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MARKET NOTE ON INFORMATION TECHNOLOGY (IT)

(H.S. No. 84.71)

The IT industry in Ethiopia was introduced in the 1960s through the first installation of IBM 421 accounting machine – “programmable” brought by IBM for the UNECA (United Nations Economic Commission for Africa).  There after, IBM slowly established itself in the country and has become the main computer supplier.  Later NCR and Burroughs (now named UNISYS) entered the market.  Low cost microcomputers – commonly known PC (Personal Computers) started to enter the country approximately in mid 1980.  This was introduced by International organizations operating in Addis Ababa as well as by externally funded social and economic development projects.  Although the number of computer users among operational organization remains mainly to be government as well as international organizations, subsequently followed by the private sector.  This is clearly visualized through the increased number of computer hardware vendors who entered the market, which is dominated by Dell brand.  Although majority of the Ethiopian population has not yet harvested the use of IT in their day-to-day life.  Present telecommunications setup in Ethiopia is, by and large, monopolistic. Ethiopian Telecommunications Corporation (ETC), owned by the government, is the sole operator to provide telecom services in the country. Ethiopia remains the only African country with one ISP.

The Ethiopia Government stated that it has been investing 1.5 billion USD in the telecom industry, which is the biggest investment an African government has undertaken in the sector. The country is implementing a 1.5 billion USD grand mobile telephone infrastructure until 2010 to benefit 85% of the country.  The government had a target to increase the mobile and fixed line subscriber base to over 10 million by 2010 from the current 3.6 million.  Ethiopia is already hooked onto a submarine cable running from Port Sudan through the Red Sea to Europe but it also plans to connect other cables from Djibouti and Kenya. 

Most major international companies have presence in Ethiopian market. These include NCR, IBM, Microsoft, Dell, etc.  Sap AG, the world’s largest inter-enterprise software company officially announced its plan to enter the Ethiopian market recently

Ethiopian Telecommunication Corporation (ETC) in September 2006, signed a memorandum of understanding with three Chinese Telecom companies; ZTE Corporation, Huawei Technologies Co. and Chinese International Telecommunication Construction to undertake expansion projects worth 1.5 billion dollars.  In this connection ETC struck the loan deal for a staggering 1.5 billion dollars from ZTE in November, 2006 at the Sino-Africa Forum held in China. China based IT Company, ZTE is exclusively developing Ethiopia’s nationwide network to cover 14 major cities in the country, including the capital city of Addis Ababa.  As per the agreement with the Ethiopian Telecommunications Corporation (ETC), ZTE will help ETC establish two separate networks that will allow the corporation to provide NGN and BTS related network services deployed by ZTE’s GSM bearer network optical equipment. This project will help ETC to satisfy its customers’ demands for multi service transmission within GSM, CDMA, IP and fixed line. 

India presence in IT sector of Ethiopia:

Ethiopia will be the first beneficiary of the Pan African e-Network Project in Africa that aims to deliver tele-education and tele-medicine to all countries of Africa.  TCIL, the implementing Agency of the project, signed a MOU with the Ethiopian Information and Communication Technology Development Agency (EICTDA) on January 12, 2006 for the pilot project of the Pan-African e-Network Programme which will be fully funded by GOI at a cost US$2.13 million.   The nodal centres for tele-education and tele-medicine are located at the Addis Ababa University and Black Lion Hospital respectively, with remote centres at Haromaya University  and Nekempt Hospital.  IGNOU has conducted a three-day induction programme for teachers/trainees and coordinators at these two universities in Ethiopia from 26-28 February, 2007.  IGNOU has registered eligible students from the two educational institutes for the regular MBA course last year.  Regular consultations between doctors at the Black Lion Hospital and the CARE Hospital in Hyderabad are currently going on.  CARE is already providing tele-medicine consultations in the areas of cardiology and neurology.

An IT and Electronics delegation from ESC, New Delhi visited Ethiopia on 8^th and 9^th December, 2004.  The Embassy organized a Buyer-Seller Meet (BSM) of the delegation with the Ethiopian business persons at the Chamber Hall, which was very fruitful.

