Consultants supporting reform of state-owned enterprises in Ethiopia

Five Ethiopian state-owned enterprises have turned to external consultants for guidance as they embark on a strategic re-assessment of their core business model.

As part of a major government reorganization program, Ethiopia is in the process of improving the performance of its portfolio of state-owned enterprises through initiatives including performance improvement, better commercialization of services, and the (partial) privatization.

In 2023 and 2024, around 50 state-owned enterprises are expected to list on the Ethiopian Stock Exchange (ESX), with majority ownership of these groups to be transferred to private sector players. For most public offerings, government ownership has been capped at 25%.

Overseeing the reorganization of state-owned enterprises is the Public Enterprises Holding and Administration Agency (PEHAA), an agency that falls under the Ethiopian government.

The PEHAA has now hired consultants from MTI Consulting to perform a strategic assessment of five state-owned enterprises under its mantle: the Ethiopian Chemical Industry Corporation, the Ethiopian Business Trading Corporation, the Ethiopian Pulp and Paper Share Company, the Ethiopian Construction Works Corporation, and the Berhanena Selam Printing Press.

The primary objective of the undertaking, which is funded by the Agence Française de Development, is to gain a comprehensive understanding of the current business ecosystem in which the five state-owned enterprises operate and devise appropriate business development and directional strategies.

The project is led by MTI Consulting’s team in Addis Ababa, and supported by experts from across its network. The consulting firm has a further three offices in Africa (in Nairobi, Kenya; Lagos, Nigeria; and Johannesburg, South Africa) and 10+ offices across Asia and worldwide.

Based on similar work MTI Consulting has conducted internationally, company CEO Hilmy Cader suggests many state-owned enterprises can turn losses into profits through the development of new and future-proof business models. The road to greener pastures is however not easy: “State-owned enterprises must make difficult business choices, such as restructure their balance sheets, adopt competitive cost modeling, and reorganize their operations.”

The strategic engagement takes place against a backdrop of a wider reform agenda in Ethiopia. Despite Ethiopia’s eonomy growing at an average rate of around 10% per year for the past decade, the country’s officials are struggling with a myriad of challenges, including the aftermath of the Covid-19 pandemic and a severe foreign exchange shortage, which has led to a significant devaluation of the country's currency, sparking a surge in inflation.

To address these issues, the government has taken steps to implement economic reforms and sought support from international financial institutions such as the International Monetary Fund and World Bank.