Ethiopia Inc Drives Consolidation While Liberalisation Remains Tightly Managed

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From a distance, Ethiopia looks like a country finally prising open its economy. Licences for mobile operators have been sold, a capital-market law passed, foreign banks invited, subsidies pared, and a distorted exchange rate nudged towards reality, at least ideally. Ministers talk the language of “liberalisation”, promising open markets, competition and the retreat of arbitrary power.

However, watch where the money flows, and another pattern appears. While the periphery deregulates, the core is requisitioned by the state and placed under Ethiopian Investment Holdings (EIH), a sovereign holding company incorporated in 2021.

EIH has swallowed more than 40 state-owned enterprises, from airlines and banks to telecoms, utilities, logistics firms and fertiliser projects. Last year, the Fund posted 2.05 trillion Br in revenue and 262.7 billion Br in pre-tax profit, an 88pc jump. Managers value the portfolio at 45 billion dollars, equal to 12pc of the country's GDP, with annual revenue of 18.5 billion dollars, numbers that would flatter many a midsized economy.

But “Ethiopia Inc.” rests on a narrow base. One airline to rule them all, the Ethiopian Airlines Group (EAG), Africa’s champion carrier, is the gravitational centre. It earned 7.6 billion dollars in revenue in fiscal year 2025 as global travel rebounded. In 2023, its profits neared 800 million dollars. Transport and logistics, therefore, supplied 66.8pc of EIH’s pre-tax earnings. Shipping is the second pillar. The Ethiopian Shipping & Logistics Services Enterprise (ESLSE) hauled in 46.8 billion Br of revenue and 9.3 billion Br of profit in the first half of 2024/25, helped by freer foreign-exchange rules. Yet, the Addis-Djibouti railway, run by Ethiopian Railway Corporation (ERC), still bleeds cash. One logistics success subsidises another’s loss.

Finance is the next profit pool, contributing 14.95pc of the total. At its heart sits the Commercial Bank of Ethiopia (CBE), which mobilised more than two trillion Birr in deposits in 2025 and earned 36 billion Br in pre-tax profit, a 170pc leap. Insurance adds ballast. Ethiopian Insurance Corporation (EIC) collected 13.3 billion Br in premiums in 2024/25 and posted a 1.6 billion Br profit despite a 138pc surge in claims. Scale, not sophistication, appears to be the secret.

Telecoms is the cash cow. Ethio telecom booked 162 billion Br in revenue in 2024/25, up 72.9pc. Its mobile-money arm, Telebirr, processed 2.38 trillion Br in transactions. Electricity tells a similar story, where the Ethiopian Electric Utility (EEU) raised revenue by 50pc to 45.4 billion Br after tariff hikes, while Ethiopian Electric Power (EEP) pulled in 75.4 billion Br as new dams came online. Fuel supply may look dull, but it prints money. The Ethiopian Petroleum Supply Enterprise (EPSE) pocketed 36.5 billion Br in gross profit in 2023/24, accounting for 73pc of revenue generated by EIH subsidiaries that year, acting as a buffer for the federal budget, until oil prices swing.

Beyond these flagships lies a long tail of stragglers. Manufacturing and mining units, such as Ethio Engineering Group (EEG) and Ethiopian Mineral Corporation (EMC), are loss-making. Agriculture and agro-processing contribute a meagre 2.64pc of profits in a country where farming still employs most people. The Ethiopian Sugar Industry Group (ESIG) continues to drown in debt and outdated kit. All told, Ethiopian Airlines, CBE, Ethio telecom and Petroleum Enterprise generate more than four-fifths of EIH’s profits.

However, valuing the behemoth is guesswork. Most subsidiaries do not publish detailed accounts, and the Ethiopian Securities Exchange (ESX) has yet to start operation. A partial share sale by Ethio telecom in 2025 — 10.6 million shares at 300 Br — signalled only a modest valuation relative to its cash flow. Assumptions about the airline and the fuel supplier are only that - assumptions - because no market price exists.