21 Ethiopian companies also participated in the annual India-Soft (IT event) which was being organized by ESC for the last six years.  ESC bears economy class excursion air fare to the Ethiopian companies.  The companies were exposed to India’s tremendous success in the IT sector.  During the visit, Alta Computec and MKTY Information Technology and others signed an MoU for cooperation with the Indian companies. WIPRO, Satyam and TCS have shown their interest in the development of IT Sector in Ethiopia.  

The United Bank has awarded its computerized banking project, estimated to cost a million dollars, to the Indian based i-flex on February 24, 2006.  i-flex also computerized Dashen Bank’s operation in 1996 and still has a working relationship with the bank. Bangalore based Infosys also participated in a tender floated by the Construction and Business Bank of Ethiopia to automate its operations. Infosys has a local company M/S. MKTY as an agent for some of its software.  The Indian companies such as Venus International Trading and other are engaged in IT training, computer assembly, maintenance and sales in the Ethiopian market. 

TCIL has been active in executing turnkey projects in Ethiopia in Telecommunications.  Till to date, it has completed various contracts for the ETC valued at US$ 22 million. 

Acer Computer announced the completion of a deal to supply the Ethiopian Ministry of Education (MOE) with high-end Acer desktops.  The deal involves the supply of 5,500 units of intel-based desktops with an estimated value of US$3.5 million.  It is purportedly the biggest such PC deal in East Africa.  As part of the deal, Acer will also provide technical support to more than 16 universities across the country who have benefited from Acer’s deal with the Ethiopian MOE. 

India has promoted the expansion of the e-Network Project in Africa at the Third World Information Technology Forum (WITFOR) 2007 which was held from 22-24 August, 2007 in Addis Ababa. The three-day Conference, which followed earlier conferences in Lithuania and Gabon, brought together over a thousand delegates from Africa and from other continents to debate the theme: 'ICT for Development and Prosperity'. The Telecommunications Consultants India Limited (TCIL) participated in the exhibition at WITFOR where the technical and front-end application of the tele-medicine and tele-education components of the e-network project was showcased. At the infrastructure sector commission of WITFOR, a special segment was allocated for a presentation on the Pan African e-Network Project, its concept, its technical details, its implementation schedule and the success of the pilot project. The presentation was made by the Ambassador of India to Ethiopia and the African Union, Shri Gurjit Singh. The tele-medicine component was also discussed by doctors from the Black Lion Hospital.   

Opportunities:

The Ethiopian government views information and communication technology (ICT) as a key weapon in the war against poverty.  In April 2005 broadband internet was launched in a US$40 million joint venture between the ETC and foreign private partners.  In the first phase of a three-year project, a broadband internet service is available in Addis Ababa and eight other towns, at speeds of up to eight megabytes per second.  This is thought to have increased the number of internet users in Ethiopia to nearer 500,000.  The ETC and partners are also laying 10,000 km of fibre-optics cables to link up with the underwater cable outside Djibouti, thereby fully linking the telecoms system to the rest of the world.  The ultimate aim is to have universal access to the internet by 2008.  ETC has also begun operating the fibre optic cable network installed in the north-western part of the country which connects Ethiopia with the international submarine cable through the Port of Sudan.  Broadband Internet access is a boon for business (although the service is expensive), enabling vastly improved communications and networking, and also the development of a retail internet market and other related service activities.  It will also help to attract foreign direct investment.

The following opportunities are also available for the Indian companies:-

1.      Some of the Indian IT companies like Infosys, Bangalore has a local Business partner to promote and sale their software and other IT accessories.  It is advisable for other companies also to have a local business partner working on agreement basis in Addis Ababa, the most important commercial center as well as other regional states for promoting and sale of their products. 

2.      The foreign purchasing is done through global tenders especially the public sector.  The tenders are normally awarded to the lowest bidder subject to other conditions like technical specifications and delivery schedules being acceptable.  In this connection, it is advisable for a supplier to have a local business partner.

3.      The local IT training institutions are interested in using Foreign IT companies’ curriculum for their IT discipline.

