Dangote to invest US$400m in Ethiopia as reforms boost confidence

Photo source: Businessday

Nigerian billionaire Aliko Dangote is making a US$400m investment to expand his cement operations in Ethiopia, marking a potential sign of improving investor confidence following recent economic reforms, including the floating of the local currency.

The investment will fund a second production line at Dangote Cement’s Mugher plant, about 100km from Addis Ababa, increasing its annual capacity from 2.5m tonnes to 5m tonnes. The new line is expected to be operational within two-and-a-half years. Dangote Cement also intends to establish a new cement grinding unit with an annual capacity of 3m tonnes.

Dangote described Ethiopia as one of the company’s most promising markets outside Nigeria. The firm entered the country in 2015 but has faced recurring challenges, including protests over land use that forced temporary shutdowns and the killing of three workers, among them the company’s country manager, in 2018. These disruptions faced by Dangote Cement led to speculation about a possible exit from Ethiopia, mirroring decisions by other foreign investors who have reduced their presence or withdrawn from the country.

Since taking office in 2018, Prime Minister Abiy Ahmed has pursued economic liberalisation, reducing state control and opening certain sectors to foreign investors. However, Ethiopia – the fastest growing large economy in Africa– has managed to overturn inflation, a persistent foreign currency shortage, and pacify conflict in the north through a combination of military and political tactic.

Over the past year, the Ethiopian government has accelerated economic reforms to attract investment. In July 2024, the central bank started floating the local currency, shifting to a market-determined exchange rate to ease foreign currency shortages and unlock international financing. Access to foreign exchange has been liberalised. Commercial banks and traders are now allowed to keep hard currency rather than turn it over to the Central bank. The move is part of the broader reform agenda, which also includes opening the banking sector to foreign competition and the launch of a stock exchange.  Under the new law, enacted earlier in December, international banks are allowed to establish subsidiaries, open branches and representative offices, as well as acquire stakes in existing Ethiopian banks. Such efforts have been backed by US$3.4bn in funding from the International Monetary Fund (IMF), approved in July 2024.During a visit to Addis Ababa earlier this month, IMF managing director Kristalina Georgieva praised Ethiopia’s progress, noting that recent policy changes were improving the investment climate. She urged the government to sustain momentum by strengthening tax and regulatory frameworks.

Dangote, meanwhile, signalled confidence in Ethiopia’s economic reforms, revealing that his company had successfully repatriated 100% of its loans and dividends. He also hinted at potential further investments, including ventures in sugar and fertiliser production.

 

References

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