Ethiopian Business Review

A Long Walk to Prosperity: A Story of Innovative Ethiopian Business Persons in South Africa

A Long Walk to Prosperity: A Story of Innovative Ethiopian Business Persons in South Africa

As the biggest economy in Africa, with a GDP of 419.92 billion US Dollar in 2010 according to the Global Finance, and labeled by the World Bank as one of the four upper middle income countries in Africa, South Africa is a preferred destination for refugees from poor nations in its backyard such as Mozambique, Zimbabwe, Malawi and other distant African countries like Nigeria and Ethiopia.

South Africa’s population was 51.77 mil- lion according to the 2011 census. Official evidences show that the share of immigrant population is growing fast; and Ethiopians are among the dominant.

Though South Africa is the green pasture for African immigrants, paradoxically the hu- man capital flight of its own skilled labor is very high. Statistics shows that about 1.6 mil- lion South Africans in skilled, professional and managerial occupations have emigrated since 1994 to USA, UK, Australia Canada and New Zealand.

South Africa has huge potential for eco- nomic growth. It has In this area one can find everything that is Ethiopian, including traditional coffee houses, Ethiopian restaurants, khat and shisha corners, butcheries, and others. attracted around 1.7 Bil- lion USD in foreign direct investment in the first half of 2012 alone, according to a report by the United Nation. The country is a low risk investment destination for investors looking for a foothold in Africa. These realities and prospects have become the main pulling fac- tors for refugees.

The latest data from the country’s home af- fair office, the country’s responsible institution for the registration of immigrants, disclose that there are nearly 320,000 legal Ethiopian immigrants in South Africa, though the num- ber is estimated to be over half a million when those immigrants without proper documen- tations are taken into account. The writer of this has come across with such Ethiopians in places such as Johannesburg, Rustenburg, Pretoria and Durban.

Ethiopians started flocking to South Af- rica after the downfall of Apartheid. And their number has increased exponentially in the last decade. The 29th orange African cup of nation was a unique incidence that highlighted the size of the Ethiopian population residing in South Africa.

Most Ethiopians are grateful about their High level of brutal crime seems to be the Achilles heel for an otherwise amazing country. And this situation casts its shadow on hopes of Ethiopians living in the country. sec- ond home and its people. The friendly, peaceful and accommodating behavior of the people, the abundant natural resources, the amazing world class resort and recreational areas, the flawless in- frastructure and transport facilities and the gen- erous public recreational facilities make South Africa an ideal place for living. Like other im- migrants these resources have given Ethiopians the opportunity to prosper.

Ethiopians and Their Ways of Doing Business

A section of Jeppe Street in downtown Joburg, referred to as Little Ethiopia, has fast become known for its exotic sounds, bright colour and bargain basement prices. The area is largely dominated by Ethiopians

Johannesburg is the economic nerve center of South Africa, while Pretoria is the administrative capital. The city, fondly referred to as Joberg by its residents, has a market center, which resembles Addis Ababa’s Mercato. Most Ethiopians call this market place “town”. In this area one can find everything that is Ethiopian, including tradition- al coffee houses, Ethiopian restaurants, khat and shisha corners, butcheries, and others. Yet it is believed that the dominant majority of Ethiopi- ans make their living from textile retailing and related businesses. These businesses which are categorized by the government as small business or informal sector (Magendo Economy) enjoy tax exemption and employment privileges, though it is common for these shops to deal in tens of thousands of South African Rands (SARs) daily.

Commerce is one of the service sectors which ac- count close to 66 pctof the GDP, followed by the in- dustry sector with 31.6 pctand agriculture with 2.5 pctaccording the CIA world fact book, and it is one of the main sectors that the Ethiopians excel at. In almost all the regions of South Africa, Ethiopians are known for their textile trading business which includes the sale of all forms of cloths, garments, bed sheets and covers and household items. Before the Ethiopians make this business their specialty, the Indians used to have the monopoly. Now the story is completely changed.

Ethiopians have been contributing a lot to the cul- ture of business doing in South Africa. A creative way of Ethiopian business doing has been a model for other immigrants as well as the native black South Africans. The earlier batches of Ethiopian immigrants take the credit for their innovative ideas, risk taking and their special skill in taking advantage of oppor- tunities. The late comers have capitalized on this busi- ness culture. Especially those Ethiopians having large family members have been able to boost their busi- ness and acquire wealth within short period of time, owning big shops and expanding their operational areas and diversity of their business. There are three business areas that Ethiopians have become known in South Africa in particular, and they are the following.

