Assessments of Electrical and Electronics sectorial Potential

,prospects ,challenges and opportunities of Ethiopia integrating

into Global Value Chain ( GVC) for Policy report

1Introduction

The Electrical and electronics manufacturing industry in Ethiopia

is currently in a nascent stage, with limited production capabilities and a focus on
basic electronics assembly, primarily due to factors like a lack of infrastructure,
skilled workforce, and established supply chains; however, the government is
actively promoting its growth, seeing potential for the sector to develop
significantly in the coming years, especially with its relatively low labor costs and
strategic geographical location. The electrical and electronics sector plays a pivotal
role in the global economy, serving as a cornerstone for technological
advancement and industrial growth.

In Ethiopia, this sector has emerged as a critical area of focus for national
development and economic diversification. As the country seeks to transition from
an agrarian-based economy to an industrialized one, the promotion of the electrical
and electronics industry is essential for enhancing productivity, creating jobs, and
increasing exports. Ethiopia’s strategic location, coupled with its rich natural
resources and a youthful workforce, presents substantial opportunities for growth
within the electrical and electronics sector.

This assessment explores the potential of Ethiopia's electrical and

electronics sector, evaluates its prospects for growth, and identifies the challenges
that must be overcome to promote effective participation in global value chains. By
understanding these dynamics, stakeholders can develop strategies that leverage
 the sector's strengths and navigate its challenges, ultimately contributing to
sustainable economic development in Ethiopia. The current manufacturing activity
is therefore focused on assembly, with a very limited presence of component
manufacturing. Components and many other supplies for electronics
manufacturing are imported, resulting in relatively low domestic value added
manufacturing in Ethiopia and a complex supply chain. The domestic market is
currently inadequate for component manufacturing, which would need to serve
assemblers in international markets. This in turn means that there is greater
international competition for component manufacturing (as a result of greater
contestability of investment).

In Ethiopia's industrial parks, the electrical products industry is growing, with

companies like "Long March Electrical Equipment Manufacturing" setting up operations
to produce electrical equipment like electricity meters within industrial parks like
Adama, where they lease space to manufacture and create jobs for local workers; this is
facilitated by the Industrial Parks Development Corporation (IPDC) which manages the
parks and attracts foreign investment in this sector.

The electronics products industry within Ethiopian industrial parks is still

developing, with a growing presence in certain segments, primarily focused on
light assembly operations like electronics assembly within parks like Bole Lemi
Industrial Park, located near Addis Ababa; Currently, most electronics production
in Ethiopian industrial parks involves assembly of components rather than full-
scale manufacturing of complex electronic devices. The Ethiopian government is
actively facilitating the development of the electronics industry through policies
and incentives aimed at attracting foreign investment.
 1.1 Sectorial Potential for Integration into the Global Value
Chain

 Abundant Renewable Resources: Ethiopia has vast renewable energy

resources, particularly hydroelectric power, with the Grand Ethiopian
Renaissance Dam expected to boost electricity generation significantly.
 Growing Demand for Electricity: Rapid urbanization and industrialization
are increasing the demand for electrical power, which provides opportunities
for investment in the electrical and electronics sector.
 Government Initiatives: The Ethiopian government is prioritizing
infrastructure development, including electrification projects aimed at
increasing access to electricity, particularly in rural areas.
 Investment Opportunities: There are opportunities for foreign and local
investment in manufacturing electrical components, solar energy systems,
and telecommunications equipment.
 Youthful Population: A young and growing population presents a potential
workforce and consumer base, particularly for electronics and technology
products.

 Natural Resources: Ethiopia has abundant resources, including minerals

and hydropower, which can support the electrical and electronics sector.
 Growing Market: The demand for electrical and electronic products is
increasing due to urbanization and economic growth.
 Government Initiatives: Policies aimed at industrialization, such as the
Growth and Transformation Plan (GTP), emphasize the development of the
manufacturing sector, including electronics.
 1.2 Sectorial Prospects for Integration into the Global Value
Chain

Here are the prospects for Ethiopia's electrical and electronics sector regarding
integration into the Global Value Chain (GVC)

 Investment Opportunities: There is potential for foreign direct investment

(FDI) in local manufacturing and assembly of electronic products.
 Skilled Labor Force: With a focus on education and vocational training,
there is a growing pool of skilled workers in engineering and technology
fields.
 Regional Integration: Being part of the African Continental Free Trade
Area (AfCFTA) provides access to larger markets, enhancing export
opportunities.
 Market Expansion: With increasing internet penetration and mobile device
usage, there is a growing market for consumer electronics and
telecommunications.
 Export Potential: Ethiopia’s strategic location in the Horn of Africa can
serve as a gateway for exporting electrical products to neighboring countries.
 Technological Advancements: The rise of ICT and digital technologies can
enhance the efficiency and productivity of the electrical and electronics
sector.
 Public-Private Partnerships: Collaborations between the government and
private sector can drive innovation and investment in the sector.

