@UNIDO – Ethiopian Business Review

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Ethiopia is projected to lose approximately USD 5 million in customs revenue during the first year of implementing the African Continental Free Trade Area (AfCFTA) agreement, according to the Ethiopian Policy Studies Institute.

The projection was disclosed as part of the finalization of Ethiopia’s National AfCFTA Implementation Strategy, which outlines the country’s roadmap for integrating into the continent-wide free trade pact. The strategy was officially launched during a public consultation forum held in Addis Ababa on June 20, 2025.

The high-level event brought together senior government officials, private sector leaders, and development partners. Among the key attendees were Dr. Kassahun Goffe, Minister of Trade and Regional Integration; Yasmin Wohabrebi, State Minister for Trade and Regional Integration; and Dr. Abebe Ambachew, Senior Researcher at the Policy Studies Institute.

According to Dr. Abebe Ambachew, Senior Researcher at the Policy Studies Institute, the estimated revenue loss over a 13-year period could reach USD 83.3 million, with USD 5 million expected in the first year alone. He added that customs duties currently account for about 25.6% of Ethiopia’s total government revenue from imports.

“Given that most of Ethiopia’s trade occurs with non-African countries, the impact of AfCFTA-related tariff losses may not be as severe in the short term,” said Dr. Abebe. “However, the country must take steps to diversify revenue sources and strengthen its export base.”

Speaking at the launch of the ECOTRADE Project, Dr. Kassahun also emphasized Ethiopia’s limited experience in duty-free trade frameworks.

“We have primarily operated within a tax-based trade system and lack practical exposure to free trade. This transition will have direct implications for our customs operations and logistics systems,” he stated.

He further highlighted structural barriers beyond tariff-related issues, pointing to regional connectivity constraints. “Although Ethiopia’s aviation sector ranks first in Africa, it still cannot be effectively utilized for large-scale continental trade,” he added.

The African Continental Free Trade Area (AfCFTA) was signed on March 21, 2018, in Kigali, Rwanda, and officially entered into force on May 30, 2019, after reaching the required number of ratifications. Ethiopia ratified the agreement in 2019 but has yet to fully liberalize its tariffs or participate in the AfCFTA’s Guided Trade Initiative.

Current trade figures show that only 14% of Ethiopia’s exports are destined for African markets, while just 9.6% of imports originate from the continent. This indicates a limited level of trade integration with African partners and suggests that Ethiopia’s gains from AfCFTA may take time to materialize.

To mitigate the projected revenue gap, experts at the forum emphasized the need to expand alternative tax mechanisms and boost export performance, particularly in value-added sectors. Dr. Abebe noted that Ethiopia’s export and import volumes have both shown moderate growth over the past decade, presenting a potential foundation for greater regional trade integration.

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Ethiopia recorded a significant rebound in foreign direct investment (FDI) in 2024, attracting approximately US USD3.98 billion, a 21.9% increase compared to the previous year, according to the latest United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2025.

This growth positions Ethiopia as the leading FDI recipient in East Africa, a region that collectively attracted around USD8.5 billion in 2024, marking modest growth despite a challenging global environment characterized by an 11% decline in worldwide FDI flows.

Neighboring countries contributed to this regional investment landscape with Kenya drawing an estimated USD2.5 billion in FDI, Tanzania about USD1.1 billion, Uganda approximately USD0.7 billion, and Rwanda close to USD0.2 billion. These inflows reflect steady investor interest across sectors such as fintech, manufacturing, infrastructure, renewable energy, agribusiness, and technology.

Ethiopia’s surge is driven by reforms and investments targeting telecommunications, renewable energy, agribusiness, and logistics, marking a recovery after subdued inflows following its 2016/17 peak of USD4.12 billion.

The East African region showed resilience, with greenfield projects increasing by 32% and international project finance deals rising 38%, signaling confidence in new investments despite global FDI contractions.

Regional integration initiatives such as the East African Community (EAC) and the African Continental Free Trade Area (AfCFTA) remain vital in enhancing investment flows and fostering economic diversification across the region.

In a further boost to Ethiopia’s regional economic engagement, the Ministry of Trade and Regional Integration (MoTRI) recently convened a high-level validation workshop on the country’s National AfCFTA Implementation Strategy. The event brought together policymakers, private sector representatives, development partners, and trade experts to review the final draft of the strategy designed to guide Ethiopia’s active participation in the landmark continental trade agreement.

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Ethiopia’s Special Economic Zones (SEZs) have secured nearly USD 900 million in new investments in the current fiscal year alone, a leap that signals the zones are active engines of industrial growth.

As reported by the Ethiopian Press Agency, 89% of all developed land and factory shades in the country’s 13 SEZs have been taken up. Bole Lemi and Adama Industrial Parks have reached full occupancy, while Jimma SEZ stands at 90%.

“This level of uptake shows that previously stagnant areas are now attracting serious investment,” said Zemen Junedi, Deputy CEO of Promotion and Marketing at the Industrial Parks Development Corporation (IPDC), in an interview with The Ethiopian Herald. “Most of the newly registered projects are already operational.”

