Navigating the latest Ethiopian Labor Proclamation: Key Changes and what it means for HR outsourcing firms
Navigating the latest Ethiopian Labor Proclamation: Key Changes and what it means for HR outsourcing firms In 2019, Ethiopia introduced Labor Proclamation No. 1156/2019, a significant update to the previous Labor Proclamation No. 377/2003 and its amendments, addressing the fast-paced changes in Ethiopia’s economy, employment dynamics, and global labor standards. As HR outsourcing firms play a crucial role in connecting talent with organizations, it’s essential to understand how these new regulations impact their operations and responsibilities. This article delves into the main updates relevant to HR outsourcing firms, from updated definitions and employee protections to new termination policies and compliance requirements. 1. Enhanced Protections Against Workplace Harassment and Violence One of the landmark changes in the 2019 proclamation is the clear, legal stance on sexual harassment and violence in the workplace, a topic previously lacking explicit definitions and enforcement mechanisms in Ethiopian labor law. For HR outsourcing firms, these updates require not only greater vigilance but also the need to advise clients on creating safer, harassment-free workplaces. Definition and Legal Consequences: Sexual harassment is defined as any unwelcome act for securing sexual favors. Sexual violence escalates to situations involving force or attempted force. Implications for HR Firms: Outsourced HR departments should work closely with client organizations to create policies that address harassment and provide clear reporting channels. They may also need to facilitate or deliver training sessions on workplace conduct and ensure compliance with these anti-harassment provisions. Employees who resign due to unaddressed harassment are entitled to severance pay, adding a layer of accountability for firms managing these employee relations on behalf of their clients. 2. Updated Probation Period Rules for Employee Suitability The 2019 Proclamation has extended the probation period from 45 consecutive days to 60 working days. This change gives employers more time to assess a new hire’s suitability for the role, a period that HR outsourcing firms can also use to demonstrate the value of thorough recruitment and assessment processes. Best Practices: During this probation period, firms should provide regular feedback and performance assessments to both clients and employees to clarify expectations and improve integration. By doing so, firms can reduce turnover and ensure more seamless staffing transitions. Why It Matters for HR outsourcing firms: HR outsourcing firms must adjust their contract structures to align with the 60-day probationary period. The extended period allows firms to employ advanced evaluation metrics and ensure clients receive well-vetted employees. 3. Streamlined Termination Policies for Attendance and Performance Issues Termination rules under the 2019 proclamation introduce more structure to address attendance and performance-related dismissals. Guidelines on Absenteeism and Tardiness: Now, eight instances of tardiness within six months, despite written warnings, justify dismissal. The previous law was vague on tardiness, often leaving it open to interpretation. Implications for Outsourcing Firms: HR firms are now better equipped to handle attendance-related issues for their clients. Clear guidelines provide outsourced HR teams with a standardized process, making terminations based on attendance less contentious. The Proclamation also stipulates that employee performance standards must either be set through collective agreements or regular assessments. This means firms should establish transparent, measurable KPIs and provide feedback mechanisms for their clients’ workforce. 4. Clearer Regulations on Overtime Work and Payments The revised proclamation permits up to four hours of overtime per day in special circumstances, increasing the flexibility for employers who may need extended shifts. Overtime pay has also been revised, with specific pay multipliers depending on the time and day the work occurs. Overtime Pay: Overtime during the day now pays at 1.5x the normal rate, and nighttime (after 10 PM) pays at 1.75x, up from 1.5x in the previous law. Work on rest days and holidays retains the 2x or 2.5x multiplier. HR Outsourcing Firm Compliance: These changes impact payroll and workforce management, areas where HR outsourcing firms often play a significant role. Firms must ensure accurate tracking of work hours, especially when managing large workforces or shift schedules for clients. They must also ensure that clients adhere to the prescribed overtime pay rates to avoid legal issues. 