Perhaps what had been missing from the tale until now was a charismatic protagonist. Enter Abiy Ahmed, as of April 2, Ethiopia\u2019s 15th prime minister. Abiy has taken the country by storm, and in just a few months has achieved what most leaders could only hope for during an entire tenure: establishing peace with neighbouring Eritrea; rousing a disenchanted population; pushing forward with key infrastructure development; opening up the economy to further financial investment; and winning support from the Ethiopian diaspora.<\/p>\n

A unifying force\u00a0<\/strong>
\nHeading up the Oromo People\u2019s Democratic Organisation \u2013 one of four parties comprising the Ethiopian People\u2019s Revolutionary Democratic Front coalition \u2013 Abiy is Ethiopia\u2019s first prime minister from Oromia, the country\u2019s biggest ethnically based state.<\/p>\n

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At 42, he\u2019s the youngest leader on the African continent. His youth is reflected in his style of leadership, his stirring rhetoric and the speed with which he is taking action \u2013 in short, Abiy is a breath of fresh air. Since coming to power, he has made moves to modernise the economy and loosen the monopoly of key sectors. This news is a boon to the aviation industry in particular, given Ethiopian Airlines\u2019 status as Africa\u2019s largest and fastest-growing airline. Competition for a 30 to 40 per cent stake in state-run Ethio Telecom is also heating up.<\/p>\n

A decade of growth<\/strong>
\nNaturally, a number of the successes sparking international admiration were already underway before Abiy came onto the scene. Indeed, last June, the World Bank labelled Ethiopia the world\u2019s fastest-growing economy. According to a new report by the organisation, its GDP growth for the 2017 fiscal year reached an excellent 10.9 per cent, while growth for the period from July 2017 to June 2018 is forecast\u00a0at 9.6 per cent.<\/p>\n

It\u2019s very important to stress that it is not only a sustained period of very rapid growth, but it was also achieved in a country that is not resource-rich. It\u2019s not a matter of being driven by oil, diamonds and so on. So it is quite an unusual record and very important in the context of sub-Saharan Africa. Despite this lack of resources and the fact that it is landlocked, Ethiopia has managed to increase its GDP tenfold since 2000. Extreme poverty, meanwhile, dropped by over 20 per cent between 2000 and 2011.<\/p>\n

Ethiopia\u2019s shift from recurrent to capital expenditure has formed the foundation of the country\u2019s socio-economic transformation, its focus on infrastructure development, in particular, being instrumental.<\/p>\n

\u201cMany orthodox economists tend to criticise high government spending in lower-income countries, but what you notice is that to some extent grudgingly, many people have come to accept that it has been really important in Ethiopia. So you\u2019ll see World Bank economists, for example, acknowledging that a set of heterodox policies, combining around a programme of large-scale public spending, has been at the basis of this period of growth.\u201d<\/p>\n

Filling the transport void<\/strong>
\nDespite its rapid GDP growth, Ethiopia\u2019s woeful transportation infrastructure has acted as a stranglehold on the economy for decades. In 1990, the country \u2013 which is around twice the size of Texas \u2013 had just 19,000km of roads. Transforming this situation has been crucial. Thanks to the government\u2019s refocused spending ($11bn has been spent on roads over the past two decades) together with a growing inflow of foreign investment (FDI has increased fivefold from $814.6m to $4.17bn between FY 2007\/08 and FY 2016\/17), by 2015 Ethiopia\u2019s roads stretched 100,000km around the country. Showing no signs of abating, today foreign investment continues to bolster the network, while 20 per cent of the government\u2019s infrastructure spending is dedicated to road building, equating to $1.7bn annually.<\/p>\n

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Railway construction is another symbol of the government\u2019s determined strategy. In September 2015, a new 32km light rail system opened in the country\u2019s capital, the first of its kind in sub-Saharan Africa. The Chinese-funded project has enabled some 60,000 citizens from the city\u2019s suburbs to travel into the centre for work \u2013 and affordably, too. Further plans are in the pipeline to connect the electrified network with the national train system by 2025, earmarking the government\u2019s plans to become a transportation hub for neighbouring countries.<\/p>\n

The 750km-long electric railway connecting Addis Ababa to the Red Sea via the Port of Djibouti best encapsulates this aim. Inaugurated in October 2016 and beginning commercial operations in January 2018, the line reduces transit time from two-to-three days to around 10 hours. With faster and cheaper access to the sea through Djibouti, the railway is a boon to the country\u2019s burgeoning manufacturing sector.<\/p>\n

Behind such assertive plans is a coherent approach to leadership, which is pivotal in the economy\u2019s transformation.<\/p>\n

