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The Guardian Nigeria

Sunday 4 October 2015
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Business and bureaucracy: Ethiopia entrepreneurs overcome hurdles

  • By AFP on September 27, 2015 6:21 am

Ethopia. Getty Image
Ethopia. Getty Image
The large open plan office with staff behind sleek computers looks like any newly-started modern business.

But Ethiopia’s first online restaurant delivery service, Deliver Addis, must contend with major hurdles that would stall many entrepreneurs in more developed nations.

Setting up any business is a challenge, but in Ethiopia, those range from daily operating headaches such as on-off Internet — stalling the highly time-sensitive orders on which it depends — to even more fundamental business challenges.

As the country’s banking and payments systems are still in their infancy, electronic payments are impossible, thus creating a huge hurdle for growth.

“The Internet goes out a couple of times a week — when that happens, there is not much we can do but rely on phone lines to take orders,” said Feleg Tsegaye, manager of Deliver Addis.

But he also believes the Horn of Africa nation — the second most populous on the continent — offers enormous opportunities.

Tsegaye was born and brought up in the United States but moved to Ethiopia, the homeland of his parents, hoping to tap into a still largely untapped but swiftly growing market he believes is one of the most promising on the continent.

“The IT sector is still in its infancy — typically in these markets there is a way to transfer money very quickly and very easily, but here that doesn’t exist quite yet,” he added.

“Once you have a way for entrepreneurs to make money through technology, I think you are going to see that change very quickly.”

– Obstacle course of paperwork –

With a growth rate of nearly 10 percent a year over the past decade, according to the World Bank, Ethiopia has attracted entrepreneurs eager to take their cut of a market with over 94 million potential consumers.

The Ethiopian capital Addis Ababa now has three “startup incubators”, some supported by foreign investors, to help Ethiopian entrepreneurs launch their own business.

“Everybody wants to own their own business, everybody wants to create something new,” said Kibrom Tadesse, manager of the XHub, which describes itself as an “open space for IT entrepreneurs, innovators, technologists, investors, tech companies and coders in Ethiopia to develop their tech idea into a product”.

With a large number of youths set to enter the workforce, Ethiopia’s government is keen to develop this potentially large source of new growth and jobs. Ethiopian universities say 70 percent of students are in science programmes.

“Even with the rate of unemployment and the amount of people who are coming out educated — and the job opportunities are not matching — there is definitely a lot of room for innovation and entrepreneurship,” Tadesse added.

Yet bureaucracy remains a major hurdle in a country run by former Marxist rebel fighters.

– ‘Small money goes a long way’ –

Starting a business in Ethiopia is an obstacle course of paperwork lasting weeks.

The authorities demand businesses have offices, while many entrepreneurs say they would prefer to develop their products shuttling between Internet cafes and home.

“It can take up to six weeks to register a company, and you have to run from office to office — the process is not transparent,” said Florian Manderscheid, manager of Ice Addis, a centre supporting young entrepreneurs. “Most people don’t know where to start.”

Like businesses worldwide, entrepreneurs in Ethiopia also face major challenges in raising cash, with domestic investors hesitant about a still largely unknown sector and tough regulations on outside investors.

“It is very hard to find investors, because there is no venture capital model or legal framework for venture capital,” Manderscheid added.

“Once the banking system opens a little bit, there will be a big boom I think in start-ups and technological development.”

Despite the difficulties, Natnael Zeleke and Amanuel Lemma, students aged 21, are developing an online platform to promote Ethiopian artists.

“Creating a company is not common in Ethiopia, but many students are starting to do it,” said Zeleke.

“You don’t need to be in the Silicon Valley to succeed. If you have a computer and Internet, you can do whatever you want. Even if we’re not in America and have great teachers, we have access to everything thorough the Internet.”

For now, with only a little over one percent of Ethiopians with Internet access, the industry is still in its infancy, but those working here are confident of future success.

“Some people say we are crazy,” Manderscheid said. “But chances of success are higher than in Europe or the US — small money goes a long way in this growing market.”