5. New Framework for Minimum Wage Policy Development While the revised proclamation does not set a specific minimum wage, it empowers the Council of Ministers to establish a Wage Board. This Wage Board will be responsible for periodically reviewing and setting minimum wages based on Ethiopia’s economic conditions. Future Implications: Though the minimum wage is yet to be defined, HR outsourcing firms should prepare to adjust salary structures accordingly once minimum wages are introduced. Strategic Guidance: Firms can advise clients on budgeting and workforce planning to anticipate potential minimum wage adjustments. By staying updated with Wage Board announcements, HR firms can ensure their clients are always in compliance. 6. Enhanced Annual Leave and Parental Leave Policies The new proclamation increases annual leave to 16 working days, plus an additional day for every two years of service, up from one day per year. Parental leave also sees positive changes, with post-natal leave extended to 90 days and a new three-day paternity leave introduced. Managing Leave Entitlements: HR outsourcing firms must update their leave management policies to reflect these entitlements. By implementing digital leave-tracking systems or payroll software, they can simplify compliance with these new leave requirements for their clients. This update reflects the Proclamation’s focus on employee well-being, and HR firms can add value by offering leave-management solutions to ensure their clients are compliant and support work-life balance. 7. Broader Employee Protections and Affirmative Action New protections are included for vulnerable groups during workforce reductions, such as newly added protections for individuals with disabilities (even those unrelated to work) and new mothers with infants under four months. Additionally, the Proclamation emphasizes affirmative action, giving women priority in hiring, promotion, or benefits if they score equally with male applicants. These changes underscore the importance of equitable recruitment and retention practices. Firms can enhance their recruitment services by aligning candidate evaluations with these updated affirmative action requirements. The Ethiopian Labor Proclamation 1156/2019 not only brings labor laws closer to international standards but
Unlocking Africa’s Outsourcing Potential: A Focus on Ethiopia
Unlocking Africa’s Outsourcing Potential: A Focus on Ethiopia In the global landscape of business process outsourcing (BPO), Africa often finds itself overlooked as a viable option. However, the continent, particularly Ethiopia, is emerging as a significant player, ready to challenge the status quo and redefine outsourcing dynamics. With a growing talent pool and a wealth of opportunities, Africa offers distinct advantages that global businesses should consider. Despite the burgeoning talent and potential, many ecosystem players still regard Africa as a latecomer in the BPO sector. This perception is rapidly changing, especially as countries like Ethiopia demonstrate that they can offer competitive advantages in outsourcing. Over 60% of Ethiopia’s population is under 30, and each year, more than 150,000 young people graduate from higher education institutions in the country. Among these graduates, 70% focus on STEAM fields—science, technology, engineering, art, and math—equipping them with skills that align well with global business needs. Ethiopia has made significant strides in improving its tech landscape, positioning itself as a hub for innovation and efficiency. Companies that outsource services to Ethiopia not only gain access to a dedicated workforce but also benefit from a culture that values learning and adaptability. A study by Everest Global and CCI Global predicts that the BPO workforce will more than double by 2030, driven by global companies’ increasing demand for outsourced customer service. This growth is expected to create up to 1.5 million new BPO jobs in Africa over the next six years, with South Africa, Kenya, and Egypt poised to benefit significantly while emerging hubs like Ghana, Ethiopia, and Rwanda also show potential for substantial growth. Several factors are contributing to this expansion. Africa offers considerable cost advantages, with labor costs up to 80% lower than in Western markets. Nearly 45% of surveyed companies noted that African governments are business-friendly environments through tax breaks, infrastructure development, and workforce training programs. Furthermore, Africa’s young, multilingual population enhances its attractiveness as an outsourcing destination. East Africa and Ethiopia present unique advantages in BPO, including a skilled, tech-savvy workforce eager to enter the job market. Labor costs in Ethiopia are significantly lower than in traditional outsourcing locations such as India and the Philippines, allowing businesses to optimize operations without compromising quality. Additionally, Ethiopia has been investing in technology and infrastructure, improving connectivity and digital services, which boosts its appeal. The resilience and determination of the Ethiopian workforce a strong commitment to quality and service, supporting fruitful business partnerships. One of the most significant