Overview
National Focus
Ethiopia’s Information and Communication Technology (ICT) landscape is rapidly evolving. Currently, the communication sector contributes about 2% to the country’s GDP, compared to an average of 4% in the East African region. In June 2020, the Government of Ethiopia (GOE) launched a national digital transformation strategy “Digital Ethiopia 2025” with the goal of digitizing the economy by 2025. This strategy takes a comprehensive approach, aiming to integrate technology across all sectors. As of late 2024, there has been no update nor new plans announced.
To support this transformation, the GOE has developed several major digital portals, including ones for e-trade, e-procurement, e-service, a city portal, and ease-of-doing-business portals. These platforms are to assist in the country’s development in the coming years. Through these portals, the government has digitized more than 130 services across 25 service providers, including authorities, ministries, agencies, and other government institutions.
Since 2020, there has been significant growth in the number of data centers built in Ethiopia. The GOE has also developed a dedicated IT Park 18 miles outside Addis Ababa in Bole Lemi, designed to attract companies that outsource ICT services as well as those involved in manufacturing and exporting IT equipment. Raxio, the first-Tier III certified data center, began operations in November 2022. Other private sector investors, such as Wingo Africa and Redfox Solution Group, are also investing in data center development in Ethiopia. Additionally, there has been considerable investment in data centers by government institutions.
The GOE has stated plans to expand the ICT manufacturing industry, modernize its infrastructure, and increase private sector investment. It also aims to increase the number of mobile, broadband, and internet data users, enhance narrowband internet and fixed telephone services, and expand international link capacity.
According to Ethio Telecom data and internet users in Ethiopia have reached to 40.4 million. The density of fixed and mobile voice subscribers has reached to 821 thousand and 75.6 million respectively.
Projected Digital Economy Growth (general trends, competitive environment, major purchasers)
Before 2022, Ethio Telecom (ET), a state-owned company, held a 126-year monopoly on wired and wireless telecommunications and internet services in Ethiopia. In 2020, the newly formed Ethiopian Communication Authority (ECA) invited private telecom operators to express their interest in entering the Ethiopian market. This call attracted considerable interest from major international telecom and internet service providers, including Vodacom, MTN, and Orange.
Following a competitive bidding process, the ECA awarded a nationwide, 15-year, full-service license to Safaricom Telecommunications Ethiopia PLC, a consortium that includes Safaricom, Vodacom, Sumitomo Corporation, and British International Investment (formerly CDC Group). The consortium paid the Ethiopian government $850 million for the license and committed to investing $8 billion over the next ten years to develop its communication infrastructure. Safaricom began operations in Ethiopia in October 2022. As of April 2024, Safaricom’s services are available in 26 cities, including the largest cities, Addis Ababa and Dire Dawa. Currently Safaricom has build 3000 towers and rented 1300 from Ethio Telecom though reports indicate that the company is currently unable to outsource tower construction to third parties – thus slowing expansion efforts.
Both Ethio Telecom and Safaricom are actively investing in expanding their telecommunications infrastructure. Ethio Telecom completed its infrastructure expansion under the Expansion Telephone Plan I (ETP I), partnering with China’s ZTE and Huawei, and the Swedish firm Ericsson. This expansion focuses on providing telecom services to all 15,000 rural villages in Ethiopia, with dedicated lines for agriculture, education, health, and consumer use.
In addition to issuing new licenses, the telecommunications market is expected to experience further changes with the planned partial privatization of Ethio Telecom. On June 14, 2021, the Ministry of Finance launched a tendering process to sell a 40% stake in the state-owned carrier to private investors. However, this bidding process has been suspended and it is unclear when it will proceed.
In June 2023, the ECA issued a tender for a second telecommunications license, with plans to award it by the end of 2023. The tender has now been floated for a third time and failed to attract any potential bidders due to concerns over evolving security and policy risks. A fourth float may happen in the future.
Banking and Finance
Early in 2022 the Government of Ethiopia has announced its plan to open the banking sector to international competition with the goal of attracting foreign capital to improve the country’s competitiveness. In addition, in December 2022, Ethiopia’s parliament has approved the opening of fintech sector to foreign companies. Following these moves, the National Bank of Ethiopia has developed directives to improve GSMA Mobile Money Regulatory Index (MMRI) and Interoperability of systems. The government also has developed Electronic Transactions Proclamation which creates provisions for consumer protection, digital payments, digital signatures, and electronic receipts.
Ethio Telecom changed Ethiopia’s financial landscape with the launch of its Telebirr mobile money product in 2021, moving the country away from a predominantly cash-based system. Developed in collaboration with Dashen Bank, Telebirr is an online payment and money transfer application that allows users to deposit cash, send money, receive payments, and withdraw cash. Users can also use Telebirr to buy airtime and packages, pay for utilities and traffic fines, and make payments to merchants. Since its launch, Telebirr has gained 41 million subscribers and facilitated transactions worth 910.7 billion Ethiopian Birr (ETB).
Ethiopia’s digital financial services sector is poised for further change with the introduction of Safaricom’s m-Pesa in August 2023, a well-established product in the Kenyan market. As of January 2024, Safaricom had signed up 3.1 million users for m-Pesa in Ethiopia. It is hoped that other players will be able to enter the market as the countries continues steps to liberalize the banking and finance sector.
U.S. tech companies are active and have had success in Ethiopia’s digital space in both the public and private sectors.
Capital Market and Securities Exchange
The pending launch of Ethiopia’s first capital market and securities exchange is an indication of the need by the government to develop the economy through creation of a modern and efficient trading systems. This helps to attract modern digital infrastructure, electronic trading platforms, and order management systems into the country.
