Ethiopia emerges second-largest investment destination, attracting $18.6 billion in 5 years

Ethiopia has emerged as Africa’s second-largest destination for foreign direct investment (FDI), underscoring its growing appeal to global investors and the impact of recent economic reforms.

• Ethiopia has emerged as Africa’s second-largest FDI destination, attracting $18.6 billion over the past 5 years.
• Chinese companies dominate investment, accounting for the majority of projects across key sectors.
• Recent reforms that have opened up retail, trade, and property markets have boosted investor confidence.
• Participation in the African Continental Free Trade Area is set to further expand market access and growth opportunities.

Speaking at an investment forum in Addis Ababa, Ethiopian Investment Commissioner Zeleke Temesgen said the country attracted a total of $18.6 billion in FDI over the past five years, ranking just behind Egypt. Ethiopia also recorded $4 billion in inflows during the 2024 to 2025 fiscal year, marking a 22.7 per cent year-on-year increase.

Temesgen noted that China remains Ethiopia’s leading investment partner, with Chinese firms accounting for the largest share of inflows. Data from the United Nations Conference on Trade and Development show that China accounts for around 60 per cent of FDI projects in the country, particularly in manufacturing and services.

The surge in investment follows policy shifts that have opened previously restricted sectors, including retail, wholesale, import, and export businesses, to foreign participation.

“Ethiopia attracted the highest FDI in East Africa and the second highest in Africa,” Temesgen said, highlighting the role of liberalisation measures in boosting investor confidence.

He added that new regulations allowing foreign nationals to own residential property have further strengthened inflows. Over the past five years, authorities issued 1,477 investment permits to foreign investors.

Minister of Trade and Regional Integration Kassahun Gofe said Ethiopia’s large, youthful workforce and strategic location make it an increasingly competitive investment hub. He pointed to ongoing reforms aimed at expanding private sector participation and improving the overall business climate.

Ethiopia’s participation in the African Continental Free Trade Area is also expected to accelerate investment. The government is working to implement the bloc’s investment protocol, which could unlock access to a vast continental market.

Beyond China, other key investors include Saudi Arabia and Turkey, reflecting Ethiopia’s widening pool of international partners as it positions itself as a gateway to African growth.