Zemen attributes the turnaround to a set of government-led legal and regulatory reforms—nearly 80 policy frameworks have been revised. The goal: eliminate red tape and boost investor confidence. The results are visible. Just a few years ago, local investor participation in SEZs stood below 5%. That figure now stands at 60%, with Ethiopian firms operating alongside foreign players in zones across the country.

SEZs have also shifted from being purely export-driven to supporting import substitution, especially in textiles, pharmaceuticals, automotive assembly, logistics, and agro-processing. Parks once seen as underutilized are now actively contributing to employment, technology transfer, and foreign exchange generation.

“Zones that were struggling are now alive with factories, warehouses, and local value chains,” Zemen said.

However, recent reports highlight persistent challenges for workers within these zones. Laborers face wages as low as USD26 per month, among the lowest globally. Poor working conditions, including long hours, inadequate occupational safety, and substandard housing, contribute to high turnover rates—sometimes exceeding 10% monthly. Inflation continues to erode workers’ purchasing power, while weak enforcement of labor laws and limited union influence leave many with little protection or recourse.

Kegna Beverages S.C has officially launched its flagship product, Kegna Beer backed by an impressive ETB 22 billion investment and the support of over 5,000 Ethiopian shareholders.

The grand launch, held at the Addis International Convention Center, was not merely a product unveiling. It was the realization of an eight-year journey marked by perseverance through foreign currency shortages, COVID-19 disruptions, and political turbulence. Yet, the company stood firm, fueled by what it calls a “collective vision” of economic empowerment and national pride.

“We passed through tough challenges, but we had strong backing from the community. From the first public announcement alone, we raised ETB 1.2 billion,” said Neway Megerssa, Chairman of the Board at Kegna Beverages and CEO of Sinqe Bank. With visible excitement, he also recalled the moment they submitted nearly 50 documents to the Development Bank of Ethiopia, secured ETB 7.12 billion in financing, and proceeded to purchase the machinery.

Derived from the Afaan Oromo word “Kegna” — meaning “ours” — the brand is an expression of public ownership and cultural identity. The company was founded under the principles of the “Oromo Economic Revolution”, an economic philosophy aiming to elevate regional prosperity through inclusive entrepreneurship.

During its formation, Kegna conducted extensive taste research across 20 cities, crafting a recipe tailored to Ethiopian preferences. The result: Kegna Beer, a premium lager brewed with local and internationally certified inputs, featuring 5% ABV and available in 33cl and 50cl bottles, as well as 30-liter kegs.

Situated on 110 hectares in Ginchi Town, Oromia Region, the Kegna Brewery is among the most advanced in East Africa, blending state-of-the-art global machinery with local engineering talent.

“From the water to the wheat, every ingredient is tested to international standards. Kegna is built with cost-efficiency in mind — one machine here can replace five traditional ones,” said Afework Legesse, Chief Operations Officer.

With a current production capacity of three million hectoliters, the company plans to double capacity to six million hectoliters within four years.

“This isn’t just made in Ethiopia – it’s made of Ethiopia. It’s a shared legacy,” said Abiyu Abera, Commercial Manager at Kegna Beverages.

Kegna Beverages is uniquely structured as a public share company, now employing over 250 people, with plans to grow its workforce to 1,000 nationwide. Its over 5,000 shareholders include individuals, cooperatives, and institutions from across Ethiopia — ensuring that the profits generated return to the communities that built it.

Kegna’s ambitions go beyond beer. As part of its multi-product roadmap, the company plans to introduce eight additional beverages, including water, juices, and soft drinks, in a bid to expand its footprint in Ethiopia’s fast-growing FMCG sector. Starting mid-June, Kegna Beer will be available at bars, butcheries, groceries, and restaurants nationwide.

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President Donald Trump has openly dismissed the idea of reviving America’s textile industry, despite the recent tariff policies that shook global trade.

“I’m not looking to make T-shirts, to be honest. I’m not looking to make socks… We are looking to do chips and computers and lots of other things, and tanks and ships,” Trump told reporters on May 25 before boarding Air Force One, as quoted by USA Today.

The remarks, paired with his agreement that the U.S. doesn’t need a “booming textile industry,” were met with sharp criticism from domestic producers. But they have also caught the attention of international observers who see a strategic opening for emerging manufacturing hubs.

Ethiopian-American economist Zemedeneh Nigatu framed Trump’s comments as a potential advantage for Ethiopia, where textile and apparel manufacturing remains a core part of the country’s industrial growth strategy.

“Emerging economies like Ethiopia, which have competitive and comparative advantages, can produce labor-intensive products like clothing at very competitive prices and still deliver high quality to American consumers,” he shared on social media.

With Ethiopia’s industrial growth accelerating from 4.8% in 2022 to 8.4% in 2024, and projections pointing to 12% by the end of the fiscal year, the country is positioning itself as a low-cost, high-capacity producer. Programs like Made in Ethiopia are aligning policy and investment to replace imports and boost exports.

