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EthiopiaENTREPRENEURIAL ECOSYSTEM SNAPSHOT

E A S T A F R I C AWITH SUPPORT

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Ethiopia ENTREPRENEURIAL ECOSYSTEM SNAPSHOT

Ethiopia, Africa’s second most populated country, is forecasted to be the fastest growing economy in Sub-Saharan Africa this year according to data from the IMF. At the same time, the market is riddled with challenges. State-owned enterprises dominate the economic landscape, which have constricted the private sector’s ability to flourish. However, recent government-led market reforms are beginning to paint a positive outlook for Ethiopia’s private sector. For example, opening up the national airline to foreign investment is an encouraging signal for what may lie ahead for businesses throughout the country.

The journey to mapping Ethiopia’s entrepreneurial ecosystem started in February 2017, with support from the Department for International Development (DFID), at an Aspen Network of Development Entrepreneurs (ANDE) event that brought together a select group of investors, capacity development providers, and funders who support small and growing businesses (SGBs) in Ethiopia. ANDE and the meeting participants conducted an initial assessment of business support providers within the ecosystem at the meeting.

E A S T A F R I C A

METHODOLOGY

Review of Existing Literature

Surveys and Interviews

Stakeholder Meetings

To see more data and findings, see the digital version of ANDE’s Ecosystem Snapshots at:ecosystems.andeglobal.org

http://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD/AFQ/SSA/ETH

http://ecosystems.andeglobal.org

ETHIOPIA | Entrepreneurial Ecosystem Snapshot | 2018

SUMMARY

2

OF SURVEY RESPONDENTS FOCUS ON ACCESSIBILITY

TOP STAKEHOLDERS FOCUS

OF SURVEY RESPONDENTS FOCUS ON CAPACITY BUILDING

TOP IMPACT OBJECTIVE

75+25+J75%

63+37+J OF SURVEY RESPONDENTS FOCUS ON SECTOR DEVELOPMENT

NON-FINANCIAL SUPPORT

64%

OF SURVEY RESPONDENTS FOCUS ON AGRICULTURE & FOOD

TOP SECTOR OF FOCUS

48+52+J50%

OF SURVEY RESPONDENTS PROVIDE EQUITY

TOP FINANCIAL INSTRUMENT

86+14+J86%

OF SURVEY RESPONDENTS FOCUS ON AGTECH

TOP VERTICALS

61+39+J62%

65+35+J67%

NON-FINANCIAL SUPPORT PROVIDERS

86 62

FINANCIAL SUPPORT PROVIDERS

2

OTHER ECOSYSTEM SUPPORT PROVIDERS

+6+9+17+19+44+51+59+100+100+100+100+100+100+100ETHIOPIA | Entrepreneurial Ecosystem Snapshot | 2018

DATA

3

Intervention Type

Investment Instrument

Equity (12)

n=109

n=14

Quasi-Equity (3)

Guarantees (1)

Debt (8)

Grant (2)

Other (1)

60%

57%

14%

21%

7%

7%

86%

17%

45%

6%

50%

9%

20%

Provide Nonfinancial Services to Entrepreneurs Directly (65)

Invest Directly (18)

Provide Financial Support to Intermediaries (49)

Other (6)

Promote and Educate about Entrepreneurship (55)

Invest into Funds (10)

Conduct Research on the Sector (22)

22+78+H 20+80+H 18+82+H 18+82+H 17+83+H63+37+H 40+60+H 32+68+H 32+68+H 25+75+H

15+85+H 14+86+H 14+86+H 12+88+H 11+89+H


6+94+H9+91+H 9+91+H 8+92+H 8+92+H 8+92+H

DATA

Sector Development(42)

Technology Development or Adoption

(14)

Ideation(6)

Leadership Development

(10)

Exit Strategies(4)

Value/Supply Chain Development

(21)

Performance management

(12)

Product Certification

(5)

Governance Structure

(9)

Business Strategy and Planning

(27)

Building M&E Capacity

(13)

Legal, Accounting, Other Office Services

(6)

Building HR Capacity

(10)

Access to Networks and Partners

(21)

Marketing Support or Market Research

(12)

Investor Matchmaking

(5)

Media Exposure(8)

Financial Management

(16)

Needs Assessment(11)

Due Diligence(5)

Investor Showcases(7)