Technology Park in Ethiopia:

With a view to improve and develop IT in Ethiopia, the government is mandated the Ethiopian Information Technology Development Agency (EICTDA) under the Ministry of Capacity Building to formulate ICT policies and strategies, and coordinate their implementation.  EICTDA has done so far activities like establishing national ICT policy (which is currently under submission to the Council of Ministers and awaiting its approval) and establishment of ICT standards which includes preparing of Ethiopic key boards layouts, type face & OCR standards; localization standard in Afar and Somali language; ICT security policy and standards; information exchange standards; standards and guidelines for hardware and software.  The ICT policy aims to exploit the opportunities created by ICT in order to achieve rapid and sustainable socio-economic development, facilitate good governance and a healthy democratic system and to generally improve the social and economic well being of the peoples of Ethiopia.  The key strategies outlined in the policy document include human resource development, physical and ICT infrastructure development, ICT for governance/e-government, ICT industry and private sector development, electronic commerce, community access and service delivery, local content and application development, ICT for research and development, ICT systems security and standards, the legal and regulatory environment, promotion of ICT in education, use of ICT in health and ICT for agricultural modernization.  The plans call for all schools and health centers to be connected to the internet by 2008, which will significantly boost their effectiveness.  To help facilitate the roll-out of modern technology, the World Bank approved a US$25 million loan for ICT development in September 2004. 

EICTDA has also taken various initiatives in the use of ICT in different sectors, including the networking of woredas and other private and government operations under Information and Communication Technology Assisted Development (ICTAD) project in cooperation with the World Bank and the German Development Service (DED).  For the successful implementation of the Project the Ethiopian Government has allocated five million USD while DED agreed to support the project by providing technical assistance of USD 1.8 million equivalents for human resource development efforts.  With the help of its partner institutions, ICTAD aims at meeting national development objectives and helping Ethiopia to attain global competitiveness.  Several subcomponents of the ICTAD project concentrate on enabling the public and private sector to improve their information, services and goods provision through the effective use of ICT:

• Community Information and Communication Technology for Development (CIDEV)
• Technical and Vocational Education and Training (TVET)
• ICT Incubator - So far they have set up ICT incubator in Amhara, Tigray, Oromia and SNNP regions.
• Setting up a computer Refurbishment and Training Centre

The Ethiopian Telecommunication Corporation (ETC) and the Chinese Telecom Corporation, ZTE signed a US$10 million agreement to construct part of the technological infrastructure of the long awaited Information Technology (IT) Park of Ethiopia.  According to the agreement, ZTE is expected to build the Internet Protocol (IP) framework and will supply equipment such as routers and switchers. Building National Operating Center (NOC) which will be used to manage, maintain and operate the IT Park is also included in the project.  When the IT Park is completed it will give an opportunity for businesses willing to engage in IT manufacturing and the IT service industry to work in the same compound.

Education and training in IT:

During the introduction of IT industry, there was no school that provided IT training.  IT training was mainly provided by vendors who were primarily interested on their products which were the major draw backs.  However, the development of IT training colleges and institutions in the country for the last estimated ten years found to be very encouraging to begin with.  The interesting point view over this development is the participation of the private sector, which is found to be high.  Even Government organization like ETC, one of the leading IT user and the only Internet Service Provider in the country, is competing with the private sector as well.   From this, it is observed that the supply and demand economic theory is justifying investors to venture on the IT industry especially on IT training.  Some of the colleges are a multipurpose college providing various types of academic subjects that include IT training such as systems analysis and design and some of them are entirely dedicated for IT training courses.  There are also training and certification IT companies.  Degree programmes in computer science are among the regular programmes offered by Addis Ababa University including Government universities.  However the IT training services have faced problems like lack of quality and credibility of IT training schools standards and shortage of IT professionals. 

A four-member high-level delegation from the NIIT Limited and NIIT Technologies visited Addis Ababa from 18^th to 22^nd September, 2006.  The delegation made a presentation of NIIT’s capabilities on 19^th September, 2006 which was attended by several government Ministries, departments, IT companies, IT educational institutions, government and private universities and colleges, banks, insurance companies, academicians and private entrepreneurs.  They also held separate meetings with them.  During the visit, the NIIT delegation had detailed discussions with the African Union Commissioner for Science and Technology, and with senior officers of the UN Economic Commission for Africa for future cooperation.  APTECH is also interested in looking for prospective business partners in Ethiopia related to IT and education.

