Proliferation of Halal Business in Ethiopia

Catering to Growing Demands, Values

Ethiopia, known for its diverse cultural and religious tapestry, has recently experienced a significant surge in demand for Halal products and services. This trend reflects a growing awareness of Halal principles, particularly within the country’s substantial Muslim population, estimated at around 34%, according to various studies.

This heightened awareness presents a significant market opportunity. Businesses increasingly recognise the demand for Halal-certified products, primarily focusing on food. However, the need for Halal-certified cosmetics, pharmaceuticals, and other goods is also emerging. This rise in Halal businesses presents exciting new avenues to boost exports, paving the way for increased investment and job creation.

However, the expansion of the Halal business sector needs some help. Ethiopia needs a robust national Halal certification system and a well-defined policy and legal framework. The infrastructure and logistics to create a truly enabling environment have yet to be fully established. These shortcomings hinder export performance and erode consumer trust.

Despite these hurdles, Ethiopia’s burgeoning Halal market holds immense potential. By addressing certification limitations and fostering adherence to Halal standards, Ethiopia can strategically position itself as a significant player in the global Halal industry. This article explores the proliferation of Halal businesses in Ethiopia, examining the driving forces behind this growth, the opportunities it presents, and the challenges it faces.

Abdulhadi Beyan Seid, 50, is a financial management expert. He works in a private company engaged in import, export, and manufacturing. A devout Muslim who practices the teachings of the faith very strictly, Abdulhadi observes the fasting of Ramadan and also prays. For a long, the absence of certified halal restaurants in Ethiopia was one of the challenges he faced when thinking of meeting people and dining outside. As a result, he either meets his friends at home or has yet to. But now, with the opening of several Islamic restaurants in Addis Ababa, he has plenty of options to meet and dine with his business clients, friends and families. “It’s a relief,” he told EBR. He is pleased about the proliferating halal restaurants in the city. “I now have multiple options, but back in the day, if I go to restaurants, I only order fasting foods, foods that have no animal ingredients and are primarily meant for non-Muslims.”

Abdulhadi’s story exemplifies the impact of the burgeoning Halal businesses in Ethiopia, particularly the rise of Halal restaurants. This trend goes beyond catering to dietary restrictions; it fosters community, strengthens social bonds, and creates new business opportunities.

However, this calls for the expansion of Halal certification and standardisations. Halal certification ensures food is prepared according to Islamic guidelines, offering peace of mind for observant Muslims like Abdulhadi. Before the recent proliferation of Halal restaurants, social gatherings often meant relying on home-cooked meals or limiting menu options at non-Halal establishments. This creates barriers, particularly for business lunches or networking events. With the growing number of Halal restaurants, Muslims in Addis Ababa, like Abdulhadi, now have a more comprehensive range of options. They can enjoy a meal with colleagues, friends, and family, confident that the food adheres to their religious beliefs. This situation fosters a sense of belonging and strengthens social connections within the Muslim community.

“Halal” translates to “permissible” in Arabic and refers to products and practices that comply with Islamic law and teachings. For food products, this encompasses guidelines for slaughter, permissible ingredients (excluding pork and alcohol), and hygienic preparation methods. Beyond food, Halal principles extend to finance, cosmetics, clothing, and other aspects of life.

Abdulmenan Mohammed (PhD), a financial expert based in London, explains the different factors contributing to Ethiopia’s flourishing Halal market. The main driving force is the country’s steadily increasing Muslim population, which creates a larger consumer base for Halal products. He argues that this demographic shift fuels demand for a wider variety of Halal options across various sectors.

Another reason that drives this is the heightened awareness among the people. The growth of awareness is attributable to the increased access to information, and the speedy pace of globalisation has created opportunities for heightened awareness of Halal principles among Muslim and non-Muslim Ethiopians. Increasingly, people travel for business or leisure to countries where Halal business is the norm. They see how consumers are served themselves, become more conscious of the issues, and start minding the ingredients and sourcing of products they purchase.

Ethiopia’s economy has grown tremendously over the past two decades, creating more opportunities for better lives for a large portion of the population. This disposable income growth has allowed consumers to invest in higher-quality products, including Halal offerings, which are perceived as premium.

