Ethiopia is at a crucial point in its economic journey. The country has a unique chance to use digital trade to boost its growth. As Ethiopia moves from relying on agriculture to focusing on manufacturing and services, the key to this change lies in its young population. If properly supported, these young people could drive the country’s economic progress.
One major challenge Ethiopia faces is high youth unemployment. Each year, many new graduates enter the job market, but there aren’t enough jobs available. To address this, Ethiopia needs to promote innovation and entrepreneurship. By encouraging young people to start their own businesses and explore new ideas, the country can help reduce unemployment and drive economic growth. However, this requires a supportive environment, including better financial and bureaucratic systems to help new businesses succeed.
Recent efforts to improve digital skills in Ethiopia are a good start. For example, the agreement with the UAE to teach basic digital skills is a positive move. But teaching digital skills alone isn’t enough. To succeed in today’s tech-driven world, Ethiopia needs to produce highly skilled professionals in advanced technology fields.
The global business process outsourcing (BPO) industry is growing rapidly, from $85.6 billion in 2018 to an expected $260 billion this year. This market could surpass $500 billion in five years. Ethiopia, with its large number of STEM graduates—over 200,000 each year—has the potential to join this booming market. But to attract investment and foster innovation, Ethiopia must create a better environment for startups and tech companies. Establishing a national innovation fund is a good step, but it needs to be approved and put into action.
The government’s idea to classify colleges into research, applied, general, and specialized categories is a step in the right direction. However, linking these schools more closely with industries could be even more beneficial, helping students gain practical experience and reducing the mismatch between qualifications and job requirements.
Ethiopia currently attracts less investment compared to its African neighbors. From 2015 to 2022, Ethiopia received under $100 million in venture capital, while countries like Kenya and Nigeria secured much more. This shows the need for Ethiopia to improve its investment climate. Encouraging more angel investors and venture capital funds, and modernizing traditional social financial systems like Ekub and Idir, could help fill this gap.
Developing a national innovation system that includes schools, businesses, and policymakers is essential. Ethiopia can learn from successful examples in other African countries, such as Kenya and Rwanda, and from economies with strong innovation systems like Ghana and Senegal. Civil society also has a role to play, especially in supporting sustainability and green initiatives.
The African Continental Free Trade Area (AfCFTA) offers another opportunity. This initiative, which includes digital trade and eCommerce, could help Ethiopian businesses expand across Africa. To take full advantage of this, policymakers need to make it easier to start and run businesses by simplifying licensing requirements and adapting rules for the digital age.
The delay in passing the startup law is a significant issue. Even after more than five years, the bill has not been approved. In a fast-evolving digital world, timely action is crucial to avoid missing out on investment opportunities.
Ethiopia is on the brink of a digital trade revolution that could transform its economy. By focusing on innovation, creating a supportive environment for startups, learning from successful models in other countries, and leveraging AfCFTA opportunities, Ethiopia can unlock its potential and drive significant growth. Success will require efforts from the government, businesses, schools, and society to build a thriving digital economy for the nation.