Since Ethiopian Prime Minister Abiy Ahmed took power in April 2018, his government has sent an unambiguous message: It needs more private sector investment to drive growth and create jobs.
The government's growth strategy calls for structural reforms designed to strengthen the private sector, boost competition, and increase investment—an approach that is accelerating the end of Ethiopia’s long reliance on state-led economic development.
The ratification of a new investment law at the end of last month by the House of Peoples' Representatives is expected to add momentum to Ethiopia’s reform efforts. The new law, which updates the 2012 Investment Proclamation, consolidates reforms and confirms that few sectors will be restricted for foreign direct investment—the specifics will be defined in an investment regulation in the following months—allowing all other economic sectors to be open to foreign investors. These developments are in line with recommendations from the Country Private Sector Diagnostic (CPSD) for Ethiopia, published by IFC and the World Bank in March 2019.
Climatescope 2019 profiles 104 emerging markets worldwide and evaluates their ability to attract capital for low-carbon energy sources while building a greener economy. For the first time since BloombergNEF began the Climatescope survey, India tops the rankings. The Asian nation is followed in the top five by Chile, Brazil, China and Kenya. The detailed report described what drove each of the top five markets to the top of the ranking.
The same report ranked Ethiopia 55 globally with a score of 1.83. The report provided highlights for the Power Market, Clean Energy Policy, Clean Energy Investment, Price environment, Doing Business and the Barriers in the sector.
Key highlights the report touches upon the power sector in Ethiopian are
In April 2019 Siemens signed a Memorandum of Understanding (MoU) with the Investment Commission of Ethiopia, to address the country’s energy and infrastructure sector challenges, to assist the government, stabilize and expand the existing grid infrastructure and explore island solutions for industrial hubs/parks and micro grid solutions for remote villages. The Ethiopian Governments Growth and Transformational plan II has a goal to achieve universal electricity by 2025. Currently 56% of the Ethiopian population does not have access to electricity.
At the G20 summit, Siemens committed to supporting and contributing to Ethiopia’s Growth and Transformation Plan II and its objective of electrifying Ethiopia. Siemens will install a solar-hybrid plant in Sodo supplying reliable, sustainable and affordable electricity to the FruitBox farm as well as to the surrounding communities. The G20 investment Summit-Compact with Africa brings together delegates in the public and private sectors to promote German-African business relations under the compact with Africa.
“The Fruitbox Farm project is a key Siemens lighthouse project aim
(Vivien Foster, 2019), Rethinking Power Sector Reform in the Developing World report suggests that future power sector reforms should be shaped by context, driven by outcomes, and informed by alternatives with a clear departure from the normative 1990s power sector reform prescription which comprised a package of four structural reforms: Regulation (through the creation of an autonomous regulatory entity); Restructuring (entailing corporatization and full vertical and horizontal unbundling of the utility); Private sector participation (particularly in generation and distribution); Competition (ultimately in the form of a wholesale power market).
(AfDB, 2019), Revisiting Reforms in the Power Sector in Africa, asserts that the power sector in Africa still largely retains the traditional integrated monopoly utility structure, although many have included IPPs, despite the standard model Prescription of the reform targeting all segments of the power sector value-chain in Africa, and in very different ways pointing that the standard model reforms generally did not prioritize social and political goals of expanding access to electricity and clean energy sources, nor improving equity or affordability conditions.
Ethiopia being among the laggards in terms of implementing the standard policy prescription, it has taken the first few steps including setting up an independent regulator and vertically unbundling the state monopoly in to two separate utilities since the beginning of 2013. The reform process continues to unfold albeit a slow and cautious pace.