Patricia Poon's Blog

Ethiopia is the only African country that has never been colonized, a fact the people are extremely proud of, and rightly so. Walk down the street and you will not see ONE foreign owned enterprise or big box retailer. That means no Walmart, no Target, no Forever 21, no McDonalds, and no, not even a Starbucks, even though Ethiopia’s own “Kaldi’s” is the copycat version. Other than the large banks, almost every business is either government owned or family owned.

Indeed, it is painful to imagine foreign retailers pasting a templated store into the heart of Addis. Businesses having success in Kenya or South Africa often do not have a market here.

In almost every market, the barriers to entry are low but there is little support and business infrastructure to be found. Therefore, every business is under funded and is heavily hindered from being scalable. The pain points are clear. Talk to any business owner, manager, CEO, or entrepreneur in Addis and they will tell you the same thing –

1. Rent

2. Financing

The shortage of not only money, but also capital available in Ethiopia is astounding. Due to government regulations capping foreign investment in most sectors, Ethiopia has one the lowest amounts of credit available in the private sector in the region – about 14%. However, generous government subsidies are available to certain businesses, often covering cost of materials and even rent.

The biggest hindrance to private sector development and innovation is a “government blessing”. In most cases, success largely depends on government policy. For example, if a company wanted to import raw materials not produced in Ethiopia, regulations state that it MUST also export Ethiopian produced goods in amounts equal to or greater than the value of the imported goods.

And a lot of things are not made in Ethiopia. For example, medical devices such as syringes, urine or stool cups, and surgical masks. An entrepreneur named Abeba has secured a government grant, government demand and highly subsidized land to be the sole producer and manufacturer of these products in Addis Ababa.

Some are getting restless. They see the homogenous and low quality products and services that are being distributed in Addis and know there is a huge gap between what could be offered and what actually is. Currently the government owns all telecom, electricity, water, utilities, and heavily restricts banking, transport, and retail sectors. It refuses invitations to join the WTO each year and will continue to.

But, it seems the government will change its mind for good reasons. Mr. Fitsum Gezahegn, is the owner of Paradise Ethiopia Travel and an Arc graduate. Under his suggestion, the government formed the Ethiopian Board of Tourism, resulting in tourism becoming a private / public sector. The government now funds only 40% of the industry, allowing for greater expansion opportunities from private parties. Fitsum is now Ethiopia’s international tourism representative.

Speaking of tourism, depending on who you ask, customer service is either “everything”, or “not a thing”. During our workshop, we asked the question, “What do your customers want?” – and each entrepreneur had the same answer: High quality and customization. Business is so humble here that products and services are customized by the nature of the start-up (clothing design, honey wine production, security, landscaping services). Almost all small businesses will be quick be use this as a point of differentiation, but it is really intrinsic of their business, a realization that was felt by many in our group.

Because of this, many grow to distrust large corporations, imported products, and even the news on TV, preferring locally made products, and information heard through friends and family. Our team was surprised when many participants wanted to start local manufacturing businesses for basic materials such as plastic bottles or juice, which would enter the market to directly compete with low cost, low price, huge volume imported goods from China. However, in Ethiopia, such “audacity” is actually feasible because there is such a demand for locally made and produced products – it is not only heavily encouraged by the government (in the form of subsidies) to boost the economy, but also by the local customers who trust locally made products rather than the chemical and questionable quality of Chinese imports.

Therefore, almost all business marketing is primarily done through word of mouth, making awareness of each again, difficult to scale. Surprisingly, TV advertisements are not taken with a grain of salt; the logic being that if a business had enough cash to advertise, they must be reputable.

Most foreign corporations have mastered ongoing customer service. However, the laissez-faire attitude of the habesha culture, despite the friendliness of most citizens, certainly infiltrates the corporate world. According to our participants, support through the buyers’ process, and especially product maintenance and upkeep is almost non existent. The looming threat of foreign corporations in Ethiopia concerns some entrepreneurs who believe the superior customer service may crowd out and replace local businesses if they cannot adapt.

Despite this, Ethiopia’s “closed door” policy has many merits. I have never seen targeted groups or people. Although the disparity between rich and poor is extreme, (a man told me last week, “There is no average. There is rich and there is very poor”). Locals are accommodating, helpful and friendly, and in some ways because of the people I feel safer in Addis than in many places I have travelled.

Although the country is split almost exactly 50/50 religiously (Christian and Muslim), the two groups live in such harmony it is difficult to believe that their brothers and sisters in faith in surrounding regions have gone to war for millennia over differing beliefs.

Bright and hopeful minds we met believe the country plans to change drastically. The pace of wealth creation is impressive for a country with an average GNI of less than $500. Surely it is a country that cannot close its doors from the world forever, and when it finally changes it policies, we might see a new and formidable player in the game.

-P

“If people protect the environment, it will be kind to us.”

I am inspired to blog today after meeting Mr. Tesfaye Mekonnen (Tes-fai), an Ethiopian entrepreneur who designs, produces and sells eco-friendly, recycled paper products. Currently all paper products are handmade. He invited us into his factory to see the paper production process. The materials are collected from the vast excess resources in Ethiopia, including recycled paper, cotton, and banana or coconut husks. Tesfaye makes postcards, bookmarks, notebooks and folders of different sizes, wedding cards/gifts, and even custom orders.