64%

21%

9%

15%

6%

32%

18%

8%

14%

41%

20%

9%

15%

32%

18%

8%

12%

24%

17%

8%

11%

4

Nonfinancial Support

n=66

ETHIOPIA | Entrepreneurial Ecosystem Snapshot | 2018 5

DATANonfinancial Support Delivery Mechanism

Stakeholder or Business Model Focus

Accessibility (70)

Youth Entrepreneurs (47)

Social Enterprise (57)

Urban Communities (32)

Women Entrepreneurs (47)

Science, Engineering or Invention Based Businesses (13)

Resiliency/Climate Change (12)

Ethical Sourcing (6)

Citizen Empowerment (57)

Gender Inclusion (35)

Rural Communities (51)

Base of the Pyramid (18)

59%

54%

47%

31%

30%

23%

19%

14%

8%

7%

8%

67%

54%

54%

49%

45%

45%

5%

33%

3%

30%

3%

17%

2%

12%

11%

6%

Advocacy (5)

Minority or Previously Excluded Population (3)

Franchising (3)

Refugees and Migration (2)

Classroom/Seminar Training (62)

Mentoring (57)

Cohort or Group Support (49)

Co-working Space (33)

Direct Consulting Services (32)

Seat on the Board (24)

Peer to Peer/Network-based Support (20)

Competitions/Prizes (15)

Fellowships (8)

Talent Placement (7)

Other (8)

n=105

n=105


2%

2%

6

Stakeholder Type

Sectors of Focus

Business Development Service Provider (38)Accelerator/Incubator (28)

Consultant (16)

Fund of Funds (15)

Private Equity Fund (15)

Funder of accelerators (12)

Angel Investor (8)

Impact Investor (6)

Venture Capital Fund (6)

DFI/Multilateral (3)

Enterprise Development Services (3)

Crowdfunding (1)

n=109

n=73

Agriculture & Food (54)

Education (17)

Financial Services (35)

Infrastructure/Facilities Development (13)

Supply Chain Services (18)

Health (10)

Energy (10)Information and communication technology (8)

Sector Agnostic (39)

Environment (14)

Manufacturing (32)

Wholesale and Retail Trade (12)

Water & Sanitation (6)

Transportation (4)

Hospitality/Travel/Tourism (4)Housing and Community Development (3)Artisanal (2)

Land Conservation (4)

Forestry (4)

Logistics & Distribution (2)

Media & Entertainment (2)

52%

38%

22%

21%

21%

16%

11%

8%

8%

4%

4%

1%

50%

36%

32%

29%

17%

16%

6%

13%

4%

12%

4%

11%

4%

9%

4%

9%

3%

7%

2%

DATA


DATA

VerticalsAgTech (51)

FinTech (40)

E-commerce (23)

EdTech (14)

Biotech (14)

CleanTech (6)

Data Analytics (4)

Hardware (3)

Software as a service (SaaS) (3)

n=82

62%

49%

28%

17%

17%

7%

5%

4%

4%

2%

1%

1%

1%

1%

Impact ObjectiveIncome/Productivity Growth (75)

Agricultural Productivity (54)

Employment Generation (69)

Access to Information (29)

Access to Financial Services (58)

Health Improvement (19)

Access to Education (15)

Access to Energy (10)

Capacity Building (70)

Food Security and Nutrition (49)

Community Development (59)

Equality and Empowerment (25)

Energy and Fuel Efficiency (8)Disease-specific Prevention and Mitigation (6)

Sustainable Energy (4)

Water Resources Management (3)

Natural Resources Conservation (3)

Pollution Prevention and Waste Management (5)Access to Clean Water and Sanitation (5)

Conflict Resolution (1)

Affordable Housing (1)

Human Rights Protection or Expansion (1)

Sustainable Land Use (2)Generating Funds for Charitable Giving (1)

75%

70%

69%

59%

58%

54%

8%

49%

6%

29%

5%

25%

5%

19%

4%

15%

3%

10%

3%

n=100


STAGES OF SUPPORT

IDEA EARLYSTART UP GROWTH MATURE

Academic Institution

Center for Entrepreneurship & Innovation (St. Mary’s University)


Bank or Financial Institution

Business Advisory Service (Zemen Bank)

Consultancy Services for MSEs about Credit Management (Cooperative Bank of Oromia)

Cooperative Financing Project (Cooperative Bank of Oromia)

Corporate Credit Service (Nib International Bank)

Credit Provision Towards Economic Empowerment (Lion International Bank S.C)

Credit Service for Micro, Small, and Medium Enterprises (Bank of Abyssinia)

Credit to Entrepreneurs (Debub Global Bank)

Finance for Micro Finance Institutions (Commercial Bank of Ethiopia)

8

KINDS OF SUPPORT EQUITY QUASI-EQUITY DEBT GRANT GUARANTEES


KINDS OF SUPPORT


EQUITY QUASI-EQUITY DEBT GRANT GUARANTEES

MEDA Project (Bunna Bank)

Rural Financial Intermediation Programme (RUFIP) (Development Bank of Ethiopia)

Small and Micro Finance Institution Loan (Wegagen Bank)

Small Business Financing (Dashen Bank S.C)

Small Business Support (United Bank S.C.)

