Lelise Neme Ethiopian Investment Commissioner
Lelise Neme was just 24 years old when first appointed as Chief Executive Officer of the Industrial Parks Development Corporation (IPDC)—an entity tasked with grooming and grouping manufacturers into efficient centers of industry throughout Ethiopia. Her leadership traits were seen even much earlier, however.
Lelise assumed leadership roles as a student at Jimma University and prior to IPDC, held the Director General position at the Oromia Industrial Development Agency and the Deputy CEO role at Oromia Industrial Park Development Corporation. Yet, she had to endure criticism after criticism for assuming senior roles at such a tender age.
Now, she heads the Ethiopian Investment Commission (EIC) at a time when investment flows are exhibiting downward trends due to a flood of challenges including the pandemic, national security deterioration, and war.
At a time when the nation needs an economic uplift to ease foreign exchange shortages and rampant inflation, Commissioner Lelise is facing the challenge of attracting more investment into a nation rocked by a series of internal and external trials and tribulations. One of the younger leaders of the current administration sat down with EBR’s Addisu Deresse to discuss investment prospects of Ethiopia.
What is your take on women and leadership?
I have been involved in leadership roles since joining university. I was President of the Women’s Leadership Club as well as Jimma University Female Student’s Association. All in all, I was involved in student matters that required attention in my years at the university.
You know, the idea of empowering women is usually associated with the willingness of whoever is going to empower them. People don’t think it is a must to empower women. Even when women are appointed, it is more like ‘let them try it; it is not like they can actually do it’. Women are capable of many things and are beyond just assuming positions for the sake of filling quotas. Women have the efficiency and thought process that is needed to bring about change.
You have received criticism for being too young to assume such senior positions. What is your view on the convergence of age and leadership?
I took on positions at the regional level before I assumed the leadership role at the Industrial Parks Development Corporation (IPDC). I have been the head of the Industry Bureau of the State of Oromia as well as deputy head of the regional IPDC. So, this is my third leadership position. I think criticism of my youngness has helped me become stronger.
Ever since I was a university student, I have been involved in leadership roles which have taught me to update myself and engage more. This I do more for myself rather than in response to critics because if I fail at a leadership position, I have always told myself that I would also be failing many women down the line who aspire to assume such positions. I always operate within that thought framework.
So, I encourage the idea of more and more youth assuming leadership positions. The young always have different perspectives on various matters. I also believe in the extra mile they go to solve problems. Of course, we also need to surround ourselves with our seniors so as to learn from their wisdom.
What do you think are your major achievements in these top governmental positions at the regional and federal levels?
There were only four operational industrial parks when I joined IPDC. Since then, we were able to finalize and start operations at four other parks. Another achievement that I am proud of is the more than 25,000 people who were able to find employment at these parks. This is not just success in completing the construction. It entails its own hard work of launching production processes of factories. Of course, a further achievement is my relationship with my staff. From regional to federal and everywhere I go, I have believed in creating a team and team spirit which the job requires.
Most foreign manufacturers, especially garment manufacturers, are only permitted to produce for export. Is this thinking under revision?
Foreign investors are generally encouraged to manufacture for exports. Understandably, that is because of the long-time challenge of forex shortages. But, this only works for those that operate in industrial parks. Others are allowed to manufacture for local consumption. Also, they can engage in joint ventures with local investors to sell their products locally.
The industrial parks have consumed a lot; the government has invested massively in these centers of manufacturing, including supportive infrastructure. Their construction mostly utilized loans and grants and the government must see a return on those outlays.
Another challenge faced is the issue of raw materials. We are still far off on effective value chains. We are working on it but are not there yet. Factories still need to import raw materials required to manufacture their outputs, which requires hard currency. For these reasons, we encourage manufacturers in the parks to focus on exporting their goods.
As you seek more investment, how do you strike a balance between import substitution and exports?
As the media is more focused on industrial park activity, it seems as if the government gives undue focus to exports. This is true for the parks. However, in general, as the Ethiopian Investment Commission (EIC), we pay attention to both types of investments—import substitution and export. We encourage investors for both.
There seems to be a shift of focus from manufacturing to mining with regards to attracting foreign direct investment (FDI). Is this a result of current unfavorable conditions for manufacturing or a purposeful transition?
Manufacturing is still a priority. There are five priority areas: manufacturing, mining, agriculture, energy, and information and communications technology (ICT). This has been stipulated by the government in its 10-year plan. The mining sector had been dragging its feet mainly due to security and other challenges. As we have started issuing licenses recently, it has made it look like more attention is given to the sector. But, that is particularly not the case.
Access to finance is still a challenge that has been in the spotlight for decades. What is being done?
Local funding had been suspended for some time. This has now resumed. Local investors’ financing by banks prioritizes manufacturing with those engaged in pharmaceuticals receiving bettered beneficial packages. Those with plans to invest in the agricultural sector will also be prioritized. All commercial banks and the central bank are aware of the prioritization and are serving investors accordingly. Of course, the issue of collateral has also caused a challenge of its own in the process. We are currently discussing the possibility of using capital goods as collateral.
