Ethiopia’s industrial model points way for Nigeria
The industrial model being pursued by Ethiopia holds lessons for Nigeria, Africa’s most populous country, which is diversifying away from oil to the non-oil sectors.
Ethiopia runs an open door policy to foreign investors, especially manufacturers, who they allow to take out their foreign exchange earnings after investing a huge amount of money.
The East African country provides one to nine years tax holiday to new investors.
Labour cost is low ($3 a day), but the biggest attraction is the relative availability of public infrastructure, including power, rail and comparatively better roads.
The Ethiopian investment climate has led to the growth of several industrial parks in the country, including Adama, Dire Dawa, Kilinto and Jima, among 25 others, according to Mulugeta Tiruneh, head of Eastern Industry Park in Ethiopia and a member of Ethiopian Investment Commission.
“We have a success story in infrastructure. Economic growth averaged 11 percent in the last 10 years and we are politically and economically stable,” Tiruneh said during a media visit to the Eastern Industry Zone in Addis Ababa, Ethiopia’s capital, recently.
Due to a favourable business environment, Chinese firms have flocked Ethiopia, making huge investments in the country and contributing substantially to the economy of one of leading lights in the Horn of Africa.
Huajian Group, one of Chinese largest shoe exporters to the world, has set up a shoe factory at the Eastern Industry Zone in Ethiopia that employs 6,300 workers and contributes $30 million to the country’s economy, Sherry Zhang, general manager of Huajian Shoes, said in Addis Ababa.
Huajian exports shoes worth $20 million to the US market annually from Ethiopia and plans to double that by the end of this year.
This, Huajian would like to replicate in Nigeria, but is willing to see cheap energy, easy access to animal skins and other raw materials and well as a good road network in Aba, a company official said.
Huajian is also setting up a separate industrial park in the country.
Nigeria, Africa’s biggest economy, is hard hit by infrastructure gap estimated at over $300 billion and a power sector that distributes less than 4,000 megawatts of electricity.
Forty percent of manufacturers’ spend in the country goes to energy.
Electricity supply from power distribution companies (DisCos) worsened across the country in 2016 as manufacturers spent N129.95 billion on alternative energy sources within the year as against N58.82 billion recorded in 2015.
The 2016 figure represents 121 percent jump from that of 2015, data obtained from the Manufacturers Association of Nigeria (MAN) show.
In 2016, Nigerian manufacturers were hard hit by high energy cost and scarcity of alternatives such as gas. The price of fuel rose to N145 per litre in 2016 from less than N100. Gas was scarce within the year, pushing multinationals and large enterprises into the use of coal and low-pour fuel oil, which are expensive.
“We cannot find gas to do our production,” Micheal Ola Adebayo, chairman of MAN Gas Users Group, told BusinessDay, in the heat of gas crisis in August 2016.
It is illegal for investors to take out their money without approval in Nigeria and the country’s railway system is still undeveloped.
Nigeria’s dependence on minerals spelt doom when oil prices crashed in the international market. This plunged its economy into recession, though it has navigated through the rough path and exited the slump, according to a recent data released by the National Bureau of Statistics.
However, Nigeria presents a big opportunity for investors.
The country has a favourable demography of 180 million people, half of whom are less than 30 years.
“This is a huge market that cannot be ignored by any investor. This is why you still find the likes of Nestlé, Cadbury, Olam, Dangote, Lafarge and many others here. What is driving their businesses is large population,” Ike Ibeabuchi, CEO of MD Services Limited, a firm that provides cleaning services and manufactures chemicals, said.
The country has attractive manufacturing raw materials such as animal skins, limestone, gypsum, and iron ore, among others.
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