Small-scale Loan Provision (Amhara Credit and Savings Institute)

SME Financing and Loan Advisory Service (Oromia International Bank S.C. (OIB))

SME Financing Project (Awash Bank)

SME Loan (Berhan Bank)

Women Financing Service Program (Enat Bank SC)

Bank or Financial Institution


KINDS OF SUPPORT



Capacity Development Provider

Agri-business Incubator Program (blueMoon)

CBOS’ Capacity Development (Jerusalem Children and Community Development Organization)

Credit and Economic Facilities for Self Sufficiency (Christian Aid)

Developing Social Entrepreneurship in Ethiopia (Reach for Change Africa)

Economic Development Program (World Vision)

Entrepreneurship and Business Growth (Digital Opportunity Trust)

Entrepreneurship Development Programme (United Nations Development Programme)

Ethical Coach Initiative (Center for Creative Leadership)

Global Business Network (Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH)

GrowthAfrica Acceleration Programme (GrowthAfrica)

GrowthAfrica Advisory (GrowthAfrica)

Impact Angel Network (RENEW Investment Advisors, PLC)

Private Equity Funding for Small and Medium Businesses in Ethiopia (RENEW Investment Advisors, PLC)

Scaling Up Rural Savings and Credit Cooperatives (Self Help Africa)


KINDS OF SUPPORT



SME Finance Program (Enterprise Partners)

Supporting Small Business Owners through Financial Access (Mercy Corps)

Sustainable Livelihoods and Social Justice (ACORD Ethiopia)

Sustainable Transformation of Agricultural Resources (STAR) (Self Help Africa)

The Exchange (RENEW Investment Advisors, PLC)

Women Empowerment Program (Center for Accelerated Women’s Economic Empowerment)

Youth and Women Entrepreneurship Project (United Nations Industrial Development Organization (UNIDO))

Youths & Entrepreneurship (Development Expertise Center)

Capacity Development Provider


KINDS OF SUPPORT



Energy and Manufacturing Project (Elpizo)

Ethiochicken (Ethiochicken)

Private Enterprise Program Ethiopia (PEPE) (DAI)

Social Entrepreneur’s Incubation Program (xHub Addis)

Corporation or Corporate Foundation


Development Finance Institution or Donor Agency

Business Support Service Department (Addis Ababa Chamber of Commerce and Sectoral Associations)

DCA Project (U.S. Agency for International Development)

Micro-banking Project (Vision Fund International)


KINDS OF SUPPORT



Capcity Building Training (Ethiopian Youth Federation)

Empretec (United Nations Conference on Trade and Development (UNCTAD))

Ethiopian Investment Commssion (Ethiopian Investment Commssion)

SME Finance Project (Federal Small and Medium Manufacturing Industry Development Agency)

Sustainable Financial System in Ethiopia (National Bank of Ethiopia)

Government Agency


Investor

Beekeepers Economic Empowerment through Long-term Investment in Entrepreneruship (Oxfam)

Incubation Support for Biomedical Device Startups in Simbona Africa (Villgro Innovations Foundation)

Novastar Ventures (Novastar Ventures)

Novastar Ventures Ethiopia CRO (Novastar Ventures)

Statera Capital (Statera Capital)


KINDS OF SUPPORT



Credit and Saving Provision (Specialized Financial and Promotional Institution)

Harbu Microfinance Institution (Harbu Microfinance Institution)

Micro & Small Business Loans (Addis Credit and Savings Institution)

Micro Finance Credit Service (Gasha Micro Finance)

Poverty Reduction and Community Empowerment Micro Finance Institution (Poverty Reduction and Community Empowerment Micro Finance Institution)

Provision of Financial Services to Small and Micro enterprises (Africa Village Financial Service S.C)

Saving and Credit Service (Agar Micro finance S.C)

Saving and Credit Service Provision (Metemamen Microfinance S.Co.)