Indeed, consumers’ rising awareness is a global phenomenon. The world is witnessing a fascinating shift in consumer behaviour – a rise in awareness and sophistication regarding market needs. This phenomenon transcends geographical and cultural boundaries, impacting how people interact with brands and products.

The internet and social media have empowered consumers with unprecedented access to information. Citizens in many countries can research brands, compare prices, and delve into production processes – all with a few clicks. This has led to a more discerning customer base, demanding transparency and quality.

Urbanisation and changing lifestyles are other reasons for improved consumer awareness, which translates into market opportunities for halal products. As in different markets, rapid urbanisation in Ethiopia has led to busier lifestyles. Consumers seek convenience and readily available Halal options, particularly in processed foods and ready-to-eat meals.

Furthermore, as a country endowed with immense tourism potential, Ethiopia’s rich cultural heritage leads to a growing tourism industry that demands Halal-certified hotels, restaurants, and tourist amenities to cater to growing Muslim travellers. As a country specially placed in a meaningful historical connection with Islam and a country that’s been an early heaven for messengers of the Prophet from persecution in Mecca, Ethiopia enjoys a premium place in Islam. The two billion Muslims worldwide would potentially wish to travel to Ethiopia, a country that saved the religion, according to Islamic scholars. Ethiopia offers a vast market opportunity for halal-certified products. The country’s profound place in Islamic history opens a huge window of opportunities for halal services.

Conscious efforts to promote halal business are only a thing of a recent phenomenon in Ethiopia. “With a sizeable proportion of Ethiopian Muslims, the promotion of halal business will have a considerable impact on the economy”, Abdulmenn anticipates. However, some concerns have to be addressed meaningfully. The overwhelming focus at the moment is on the final consumer products. There should be a balanced focus on raw materials and ingredients uses, the manufacturing process, the financing of the business, the treatment of employees, and the provision of insurance services in the whole chain if every step indeed adheres to the Islamic principles, Abdulmenan explains.

The proliferation of Halal businesses presents several exciting opportunities. Businesses catering to the Halal market can tap into a sizeable and growing consumer base, offering them a more comprehensive range of products and services. The demand also encourages businesses to innovate and develop new products that adhere to Halal guidelines while maintaining quality and taste.

Given Ethiopia’s strategic location, which makes it well-positioned to expand the export of Halal products to neighbouring countries beyond, the Middle East presents a significant opportunity for Ethiopian exporters. The Middle East boasts a large and affluent Muslim population with a growing demand for imported goods.

The geographical proximity between Ethiopia and the Middle East and the vast network of daily flights and affordable sea freight options facilitate efficient trade routes.

Ethiopia’s agricultural sector, a mainstay of its economy, can benefit immensely from halal certification. Historically, the country is a major producer of coffee, oilseeds, pulses, and live animals – all of which have a significant market in the Middle East. Halal certifications can open doors to premium markets within the region, allowing Ethiopian products to command higher prices and potentially more outstanding market share. As a country struck by a shortage of foreign currency, this is indeed a good opportunity.

Halal certification acts as a passport to the Middle Eastern market. With it, Ethiopian products may avoid import restrictions or struggle to gain consumer trust. Halal certification signifies adherence to ethical and religious standards, potentially enhancing the brand image of Ethiopian products in the eyes of Middle Eastern consumers.

Halal-certified products often command premium prices in the Middle East, potentially allowing Ethiopian exporters to increase their profit margins. That’s why implementing all the policy and regulatory requirements is a fundamental prerequisite for expanding Ethiopia’s fledgling export sector.

Solving these policy problems and building the infrastructures would also create job opportunities in food processing, manufacturing, logistics, and marketing sectors.

Despite the promising outlook, the Halal business landscape in Ethiopia faces some challenges. One of these is the lack of sufficient certification institutions. Ethiopia currently has a limited number of accredited Halal certification institutions. This can hinder businesses seeking certification and create confusion for consumers about the authenticity of Halal claims.

Even in the existing halal certification works, there is a lack of standardisation. Variations in the interpretation of Halal guidelines across different certification bodies can make it difficult for businesses to navigate the certification process.

While awareness of Halal principles is increasing, some consumers might need further education on the benefits and significance of Halal certification. This calls for consistent promotion among businesses engaged in the halal industry.