1.3 Sectorial Opportunities for Integration into the Global

Value Chain
 Ethiopia's electrical and electronics sector has substantial opportunities for
integration into the Global Value Chain. By leveraging its renewable energy
resources, government support, and a growing regional market, Ethiopia can
enhance its competitiveness on the global stage. Focusing on workforce
development, technological advancements, and sustainability will be crucial for
realizing these opportunities and driving sustainable growth in the sector.

 Abundant Renewable Energy Resources

 Opportunity: Ethiopia's significant investment in renewable energy,

particularly hydroelectric power, can support energy-intensive electronics
manufacturing.
 Impact: Reducing energy costs and enhancing sustainability can make
Ethiopian products more competitive in global markets.

 Increasing Demand for Electrification

 Opportunity: The rising demand for electricity, both domestically and

regionally, creates a need for electrical components and appliances.
 Impact: Local manufacturers can cater to this demand and potentially export
surplus products to neighboring countries.

 Government Support and Policy Framework

 Opportunity: The Ethiopian government has prioritized industrialization and

is implementing policies to attract foreign investment.
 Impact: Favorable policies and incentives can create a conducive
environment for international companies to set up manufacturing bases in
Ethiopia.
  Growing Regional Market

 Opportunity: East Africa’s growing population and increasing urbanization

are driving demand for electrical and electronic products.
 Impact: Ethiopian manufacturers can tap into regional markets, leveraging
proximity to reduce transportation costs and delivery times.

 Investment in Infrastructure Development

 Opportunity: Ongoing investments in infrastructure, including transportation

and logistics, improve the efficiency of supply chains.
 Impact: Enhanced infrastructure can facilitate the movement of goods,
making it easier for local firms to integrate into GVCs.

 Technological Advancements

 Opportunity: Access to new technologies through partnerships with

international firms can enhance local production capabilities.
 Impact: Improved technology can lead to higher quality products that meet
international standards, increasing competitiveness.

 Skilled Workforce Development

 Opportunity: Initiatives to develop a skilled workforce through education

and vocational training programs can prepare workers for the electronics
sector.
 Impact: A well-trained workforce can attract foreign investment and
improve productivity in local manufacturing.

 Sustainability and Green Technology

  Opportunity: There is a global shift towards sustainability, and Ethiopian
manufacturers can focus on eco-friendly products.
 Impact: Positioning local products as sustainable can enhance their appeal in
international markets, particularly in regions with strict environmental
regulations.

 Access to International Markets

 Opportunity: Participation in trade agreements and regional economic

communities can facilitate easier access to international markets.
 Impact: These agreements can reduce tariffs and barriers, making Ethiopian
products more competitive abroad.

Innovation and R&D Initiatives

 Opportunity: Establishing research and development centers can foster

innovation in product design and manufacturing processes.
 Impact: Innovative products can differentiate Ethiopian firms in the global
market, leading to increased market share.

1.4 Sectorial Challenges for Integration into the Global

Value Chain

 Access to Finance: Limited access to capital and credit facilities can restrict
investment in the sector.
 Technological Gaps: The need for technological advancement and
innovation is critical to compete in the global market.
 Infrastructure Deficiencies: Inadequate infrastructure, such as transportation
and supply chain systems, can hinder the growth of the electrical and
electronics sector.
 Funding and Investment Gaps: Limited access to finance and investment can
impede the development of manufacturing capabilities.
 Skill Shortage: There is a need for skilled labor in engineering and technical
fields to support the growth of the sector.
 Regulatory Environment: Complex regulations and bureaucratic
inefficiencies can deter investment and slow down project implementation.

1.5 Statement of the Problem

 Despite having abundant natural resources and a growing labor force, the
sector remains underdeveloped.
 There is a gap between the available resources and their utilization for
manufacturing high-quality electrical and electronic products.
 particularly in transportation and energy—poses significant challenges for
production efficiency and market accessibility. This affects the sector's
ability to compete on a global scale and limits its integration into GVCs.
 Limited access to finance and investment deters both domestic and foreign
investors from entering the electrical and electronics market. This financial
constraint inhibits the sector's growth and innovation capabilities.
 The sector lags in technological advancement and innovation, which are
crucial for meeting international standards and consumer demands. This
technological deficiency restricts Ethiopia's ability to engage in higher-value
segments of GVCs.
  The regulatory environment in Ethiopia is characterized by bureaucratic
inefficiencies and inconsistencies, making it difficult for businesses to
operate effectively. This lack of clarity and support hinders investment and
sectoral growth.
 While there is potential for export growth, the lack of robust export
strategies and logistical challenges limit access to international markets. This
restricts the ability of Ethiopian products to compete in global markets.
 the problem lies in the disconnect between Ethiopia's potential in the
electrical and electronics sector and the various challenges that impede its
effective participation in global value chains

