Ethiopia’s Digital Economy

Source: Cepheus Growth Capital

We review the digital economy landscape in Ethiopia and cover in this reportthe scope of services offered, companies involved, activity indicators, stand-outcases, funding trends, cross-country comparisons, policy environment, currentmarket size, and near-term growth outlook.§ Background and Context: A review of the Ethiopian digital economy landscapereveals close to 570 businesses offering a wide range of digital finance, ecommerce, transport, sector-tech, and ecosystem services. We find that mostcompanies operating in the digitalspace are still largely sub-scale in nature andthat very few ‘digital disruptors’ have emerged so far with widespread marketacceptance, a large customer base, and meaningful revenue generation. Thisshould change very soon, however, as major sector reforms are addressingnumerous past constraints—poor network connectivity, high telecom costs,restrictive regulations, limited funding, skills shortages—while broader policyconditions are now much more conducive for the emergence of trulydisruptive Ethiopian companies using digital platformsto transform traditionalways of doing business in agriculture, industry, transport, and other services.In this context, we take stock of the currentstate of Ethiopia’s digital economy,identify key themes and trends, assess the impact of recent ‘game-changers’in this field (new policies, new entrants, new products), and offer our views onboth the overall outlook and sector-specific prospects.§ Service offerings: Several notable features stand out in Ethiopia’s currentdigital economy landscape: (1) The finance, ride-hailing, e-classifieds, andmedia segments have been comparatively more successful at building largedigital user bases and ensuring monetization; (2) conventional e-commerce,delivery services, and those focused on agricultural, health, and educationrelated offerings have been slow to gain traction; (3) public sector entitiesand e-government services turn out to be among some of the economy’smost successful ‘digital disruptors’, often with private partnerships, and; (4)B2C business models tend to attract the most entrants though these presentmore demanding operational and execution challenges in the local context.Current service offerings are also marked by high geographical concentration,a narrow set of technology types, and still limited levels of forex generation.§ Activity Indicators and Stand-out Cases: Despite the common view that‘Ethiopia has virtually no digital economy to speak of’, we find someimpressive digital use cases are already firmly in place. For example, banksare handling around half a million customer transactions via digital channelsevery day and Birr 260bn (~8% GDP) on an annual basis