This is a best prospect industry sector for Ethiopia. This section includes a market overview and trade data.
Overview
As a landlocked country, Ethiopia uses Djibouti port as its main gateway for international trade. Rapid economic growth for over a decade coupled with the creation of the African Continental Free Trade Area and growth of Ethiopian cities has increased demand for freight and public transport. The Ethiopian transport sector is heavily dominated by the public sector with road infrastructure development, railway sector, maritime, and logistics as well as aviation sectors heavily monopolized by the government. Private sector involvement in the transport sector was limited to public and freight transport services, freight forwarding and chartered flight services with small passenger aircrafts. This situation will change in the coming years as the current administration has shown a promising commitment to liberalize the sector for private sector engagement in different modalities.
The Government of Ethiopia identified the transport sector as a game changer to maintain the country’s impressive economic growth trajectory, and it formed a National Transport Council that will lead the reform program in the sector. The Council chaired by the Minister of Transport reports directly to the Prime Minister, and it comprises various other Ministers including Agriculture, Finance, Trade and Industry, and Mines in addition to other stakeholders . In its two years life span, the Council formulated and endorsed a national transport policy (March 2020), a national logistics strategy (2020 to 2030) and policy, and the transport sector’s 10-year perspective plan (2020 to 2030).
The reform program spearheaded by the Transport Council opens up room for more private sector engagement in port development, railways development and operation, maritime and logistics services, and road infrastructure development. In the coming years, international and domestic private investors can engage in the Ethiopian transport sector in the form of full private ownership, joint ventures with the government or other local entities or in public private partnership (PPP) modalities. According to the government’s 10-year transport perspective plan, the country envisages to invest 3.0 trillion birr (approximately $58 billion) in the sector in the next ten years and identified the private sector as an engine and active participant in this development plan. Various funding sources are planned to be used for this ambitious plan with 70 billion birr to be generated from the revenues of the Ministry while the rest is planned to be sourced from government budget subsidies, private sector involvement, foreign support, and grants.
The plan identified about 44 projects that will be open for private sector investment including in dry ports development, dry bulk terminals, logistics city development, cold chain development, freight forwarding and shipping agency services, cargo handling services at railways, maritime training institutions and maritime services, railways development, railways rolling stock spare parts manufacturing, private operators engagement in existing rail infrastructure, logistics city development, auxiliary services at passenger stations and within the trains, rolling stock leasing, urban mass transport services, cross-country public transport services, dry and fluid cargo transport services, string-rail transport, pipe line transport development, express road ways development, one stop border posts, air transport and aviation services, aeronautical information management system development, aeronautical flight inspection development, ICT development for port shipping and logistics sector development and expressway integrated traffic management system development, bus rapid transit (BRT) corridor system and cable car system development and many more.
Ethiopia’s 10-year (2020 to 2030) transport sector perspective plan creates massive trade and investment opportunities for U.S. companies seeking to do business in Ethiopia. U.S. companies can engage in this development plan either as an investor or providers of technology, equipment and know-how as contracting partners in the implementation of the plan.
The GOE has steadily expanded its road network in recent years. As of the end of FY 2019/20, Ethiopia had 144,024 kilometers (89,492 miles) of all-weather roads – about 41% of the required road network in the country. In FY 2018/19, the GOE invested 37.3 billion birr ($1.1 billion) in road construction. The Ethiopian Roads Authority plans to build an additional 10,000 kilometers of road at a cost of 41 billion birr ($80 billion) in the coming year. In the past fifteen years, the GOE has been vigorously engaged in new road construction as well as expansion of the existing road network through Ethiopia’s Road Sector Development Programs (RSDP).
U.S. firms have bid on tenders for road design, construction, auditing and supervision services. However, most of them have not been price competitive. Ethiopia will continue to need construction vehicles (bulldozers, cranes, trucks, and forklifts), vehicle attachments, and mechanized and non-mechanized equipment to level and pour construction materials. Most projects open for international competitive bidding are funded either by the GOE or major international financial institutions, such as the World Bank’s International Development Association (IDA) and the African Development Bank (AFDB).