Saving and Small Enterprise Loan (ESHET micro finance institutions S.Co)

Small and Medium Enterprises (SME) Loans (Nisir Micro Finance Institution (NMI))

Microfinance Institution


KINDS OF SUPPORT



Research or Advisory Service Provider

Enterprise Development Program (EDP) and Business Development Center (BDC) (Enterprise Development Center (EDC))

Entrepreneurship Research (Ethiopian Development Research Institute)

Strategic Planning Development (Dalberg Global Development Advisors)

Veritas Consulting (Veritas Consulting)


Sector Association

Private Sector Development Hub (Ethiopian Chamber of Commerce & Sectoral Associations)


MAP

31 PROGRAMSprovide services in Somali.

32 PROGRAMSPrograms provide services in Afar.

60 PROGRAMSprovide services in Oromia.

53 PROGRAMSprovide services in Southern Nations, Nationalities and Peoples.

33 PROGRAMSprovide services in Gambela Peoples.

31 PROGRAMSprovide services in Benishangul-Gumuz.

55 PROGRAMSprovide services in Amhara.

49 PROGRAMSprovide services in Tigray.


CHALLENGES AND OPPORTUNITIES

CHALLENGES in the Ethiopian Entreprenurial

Ecosystem

High demand for foreign currency by the Government of Ethiopia’s infrastructure projects is creating foreign exchange shortages. Businesses can expect delays of weeks or months to exchange currency because they must apply and be approved by the government.

Accelerators and incubators have most of their operations in Addis Ababa, so innovative businesses outside of Addis Ababa do not get as much support as their city counterparts.

Lack of access to finance is a major constraint for local businesses, especially for SGBs

While the number of mobile subscribers and internet users has been increasing, only half of the population are mobile subscribers and less than 15 percent of the population have access to Internet, according to the CIA World Factbook.

There is a lack of clear information on how foreign investors can invest in local businesses.

Many organizations working to promote entrepreneurship in Ethiopia are duplicating efforts, creating inefficiencies in the entrepreneurship-support system.

Entrepreneurship education and entrepreneurial activities are in their infancy at Ethiopian universities. The courses are more theoretical than practical and do not build entrepreneurs’ abilities to innovate.

OPPORTUNITIES in the Ethiopian Entreprenurial

Ecosystem

Ethiopia is the second most populous country in Africa and has one of the fastest-growing economies in the world, which, with the right kind of policies and ways to ensure that growth is not just concentrated at the top, could result in an expanding middle class with more purchasing power.

A relatively young population is an advantage that is yet to be fully utilized. Entrepreneurship programs could focus more on developing the entrepreneurship abilities of young people.

Equity funds and venture capitalists are showing interest in the country. Many Ethiopians in the diaspora are also investing in the country.

The Sustainable Development Agenda, adopted by the Ethiopian government, is a good road map for the government to work on various initiatives in the entrepreneurship sector, which would then lead to a conducive entrepreneurial environment.

The Government of Ethiopia is committed to promoting entrepreneurship – a case in point is the roll-out of the 10 Billion Birr revolving fund that is administered by Commercial Bank of Ethiopia (CBE).

The Government of Ethiopia is spearheading access to finance through lease financing.

The government is also promoting entrepreneurial culture by introducing entrepreneurship courses in TVET institutions.


INVESTMENT REQUIREMENTSThe government should consider relaxing some foreign investment requirements. For example, reducing the cap on foreign investment, or creating space to negotiate sensible, mutually beneficial investment policies could encourage foreign investment in the country.

CREDIT GUARANTEEMore affordable capital should be made available to entrepreneurs by developing a national credit guarantee specifically for entrepreneurs.

ENTREPRENEURSHIP CURRICULUMThere should be an entrepreneurship curriculum that is entrenched in the education system, ideally starting from elementary education.

MARKET GAPS The Government of Ethiopia could setup an independent entrepreneurship development agency or institution to address market gaps.

RECOMMENDATIONS

PRACTICAL TRAINING Educational institutions should also shift from purely theoretical training to practical entrepreneurship training that promotes a culture of entrepreneurship.

For more information please contact the staff of ANDE’s East Africa Chapter:

MARYANNE OCHOLA ANDE East Africa Chapter [email protected]

KHATUCHI KHASANDI ANDE East Africa Program [email protected]

ANTONY MAINA ANDE East Africa Senior Program [email protected]

EDNA KARANJA ANDE East Africa Program [email protected]

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