The communications industry in Ethiopia

As a frequent visitor to many African cities, I am often tempted to use the descriptor ‘under construction’. The economic growth of the continent is well documented and the most tangible evidence of this is its city skylines of scaffolding, construction cranes and buildings in various stages of completion.

As a first-time visitor on a recent trip to Addis Ababa, I found this description to be somewhat of a euphemism. The city is quite literally a building site, with a state of development so remarkable that even the locals find it overwhelming. Following several conversations with Addis agency leaders, I gained a deeper insight into how they view Ethiopia’s economy as well as the machinations of the communications industry.

Ethiopian GDP growth was reported at 10.3% in 2014 and the country is aiming for a growth rate of 11% per annum between 2015 and 2020 as part of its Growth and Transformation plan. If it succeeds, Ethiopia will be one of the fastest growing economies in Africa and globally. 

The country’s swift state of development is in evidence everywhere and almost every conversation refers to the apparent, highly orchestrated government plan to establish Ethiopia as a dominant player amongst other African economic powerhouses. 

This is a lofty ambition, given that the country is 85% dependent on agriculture, has no natural resources and was a closed economy under communist rule until 1991. The country’s growth is being driven by the industrial, agricultural and service sectors.

Within this milieu, the communications sector could also be described as an industry ‘under construction’ with mostly global FMCG companies such as Coke, P&G and Unilever driving agency business.

The alcohol giants are also significant contributors. Heineken invested US$320 million in building the world’s second largest brewery in Addis last year. The operation is already at capacity, brewing five million hectolitres annually for the Ethiopian market alone and the brewery’s capacity is expected to be the biggest globally within the next two years. In support of this, Heineken has started spending heavily on communications and, according to one industry professional, has changed the dynamic of the local FMCG industry. 

In his view, Heineken’s intensified communication initiatives have been the catalyst for other global FMCG entities to further acknowledge the potential of the Ethiopian consumer. This has seen an escalation of marketing efforts across the board – a move which only seems likely to build as the market develops.

The media landscape in Ethiopia is largely state controlled and comprises one national television station and four regional affiliates, nine radio stations and four weekly newspapers. There are, however, about 12 radio stations owned by private media companies.

For many years, local industries have been serviced by a handful of agencies – with one or two featuring repeatedly on many global agency credentials presentations. Local agencies generally conduct non-exclusive deals to handle international business from global networks, but stop short of full affiliations, leaving themselves open to handle business from competing networks. External agencies can do deals with Ethiopian agencies, but cannot own shares in these local businesses. 

The Ethiopian government does not feel the country is ready to open up in industries such as finance, telecommunications, media and communications as it believes they would be overwhelmed by international competitors. The idea is to first strengthen local industries, make them competitive and then allow foreign competition.

For many agencies, client demand outstrips supply and some battle to manage the quantity of business they get. Notably, agencies have integrated vertically to offer quality production services and the majority offer media buying and planning.
It is almost a risk to attempt any form of specialisation due to the strong client demand and resultant likelihood of having to turn down business. Even if agencies start out specialising in PR, post-production, events or media strategy, clients tend to pressure them to deliver other parts of the communications spectrum, because they enjoy working with them. This leads to them making the decision to diversify. 
Regardless of a protectionism versus free-market view, it is clear that Ethiopia is producing some quality agencies and doing so quickly. Regional practitioners will attest to almost half the number of quality agency offerings as little as five years ago. What is also clear is that the pace of marketing industry expansion will only spur development even further. All of which points to a palpable sense of an industry on the cusp of significant expansion.

And this is probably a microcosm of the broader Ethiopian economy. With the current growth trajectory, the seemingly highly organised developmental agenda and the sheer size of the population, one cannot help but feel that when the economy truly ‘opens up’, the fallout will be akin to an urban gold rush. This is something that global and local organisations are viewing with equal measures of excitement and trepidation. 

What is unanimous, however, is that as this becomes an approaching reality, everyone wants to be out of the starting blocks and well established with on-the- ground knowledge, local partners and experience in order to navigate what promises to be a tidal wave of opportunity.

By Graham Cruickshanks, director Africa Operations, TBWA\Africa