1.6 Objectives

main and specific objectives Electrical And Electronics sector in Ethiopia

Here are the main and specific objectives for the electrical and electronics sector in
Ethiopia:

1.6.1 Main Objectives

 Establish a competitive local manufacturing base for electrical and electronic

products to reduce import dependency.
 Increase the share of renewable energy sources in the national energy mix,
focusing on hydro, solar, and wind.
 Contribute to national economic growth by developing the electrical and
electronics sector as a key driver for job creation and innovation
 Establish Ethiopia as a leading manufacturing and export hub for electrical
and electronic products in East Africa.
 1.6.2 Specific Objectives

 Upgrade and expand the national grid to improve electricity distribution and
reliability .
 Attract foreign direct investment (FDI) into the electrical and electronics
sector
 Train technicians and engineers in electrical and electronics-related fields
through vocational training programs.
 Establish research and development centers focused on electronics and
renewable energy technologies .
 Streamline the regulatory framework to reduce the time required for
business licensing in the sector .
 Increase local production of electrical appliances and components to meet
domestic demand.
 Conduct a nationwide campaign to educate 1 million people about electrical
safety and the benefits of using locally manufactured products .

1.7Research Questions

The following research questions aim to guide the assessment of the electrical and
electronics sector in Ethiopia, focusing on its potential, prospects, and challenges
in promoting global value chain (GVC) participation: These research questions
will help structure the investigation and provide a comprehensive understanding of
the factors influencing the electrical and electronics sector's potential in Ethiopia.
The following case study questions are designed to facilitate an in-depth
examination of the electrical and electronics sector in Ethiopia, focusing on its
potential, prospects, and challenges related to global value chain (GVC)
participation:
 What is the current state of the electrical and electronics sector in Ethiopia,
and what resources are available to support its growth?
 What are the key market opportunities and trends within the electrical and
electronics industry that could enhance Ethiopia’s economic development?
 What specific challenges does the electrical and electronics sector face in
terms of infrastructure, finance, technology, and regulation that hinder GVC
participation?
 How can Ethiopia effectively position itself within global value chains in the
electrical and electronics sector to maximize economic benefits?
 What role do domestic and foreign investments play in the development of
the electrical and electronics sector, and how can investment be encouraged?
 What strategies can stakeholders implement to overcome the identified
challenges and enhance the competitiveness of Ethiopia’s electrical and
electronics sector?
 How can collaboration between government, industry, and educational
institutions be fostered to drive innovation and technology transfer in the
sector?
 What policies and regulatory frameworks are necessary to support the
growth of the electrical and electronics sector and facilitate its integration
into global markets?
 What are the key characteristics of the electrical and electronics sector in
Ethiopia, including its size, scope, and major players?
 How do the available natural resources and human capital contribute to the
sector's potential for growth and development
 What types of investments (both domestic and foreign) have been made in
the electrical and electronics sector, and what factors influence investment
decisions?
  What are the current market trends in the electrical and electronics industry
within Ethiopia, and how do they align with global market demands?
 How does the existing infrastructure (transportation, energy, and
communication) impact the operational efficiency of businesses in the
electrical and electronics sector?
 What is the level of technological advancement in the sector, and how does
it compare to regional and global standards?
 How do government policies and regulations affect the growth and
competitiveness of the electrical and electronics sector in Ethiopia?
 Can specific case studies of successful electrical and electronics firms in
Ethiopia illustrate best practices and strategies for overcoming challenges in
GVC integration?
 What examples exist of collaboration between industry, academia, and
government that have successfully fostered innovation and growth within the
sector?
 Based on the findings, what are the strategic recommendations for enhancing
Ethiopia’s participation in global value chains in the electrical and
electronics sector?

2 Key companies which are active in the Electrical and electronics

industry in Ethiopia include:

METEC

 a government owned corporation active in a range of industries, including cable and

wire production, consumer electronics and aviation.

 It acts as a key anchor company for the industry.

 dVentus Technologies

 is focused on electronic products for the renewable energy market.