Ethiopia\u2019s recent economic success can also be accredited to pragmatic \u2013 rather than ideological \u2013 leadership. They are very willing to learn from a range of other countries\u2019 experiences and to talk to all manner of people \u2013 from western investors, the IMF and the World Bank to the Chinese Communist Party. They study the record of industrial paths in Vietnam, Mauritius and elsewhere before making their own strategic choices. That pragmatism goes with a willingness sometimes to learn from mistakes and to adjust direction and move forward.<\/p>\n

An enticing investment<\/strong>
\nSuch infrastructure development has obvious effects on the economy, but there is another reason pushing the momentum forward so rapidly: Ethiopia\u2019s vision to become a manufacturing hub. In recent years, the nation has boasted formidable success in using its very competitive rates to persuade foreign manufacturers to set up shop in the country.<\/p>\n

One of the first such manufacturers was Huajian Group, a Chinese shoe manufacturer that employs around 4,000 people in an industrial park outside the Ethiopian capital. Big-name clothing brands have since followed suit, including the US\u2019 Gap, Germany\u2019s Tchibo and Sweden\u2019s H&M. In 2017, the industry received another windfall when not one but three fashion giants set up factories in the country: PVH, of Calvin Klein and Tommy Hilfiger fame; Velocity Apparelz Companies, which boasts the likes of Zara and Levi\u2019s; and Jiangsu Sunshine Group, the manufacturer for Hugo Boss and Giorgio Armani. According to Ethiopia\u2019s investment commission at the time, a further 150 companies from China and India would soon begin sourcing production from Ethiopia.<\/p>\n

The government itself is very focused on industrialising and is serious about developing Ethiopia as a manufacturing destination.<\/p>\n

Its goal, former prime minister Hailemariam Desalegn told reporters when Hawassa became fully operational in July 2017, is to create \u201cmillions of new jobs in labour-intensive and export-oriented light manufacturing\u201d. He added: \u201cThe Hawassa industrial park is the most evident and concrete example yet towards achieving our national vision, and marks a milestone in our quest for industrialisation.\u201d<\/p>\n

Being one of the country\u2019s greatest assets, Ethiopia\u2019s enormous population is at the core of this mission. Importantly, the people are ready and willing.\u00a0 Many of them think that the concept of working in factories is good for the country \u2013 there is that sense of patriotism and wanting the country to succeed.<\/p>\n

Quenching the power thirst<\/strong>
\nThough Ethiopia is the rising star of light manufacturing, challenges remain, ranging from those of bureaucracy to issues with cotton quality. However, the most pressing is the issue of energy stability.<\/p>\n

For too long, energy apartheid has stifled countries in sub-Saharan Africa \u2013 Ethiopia is no exception.<\/p>\n

While many investors are hopeful that the country\u2019s new industrial zones will result in large-scale garment assembly and manufacturing, the unreliable supply of electricity is a concern.<\/p>\n

The government is aware of the importance of overcoming this particular challenge. Fortunately, it is taking advantage of the country\u2019s hydroelectric potential and has built several dams in recent years,\u00a0 including the GERD, whose potential is tremendous. With an expected generation capacity of 6,450MW, the GERD project is set to become the biggest dam in Africa.<\/p>\n

These kinds of projects have the potential to start to overcome the power shortage.<\/p>\n

Significantly, the GERD will also act as a driving force for exporting electricity to neighbouring nations, which in turn will prove crucial to generating foreign exchange. Indeed, the dam has become a powerful symbol for the country. Costing a whopping $4.7bn, the GERD has been funded and constructed almost solely by Ethiopians, marking a monumental step in the state\u2019s ability to stand on its own two feet and demonstrating its status as a regional power.<\/p>\n

The best is yet to come<\/strong>
\nEthiopia is now on the cusp of a complete transformation. Its remarkable economic growth makes it a beacon of inspiration for the entire region; indeed, it holds a number of lessons from which other developing nations can draw. First, it highlights the importance of government spending \u2013 even in low-income countries \u2013 particularly in areas that are stifling the economy. In Ethiopia, the government has maintained a determined focus on improving transportation and energy infrastructure, and it has done so through a combination of local financing, the facilitation of foreign investment, securing loans from international entities and the help of the diaspora.<\/p>\n

Now with Abiy at the helm, the economy has received yet another boost, thanks in large part to his quick work and charisma. Today, the country is more stable than it has been for years \u2013 foreign investors are further motivated, while the population is amply inspired. The time is ripe for the country to firmly push itself into the next phase of its development: becoming a hub for sub-Saharan Africa in terms of manufacturing, transportation, energy and economic leadership. With more reliable energy soon to follow, the country\u2019s grand ambitions are actually within reach. Ethiopia\u2019s economic story is truly extraordinary \u2013 and the best part is, it\u2019s not over yet.<\/p>\n

Source: World Finance<\/a><\/p>\n