The infrastructure and logistics needs should also be planned and built to scale up the production and distribution of Halal products across Ethiopia. The lack of it is impacting product availability and affordability. Only through a robust infrastructure and logistics development can competition from established markets be sufficiently met. As Ethiopia’s Halal industry is relatively young compared to established players in Southeast Asia and the Middle East, fierce competition in the international market would be evident. That requires consistent marketing and promotion campaigns to establish Ethiopia as a reliable source of Halal products and a profound destination for Halal services.

According to experts, key measures should be taken to harness the full potential of the Halal business in Ethiopia. One of them is developing a robust certification system, which is crucial. This call for establishing a national Halal certification body with internationally recognised standards can ensure transparency and build consumer trust. Having this is especially crucial for entering and expanding the export market.

The rise of Halal businesses in Ethiopia presents a significant opportunity for economic growth and job creation, as well as catering to the evolving needs of its diverse population. By addressing the existing challenges and embracing best practices, Ethiopia can position itself as a significant source of Halal foods. It boosts the market for agricultural products and propels the burgeoning manufacturing sector. With existing capabilities in food processing, textiles, and leather products, Ethiopian manufacturers can cater to the specific needs of the Middle Eastern market. For instance, halal-certified processed foods like canned meat and vegetables can find a ready market in the region. Similarly, halal-compliant leather products and garments can cater to the fashion-conscious Muslim population locally and overseas.

Beyond facilitating exports, Halal certification can be a powerful strategy for building an inclusive economy in Ethiopia.

Indeed, Halal certification is not just about market access alone; it’s a strategic approach to building a sustainable economy.

Building an inclusive economy is a complex but necessary endeavour. An inclusive economy offers everyone a shot at economic security and participation. People can work for fair wages, build wealth, and contribute their talents. When more people can participate in the economy, there’s a larger talent pool and innovation. This diversity of ideas and skills leads to a more robust and adaptable economy. An inclusive economy fosters a sense of belonging and reduces social tensions by ensuring everyone has a chance to contribute and benefit. When people are excluded due to factors like race, gender, disability or lack of knowledge, it means the economy is missing out on their talents and contributions.

Ethiopia can position itself as a leading player in the global Halal market by empowering diverse businesses, creating jobs, attracting investments, and fostering international partnerships. However, addressing standardisation, infrastructure, and consumer awareness challenges is crucial to maximising this potential. Through focused efforts, Ethiopia can leverage the Halal industry to create a win-win situation for businesses, communities, and the nation’s overall economic well-being.

Together with the development of interest-free and other Sharia-compliant banking services, Islamic tourist site developments, and compliant service packages, Ethiopia can tap tourist flow from the Middle East and other Muslim countries. This, “beyond developing an inclusive economy, is instrumental for the overall development and prosperity of the country,” says Abdulkadir Adem (PhD), chairman of the Freedom and Equality Party (FEP).

An inclusive economy is about creating a system in which everyone can reach their full potential and contribute to a better future for all.

According to the Dubai Islamic Economy Development Centre (DIEDC), established in December 2013 to transform Dubai into the ‘Capital of Islamic Economy, ‘ the global halal economy represents a US$6.7 trillion market. Islamic finance, a key component of the Islamic economy, estimated assets of $2.88 trillion in 2019. Its projected growth to $3.69 trillion in 2024 indicates significant market growth.

The Islamic economic model emphasises principles like profit-sharing and responsible investment. This fosters a more inclusive economy by promoting financial inclusion through Sharia-compliant financial instruments accessible to large unbanked populations. It also encourages principled business practices that consider social and environmental well-being alongside profit.

Developing countries with large Muslim populations can benefit from the Islamic economy in several ways. It helps mobilise domestic savings, and Islamic finance can attract investments from within the country that might have previously been held outside traditional banking systems.

It also fosters financial sector development. As more interest-free banks join the market, it leads to a more robust financial sector, benefiting all businesses. The proliferation of IFB also fosters sustainable development because the focus on principled practices encourages responsible resource management and social development goals beyond pursuing economic growth.

As Ethiopia needs to catch up on development endeavours, instituting the legal and policy framework and building all the necessary infrastructural and logistical facilities to construct a robust halal economy would ensure an inclusive and sustainable economy. It also promotes peace and stability, as an inclusive economy allows the sharing of the fruits of development and empowerment of citizens, Abdulkadir concludes. EBR

12th Year • April 2024 • No. 128

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