 Tecno Group and Bravocom,
 is a significant company in the manufacture (assembly) of mobile phones for
the domestic and regional market.
 Other companies involved in mobile handset assembly include: Weigou Yu,
Smadl, Cell Tell, Tana, Qingmin Chen, Zhendong, Kenxinda, Thgg,
Mohammed RediAbshiro, Advan Technologies and Sime electronics .
 Companies in consumer electronics/TV assembly include: Garad, Metro,
Glorious, Selam business, Hidasie and Alpha (as well as METEC)
2.1Companies in cables and wires include:
 BMET, El Sewedy, Euro Cable and Belay. All these are foreign companies,
except Belay
 Other key foreign companies with a presence in Ethiopia, but not
manufacturing locally include: Huawei (telecommunications), ZTE
(telecommunications), and GE (airplane engine services).
 In addition, various foreign companies operate through domestic contract
manufacturers (e.g. Samsung, LG and Sony).
2.2 An action plan and road map to implement the sectoral
strategy in short, medium, and long terms.
Action plan
 Firstly, it is important that the country addresses the significant logistics
challenges and costs for manufacturers in Ethiopia.
 This should involve opening up the logistics sector to more competition and
foreign investors, potentially through domestic joint ventures organizations.
 This will allow them to bring in best practices and productivity
improvements which are expected to bring down transportation costs and
increase service levels for local manufacturers.
 This should be complemented by the completion and successful
operationalization of the railway link between Djibouti port and the dry
ports/industrial parks in Ethiopia.
 Secondly, there is a need for continued development of the existing
industrial park strategy.
 This should focus on enabling foreign and domestic investors to bypass
issues related to land acquisition, utility supply reliability, access to cost
competitive transport infrastructure and services in a ‘plug and play’
environment, and thereby maximize knowledge transfer potential.
 Thirdly, it is important for Ethiopia to accelerate planned reforms of the
customs administration and upgrade the customs processing system.
 This should include the operationalization of the single electronic window
for import/export procedures.
 Fourthly, the government of Ethiopia should ensure that all sector
development policies (incl. incentives schemes) are inclusive, in terms of
targeting both foreign and domestic firms.
 In practical terms, this means that an effective organization— the EIC in
close collaboration with the Ministry of Industry Should extend a similar
one-stop-shop service mechanism, as is currently being offered to foreign
investors, to domestic firms.
 In addition, the Government of Ethiopia should provide incentives for joint
ventures and collaborative projects between foreign and domestic companies
as well as universities while requiring foreign companies to have a
‘localization plan’ that gradually transfers jobs to local staff
 Fifthly, there is a need for continued skills development for the sector. This
should, for example, include the establishment and further development of
dedicated departments and institutes focusing on electronics (engineering)
research and education within higher education organizations across the
country.
 Finally, the sector development activities should be complemented by pro-
active and re-active investment promotion efforts.
 review current FDI related promotion and facilitation activities performed by
the EIC, the Ministry of Industry/CIT and the IPDC

2.2.1 Short-term (1-3 years)

 This short-term action plan aims to leverage Ethiopia's potential in the

electrical and electronics sector by addressing current challenges and
positioning the country for successful integration into the Global Value
Chain.
 By focusing on capacity building, investment promotion, regulatory
enhancements, and market analysis, Ethiopia can enhance its
competitiveness and foster sustainable growth in this vital sector.
 the emphasis should be on growing the sector presence and capabilities,
primarily in assembly
 Indeed, the growth of assembly operations is the route through which
sufficient scale can be created to gradually start building a domestic value
chain with both foreign and local supplier companies.
 Conduct a comprehensive assessment of current infrastructure and identify
gaps.
 Launch initial investment promotion campaigns targeting local and foreign
investors.
 Initiate skill development programs and partnerships with educational
institutions.

2.2.2 Medium-term (4-7 years)

 priority should be given to encouraging the development of the supplier

base in the country
 Begin construction and upgrade of key infrastructure projects.
 Establish special economic zones and attract at least 10 major electronics
manufacturers.
 Launch R&D initiatives focusing on renewable energy technologies and
electronic components.

2.2.3 Long-term (8-10 years)

 Gradually, the sector should then be able to grow further, with more
component and higher value manufacturing.
 This will require comprehensive and integrated cluster development and
support, as well as appropriate skills development and innovation support.
 This stage of sector development is likely only to be realized in the long
term, and is critically dependent on the successful realization of a number of
key improvements in areas such as infrastructure, regulations and public
services, technology and knowledge transfer, skills development, and
investment promotion.

3 Conclusion

 The action plan provides a structured approach to develop the electrical and
electronics sector in Ethiopia.
  By focusing on infrastructure, investment, skill development, R&D,
regulatory improvements, market expansion, and public awareness, Ethiopia
can build a robust sector that contributes to economic growth and
technological advancement.
 Regular monitoring and evaluation will be essential to adapt and refine the
action plan as necessary.
4 recommendations

 the sector development activities should be complemented by pro-active and re-active

investment promotion efforts.

 it is necessary to review current FDI related promotion and facilitation activities

performed by the EIC, the Ministry of Industry and the IPDC and coordinate, align or
redefine investment promotion activities, mandates, responsibilities, and
organizational set up from an investor centric perspective.