About Ethiopia

  • The fastest growing economy in 2019, and among the top 5 fastest growing economies for more than a decade
  • World Bank Project is 8.2 for 2020 and 2021
  • Ethiopia’s economy experienced strong, broad-based growth averaging 9.9% a year from 2007/08 to 2017/18, compared to a regional average of 5.4%. (World Bank)
  • Largest economy in East and Central Africa
  • Ethiopia aims to achieve middle income status by 2025
  • 109+ Million (World Bank 2019)
  • 2nd Largest Population in Africa
  • 12th Largest in the World
  • 5% Annual growth rate (World Bank)
  • Expected to reach 200 Million by 2050 (UN)

Ethiopia is one of the countries in Africa in which energy resources are underexploited, as evident from the past, significant energy demands are still met from traditional resources. Currently final energy consumption of country was around 40,000 GWh, in which about 92% are consumed by domestic appliances, 4% by transport sector and 3% by industry. However, energy supply thereby is covered by bio-energy which accounts about 90% of final energy consumption.

Bio Fuel

Biofuels production has received increasing focus by developed and developing countries due to rising fossil fuel prices and the need to mitigate greenhouse gas emissions. By the end of the 20th century, global commercial energy consumption was about 400 exa-joules (EJ) per year, with fossil fuels contributing about 85% of the total. Global energy demand projections indicate that energy demand could be in the range of 550-1000 EJ per year in 2050, depending on factors such as resource availability and policies.

Biofuels have been promoted as part of the global energy mix to meet the climate change challenge. Climate  change  and  a  rise  in  fuel  prices  over  the  last  decade  have  led  to  increased  demand for land worldwide, including in the developing South, for the production of  biofuel feedstock. In Ethiopia, considerable amounts of land has been transferred to investors for biofuel feedstock production. Depending on the type of land conversion and the feedstock produced, this contributes positively to the countries’ green economies and food-security efforts. The scarcity and rising prices of fossil fuel, together with apprehension about the environmental harm created by them, have resulted in increasing efforts to search for alternative energy sources. Biofuels are among the options considered as renewable and relatively cleaner substitutes for conventional energy sources. Reasons for engaging in biofuels production include, among others, diversifying energy sources, alleviating dependence on imported fossil energy, and reducing greenhouse gas (GHG) emissions.

Biofuel is environmentally friendly since it is extracted from renewable sources. Production of this fuel in large quantities would both reduce the burden on export earnings and become an important source of export revenue and it would also create significant job opportunities. Proven technologies and approaches are available for the introduction of biofuel technology. In addition, a large amount of data exists on both the successes and failures within this field. This information can serve as a valuable lesson for Ethiopia, allowing the country to assess its own situation, adopt the appropriate technologies and gain its own experience in managing these resources. Biofuel plants are locally available, often indigenous, and the conversion technologies are not complicated, have no negative health impacts and require little effort. The technology for the utilization of biofuel, especially for rural household use, could be obtained at an affordable price. Since it targets several customer groups, it is a strategically important fuel and has become a focus of government policy. Biofuels’ share of the energy mix is expected to grow over time as policymakers worldwide encourage greater biofuel production with tax exemptions, as well as blending and consumption mandates and subsidies.

Biogas Energy Potential

Based on Africa energy outlook new bottom-up assessment, today in Africa there is sustainable technical potential available to produce around 50 Mtoe of biogas. The potential doubles by 2040 to almost 100 Mtoe at an average cost of just over $10 per million British thermal units (MBtu), which would represent around one-third of the projected natural gas demand in the region in the Stated Policies Scenario. The biggest contribution to the potential comes from rural areas with strong agricultural sectors. Crop residues, especially cereals, account for almost 60% of the total potential, animal manure for close to 25%, and municipal solid waste for most of the remainder.

Ethiopia has a high potential for biogas production with its sufficient resources of crop residues and animal manures. A feasibility study undertaken by the Ethiopian Rural Energy Development and Promotion Centre (EREDPC) and SNV-Ethiopia in 2006 assessed two scenarios of biogas production potential in Ethiopia, with the options to benefit about 1.1 million to 3.5 million households in four regions of Ethiopia.