Be this as it may sound, EIH is more than a holding company but a fiscal device for the federal government. In the first nine months of 2024/25, it paid 98 billion Br in taxes, cushioning a Treasury wrestling with debt restructuring and an IMF programme. The state is both a shareholder and a beneficiary, a dual role that sharpens incentives but blurs accountability.

The next act depends on privatisation and governance. EIH plans to list Ethio telecom, ESLSE and EIC on the ESX. Handled well, listings could impose disclosure standards, discover prices and widen domestic ownership. Botched, they might invite asset-stripping and politicised pricing. Policymakers are betting that by selling slices of its crown jewels, they can build a capital market from scratch, using the proceeds to patch weaker firms. Whether competence can spread beyond one airline, one bank and one oil importer is untested.

For now, EIH, under the managment of Brook Taye (PhD), the third boss of the sovereign fund, is a paradox of a portfolio of striking scale but fragile balance. Its numbers proclaim success while its structure whispers caution.

This could be by design. When Meles Zenawi, the late prime minister, spoke in the mid-2000s of building a “lily-white capitalism”, he envisaged markets tolerated only up to a point. Under the Revolutionary Democrats, ownership was fragmented across federal governments, regional states and party endowments. The Prosperity Party, which succeeded them, is stitching the pieces back together. Assets are not being relinquished but consolidated under one roof.

The model on the slides appears to be Singapore’s Temasek, a commercial holding company operating at arm’s length from politics.

Ethiopia's contemporary reformers seem to be opening margins to lure investment while keeping the core under state control, ensuring rents flow to the public purse — and, critics say, helping the ruling party consolidate its grip on power. Private capital is courted, but usually as a minority partner or downstream contractor. This is not classical privatisation but the financialisation of state ownership.

The tension is clearest in potash, fertiliser and aluminium. EIH has struck deals, including a 2.5 billion-dollar fertiliser plant with Dangote Group, a memorandum of understanding with RUSAL for a one billion-dollar smelter, and storage depots and industrial parks.

From a development perspective, such ventures could bring exports and jobs. But, from an investor’s perch, they blur the line between the regulator and the competitor. Markets tolerate state participation while detesting opacity.

Opacity is rife with the EIH, which has yet to publish its consolidated statements. Asset transfers were never externally audited, and governance decisions occur behind closed doors.

However, EIH’s board includes the Planning Minister Fistum Assefa, the Education Minister Berhanu Nega (PhD), the Central Bank Governor Eyob Tekalegn (PhD), and the Investment Commissioner Zeleke Temesgen (PhD). They can approve mergers, capital restructuring and liquidations without cabinet sign-off. In theory, that may shield decisions from meddling. In practice, it could concentrate economic power in a narrow apex.

The IMF has flagged the omission as a missed benchmark, warning of hidden liabilities. Without transparency, neither citizens nor creditors can judge risks or subsidies. For domestic firms, the field tilts. State-backed giants enjoy privileged access to credit, foreign currency and land. Losses are socialised while private failures are not. The result is a protected core and a precarious fringe. Political scientists call this state capitalism, or in starker terms, authoritarian capitalism.

In such systems, prices move and capital flows, but within parameters set by an executive that brooks limited scrutiny. China shows such a model can deliver growth when exports and discipline align.  Russia shows how it can ossify when rent-seeking prevails. Where Ethiopia’s version will land remains uncertain. The Prosperitians face a choice.

EIH can become a genuine and transparent holding focused on areas where private money still fears to tread or morph into an all-devouring empire, crowding out the entrepreneurship the country needs. A mandate with sectoral limits, published accounts, arm’s-length regulation and co-investment schemes could crowd in private capital. Absent that, liberalisation may widen the pie while consolidation chokes off the appetite to bake it.

Doors to Ethiopia’s economy are ajar, but the keys remain in the state's hands. Investors will decide whether that is a reassurance or a red flag.

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