EIC’s mandates are mainly tied to foreign investors. Investment bureaus within the regions and city administrations have their own mandates when it comes to access to finance. Foreign investors usually come with their own finance sources while some inquire of local loans for Birr outlays for which we work with local commercial banks to address.
As a federal commission, we highly encourage joint ventures (JVs) and it is also a focus area. We believe in collaborations between local investors with their own capacity, knowledge, and skills and foreign counterparts who may come with their own additional finance and technology. An advantage here is that USD150,000 is required as startup for JVs while USD200,000 is the minimum for a fully foreign-owned investment.
The EIC also works on capacity-building programs for the regional investment bureaus. Our programs aim to ease region-level bureaucratic burdens on investors.
The bureaucracy surrounding licenses and permits is improving. Yet, launching operations still comes with hurdles. Part of the problem is officialdom while another challenge is investors’ abuse of incentives. How do you navigate these tricky waters?
This is an accurate concern. We support investors until they leave our office upon securing their licenses. Thereafter, however, there was no support to help them effectively commence operational processes. As of last January, we have been implementing a program that aims to address just that, through the establishment of an after-care support team which follows-up on investments from inception to production and selling of goods and services. This support program has a technical committee with members from regional investment bureaus, utility and infrastructure providers, and other stakeholders. We are implementing a full-fledged after-care strategy through which we additionally provide practical support on the ground.
We believe this will solve some of the bureaucratic problems. We are also responding to investors’ challenges which come to us through associations and from individual investors. Further, a procedure has been put in place which mandates public officials visit investment sites at least once a week. So, officials at the regional level are now highly advised to not run their jobs sitting in their offices, only. We also have undertaken a series of trainings to aid regional offices towards customizing their after-care strategy.
The issue of investors who abuse their incentives or those who have delayed operations after receiving all the required support is also overseen through the same support strategy.
We have reports of investors in agriculture complaining about double taxation by regions which is impacting investors’ confidence. How do you work with regional officials to solve such problems?
Yes, investors raise lots of challenges and one is double taxation by federal and regional officials. There is one team under the leadership of the Deputy Prime Minister that meets every two months. The team evaluates this and other intergovernmental challenges and attempts to address them. The platform also brings together senior regional officials and other stakeholders so that they would take note of things they need to address within their respective jurisdictions.
Finally, we have the Export Stream Committee under the direct leadership of the Prime Minister’s Office and is comprised of regional chief administrators, the Ministry of Agriculture, regional agricultural bureau officials, and other stakeholders from industry, customs, commercial banks, and the central bank.
Working in an administration led by a prime minister who seems to have taken an interest in the environment, how do you strike a balance between caring for nature and the need for more investment?
We are maintaining the balance very well. One good example is the waste discharge system that we have installed in almost all industrial parks which allows for the treatment and re-usage of 80Pct of waste. This experience is now also being adopted by factories outside industrial parks. There were communal complaints against leather, horticulture, and other industries regarding waste released into the environment. To keep the progress in check, we conduct supervisory works.
We need the investment, the technology, and all the benefits that that entails. Yet, we also believe that all the laws of the land must be respected when doing so. Towards this, we enact necessary checks and balances before licensing. This is something which we have started doing recently. For older factories, we revisit their procedures on waste disposal and other related issues. Some dispose of their wastes in rivers leading to the contamination of natural resources and harming of communities.
We are also trying to collaborate with concerned bureaus at the regional level by helping them give the right support which ensures both the flow of investment and environmental health. What we need is green, sustainable investment. We need investments that benefit surrounding communities, not ones that hurt them. We have seen the difference. Investments that benefit neighboring populations have been protected by youth, while those on the other side have been the target of violence.
A free trade area among African nations is being championed by the government. What impact do you anticipate on foreign direct investment, in particular?
We have considered it as a big opportunity. As our country is in an investment dilemma, the African Continental Free Trade Area (AfCFTA) could bring in lots of investment opportunities. We participated in a Ministry of Trade and Regional Integration study which concluded that, all-in-all, we will be beneficiaries of the trade area. Ethiopian Airlines and our railway connectivity will positively play into the opportunities we are looking forward to. There is also another initiative to connect African countries by road, which will further boost opportunities in our favor. Manufacturers in parks, for example, export 85Pct of their outputs to the American market. Now, these same players are showing interest to export to African nations and are eagerly awaiting the free trade area’s implementation. So, yes, we hope and believe AfCFTA will bring in more investment.
Are you expecting investment opportunities from the diaspora influx?
Diaspora members are coming to show the world that Ethiopia is actually safe to visit and live in, despite propaganda by global mainstream media to the contrary. As such, it will also play a role in portraying Ethiopia as a safe-for-investment destination, which we will definitely take full advantage of. Most potential investors might have been misinformed by this propaganda campaign by CNN and other mainstream media channels. The homecoming creates an advantage towards balancing that negativity.
But, beyond that, we are also preparing to take advantage of any interest by the diaspora for investment. Diaspora desks have been set up at federal and regional levels to inform on opportunities and procedures of investing in Ethiopia.
