Africa Rising: Ethiopia moves to diversify exports

About three hours south of the Ethiopian capital, Addis Ababa, lays a sprawling, 120-hectare field planted with hundreds of thousands of grape vines in tightly packed rows. Workers in blue coveralls cultivate the vines, looking for pesky diseases, while men stand atop ladders with slingshots in tow to fend off hungry birds.

It’s a scene more commonly associated with France’s Bordeaux region or America’s Napa Valley than Ethiopia, which typically conjures notions of famine, poverty, and repression.

The vineyard is owned by French beverage company Castel, which plans to export half of its 750,000-thousand bottle production this year, making it Ethiopia’s first major wine exporter.

Wine is the newest in a series of premium exports bolstering Ethiopia’s economy, one of the fastest-growing in Africa, according to the African Economic Outlook Report. From leather and textiles to coffee, the diversification of Ethiopia’s economy is boosting development and transforming the country into an economic powerhouse.

“This is one of the first times that we’ve actually started adding value to our natural resources,” says Addis Alemayehou, former director of a USAID-funded project to boost value-added exports. “We’re a pioneer in regards with what we’ve been able to do.”

Evidence of booming industry is hard to ignore: textile and leather manufacturing factories are popping up across the country, the roads leading out of the capital are lined with large-scale plantations growing roses or strawberries for export, and advertisements for trade shows are more ubiquitous than ever before. And the numbers don’t lie: According to the Ministry of Industry, exports of leather and textiles, increasingly processed, have increased by 50 percent in the last decade.

In 2010, Ethiopia boasted an 11.4 percent overall growth rate (a number disputed by the International Monetary Fund, which estimates growth to be closer to 7.5 percent). The boost is part of an ambitious government-led strategy to achieve middle-income status by 2015.

Bolstering the export economy is a major part of the target, specifically increasing value-added exports to Ethiopia’s main markets – the Middle East, America, and Europe – that attract foreign currency, create jobs and encourage investment in public infrastructure, according to State Minister for Industry, Tadesse Haile.

“It’s a chain effect,” he says. “Value addition will give you capital and capital will give you growth.”

To attract investment for the production of premium commodities, the government offers a bevy of incentives, including five-year tax holidays, duty-free privileges, and a “70/30” scheme, where the government agrees to loan 70 percent of startup costs for companies looking to invest in the export sector.

“I don’t think there’s any government giving the kind of incentives that this government is giving in regards to encouraging firms, be it foreign or local, to get into the export sector,” says Addis.

These lures, along with a massive cheap labor pool (Ethiopia is Africa’s second-largest country with a population of 82 million, according to the World Bank) have boosted investment and caused exports to soar by 25 percent each year since 2002, says Mr. Tadesse.

“In the last 10 years, overall exports have been steadily growing,” says Tadesse. “It’s one of the bright futures for this country.”

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