The Ethiopian government set itself a challenge last year: to become the leader of industrial parks in Africa and overtake the already very strong countries in this field (such as Tunisia, Morocco and Egypt) by 2025. To reach this goal – which also requires that Ethiopia transform itself from a predominantly agricultural country into a manufacturing country – the government created a special entity in 2014: the Industrial Parks Development Corporation (IPDC), chaired by the former minister of industry Sisay Gemechu, who remains a minister.
In 2015, the primary sector represented almost 40% of the country’s GDP, contributed 90% of foreign currency thanks to exports, and provided 85% of jobs – with coffee, sesame seeds and beans being the most-exported agricultural products. The industrial sector – composed predominantly of SMEs – represented only 15% of GDP. Additionally, under the policies and strategies of the Growth and Transformation Plan II, the manufacturing sector is set to reach an annual growth rate of 24% and increase its contribution to export income from the current 10% to 25%.
A dozen industrial parks are under construction throughout the main Ethiopian cities. Some – such as Bole Lemi, in the suburbs of Addis Ababa – are already operational, with the first phase already complete. Investment in industrial parks is open to local, national and foreign investors, and developers can develop industrial parks independently or through public-private partnerships with the IPDC.
Companies benefit from a favourable Ethiopian tax regime not only on Ethiopian soil, but also in the countries where products are exported. Ethiopia is one of the African states that benefits from the conventions under the African Growth and Opportunity Act (AGOA). This American piece of legislation, approved in 2000 and extended until 2025, exempts from tax or reduces tariffs on African goods produced and sold in the USA. Morocco, Tunisia and Egypt do not benefit from the AGOA, as it applies to Sub-Saharan Africa only. It is estimated that trade between Sub-Saharan Africa and America has doubled and 120,000 jobs have been created in Africa thanks to the AGOA. However, with Donald Trump as president of the USA, it remains unclear what the US policy on trade with Africa will be. The vast majority of companies based in Bole Lemi export to the USA for brands such as Tesco, H&M and PVH (the latter supplies Calvin Klein and Tommy Hilfiger). Moreover, labour costs are five times lower than in China and half that in Vietnam – although the abundant workforce available is less productive as it has little experience in the industrial sector.
In February, Prime Minister Hailemariam Desalegn inaugurated construction works for the Bure (Amhara region) agro-industrial park by laying the first brick. Other parks will be built in Humera, Ziway (Batu) and Sidama.
But who is taking possession of these business parks? Three different Chinese companies will build three industrial parks in Addis Ababa and Gimma (southwestern area of the Oromia region). The overall cost of the infrastructure needed for the three new parks is estimated at EUR 430 million. According to local media reports, the IPDC assigned the construction of Bole Lemi II – the second phase of the already-existent Bole Lemi industrial park that will host textile and clothing production plants – to Chinese construction group CGC Overseas Construction, with the South Korean company Dohwa Engineering supervising. China Tiesiju Civil Engineering Group was tasked with constructing an industrial park in Kilinto (suburban area of Akaki), which will produce medicine and high-tech medical and pharmaceutical products. China Communications Construction Company will build the third industrial park in Gimma, where textiles will be produced. The textiles industry is considered a strategic priority for industrial development in Ethiopia – given the high concentration of labour in the sector – and, therefore, fundamental to create new employment opportunities for the local population.