The African Lion remains one of the fastest growing countries but not much is said or written about it.
I recently attended a forum addressed by Mr. Stephen Jennings, the founder and CEO of Rendeavor group, which is the biggest urban development company in Africa. In his presentation, Jennings talked about the future of African countries and how the best countries will be those that are largely ignored. Today, the promising story of Africa has been told and retold and the key focus has been countries such as Kenya, Nigeria and South Africa. In his presentation, Jennings made a comparison between Africa and Asia in the 60s and 70s where countries such as South Korea and China were ignored. Focus was in countries such as Philippines. In this article, I will explain the strides Ethiopia is making to become the next African giant.
Economic growth
According to the World Bank, Ethiopian economy grew by 10.3% in 2014 making it one of the best performers globally. The IMF ranks it in the top 5 countries globally. This has been a result of a decade of continuous growth which has seen the GDP growth average to 10% annually. The country’s GDP is estimated by evaluating the key sectors of the economy. According to the IMF, all the sectors did well in 2014 with agriculture, industry, and services increasing by 5.,4%, 21.2%, and 11.9% respectively. Agriculture is the country’s main earner with a 40.2% share followed by industry and service which have 14% and 46.2% respectively. It is for this growth that economists have termed the country the ‘African lion’.
In 2014, the world experienced a period of slowdown in commodity prices. To caution the residents, the government succeeded in mitigating the annual inflation to 7.1%. This was achieved by a tightened monetary policy and the use of base money as the nominal anchor.
In Sub-Saharan Africa, Ethiopia is the 2nd largest in terms of population after Nigeria with more than 94 million people. The population is growing at a 2.6%. In addition, the country is also one of the poorest with a per capita income of $470 which is lower than the regional average. The per capita wealth of Egypt is $3,187 and $7,508 in South Africa.
Millionaires on the rise
The growth in economy has created a lot of wealth to many Ethiopians. According to a report by consultancy firm New World Wealth, the number of dollar millionaires has grown from 1,300 in 2007 to 2,700 in 2014. This places the country ahead of Angola, Tanzania, Zambia and Ghana.
This growth comes from the growth of the economy with sectors such as agriculture and service achieving double digit growth in that period. Privatization has also led to the accelerated growth. Manufacturing, transport and agriculture have helped create most millionaires.
According to the New World Wealth report, the increase in the dollar millionaires is not correlated with that of the middle and low class. More people have become poorer during that period.
The richest Ethiopian is said to be Mohammed Al Amoud who owns companies in manufacturing, healthcare, energy, construction, hospitality and mining among others. Forbes estimated that he is worth about $11 billion. In the report, he was the send richest black person. He is also a registered Saudi Arabian national and one of the biggest investors in Sweden.
Growth Strategy
In 2010, the country launched a 5 year growth and transformation plan. In this plan, the government intended to use the vast land resources it has to grow and improve the economy. In the plan, the government intention is to make Ethiopia the leading agricultural economy in Africa. In addition, the government began a strategic decision to develop cities and real estate. Today, Addis Ababa is one of the largest and most modern city in Sub-Saharan Africa.
The government aims to achieve a middle-income country in the next 10 years. Whether this will be possible will depend on a number of things.Economists believe that the country will need to move from a public investment driven economy to a vibrant private sector economy. Also, there is an urgent need to keep the country away from terrorism activities because the country has the largest border with the unstable Somalia.
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