The war and ensuing diplomatic standoff with the West have dented foreign investment activity. What preparations are there to counter this?
We have identified the challenge as a threat to investment. We are currently working on what we call ERA—Expansion, Reinvestment, and Attraction. Activities are also undergoing to market the commission as one that actually listens to investors.
We need to incentivize investors to reinvest in Ethiopia while supporting them to fully utilize their potential. Thus far, only 0.3Pct of profits have been reinvested by foreign investors. In other countries, owners reinvest their profits while in Ethiopia, profits are repatriated.
The third pillar of our strategy is attraction. When evaluating the first four months of the fiscal year’s performance, we have received an investment of USD1.07 Billion—from 55 licensed companies which are now in the process of starting operations. This shows, that despite challenges, there are also investors who look positively at Ethiopia’s prospects.
Our new ERA strategy has taken full effect with the understanding of curbing challenges. We are working to generate USD5 billion in investments this year, up from USD3.9 billion last year. We need to perform better this year through the high expectations and challenges. But we are up to the task.
Not much has been done in promoting Ethiopia internationally as an investment destination compared to Rwanda, for example, that prompts itself on international mainstream media. What are you doing to change that?
We have good news in that regard. EIC was the 2022 awardee of the World Association of Investment Agencies. We took gold, ahead of Canada and India. The award recognizes best investment promotion practices. We use virtual promotion methods to expose our investment options. We are active, particularly over social media.
Of course, we assess how feasible our promotion strategies have been, with one being through our embassies worldwide and foreign delegations based in Ethiopia. We found that investors have not been coming in the way we would have liked. So, we are responding to this finding through our ERA strategy.
We are definitely considering using global mainstream media platforms. About six months ago, we were able to promote ourselves on one European media outlet. Other similar contracts are now in the pipeline. Still, we don’t think it will suffice and more needs to be done. We have to craft the message on how it is time to invest in Ethiopia and sell that message. We need to work more on that line.
Digitalization seems to be one of the focus areas of the current government. How are investments in the tech industry doing? Are there any particular activities from EIC in the sector?
ICT is one of the five priority areas of the government and we are also trying to give it due attention. However, when compared to the other four priority areas, our incentive packages are not as inviting. Therefore, we are working with the Ministry of Finance to improve incentive gaps to draw in more tech investment. But, we have witnessed interest as our country’s time zone is preferable. But thus far, incentivization leans toward the other four priority areas.
As ICT is relatively new for us, we are reaching out to concerned investors to learn what constitutes a conducive environment for them. If we can work on incentives and accommodate investor interests, we hope to see more investment in the sector in 2022. The investment of Safaricom in Ethiopia’s telecom sector has been a huge influence over investors’ interests. The distance which the nation has gone to open up that space has communicated a positive message to other ICT actors.
China has introduced a duty-free export corridor for African countries. Do you consider that an opportunity for additional investment?
The privilege is for agricultural produce. The sector is also one of the priority areas of our government. So, we think this convergence will encourage investors in that regard. Investment in logistics—including that of Ethiopian Airlines—and the given attention by the Ministry of Agriculture and regional bureaus will altogether help in taking better advantage of the opportunity.
We want to formalize our relationship with our Chinese investors which have not been, thus far, institutionalized. Towards this, we are working to sign a memorandum of understanding with the Chinese investment bureau. This will help to take better advantage of opportunities. We hope to secure USD3 – 5 billion worth of investment from China through the MoU. We are witnessing interest in areas like manufacturing, health, and pharmaceuticals.
How do you evaluate the role of the Chinese in the investment sphere, beyond advancing loans which are criticized for being too expensive?
The role of the Chinese in investment in Ethiopia is significant. We have individual investors that have advanced between USD100 million to USD1 billion. These investments have had quite an impact on the Ethiopian investment climate; they also have inspired more ventures. Chinese investors do not abandon you for simple challenges. They also bring in their own solutions and solve their own problems, for which they will go to great lengths. These are not investors who work in sheds. They rather erect their own plants, build their own facilities, and share the government’s burdens.
Ethiopia is dealing with internal and external challenges, with a significant impact on both local and foreign investment. When you look into the near and far future, do you see hope or more challenging times ahead?
I see hope. Not just in the future, I see hope now. All the challenges are roads that will lead us to innovations that ease burdens. I even believe that the time is now to invest in Ethiopia. The challenges are present in other countries too; it is not all new. It feels heavier as our particular problems are coming from all directions. When the US government moved to take away the African Growth and Opportunity Act (AGOA) privilege, people in Washington went unbelievable lengths to reverse it. The courage of investors to stand beside us has also been encouraging. We also discerned who was able to understand Ethiopia beyond its challenges. Investors are still coming at this challenging time.
Of course, we cannot think of investment without peace. But there still is hope everywhere. Even those that invested in Mekelle are emailing us to ask when everything will be better so that they can go back to work. So, all I see is hope. It is time to invest in Ethiopia.
EBR 10th Year • Feb 2022 • No. 104