Ethiopia Could be the Next China

Flag of Ethiopia

Aug 28, 2017

The industrial sector has long been enamored with identifying the next group of emerging markets. For a long time, it was the BRICS countries of Brazil, Russia, India, China and South Africa. A couple of those were definitely accurate when looking at India and China, and while analysts might have had the right continent, the African country they should have been scrutinizing was Ethiopia.

The country features the second largest population on the continent, which makes job creation a key initiative. In fact, the five percent annual growth rate demands nearly one million new jobs every year. This population, while placing greater demands on the country’s government and infrastructure, is also a leading factor in attracting new manufacturing partners.

This larger population not only offers a large and less expensive labor pool, but a growing consumer market. Clothing and textiles comprise the majority of new manufacturing in the country.

The other component that makes Ethiopia attractive to low-cost manufacturers is government stability. However, that might be a relative statement. While Ethiopia is civically more peaceful than the majority of the continent, the government has modeled a number of its guiding principles after China. This means that freedom of expression and political criticism is tightly controlled. How this plays out in the years ahead could be interesting to watch.

Meanwhile, Ethiopia has opened more than a dozen industrial parks across the country. The largest is Hawassa, which contains 350 acres of factories, a water treatment plant, and more than 10,000 workers employed by 18 companies from 11 countries. At full capacity, it will employ more 60,000 Ethiopians.

The country’s Vision 2025 initiative is to be the leading manufacturing hub in Africa, growing their GDP by 11 percent and the manufacturing sector by 25 percent annually for the next 10 years. In contrast, the U.S. GDP, which is about 250 times larger, targets three percent annual growth.