Ethiopian Imports:

Ethiopian imports include products falling under Chapter HS No. 84.71.  These include Analogue or hybrid automatic data processing machines, Digital Automatic Data Processing Machine with input and output units, Portable digital automatic data processing machines, Non portable ADP machines presented in the form of systems, Digital processing machines, ADP input/output units whether/not containing storage units, Units of automatic data processing machines, Magnetic/Optical readers machines, Digital processing units with storage, I/O units, Storage units and Magnetic or optical readers, machines for data processing, etc.  Details of Ethiopian imports of Computers during the last three years are given below:-

The figures show that there has been growth in import of Computers to Ethiopia in the three years.  Ethiopian import increased by 16.7% per cent in 2005 and by 15.6% in 2006 over the figures for respective previous year. 

COMPETITORS WITH THEIR MARKET SHARE   

Exports by India:

India’s export in this sector mainly consist of analogue or hybrid automatic data processing machines, Portable digital automatic data processing machines, Non portable ADP machines, comprising at least CPU & I/O Units, Non-portable ADP machines, presented in the form of systems, ADP Input/Output Units whether/not containing storage units, Automatic data processing machine storage units, Units of automatic data processing machines and Magnetic/Optical Readers; machines for transcribing data onto data.

Source: Ethiopian Central Statistics Authority

There is an increasing trend in Indian export of Computers to Ethiopia.  While in 2005, Indian export was US$0.1 million; it increased to US$0.6 million in 2008.

  Custom Duties:

The Ethiopian government has lifted the 5% duty and 10% surtax on computers and laptops as of January 1, 2008, considering the role they play in technology transfer and education.  However, the 15% VAT and 3% withholding tax issued on these goods have not been lifted.  Before the tax exemption, locally assembled computer on average goes for US$600-650, while a brand computer assembled in its country of origin is tagged at US$900-1100.  Laptops on the other hand go for as high as US$2000

Industrial Association and organization:

The name, address with other details of the Industrial Association and organization dealing with IT is given below:-

1. Dr. Dawit Bekele,    

President,

Ethiopian Information Technology Professionals Association,

P.O.BOX 5164, Addis Ababa (ETHIOPIA)

Tel. No.00251-11-5509417

Fax No.00251-11-5533368

E-mail: eitpa_et@yahoo.com

Website: www.eitpa.org

2. Mr. Debretsion Gebre Michael,

Director General.

Ethiopia Information Communication Technology Dvt. Agency (EICTDA)

P.O. Box 2490, Addis Ababa (Ethiopia)

Telephone No. 00251-11- 5511344

Fax No. 00251-11-4533368

E-mail: eictda@ethionet.et

3. Mr. Tessema Geda,

Manager,

Information and Communication Technology Assisted

Development (ICTAD) Project Management Unit,

P.O. Box 819, Code 1110, Addis Ababa, Ethiopia

Tel: 00251-11-5507129

Fax: 00251-11-5505383

E-mail: info@ictadethiopia.org

Website: www.ictadethiopia.org

Comments and Market Situation:

i) Ethiopia is a huge country with a population of 80 million.  Even if a very small percentage of its population gets access to IT tools, this is big enough to generate a very sizeable market for IT products and services.  Therefore, there exist ample opportunities for IT sector in Ethiopia. 

ii) Ethiopia is not yet a beneficiary of advanced information technology services in a significant number like other developing countries.  One of the major factors for the sector’s lagging has been exclusion of the private sector in investing in the areas ICT infrastructure and other services.  Although this has started to ease, mainly in training and software development much still remains in other services to catch up with the rest of the world.  The Government should remain to be a regulatory body rather than service provider, which is an obstacle to the development of ICT.

iii) The investment code offers a package of incentives and protections some of which are given below

·         Exemptions from import duties or taxes on import of capital goods & spare parts

·         Exemptions from income tax for a period of three to eight years

·         No tax on Ethiopian products destined for export market (except coffee)

·         Employment expatriates in technical and managerial positions if qualified Ethiopians are not available in the local labor market.

·         Appropriate compensation

·         Compensation money may be repatriated in foreign currency

·         Ethiopia being signatory to the Multilateral Investment Guarantee Agency Convention, there is an extra insurance cover which provides further guarantee for investments against delays in currency transfer if such delays are attributable to the host government, expropriation and similar measures, breach of contract, and war and civil disturbances. 

ADDIS ABABA (Ethiopia):  November 2009

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