As I prepare to spend November in Addis Ababa and brush up on my terrible Amharic, the third quarter of 2019 was eventful for our company, Teseteo, but also business in Ethiopia as a whole.
Africa EAC Industry

Business Opportunities in Ethiopia, MTN bids to acquire major telecom

As I prepare to spend November in Addis Ababa and brush up on my terrible Amharic, the third quarter of 2019 was eventful for our company, Teseteo, but also business in Ethiopia as a whole.

Privatizing EthioTelecom has only just begun - exciting times ahead as we watch the story unfold and find out which foreign companies are front runners.

According to various sources MTN Group, a South African multinational, are seriously interested and have already put in a bid. The same can be said for Vodafone and Deutsche Telecom - all tier 1 operators with a wealth of resources/experience to offer.

Sometimes it can be easy to forget, Ethiopia is actually a poor country and millions of people struggle here every day. My company advocates two particular causes committed to bringing about change - Impact Sourcing and the Asra Hawariat School (which I was lucky enough to visit earlier this year).

Impact sourcing involves employing high potential people through outsourcing and in a recent report by Accenture, 46 per cent of clients surveyed said they would like to be involved.

The Asra Hawariat School, founded in 1961, has educated more than 120,000 children for free and many go on to become respected professionals in various industries. Good education means people in Ethiopia can gain the skills to work for companies like Teseteo so it’s worthwhile for us to get behind them.

In an admirable effort to combat deforestation, Ethiopian nationals and expats joined forces this July to plant over 353 million trees in one day.

The country has been suffering from frequent droughts over previous decades so work like this contributes massively towards lowering national and global carbon emissions. One industry Ethiopia have always done a lot of planting in is horticulture and it exports over £300 million of roses every year.

Hansa Flowers is a company committed to social responsibility within their sector and they recently invested over £200,000 in a brand new school including gravel road.

More and more for-profit companies in Africa are improving their CSV (creating shared value) agenda which is good to see.

South Korean steel manufacturing company, EKOS, are now offering medical help to communities just outside Addis Ababa. A new site called the Dukem Health Center was inaugurated this August and works with a larger Korean hospital located in the town centre itself.

EthioTelecom has reported a total profit of over 24 billion birr (around $830 million) before tax during the Ethiopian fiscal year which concluded on July 7th.
EthioTelecom has reported a total profit of over 24 billion birr (around $830 million) before tax during the Ethiopian fiscal year which concluded on July 7th.

Health, job creation and education are high priorities for Ethiopia but also the UN whose Sustainable Development Goals cover each (3/8/4). A recent deal signed between the Ethiopian Ministry of Finance and EU has pledged 45 million Euros to create 400,000 new jobs over the coming years.

Also, Deputy Mayor of Addis Ababa, Takele Umma, has agreed on providing free school uniforms and utensils to over 600,000 disadvantaged school children. Positive news in regards to creating a better, more sustainable Ethiopia.

ESG is an acronym we come across regularly at Teseteo and is short for Environmental, Social, Governance. Many venture capital companies and other types of funds implement this when analysing risks vs opportunities surrounding a business. For us, it has been interesting to look at the S and G points when assessing our overall impact.

Social aspects to consider when evaluating ESG include employment, community, working conditions and anti-corruption. Those around Governance are; executive compensation, alignment of interests, the board and also shareholder rights.

ESG is used by a number of the top investment banks including Goldman Sachs and Deutsche, so insights they publish can be a useful benchmark when assessing your own CSV plan.

“Capital with Purpose” is the tagline Goldman Sachs have for their sustainability programme and it covers both internal and external (client) activities. Deutsche Bank recently enhanced its ESG strategy and have adopted a rating system from MSCI to offer clients valuable information around investment decisions.

“ESG comes up more and more often in our regular discussions with clients,” said Fabrizio Campelli, Global Head of Wealth Management at Deutsche Bank. “Society as a whole is becoming increasingly aware of the responsibility that comes with wealth, and the positive impact ESG factors can have on returns.”

The social impact of Teseteo in Ethiopia is largely geared towards job creation and Sustainable Development Goal 8. Two million Ethiopian youth enter the jobs market each year so this country faces a daunting prospect of creating sustainable and inclusive jobs for all.

Up until now, the government’s job creation strategy has focused largely on industrialisation, but it needs to look beyond manufacturing to confront employment challenges ahead. Outsourcing currently contributes 9% of annual GDP growth in the Philippines and it can do the same here, while considerably improving Forex shortages.

Corporate governance is a system by which a company is directed/controlled and an important element of any analysis. Allocating the right senior people allows for better decision-making and Teseteo are proud to have highly experienced leaders in place.

Africa being what it is, tasks can often take longer or involve more bureaucracy than originally anticipated. For that reason, it’s even more necessary to apply an effective corporate governance system.

This must ensure (i) things get done and (ii) what gets done actually works. The ESG screening around governance itself investigates management structure and is a useful tool for any business moving forward.

Working in any emerging market, such as Ethiopia, requires patience - especially when it comes to getting decisions. For instance, Teseteo is currently waiting on permission from chief members of staff to operate in the Ethio ICT Village, Bole Lemi.

