Under construction: The communications industry in Ethiopia

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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

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