By Henoch Derbew
Published November 17, 2009
Sub-Saharan Africa has been regularly cited as a difficult place for economic growth and development to occur due to infrastructural shortcomings and poor policies among other factors. The continent’s late and uneven entry into the increasingly competitive global market has also severely hindered the ability to effectively do business there. However the situation in Ethiopia, reports HENOCH DERBEW, is changing.
Following the stifling 1974-1991 Communist era, partly through the efforts of the budding private sector, Ethiopia has achieved record economic growth coupled with remarkable improvements in a variety of areas. Ethiopia’s ever-improving regulatory regime and innovations, like the newly established commodities market, are also continuing to provide ample opportunity for further success.
One group that hopes to further enhance the private sector’s capacity to promote development through business is Precise Consult International (PCI). Created in 2007 and headquartered in the capital of Addis Ababa, the consultancy seeks to provide innovative solutions that combine business knowledge, experience and local partnerships to connect investors with the information, ideas, resources and relationships necessary for success.
This is done through two major areas: ‘Private Sector Development,’ in which PCI offers business solutions from its unique understanding of the domestic environment, and ‘Management Consulting,’ where PCI serves as a ‘one-stop shop’ to local, Diaspora and foreign investors and international organisations, such as the World Bank, USAID, the African Development Bank, and the Centre for International and Private Enterprise.
Though Ethiopia has made large strides in the past decade, more can still be done through the private sector to fully reap the benefits of international trade. PCI’s Managing Director, Ethiopian-born Henok Assefa, explains that as Ethiopia experienced “explosive economic growth, the demand for goods and services has increased. At the same time, however, the domestic supply side has not been able to keep up with this demand. This means that the country has had to import much more than it was exporting [leading to foreign currency shortages and inflationary pressure]. This situation lends itself to explore fairly large business opportunities in many kinds of import-substituting industries. All one has to do is look at the items the nation is importing and figure out which ones can be locally produced in a cost-effective way.”
To secure greater private sector-led growth, PCI has sought to utilise Ethiopia’s human capital by merging the talents of the ‘bright, young and ambitious’ members of Ethiopia’s labour force, with those of the ‘well experienced’ Diaspora business leaders. The Diaspora has already played a large role in Ethiopia’s development and PCI estimates that there are roughly two million actively involved Ethiopians abroad providing assistance through four major sectors: remittances (approaching US$2 billion annually through official and unofficial means, according to PCI), direct investment, importing Ethiopian products and making equity investments in local companies.
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In its first two years, PCI has been successful in bringing interested parties together and informing the Diaspora of valuable business opportunities. The first ‘Ethiopian Diaspora Business Conference’, held in 2008,Â brought together Diaspora experts, Ethiopian investors, government agencies and private businesspeople to further develop jobs, promote development and invest in Ethiopia. PCI has also worked with Access Capital, the Ethiopian advisory and investment firm, to help investors identify opportunities and raise capital for Ethiopian firms.
Assefa estimates that such under-capitalised firms can both yield returns of up to 60%, and promote development. He hopes that they will draw people to invest their money in Ethiopia rather than save it in banks.
In 2009, PCI grew byÂ more thanÂ 150%, more than doubled its staff and surpassed all revenue targets. The group hopes to continue facilitating Ethiopia’s development through the private sector and other partner organisations. Assefa stated that in the future, work with other groups would include taking advantage of green technology. “The costs of these technologies are rapidly coming down,” he reported, “and Ethiopia is well on its way to being a leader in developing clean energy,” having made further plans to use its abundant hydro, wind, solar and geothermal power sources.
A MediaGlobal News Service at the United Nations article