Market Challenges
Regulatory Environment
Data Privacy
Ethiopia’s data protection landscape underwent a significant transformation with the enactment of the Personal Data Protection Proclamation 1321/2024 in July 2024. This law replaces the previously fragmented regulatory framework with more comprehensive legislation. It establishes guidelines for processing personal data, introduces stringent conditions for consent, and sets out responsibilities for data controllers. The proclamation also introduces enforcement mechanisms, including administrative and criminal penalties for non-compliance. Companies will need to ensure their data management practices, including those of their cloud service providers, comply with the new security requirements and can facilitate data subject’s rights requests, such as access and deletion rights.
Cybersecurity, online harms regulation
The National Cyber Security Index published in July 2023 indicates that Ethiopia ranks 103/172 in terms of preparedness to prevent and manage cyber threats. In the first quarter of 2023, the Information Network Security Administration (INSA) reported several cyber-attack attempts on different public institutions including telecom infrastructures, financial organizations, and air control systems.
Though The National Bank of Ethiopia (NBE) has issued a consumer protection directive that helps to apply transparency and disclosure, fair treatment, and data protection and confidentiality, its implementation in the banking system is not outwardly visible.
Standards Development
One of the challenges facing the digitalization sector in Ethiopia is the lack of a clear government structure and an organized roadmap for implementation. Current policies are not well integrated and tend to operate independently, each addressing different issues without a cohesive framework. Additionally, there is a lack of accurate tracking and monitoring systems to identify and address existing challenges, which further hampers digitalization efforts. Successful digitalization in Ethiopia requires strong government support and must be accompanied by appropriate legislation to ensure effective implementation.
Subnational Markets
Infrastructure issues and a lack of incentives are major obstacles to implementing digitalization at regional levels and across different sectors in Ethiopia. The shortage of skills and knowledge in digital technologies, combined with inadequate capacity-building efforts, reduces public receptiveness to digitalization. Additionally, the fact that the banking sector currently remains closed to foreign players limits the potential for technology transfer into the system.
Market Entry and Public Sector Procurement
To alleviate the strain on public funds, the Government of Ethiopia expects private sector investment in the digitalization sector. However, many small and medium-sized businesses lack access to financing. Additionally, the system is burdened with regulatory and bureaucratic hurdles, making it difficult for these businesses to receive the necessary government support. Slow and delayed procurement processes, along with a lack of transparency, further complicate public procurement efforts.
Digital Trade Barriers
Data Localization and Cross-Border Data Transfers
Ethiopia’s Personal Data Protection Proclamation 1321/2024 emphasizes data localization and regulates cross-border data transfers. It introduces “sovereignty of data” as a core principle, focusing on keeping Ethiopian citizens’ data within national borders. Strict rules govern personal data transfers outside Ethiopia, permitting them only to countries with similar data protection standards. Transfers to countries with “inadequate” protection will require approval from Ethiopia’s data protection authority. Cloud service providers may need to offer local storage options, and companies using foreign data centers will have to adjust their practices to comply with the new regulations.
Technology Barriers
Literacy levels of digitalization in the public create limited use of it. Including in public institutions, the level of information technology knowledge is low, which created inefficient use of digital platforms to provide services. The education system doesn’t incorporate ICT as part of a program.
Barriers to Internet Servies
Infrastructure problems in the power sector are a major constraint to provision of reliable internet services with unstable Wi-Fi a regular occurrence. This is due to lack of consistent power required to function the system. The GoE has stated its desire to improve the transmission and distribution systems in the power sector to create uninterrupted internet service for users. In addition, the cost to buy IT equipment, due to the high tax levied, creates limitations on availability of computers and mobile phones. The fact that Ethio Telecom is the only provider of
Other Trade Barriers: e.g., third country bias/influence
Poor infrastructure, lack of right roadmap in digitalization, unavailability of modern and new technologies as needed, and lack of skilled manpower in AI, blockchain, data analytics, and cybersecurity are some of the challenges.
Most of Ethio Telecom’s infrastructure has been built by ZTE and Huawei, leading to a communication system heavily dominated by Chinese companies, which raises concerns about data privacy and potential compromises.
Digital Trade Opportunities
Cross-Sector Enabling Technologies:
Communications and Networking Technologies
Supply and launch of commercial satellites, IT infrastructure development projects, building communication towers, leasing to telecom operators, and potential expansion of the telecom sector.
Advanced Computing Website software and technologies, data center development, software development for E-government services, call center development, IT business park management, web-based/mobile market information sharing, and ICT training services. Nonetheless, Ethiopia is only at the rudimentary stage in the ICT sector.
In June 2024, Ethiopia’s Council of Ministers approved the country’s first strategy for implementing Artificial Intelligence (AI) across various sectors. This strategy aims to apply AI in political, social, and economic areas to achieve more effective outcomes within these systems. Key objectives include improving healthcare access for underserved communities in remote areas through telemedicine and transforming education through digital learning. These initiatives are expected to be some of the primary areas addressed by the development of AI in Ethiopia.
Industry Sub-sector:
Financial Technologies
International Financial Reporting Standards (IFRS) and related financial standards and mobile banking services. With the opening of the banking sector the need for financial technologies including back end or transaction support hardware and software, payment services, and specialized services in areas such as marketing, and merger & acquisitions will be created. Liberalization of the telecom sector also has further driven interest in the use of mobile money which will require relevant software and fintech solutions.
Resources:
- http://www.mint.gov.et
https://www.ethiotelecom.et/ - I&A’s Office of Digital Services Industries (ODSI)
- National Trade Estimates Report – Digital Trade Barriers
- White House CET List, e.g., Artificial Intelligence -> Machine Learning
- Existing Market Intelligence and CCG Leading Sectors/Best Prospect content