On 7th September 2023, Manufacturing Africa hosted a workshop for stakeholders in the manufacturing sector to discuss the financing and investing landscape in Ethiopia. The event was graced by his Excellency Hassan Mohammed, Ethiopia’s State Minister of Industry who welcomed the support provided by Manufacturing Africa programme.
“…in many situations it is not so much lack of financing but lack of knowledge and experience of entrepreneurs to market themselves to interested financiers. The Ethiopian start up market can greatly benefit from the type of integration offered by Manufacturing Africa.”
His Excellency Hassan Mohammed, Ethiopia’s State Minister of Industry
The meeting kicked off with opening remarks from the FCDO Deputy Development Director Vicente Solera-Deuchar who outlined some of the areas of the UK’s support of the business sector in Ethiopia as financial sector deepening, industrial development, tax and economic reform.
He stated that the Manufacturing Africa programme is one of the UK’s most important programmes and is critical for supporting economic reform in Ethiopia”
Describing Manufacturing Africa’s footprint from launch in 2019 to date, Christoph Zipfel the programme Team Lead said, “As of April 2023, MA has supported 123 deals in the five African countries targeted by the programme, 26 deals have so far closed with MA support leading to mobilization of $840 million in FDI and commitments for 14,000 jobs to be created, along with other developmental impact.”
Africa Bamboo is a company that aims to catalyse the bamboo sector in Africa to meet local and international demand for sustainable, net zero building material. It is one of the companies in Ethiopia that has secured external capital through MA support. Sam Rosmarin, the company’s Chief Investment and Corporate Development Officer spoke about how the MA Ethiopia team helped the company develop a financial model which was key in negotiations with investors and understanding the company’s business strategy. He declared that one of the most significant areas of MA support was the buyer mapping which got Africa Bamboo an off-taker company in Austria that has now become an equity investor. He revealed that MA also helped the company develop a risk model which is an important tool containing the main contingencies and uncertainties to be considered. This document inspired confidence in the business model and proved to investors that they are a risk ready firm.
Esete Leulseged, a Principal at Zoscales Partners which is an Addis based private equity firm highlighted the factors private equity firms and companies need to agree on before beginning a relationship. Some of the key considerations include sector focus, deal size, readiness and timing with the understanding that private equity firms generally invest for the first 5 years of a business and within the next 5 years of a company’s life span slowly start to payback their investment as they get ready to exit. She underlined the importance of agreeing on a shareholding structure which is usually a 51% – 49% deal and finally a transparent alignment on the business plan and vision.
“It is safer for investors to hold on to their money and wait for the right deal than go for a risky investment, which is why there is emphasis on the need for thoroughness of investment and preparation, so the investment isn’t seen as a risky one.” Faheem Chowdhury, Portfolio Manager, Manufacturing Africa
During the Q&A session, companies pointed towards some of the challenges of investing in Ethiopia as bureaucracy within state agencies, deal ticket sizes as investors are more interested in larger deals and less willingness to take chances on smaller investments. They also cited that the requirement by investors to see clear accounting structures including a CFO with a clear vision and plan for the company’s future presents a barrier for small companies.
The workshop ended with closing remarks from FCDO Manufacturing Africa Advisor – Alex Karlsson, who reiterated MA’s availability and commitment to supporting manufacturing companies in their capital raising journey. In her statement, she announced the launch of a MA developed free resource – “A Guide to the Investment Process for Companies Seeking Capital”.