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Doing WASH business in Ethiopia

Published on: 27/02/2019

Ethiopia is currently ranked 161st out of 190 countries for "Ease of Doing Business". My first post is about why that might be the case, and how the recent new government has the potential to have an impact as it seeks to harness the potential of the private sector.

I was first involved in registering a business in Ethiopia in 2008. The paperwork to set up a consultancy at that time involved signing a few brief forms and showing identification. The most taxing part of the process was finding a name that wasn't disallowed for some reason. Overall it was a breeze!

Blogging eight years later for that same company I jubilantly reported in March 2016 that we'd finally been granted an investment licence to re-invested profits from the consultancy to set up another outfit to manufacture a water filter in Ethiopia (which I designed!).

MINCHfilter team

And so MINCH filter was born. It gained excellent test results from the Ethiopian Conformity Assessment Enterprise (to date this is the only official body equipped to test such a product, but product certification is another blog post).

Last week, (30th January) nearly three years later we were finally granted an actual business licence to actually go ahead, start manufacturing and selling in bulk. I'm very grateful that the authorities finally granted us this opportunity. But three years is a long time when the most recent JMP survey shows that 36 million Ethiopians collect drinking water from highly contaminated sources while 30% of water samples from public taps were contaminated with high risk levels of E. coli. Our product helps the current challenge, while providing jobs to a mainly deaf production team.

Making the MINCHfilter

Having finally been cleared for takeoff, my thoughts turn to making sure it's not so hard for other WASH businesses in Ethiopia to enter this challenging sector.

So what was going on for three years? And why?
Without boring you with the details we have been through several phases with this:

  • "You're reinvestment is too little to justify a manufacturing licence."
  • "There is no business category for 'Manufacture of Water Filters' for foreign investors."
  • "We've allocated you the category 'Manufacture of Machinery'. But to fulfil the requirements you need to import some kind of 'large' machinery."
  • "You are in the wrong business category. We're not sure whether it's the metal processing department or the 'other' category."
  • We've re-categorised you as 'Other - Water Filters' but until you have certified the product you can't have a business licence (Certification is another story for another day).
  • We've re-categorised you as 'Other'. Congratulations, here's your business licence. But you have one year to gain certification.

One of the underlying challenges to businesses like ours – at least until now - is a general distrust of the private sector by the authorities. This is reflected not in the written law of Ethiopia (the Negarit Gazetta), but in a background belief that the private sector is 'up to no good'. I understand that it's not about foreign investors. My Ethiopian entrepreneur friends tell me that local enterprises have been treated with the same level of suspicion. It's been common to have to comply with arbitrary requirements of unnecessary equipment, office features or even minimum office floor-space before licences are granted. I also know that this distrust has history – it's only a few years since many phony 'Tour Companies' were shut down after the realisation that it had been used for years as a cover to drive around in tax-free landcruisers.

No time for sour grapes. We can now start to move from a workshop producing test volumes of 100 units / month and implement capacity for larger volumes.

Our business licence is granted at a time of unprecedented change in Ethiopia. If the changes in the relationships with our nearest northern neighbours are anything to go by, the mistrust of the private sector is not beyond hope. What is certain is that to benefit from social enterprises bringing products and services in Water and Sanitation, Ethiopia is going to have to make the paths a lot easier.

The proof of this will possibly be reflected in Ethiopia's future rankings. But it will also be reflected in the experience of social entrepreneurs visiting the Ethiopian Investment Commission and the Ministry of Trade as Ethiopia welcomes increasingly novel businesses both large and small.

This is an ongoing series of blogs and publications by IRC under the USAID Transform WASH project. Please click here for all IRC’s work on this project.

USAID TRANSFORM WASH sets out to improve water, sanitation and hygiene (WASH) outcomes in Ethiopia by increasing access to and sustained use of a wide spectrum of affordable WASH products and services, with a focus on sanitation. It does so by transforming the market for low-cost, high quality WASH products and services: stimulating demand at community level, strengthening supply chains, and building the enabling environment for a vibrant private market.

USAID TRANSFORM WASH is a USAID-funded project implemented by PSI in collaboration with SNV, Plan International, and IRC. The consortium is working closely with government agencies including the Ministry of Health, the Ministry of Water, Irrigation and Electricity, the National WASH Coordination Office and regional governments.

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