Anybody familiar with Ethiopia’s investment climate will tell you that banking, telecoms and energy are some of the most closely guarded industries in the country; and for a good reason. Highly profitable when managed in a sound and ethical manner, Addis has been concerned that opening up these sectors in the absence of capable indigenous intermediaries or players would be opening the gates to avoidable capital flight.
Take the example of telecoms. By retaining ownership of the telecom industry, Ethiopia has been able to raise unencumbered capital that it ploughs back into other sectors of the economy such energy. But given the country’s huge infrastructure development and accompanying capita needs, it was always going to be just a matter of time before investors knocks on Addis’s door became persistent and the establishment would concede some ground.
Johannesburg headquartered Standard Bank Group announced October 29 that it had opened a representative office in Ethiopia. That expanded Standard Bank’s African footprint to 20 countries. Standard Bank is already Africa’s largest bank by assets.
The bank said its Addis Ababa based representative office, will act as an entry point for clients seeking to invest in Ethiopia and will be administered by Standard Bank’s head office in South Africa.
“The growth potential for the East African region continues to attract significant investment. With an established presence across four of the key markets in the region, namely Kenya, South Sudan, Tanzania and Uganda, the opening of the Ethiopian representative office is indicative of the group’s commitment to the region,” the bank said in a statement.
The bank cited Ethiopia’s robust growth which has been underpinned by high public investment and a growing consumer base as one of the key factors that attracted it to this market.
“The country boasts the second largest population on the continent, behind Nigeria, at around 90 million. GDP growth has averaged about 10.0 percent over the past 5 years. Heavy public investment in agriculture, energy and transport are likely to continue to support growth in the medium term as the government ramps up its productive sectors.
“The energy sector is also set to boom with power projects at various stages of development, and with Ethiopia emerging as a major power hub in the region, energy exports will likely become a major foreign exchange earner in the near future. Industry and manufacturing, a top priority for Ethiopia, are likely to start making a more significant contribution in the country’s GDP going forward which will largely be facilitated by the increase electricity supply.
“As such, establishing a presence in Ethiopia is in recognition of the increasing interest by investors and our clients, in the country’s economic growth. Standard Bank will be well-positioned to take advantage of the cross-sectorial investment opportunities both in Ethiopia and the region as a whole. Our experience in East African markets will benefit all our clients by providing them with insights into how best to capitalise on their investments in the region,” Standard bank further said.
Standard Banks announcement came almost in tandem with Kenya Commercial Bank’s revelation that it too was poised to open a representative office in Ethiopia.
While announcing a 10 percent jump in the Group’s nine month profit October 29, the lender revealed that it had secured approvals to enter the Ethiopian market.
KCB’s impressive run was driven by growth in loans, non-funded income, subsidiaries and new business lines. The lender reported substantial growth in net-interest income, fees and commissions
Profit before tax climbed 10 percent to KShs.19.4 Billion ($187.4m) in the nine months ending September 2015. Total Assets grew 34 percent from KShs. 451.6 Billion to KShs. 607.3 Billion. On the other hand, net loans and advances were up 32 percent from KShs. 264.3 Billion to KShs 347.6 Billion as customer deposits rose 35 percent from KShs. 350.1 Billion to KShs 471Billion.
KCB received the license to open a representative office in Ethiopia on October 14, 2015, opening up the Bank to opportunities in Africa’s second largest market by population. The Bank hopes to use its presence in Ethiopia to facilitate trade between Ethiopia and other East African countries while playing part in driving economic expansion in the country.
In 2013, Kenya signed a special status agreement (SSA) with Ethiopia, giving Kenyan companies the highest possible access to the country and focusing on areas of trade, investment; infrastructure and food security.