Ethiopian entrepreneurs struggle as command economy soars

By Aaron Maasho

ADDIS ABABA (Reuters) - In Ethiopia, where state spending rather than private enterprise has been the driving force behind double-digit economic growth, tech entrepreneurs like Araya Lakew feel stuck in the slow lane.

Five years ago, the 34-year-old spotted a niche for a website matching buyers and sellers of second-hand cars in a nation where prices often rise even as vehicles age because of high tariffs on imports.

His website, Mekina.net, receives 316,000 hits a month and adds 20 cars a day to its sales list but he has struggled to expand beyond the capital because of poor Internet penetration and a ropey mobile network run by state monopoly Ethio Telecom.

"We are only touching a tiny surface of the market," Araya told Reuters. "We try to optimise what we have as there are a lot of obstacles to growth."

In a nation where the authorities have little tolerance of criticism, Ethiopian entrepreneurs are reluctant to blame the government or its agencies for the challenges they face.

But economists say the state's tight grip and a list of restrictions on where private business and foreigners can invest risk stifling tech and other start-ups that will be vital for creating jobs and driving innovation.

"The way things stand, this sector may not survive," said Markos Lemma, co-founder of iceaddis, a technology hub in Addis Ababa that supports entrepreneurs. "Ethiopia is leaving out a huge talent-based opportunity."

Telecoms services are in the hands of the state, while foreigners are barred from retail and banking. Entrepreneurs struggle for funds as banks have to invest the equivalent of 27 percent of their loan portfolio in low-yielding state development bonds, leaving less for private lending.   Continued...