Ethiopia is aggressively working to develop an extensive rail network. As a landlocked country, Ethiopia primarily uses the port of Djibouti as a gateway for the vast majority of its internationally traded goods (through which flow 90% to 95% of its trade), with most of the goods essentially transported to and from the port by trucks. This situation has made Ethiopia’s trade logistics very expensive and uncompetitive. Ethiopia’s reopening of diplomatic relations with Eritrea has created the expectation of expanded logistics operations via the Eritrean ports of Assab and Massawa.
The Ethiopian Railways Corporation (ERC) under the Ministry of Transport is mandated to create a modern nationwide railway network, replacing the Franco-Ethiopian railway that is no longer in service. ERC completed a 656 kilometer railway network construction project that links the capital city Addis Ababa to the port of Djibouti. This railway expansion project was carried out by two Chinese companies, state-owned China Railway Group and the China Civil Engineering Construction Corporation. The new rail system began commercial operations in 2018. Two Chinese companies operate and manage the $3.4 billion railway line through 2024 as local employees are trained to takeover in due course.
The Addis Ababa-Djibouti rail project was hoped to significantly improve Ethiopia’s international trade by reducing logistical costs and time of delivery. The new electric railway reduces transport time from Djibouti to Modjo (a dry port city 70 kilometers from Addis Ababa) from 84 hours to just 10 hours. Cargo capacity on the rail network is 3,500 to 4,000 tons of freight per train, with ERC anticipating 6 to 7 million tons of cargo per year in its first few years of operation. Cargo volume will increase to 10 million tons in the mid-term. However, even though the Chinese made rail network has a capacity to accommodate 21 pairs of trains per day, it currently operates only 7 pairs of trains per day with an estimated annual freight volume of only 5.6 million tons.
U.S. companies have several market opportunities in the railway sector, including transit-oriented planning, development, and design for railway projects, and the supply of rail technologies such as locomotives and smart rail ticketing systems. The Addis Ababa-Modjo rail network is the first phase of a master rail network development plan, to be developed over an extended period due to funding requirements, that aims to connect Ethiopia with all of its neighboring countries outside of Eritrea and provide access to three ports (Djibouti and Tadjoura in Djibouti, and Mombasa in Kenya) in two phases. The second leg of this network, the railroad from Awash (one of the stops on the Addis–Djibouti railway line) to Mekelle is currently under construction by a Turkish company, Yapi Merkezi, and a Chinese contractor, China Communications Construction Company (CCCC), with completion expected in 2022. The third leg is the connection between Weldeya and Tadjoura; while the contract has been awarded to two contractors, one Chinese firm, CCCC, and one Indian company, Overseas Infrastructure Alliance (OIA), the financing for this project has not yet been finalized. The fourth step will be to connect Addis Ababa with Konso via Hawassa and Arba Minch, for extension in phase II to Mombasa, Kenya, via Moyale and Nairobi. The final leg of Phase I is the link from Addis Ababa via Ambo, Ejaji and Jimma to Bedele (to be extended to South Sudan in the second phase). In phase II, the network would be extended to Axum, Shire, Bahir Dar and Assosa and, in addition to the links to Kenya and South Sudan mentioned above, to Metema and Kurmuk on the border to North Sudan. Priorities have been set based on the need to move commodities such as potash and coffee out of the country and import capital and consumer goods.
Ethiopian Railways Corporation is among the major state-owned enterprises that have been announced as slated for partial or full privatization. Specific details on the privatization process of the Ethiopian Rails Corporation are yet to be announced.
The Government of Ethiopia is currently implementing a $2 billion National Logistics Development (NLD) strategy to alleviate trade logistic hurdles. Under this strategy, the GOE aspires to expand its rail network, targeting enhancement of the country’s export competitiveness by significantly reducing trade logistic costs. According to the ten years perspective plan (2020 to 2030), the GOE aspires to
-
Increase the total road coverage of the country from the current 144,027 kms to 245,942 kms.
-
Upgrade and strengthen the existing 28,099 km federal and regional roads.