This impressive park spread over 200 hectares of land recently transferred ownership from the Ministry of Technology to the Industrial Parks Development Corporation. With this change could come a number of benefits - such as investment incentives or improved infrastructure but it takes time.

Thankfully, Addis Ababa is constructing office blocks everywhere so there are numerous places to choose from, although caution is advised when signing a new lease and evaluating frameworks (i.e. internet/electricity supply).

WebSprix is an enterprise in Addis Ababa making it a lot easier for private companies to access regular, high-quality WiFi. They charge clients a monthly tariff and have engineers on hand 24/7 - smoother than going through EthioTelecom direct.

A number of other firms are establishing themselves in Ethiopia with the sole goal to improve infrastructure and ease of doing business.

Tadesse Kiros Law Office is an excellent company making Ethiopian law straightforward to understand. Things can be more complicated than they need to be when conducting business here, so people like this who can explain things in simple-terms are invaluable.

Staying on the subject of business law, it is important for directors to get their head around it - even if they have advisers on hand.

The Federal Negarit Gazeta is an official government newspaper publicising all new laws and this year there have already been changes to certain rules around employment/tax. For instance, probation for employees has now increased from 45 to 60 days and (as long as it’s in writing) termination of contracts in this time period is allowed without risk of compensation or severance pay.

Maternity leave has now been extended from 90 consecutive days to 90 working days and annual leave is up from 14 working days in year one to 16 days. Rate of pay for overtime work has slightly increased from 1.5 x hourly rate to 1.75 x hourly rate and reporting late eight times in a six month period of absence from work for a total of five days in a six month period (while being warned in writing) can now lead to immediate termination.

A good place to stay up-to-date on business law is africalegalnetwork.com and of course tadessekiros.com. Because it was once a socialist country with many trade unions, Ethiopia can have a reputation for favouring workers over employers.

Africa being what it is, tasks can often take longer or involve more bureaucracy than originally anticipated.
Africa being what it is, tasks can often take longer or involve more bureaucracy than originally anticipated.

For that reason, it is imperative business owners keep detailed notes on their staff about information such as time-keeping, performance, pay, holidays and any other info deemed necessary. Having all this written down will go a long way in the unfortunate event of a dispute. Our analysis page covers many topics concerning tax and law in Ethiopia - teseteo.com/featured-analysis

EthioTelecom has reported a total profit of over 24 billion birr (around $830 million) before tax during the Ethiopian fiscal year which concluded on July 7th. A total number of subscribers has increased to 43.63 million from 37.92 million (2018) and new headquarters are currently being constructed in the Ethio ICT Village.

More selling power when it comes to privatisation - although auditing of their results and data will change hands when new partners come on board. Forex is improving in Ethiopia and currently stands at $3.2 billion; still a long way from where it should be.

These reserves are only enough to cover basic fuel import for about three months so the government must look at new industries (such as outsourcing) to boost numbers further. Income tax collection also rose this year and according to the Ministry of Revenues is up 22 billion ETB (about $761 million) from last year.

“Tax evasion and avoidance remain a challenge,” said Minister Adanech Abebe. “We are still collecting far below the amount this economy should generate. However, if our department addresses major challenges it’s possible for us to cover expenses from domestic financing in the near future.”

The far east continues to invest heavily in Ethiopia and officials from a Chinese city called Kunshan have decided to build an industrial park at Dire Dawa.

Dedicated to the manufacture of textiles, it will foster university-industry linkage and create thousands of employment opportunities. There are currently 23 industrial parks in the country - some fully operational and others under construction. Interestingly, now the ICT Village is considered an industrial park in its own right which just goes to show how seriously the government are viewing services as a contender to manufacturing.

Hong Kong-based textile and garment company, Hop Lun, have now fully taken over the recently built Bahir Dar Industrial Park. Premark is the brand they are best known for, and with all eight sheds under management, they clearly have ambitious growth plans.

When Hop Lun become operational the company is expected to create over 6,000 jobs straight away and many more in coming years. Ethiopia is still attracting large-scale investment in export-oriented manufacturing but improving the efficiency and speed of logistics (i.e. roads) as well as infrastructure (i.e. electricity/internet) will be key to meeting revenue goals in place.

For those not aware of what Teseteo actually do, we are a Customer Experience and KPO company based in Addis Ababa. Cost-effective, offshored solutions include AI blended CX, technical support and knowledge process outsourcing (KPO).

Ethiopia has a strong university-network and readily available pool of qualified, English speaking graduates. Our company use blended AI to complement live agents with technologies such as chatbots and predictive routing.

In partnership with our SaaS provider Connex One, and Ethiopian software development company iCog Labs - we consult clients on the best way AI can streamline processes, cut costs and increase ROI. Routine, high volume-low value interactions are dealt with seamlessly allowing our people to excel and really shine when it matters most - mainly around technical support and more challenging personal enquires.

Our KPO offering is geared towards the telecoms industry and Teseteo’s Head of Engineering, Yihenew Wondie, is an experienced wireless communications expert with fifteen-plus international conference/journal paper publications. Another area we are looking into is specialised research concerning African markets and business intelligence.

BY RUARI PHILLIPS