Developing countries require capital injections and diversifying of sources of wealth to meet their growth targets.
In this regard, many countries in Africa are introducing mechanisms that could pool sovereign assets together and revolutionize their corporate management and profitability. One growing trend is the creation of Sovereign Wealth Funds (SWFs) that could fill gaps in financing investment.
According to the world bank, in Africa, the growth of SWF increased by 76 percent, while the number of investors also increased by 54 percent respectively mobilizing about $300 billion in 2020. Hence, it represents a major source of investible capital for the continent. Currently, Africa has 30 SWFs or sub-funds including the recently established Ethiopian Investment Holdings (EIHs).
EIHs has twenty-seven investment opportunities across six major portfolio areas. These are Agriculture and Food security, logistics infrastructure, renewable energy, manufacturing/processing, real estate, and the health section with $150 billion assets under its management. This makes it the largest Sovereign Wealth Fund in Africa.
In the past, public enterprises have contributed positively to filling the gap where the private sector has not focused on or taking initial step in sectors that need to grow. However, at the current stage some of these enterprises need to increase productivity and improve corporate management.
Some of them were exposed to high domestic and foreign debt when they were incorporated into the investment holdings. Thus, among the government's focus on economic reforms was to enable these corporations to become debt-free and profitable to attract foreign direct investments. To this end, the EIHs established professional management for its funds, and assets achieving the optimal use thereof by international best practices, and corporate governance principles, and increasing the value for the benefit of contemporary and future generations.
The main objective of the EIHs is to increase the flow of significant foreign direct investment and technology by making state-owned enterprises follow a better management system in order to have a greater investment in the country. EIHs as the key government investment vehicle addresses this challenge by managing government resources in a highly professional and efficient manner and working in partnership with domestic and foreign investors to achieve national development through different investment projects.
What does Ethiopian Investment Holdings do?
Ethiopian Investment Holdings was established to serve as a strategic tool to attract foreign direct investment by creating intermediation that encourages joint investment, pooling resources to generate additional income, and creating value from underutilized resources.
Instead of operating independently, pooling resources and capabilities help to make investment activities more effective. In addition, pooling resources can help reduce resource wastage, increase access to finance, and increase the profitability of companies. This system will improve the management of government resources and create more resources to get a better financial supply.
The twenty-seven public enterprises have different capacities and profit rates. To this end, the Ethiopian Investment Holdings follows strong corporate governance and applies administrative procedures to make all twenty-seven enterprises profitable.
Many institutional investors that are interested to invest in Africa, including Ethiopia, find available investment projects to be of a lesser size in matching with the equity they bring along. Bringing together and managing these state-owned enterprises with large capital capacity will address the interest of attracting large scale investments while at the same time transforming the public enterprises into more successful and profitable entities.
Opportunities to co-invest with EIHs
EIHs works to attract foreign investment, among others, through joint ventures that are critical to the country. At the same time, it has been given the mandate to inter into international joint ventures abroad using its assets under its management.
In this connection, EIHs has struck its first international joint venture with a Djiboutian company called Great Horn Investment Holdings a memorandum of understanding in 2022, to jointly fuel storage terminal in Dimerjog Industrial Park. According to the company statement, the tank to be built will have a capacity of 270 tons of fuel.
ETHs represents Ethiopia’s long-term commercial and investment interests. Potential businesses in the Benelux countries are, therefore, invited to partner with EIHs and forge possibilities for mutual growth. For further information please visit EIH at www.eih.et.