Zemedeneh also called on U.S. entities—including private equity firms and development institutions like USDFC—to co-invest in African manufacturing, a move that could build resilient supply chains and offer American consumers alternatives to Asian production.

Local economists are also calling for structural reforms in Ethiopia’s textile value chain, especially in the use of abundant domestic raw materials like cotton. However, they stress that peace and political stability remain non-negotiable, forming the heartbeat of investment, industrial productivity, and uninterrupted supply chains.

Siket Bank is positioning itself as a central player in Ethiopia’s industrial renaissance, claiming a significant role in transforming the country’s manufacturing landscape through financial innovation. At a high-level panel discussion themed “Financial Provision for Industrial Productivity”, the bank showcased its evolving strategy to empower local manufacturers and accelerate industrial productivity.

Held alongside the 2025 Manufacturing Industries Exhibition and Fair at the Addis International Convention Center, the panel attracted key figures from federal and city administrations, private sector leaders, development partners, and industry experts. The discussion aligned with the national “Ethiopia Tamirt” (Ethiopia Manufactures) movement, which champions a shift from import dependency to homegrown production and self-reliance.

Panelists discussed the broader role of finance in Ethiopia’s industrial development while spotlighting Siket Bank’s own transformation—from a microfinance institution into a commercial bank. The transition, they noted, has allowed the bank to expand its reach and offer more sophisticated services tailored to the needs of various businesses.

Testimonials from long-standing clients painted a vivid picture of transformation, micro-enterprises nurtured into competitive manufacturing firms. One such testimony came from Abemelek Degu, a plastic manufacturer, who described finance as “essential—as essential as vision itself.” He credited the bank for turning his small-scale operation into a scalable enterprise, saying Siket “transitioned me from zero to hero.”

Another compelling story came from two returnees who, after abandoning overseas migration, launched a local business with just ETB 5,000 in microfinance support from Siket. Today, they run a firm with a capital base exceeding ETB 10 million—a testament to the bank’s role in unlocking entrepreneurial potential for underserved groups.

Siket Bank also unveiled an innovative lending product developed in partnership with the World Bank, employing psychometric testing to assess loan applicants based on personality traits, behavioral consistency, and social indicators rather than physical collateral.

“We have now started piloting this model with select customers,” said Damte Alemayehu, CEO of Siket Bank. “It evaluates long-term relationships, work ethic, family context, and broader social behaviors to determine creditworthiness. This opens new doors for entrepreneurs who are typically locked out of formal finance.”

The psychometric approach is particularly significant for Ethiopia’s large informal sector, where credit exclusion is a persistent challenge. By gauging trustworthiness beyond traditional balance sheets, the bank hopes to expand access to capital for promising small business owners.

Beyond lending innovation, Siket Bank announced key digital milestones: the launch of mobile banking services and the establishment of a modern data center. These developments are part of the bank’s broader push to modernize its operations and serve an expanding customer base that now exceeds 600,000 clients.

“These may seem like simple steps for legacy banks, but for a newly transitioned institution like ours, they represent bold progress,” said Damte. He emphasized the bank’s vision to be a catalyst for inclusive growth in Ethiopia’s shifting financial landscape.

The panel closed with a unified message from stakeholders: Ethiopia’s industrial growth will remain stunted without bold financial innovation.

Adama Special Economic Zone (ASEZ) has launched an innovative digital system to monitor the liquid waste discharged from factories operating within the zone, marking a significant step in modernizing waste management practices.

The system was officially unveiled by Dr. Feseha Yitagesu, CEO of the Industrial Parks Development Corporation (IPDC), who emphasized that the technology will not only improve service efficiency but also streamline operations, positioning ASEZ as a leader in sustainable industrial practices.

Dr. Feseha further pointed out that the insights gained from this initiative will serve as a model for other economic zones to adopt, contributing to the broader goal of environmental sustainability across the country.

Gulilat Abebe, General Manager of ASEZ, highlighted the system’s potential to simplify sewage treatment management, enhance operational oversight, and offer faster, more efficient services to investors. He also expressed gratitude to the development organization IDH for their financial backing and crucial role in the successful implementation of the project.

Ethiopia Anticipates USD5 Million Customs Revenue Loss in AfCFTA’s First Year

Ethiopia’s FDI Surges Nearly 22% to USD4 Billion in 2024, Leading East Africa’s Investment Recovery

Ethiopia’s Special Economic Zones Attract USD900M in a Single Year as Occupancy Hits 89%

Kegna Beverages Unveils Flagship Beer with Over ETB 22 Billion Investment

Trump Shrugs Off U.S.Textile Industry: Opening a Lane for Ethiopia?

Siket Bank Claims At the Forefront of Ethiopia’s Manufacturing Transformation

ASEZ Unveils Digital Waste Monitoring System to Enhance Environmental Oversight