-
Increase the coverage of regular and alternating road maintenance from the current 131,596 kms to 808,662 kms.
-
Build new long distance public bus stations to increase from the current 690 in 2020, to 732 by 2030 nationwide.
-
Build cargo vehicle terminals to increase the number from 1 to 23 and one stop border posts from 2 to 6
-
Increase the number of dry ports from the current 8 to 11 by 2030 •
-
Build cold stores at studied & specified locations to increase the number from 3 (currently) to 6.
-
Increase the urban transport infrastructures (depots, terminals, vehicle stops and parking) from 1008 currently to 2106 in 2030.
-
Install a 25 km of cable transport (cable car) route.
-
Build a 925 km refined fuel pipe line transport infrastructure.
-
Increase the coverage of train infrastructures from 690 km to 3,999 km by building train infrastructure projects.
-
Make the aeronautical data exchange 100% reliable, fast and accessible.
-
Increase the radar coverage of the country’s air space from the current 97% to 99%.
-
Increase the number of standardized airports from 22 in 2020 to 28 by 2030.
-
Build six passengers’ terminals and 10 paved air strips.
-
Develop local water transport infrastructures at seven locations (Tana, baro, abaya, chamo, tekeze, renaissance dam and gibe river).
- Construct 3,000Km of Road for non-motorized transport services (Walking and Cycling).
Please go to the following link http://www.ethiotransport.gov.et/news for details on the sector perspective plan and projects that are open for private sector investment.
U.S. companies can bid for upcoming projects in road, railway and other communication infrastructures design, construction, and supervision services. As these infrastructure projects have limited financial resources, foreign bidders with project financing proposals are best positioned. U.S. companies can approach the U.S. International Development Finance Corporation (DFC), the successor agency of the Overseas Private Investment Corporation, and the U.S. EXIM Bank to develop attractive funding proposals for these upcoming projects.
Table: Road Network Unit: Kilometers
|
|
2020
|
2021
|
2022 (Estimated) |
2023 (Estimated) |
|---|---|---|---|---|
|
Total Market Size |
144,024 |
155,000 |
165,000 |
180,000 |
|
Total Local Production* |
70,000 |
75,000 |
85,000 |
80,000 |
|
Total Exports |
- |
- |
- |
- |
|
Total Imports** |
56,773 |
75,000 |
80,000 |
100,000 |
|
Imports from the United States*** |
- |
- |
2,000 |
4,000 |
Source: National Bank of Ethiopia
‘* indicates length of road projects carried out by local contractors.
‘** indicates length of road projects carried out by foreign companies.
‘*** indicates estimated length of road projects that can be constructed by U.S. companies.
Leading Sub-Sectors
- U.S. firms can invest in the development of 44 project that the government of Ethiopia opened for private engagement.
- U.S. firms have opportunities in the road and railway construction sectors and may also offer engineering design, consultancy and supervision services in partnership with a local company.
- U.S. exports of construction machinery, chemicals, locomotives, railway machinery and equipment and building materials are highly valued in Ethiopia.
Opportunities
There are opportunities for U.S. companies through government tenders for road, railways and other communication infrastructures construction projects. U.S. companies can also provide engineering design, consultancy and construction supervision services in the road, railways and logistics sector to the administrating agencies or the contracted companies. Other potential opportunities are the sale/ lease of railways locomotives, machineries and equipment, construction vehicles (bulldozers, cranes, trucks, and forklifts), vehicle attachments, and mechanized and non-mechanized equipment to level and pour construction materials.
Companies should refer to the Project Financing section of Chapter 7: Trade and Project Financing for specific project opportunities.
Resources
U.S. Foreign Commercial Service,
Teddy.Tefera@trade.gov
Dr. Frehiwot Gebrehiwot
Logistics Sector Advisor to the Minister, Ministry of Transport
African Development Bank
-
Ethiopian Roads Authority at http://www.era.gov.et/
-
Ethiopian Railways Corporation
-
Ethio Lease Ethiopian Capital Goods Finance Share Compnay at Ethio Lease - Home