Abiy Ahmed has made Ethiopia a high-risk investment country. What level of Rate of Return (ROR) on Investment would the high risk-seeking investors demand for investing in Ethiopia?
2025 Investment Climate Statements: Ethiopia
By United States Department of State
The Government of Ethiopia insists it is eager to attract foreign direct investment (FDI) but has mostly failed to address the many shortcomings – some outside but many within its control – that deter foreign interest.
Ethiopia’s investment climate is challenging for U.S. and other foreign businesses. Internal conflict, notably in the Amhara and Oromia regions, restricts travel, leads to frequent expropriation of assets by either unscrupulous government officials or members of armed groups, and limits the Government of Ethiopia’s ability to intervene.
Insufficiently protected property rights, most prominently demonstrated by a series of “corridor development” projects in which the Government of Ethiopia expelled tens of thousands of residents and businesses – including foreign-owned ones – and demolished their properties with little to no warning or compensation, deter investor interest. Though the currency float briefly ameliorated foreign currency shortages and economic distortions resulting from the overvalued Ethiopian birr, a growing gap between bank exchange rates and the parallel rate re-emerged in November 2024.
A small tax base – partly limited by Government of Ethiopia inability to operate consistently outside Addis Ababa and partly by a large proportion of the populace working in informal employment – leads authorities to target foreign businesses for questionable and excessive tax bills. The customs commission makes frequent, non-transparent, and retroactive changes to regulations, causing losses to companies that were following regulations in force at the time. Poor infrastructure and an inefficient logistics system, despite boasting Africa’s largest airline, further inflate costs.
Although the Government of Ethiopia claims it is privatizing sectors, it continues to manipulate the system to benefit inefficient state-owned enterprises (SOEs), for instance requiring foreign companies to lease equipment from Ethiopian SOEs. Corruption remains a challenge. The absence of an effective dispute resolution system for businesses exacerbates the lack of rule of law more broadly.
Link for the full report https://www.state.gov/reports/2025-inve ... s/ethiopia