Ethiopia beats Kenya to top FDI destination in East Africa

Ethiopia has emerged as a top destination for Foreign Direct Investment (FDI) in East Africa, surpassing Kenya in attracting substantial investment according to a recent report by financial consulting firm, Ernst and Young. The country received a remarkable $7 billion in FDI, showcasing its appeal to global investors. In a recent interview with CNBC Africa, Zemedeneh Negatu, Global Chairman of Fairfax Africa Fund, shed light on the key reasons behind Ethiopia's success in attracting FDI and the necessary steps for job creation in the continent. One major factor contributing to Ethiopia's attractiveness to investors is its strategic focus on industries where it possesses clear competitive advantages, such as labor-intensive large-scale manufacturing, textiles, and shoe manufacturing. With a workforce of over 45 million in a population exceeding 100 million, Ethiopia offers cost-effective labor comparable to countries like Vietnam. The country's investment in infrastructure, including roads, railways, and the largest airline in Africa, has also captured the attention of global investors. Major brands like Calvin Klein have set up manufacturing units in Ethiopia for export to various markets worldwide, leveraging the country's industrial parks and affordable energy tariffs. Ethiopia's emphasis on providing affordable electricity, with rates as low as four cents per kilowatt hour, further enhances its appeal to investors compared to neighboring countries. Negatu emphasized the importance of FDI not only in providing market access and knowledge transfer but also in job creation. While Ethiopia's success in generating jobs is commendable, the continent as a whole faces a significant challenge in creating sufficient employment opportunities. With Africa requiring one million jobs per month to keep up with its growing population, a comprehensive approach involving both FDI and domestic investment is crucial. Negatu highlighted the role of the African private sector in driving job creation, emphasizing that governments alone cannot generate significant employment. Encouraging indigenous African companies to expand regionally and globally is essential in complementing FDI efforts. The continent's youthful population, with a median age of around 20, presents both a challenge and an opportunity for economic growth. Deploying young people in sectors such as manufacturing and agro-processing can significantly contribute to job creation and economic development. Negatu stressed the importance of shifting from exporting raw commodities to value-added products, which have the potential to generate higher revenue and employment opportunities. Failure to address the job creation challenge could lead to widespread instability across Africa, underscoring the urgency of implementing practical measures at a regional level. As Africa continues to strive for economic growth and sustainable development, leveraging FDI and promoting domestic investment will be essential in creating long-term prosperity and addressing the continent's pressing job needs.