Investment Incentives • 100% duty free privilege for construction equipment and 15%

worth of spare parts to be allotted to the initial stage of investment;

• Exemption from income tax – 2 to 7 years tax holiday;

• Loss carry forward- investors that suffer losses during the income tax holiday period, by the end of the term, get extension for half of the term;

• Bank loans – on a 30-70% basis;

• Remittance – investment profits, dividends, payments to loads to foreign banks and buying of technology transfer;

• Encourages increased flow of the Diaspora

Export Incentives • Export Credit Guarantee Scheme

• Duty Drawback Scheme

• Foreign Exchange Retention Scheme

• Franco Valuta Import Facility

• Bonded Manufacturing Warehouse Scheme

Outcomes• The private sector has become the major source of

employment;• Competitiveness and growth; • Youth employment on the rise; • Backward and forward linkages;• Work ethics and innovation;• Flourishing of towns; • Poverty headcount reduced by half in the past 10 years; • Local capacity development, engineering, business, agro-

processing;• On the right path to meet MDGs Goals and target of being

a Middle Income Country.

Thank You

Hirut ZemeneTrade & Investment Minister Counsellor

Embassy of Ethiopiae: hirut@ethioembassy.org.uk