Belt vending (Kebeto Mazor)

The earlier immigrants were the first to start this business of belt retailing on the streets, in their drive for survival and self employment. Most of the present Ethiopian business tycoons and multimillionaires used to be belt vendors, according to ur- ban legends. This business is the absolute creation of Ethiopian immigrants. Many businesses are saturating and profit margins that Ethiopians used to get are diminishing fast. Ethiopians have already started reminiscing about the good old times. Custom- ers were satisfied for they can access simple items without any inconvenience and waste of time. After graduating from this busi- ness the natural transition was to rent or buy shops and start settled trading of textile and related business. Of course some of the pioneers have become owners of buildings and hotels in South Africa and lots of assets back home. Currently belt vending is almost taken over by the south Africans themselves and the Ethiopians are proud of their inno- vative business approach that paved the way for the natives and other immigrants. South Africa is a country with one of the highest income inequalities in the world. Therefore, there is a growing interest from the South African poor in to businesses commonly done by immigrants.

Door to door retailing and credit sales

Readymade cloths at a shop owned by an Ethiopian in Joburg
Source: Photo:

Trading sites outside of the metropolitan area are commonly called ‘location’. Small cities, urban and suburban areas are all destinations for Ethiopian businesspeople. Ethiopians carry on their items com- monly bed sheets, bed covers, household items and move around villages, knocking every door in search of buyers either in cash or credit with very attractive profit margin. When the transaction is on credit they take note as to when to collect their money.

Though the profit margin of this business is good, it is said to be the most risky one. The chance of be- ing robbed or even killed is always present. Some- times the vendors die without telling anyone where they have saved or hide their money with no trace to take it back to their families. Since saving their money in the bank has a risk of being frozen by the government, for their income is not taxed, and they don’t send their money back home frequently due to hindrances, most of them keep hard earned cash in a secret place where they thought is safe. As a result when they die their money remains untraceable and such tragic incidences are quite frequent.

There are thousands of Ethiopians still engaged in door to door retailing and making substantial wealth, bearing all the risks. Such adventurous busi- ness doing is quite amazing for most of us who want to avoid even insignificant risks.

Crime is a wide spread malady in South Africa. Even though the rate of investment is very high, crime is one of the major factors holding back fur- ther flow of foreign direct investment and one of the push factors for the significant amount of brain drain. High level of brutal crime seems to be the Achilles heel for an otherwise amazing country. And this situation casts its shadow on hopes of Ethiopians living in the country.

Partitioning a Building for Rent (Shinshano)

The buildings in the place commonly known as ‘town’, in Johannesburg resemble the type of build- ings we find at piazza or around national theater, in Addis Ababa. The ground floors are used for shops while the upstairs are offices or residences. After renting a shop in the ground floor the Ethiopians partition it into small shops and rent it to others. If the location of the building is at a prime business district, they also partition the upstairs, which are originally designated for residence purposes. In buildings found around the ma- jor centers of Johannesburg, it is common to find second, third and even fourth floors partitioned for shops. These areas are busy and people packed the whole day. This in- novative business venture is expanding and becoming a norm in the town. There are lots of buildings in the town abandoned by their previous owners and auctioned by the municipality for public auctions. Ethiopians acquire such buildings offering higher prices. Building owners also sale their property through agents and property dealers. Ethiopians also purchase these privately owned buildings and the title transfer and tax issues will be handled by lawyers smoothly. Many Ethiopians who were once belt venders are becoming land lords generating susbtancial income from rent.

Ethiopian shops selling a range of home made spices in Joburg
Source: Photo:

The growing number of Ethiopian building owners has made building partition business the new norm. It has contributed much to business expansion in the shanty areas which were once hot spots of crime and violence.

Municipality officials and the natives are taking les- sons from this. Many immigrants are being hired by these industrious Ethiopians, subsequently decreasing crimes and other social ills. The native population in these areas is getting involved in these kinds of businesses as well. They are opening their own shops and have started to catch up, though they are yet to be a real competition to their Ethiopian counter parts.

The black empowerment program of the government that provide them with the opportunity to take grant and loan from the government with packages of tax incentive and related benefits as citizens may give the edge though.

Unemployment rate in South Africa is estimated to be around 25.2pctin 2012, according to official statistics. And this high level of unemployment is expected to push many South Africans in to businesses that were normally dominated by immigrants like Ethiopians. The effect has already started to be visible. Many businesses are saturat- ing and profit margins that Ethiopians used to get are diminishing fast. And Ethiopians have already started reminiscing about the good old times. These developments are forcing Ethiopians to be wary about the future. And some have started making plans to invest whatever they accumulate in their homeland as a security. Yet many in Ethiopia still continue to risk their life in dangerous voy- ages to reach the promise land of Africa. And the exodus seems set to continue in to the foreseeable future.

Abebe Asamere

Abebe Asamere holds an LLB in Law and BA in Political Science and International Relations from AAU. He was a member of the executive committee and pro bono legal advisor of the Ethiopian Consumers Protection Association for six years. Later on he became president of the Association for about a year. Since 2000, he has been working as consultant and attorney at Law. He was also teaching business law at the School of Commerce at AAU on part time basis for several years. Comments can be sent to or

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