History, Politics, Economy and Startups in Ethiopia.

Ethiopia is the paradoxical country.

It’s one of the oldest states on the Black Continent and it’s only one which has remained independent for almost all of its history (except for a brief period 1936–1941). At the same time Ethiopia has came under the influence of different cultures, religions and ideologies. It is the largest Christian country on the African continent. However, it became one of the staunches allies of atheist USSR in Africa.

It’s the fastest growing economy in the world. On the other hand, it’s one of the poorest countries on Earth. From almost 100 million people in Ethiopia more than 25 million leave under the poverty line. Agriculture is the major source of income for almost 80% of countries population with coffee beans being the main crop. Frequent droughts have caused major famines several times in the past.

Ethiopian history goes back to the dawn of human civilization. Name ‘Ethiopia’ (which means ‘burned face’ in ancient Greek language) is mentioned in ‘Iliad’ and ‘Odyssey’. Egyptian Queen Hatshepsut organized the expedition to the Land of Punt (Egyptian name for Ethiopia) in XIV century B.C. Generations of indigenous kings and queens ruled Ethiopian for hundreds of years. Ethiopian army defeated Italy in the Battle of Adwa on 1 March 1896 but in 1936 fascist dictator Benito Mussolini occupied the country which became the part of Italian Empire until its liberation by British forces during the East African Campaign in 1941.

From 1970th to the beginning of 1990th, Ethiopia came under the influence of USSR and joined socialists camp. Ethiopian Marxist-Leninist experiment led to economic collapse followed by social unrests. After the break down of the Soviet Union at the beginning of XX century the democratic political system was implemented in Ethiopia for a brief period of time. However, soon after that only one party — Ethiopian People’s Revolutionary Democratic Front or EPRDF — began to dominate the political scene in Ethiopia. Currently there is no opposition members in the country’s parliament — the House of People’s Representatives. All 547 seats in it belong to EPRDF or its allies.

All of key Ethiopian industries such as telecommunications, retail, transport and finance remain under the strict central government’s control. The fastest developing industry in the country is gold mining.

Today Ethiopia is a country were the government tries to control all major aspects of political, business and social lives of its citizens. However, despite the record GDP growth rate (around 10% in past 10 years) Ethiopia is falling behind most of countries in the World.

Ethiopia is a white spot on the map of high-tech entrepreneurship. This country of more 100 million people had been self-isolated for a quarter of century from the information revolution. As the result, at mid-2010th, government owned telecommunication corporation of Ethiopia (an absolute monopolist in this country) publicly praised itself for making a nearest stationary telephone post available for every citizens in a radius of 5 km (reducing it from previous 7).

Not-so-long-time ago smart-phones (as well as all other types of cell-phones) had required government’s authorization to buy. You couldn’t bring them into Ethiopia without special permission as well. Today, it reduces mobile devices usage to about 15% of population. Internet penetration rate in that more than one-millions-square-kilometers-sized country stays under 4%. All communication traffics there are closely monitored.

Registering and running a private enterprise in Ethiopia is hard, to say the least, but profiting from a local Internet startup is almost heroic. There’s no credit cards, electronic money or mobile payments allowed there.

Although the local rate of economic expansion is one of the highest in Africa (almost 10%), this growth is achieved by rapid deployment of large international corporations’ businesses (jointly with local government) in manufacturing and mineral extraction industries.

On the positive side, Ethiopia remains one of the few unexplored markets for high-tech startup founders. If some of them (there have been appearing more and more of those lately) manage to survive harsh present times, they can have all of this tremendously promising market only for themselves in a future.

Business Notes for Startups Founders:

  • political climate: hostile;
  • economic climate: not friendly;
  • regions to focus: locally;
  • industries to focus: e-services;
  • major limitations: government politics, prohibitive legislation, absence of basic telecommunication infrastructure, very poor population, no seed or VC financing available;
  • opportunities: no competition, a lot of open market opportunities.