Tesfaye has been involved with the Arc Initiative since its inception in Ethiopia. Since attending the first conference in 2010, he has developed international partnerships, resulting in the procurement of German and Chinese paper press machines, attracted international academic interest – and most recently, submitted a 40 page business proposal to the government for a $50,000 grant, beating out almost 90 other applicants for the award.

I am honoured to work with Tesfaye over the next 2 months.

Tesfaye’s dreams are indeed grand. “In one month, this will not be enough”, he says, gesturing around his factory, which still has plenty of open and empty space.

“We can change our lives in Ethiopia. The right time is coming”, he says. “My colleagues, they always talk about going to Canada, to America. Why go? We can make a change here, in Addis. In our own community. I believe we can change: first ourselves, then everything around us.”

And as my finance friends fly off to Toronto, to New York, to London to join and work for big firms, Tesfaye’s strong words sincerely moved me. His commitment to his own community was powerfully genuine. Why go? Why not improve our community? Why not our city?

Tesfaye also does not take no for an answer. He recalls when his application for imported equipment was denied. “So”, he recounts with a sparkle in his eyes, “I camped outside his office for 2 months”.

Do you think your work would be easily copied, we ask? We know that competition becomes fierce when you start seeing success. Tesfaye agrees. He recently turned away offers of millions from businessmen: “Many rich businessmen, they say, Tesfaye, I want to see your factory. I want to know about your production. Why? I have spent 6 or 7 years learning and creating this process. Why give it away in minutes? I have tested the waters. I know the ups and downs.”

We are growing quickly, he says. In just two weeks we can make over 100,000 bags per year. I need you.

No problem, I say. I will make you a beautiful website. His eyes smile and he clasps his hands together. “Thank you”, he says. It is such a warm and generous show of gratitude that a grin splits my face from ear to ear and I feel as if I almost cannot accept it.

Tesfaye invites me to sit. He carefully explains that some friends have made suggestions to his current website and requests changes. No problem, I say. I already have some ideas in mind.

What about Facebook? He asks. He has heard about Facebook. No problem, I say. I would love to.

And LinkedIn? And Twitter? He is now getting more and more excited. I cannot stop from smiling. Not a problem, I say. To find such a great person, whose business needs fit my skill set perfectly is rare.

He is unsure how to ask the next question. And coaching or training, he asks?

Tesfaye, I say, smiling widely now, this is exactly what I do in Canada. I design and create websites. I help businessmen like yourself use technology to grow your business. I teach workshops for LinkedIn, for Facebook, for web design. I know what you need. I am so excited to work with you.

After, we walked around the city (like normal teenagers), grocery shopped for junk food, visited Edna Mall and an amazing bakery. We cracked open our first beers as a team sitting on small purple stools at a tiny beer stand outside our guesthouse.

I spent the rest of the evening creating financial management practice questions for our entrepreneurs. They had to be useful, they had to be understandable, relatable to the business landscape in Ethiopia, and most of all, they had to be easily explainable to someone whose first language was not English.

I aimed to answer 5 crucial questions:

• Should I Invest?
• Which Project?
• Should I Borrow?
• Should I Sell?
• Should I Buy?

Our conference is in 2 days. I cannot wait to learn and teach.

Last week, we walked around the city and I felt overwhelmed. Quietly observing and absorbing was enough for me. The cultural differences were immense and I was intensely aware of my foreign appearance, my foreign actions. After having visited the museums, some businesses, and very friendly locals during the first few days, I felt as if Ethiopia had much more to teach us than we had to teach Ethiopia.

After all, who am I to visit a new land and begin pushing our foreign business concepts on people who know more about running a business than I do?

But this is why I love technology. Because, more so than any other field, I have been fortunate enough to spend time building websites, learning code, implementing software, using Facebook, and using LinkedIn – not only for my own pleasure but also to grow businesses rapidly. I was extremely humbled to be asked to be the team web lead and asked to design and create websites for many of our key entrepreneurs.

Being wholly against “voluntourism”, “donations”, and foreigners who do more harm than good in developing countries, I was apprehensive about what I could have offered as a stranger in a strange land. The way foreign aid has been given to countries in Africa helps perpetuate poverty and hinders economic growth. This is the opposite of what Arc stands for.

Meeting Tesfaye today was the beginning. I began to believe that I could help enhance his business in small ways. The Arc Initiative ultimately gives a small number of Ethiopian entrepreneurs something many charities do not: governance over their own future in hopes of working towards governance for their country.

So many entrepreneurs are on the cusp of something great, and my goal is to help guide them towards this enormous success. My work is my passion, and I am SO excited to share this passion with the entrepreneurs in Addis.

This week, I am inspired to help make small changes as a visitor in this world.

“You have come at the right time”, Tesfaye said in an email to me. With such conviction that I almost believed that I had.

Signing off, with passion,

Patricia