  • The heavy dependence on bioenergy as a source of energy in Ethiopia combined with a slow shift to-wards modern fuels indicates that biomass will continue to be the dominant fuel for the foreseeable future
  • Only 30% of the population has access to electricity even though the grid system covers over 50% of the country
  • Low cost of production compared to other energy sources
  • Presence of huge biomass energy potential
  • Government support for investment in biomass energy resource development and utilization

Performance Targets:

  • Increase generating capacity by 25 000 MW by 2030: 22 000 MW of hydro; 1 000 MW of geothermal; and 2 000 MW of wind by 2030.
  • National Electrification Program (2017): 100% electrification in 2025, with 35% off-grid and 65% grid, while extending the grid to reach 96% grid connections by 2030.

Industrial Development Targets:

  • Achieve an annual average real GDP growth rate of 11% within a stable macroeconomic environment and become a lower middle-income country by 2025.
  • Focus on ensuring rapid, sustainable growth by enhancing the productivity of the agriculture and manufacturing sectors, and stimulating competition in the economy.
  • Ethiopia is member of Common Market for Eastern and Southern Africa (COMESA)
  • Ethiopia is one of the 44 countries in Africa that signed continental Free Trade Area (CFTA)
  • Ethiopia has signed Bilateral Investment Treaties (BITs): with 30 countries and Double Taxation Avoidance Treaties (DTTs): with12 countries
  • Ethiopia is using the opportunity of Generalized System Preferences (GSP), AGOA (African Growth and Opportunity Act ) and Everything but Arms (EBA)
  • Ethiopia is the 3rd diplomatic a seat for African Union, United Nations Economic Commissions for Africa (UNECA) with its 20 agencies and the Pana African Chamber of Commerce and Industries (PACCI)
  • Ethiopia hosts more than 112 diplomatic mission in Addis Ababa

During the past two decades, shifting economic paradigms and conditions for investment and capital flows—globalization—have underlined the importance of African countries’ steps to widen and deepen regional integration. They have, in particular, removed open impediments to capital flows, enabling investors to freely select among alternative destinations on the basis of comparative advantage. In the destination countries, the recent financial crisis and the consequent reduction in official development assistance have also prompted governments to increase their efforts to mobilize private financial resources for public projects, especially for infrastructure.

African countries’ wish to attract external resources provides an incentive for them to tighten eco­nomic links among themselves and to take steps to boost intra-regional financial flows. Economic policies nationally have also enhanced countries’ attractiveness. These moves, coupled with abundant global liquidity, have led to a surge in all types of private capital flows into the continent.

Sub-Saharan Africa is set to enjoy a modest growth uptick, and decisive policies are needed to both reduce vulnerabilities and raise medium-term growth prospects. Average growth in the region is projected to rise from 2.8 percent in 2017 to 3.4 percent in 2018, with growth accelerating in about two-thirds of the countries in the region aided by stronger global growth, higher commodity prices, and improved capital market access.

On current policies, average growth in the region is expected to plateau below 4 percent—barely 1 percent in per capita terms—over the medium term. Turning the current recovery into sustained strong growth consistent with the achievement of the SDGs would require policies to both reduce vulnerabilities and raise medium-term growth prospects. Prudent fiscal policy is needed to rein in public debt, while monetary policy must be geared toward ensuring low inflation. Countries should also strengthen revenue mobilization and continue to advance structural reforms to reduce market distortions, shaping an environment that fosters private investment.

In addition to regional agreements, African countries have signed Business Integration Treaties (BITs) with each other and with developed countries. Many African states have also signed double taxation treaties (DTTs). Over 70 per cent of the treaties are signed with developed coun­tries, particularly in Europe, where the United Kingdom, France, Germany and Italy have the greatest number.

African countries are signatories to multilateral instru­ments and are members of related bodies that have pro­visions for the treatment of foreign investors. The most important are the WTO, with 44 African members; the In­ternational Centre for Settlement of Investment Disputes, which provides facilities for conciliation and arbitration of international investment disputes, with 46 African signatories; and the Multilateral Investment Guarantee Agency, which provides political risk insurance, techni­cal assistance and dispute mediation facilities, with 50 countries from the continent.

International investment agreements (IIAs)—RIAs and BITs—are also designed to provide comfort to foreign investors, in particular by clarifying security provisions, fairness, protection, transparency and predictability of the policy and regulatory framework that will govern investment activities.

In the investing sphere, African regional agreements follow the basic pattern of international agreements, and include the following items.

Admission and establishment of investment:

  • Fair and equitable treatment
  • MFN and national treatment
  • Protection against expropriation
  • Transfer of funds
  • Performance requirements
  • Investor–state dispute resolution