advantages for African BPO companies is their ability to learn from global weaknesses and strengths. By observing successful models in established outsourcing hubs, Ethiopian companies can adopt best practices while innovating to meet local needs. This unique perspective allows African firms to develop tailored solutions that resonate with international clients, bridging the gap between diverse business cultures. Ethiopia’s Digital Transformation Strategy, launched in 2020, aims to address challenges related to digital infrastructure. Government market liberalization policy allows private organizations to invest in telecom connectivity and data centers, which are crucial for enhancing the operational capabilities of BPO companies. The strategy also promotes policy reforms to create a supportive environment for entrepreneurship and investment, attracting more BPO firms to the country. To address the skills gap, the government is implementing initiatives like the 5 Million Coders program, which aims to teach market-oriented coding skills to 5 million youth. This initiative directly addresses the skills gap and increases innovation, building a large pool of qualified professionals to meet the demands of the BPO industry and enhancing Ethiopia’s appeal as a destination for these services. Overall, the Digital Transformation Strategy seeks to improve citizens’ lives and drive economic growth through technology. Despite its significant potential, the country faces challenges such as infrastructure development, skills enhancement, and the need for supportive policies. The strategy focuses on improving digital infrastructure, investing in broadband and data centers, and digitizing government services to create a favorable environment for BPO companies. Together, these initiatives enhance Ethiopia’s appeal as a competitive Business Process Outsourcing (BPO) destination by offering relatively low salaries—often lower than in other African countries—a favorable time zone, and a strong commitment to quality and technology adoption. At GITEX GLOBAL, the largest tech and startup show in the world, I highlighted Africa’s rise as a key outsourcing destination, emphasizing the global competence of African talent. Ethiopia’s determination to increase a robust digital ecosystem and the readiness of the private sector to scale and absorb work is crucial in this endeavor. Additionally, the dedication of Ethiopia’s talent positions the country advantageously in the BPO sector. Events like GITEX GLOBAL support this growth by providing valuable networking opportunities and showcasing innovation, further establishing Ethiopia as a leader in the BPO landscape. The company co-founded by Mr. Wondwesen, R&D Group Ethiopia, is a great example of an African firm becoming a hub for technology and outsourcing. As the largest football analysis firm in Africa, R&D Group combines its expertise in data analytics with a deep passion for the sport, providing valuable insights to teams, coaches, and organizations across the continent. In addition to its leadership in the service export sector, the R&D Group actively creates job opportunities for IT professionals through offshore outsourcing. By integrating training with job placement, the company ensures that graduates are well-equipped to meet industry demands, thereby contributing to Ethiopia’s burgeoning tech landscape and overall economic growth. 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How tech companies are positioning Ethiopia for the outsourcing boom
How tech companies are positioning Ethiopia for the outsourcing boom Tech companies have banded together to push for policy changes and to market the country as a top outsourcing destination, looking to replicate South Asia’s success in using digital skills to transform the economy. More than 10 tech companies have joined together to form the Ethiopian Outsourcing Association, driven by the firm belief that their industry can create more and better jobs than any other part of the economy. ‘Every member is very passionate about this,’ said Wondwesen Zewdie, president of the new association. The company he co-founded, R & D Ethiopia, has more than 120 employees supporting companies located around the world. He believes that’s just the beginning, with outsourcing poised to bring major changes to the national economy. ‘We can see that it’s going to create an immense amount of jobs, and not just jobs but dignified jobs,’ he said. ‘Our employees get to know technology, they get to know how development works, they get more globalized.’ There are growing pains. Until the association was formed, Ethiopia didn’t have a single license for all outsourcing companies. Instead, they were registered by the specific type of work performed — cybersecurity versus software development, for example. One early result of the association’s outreach to the government is the creation of a new license, the kind of administrative change that makes business development easier, said Tadios Tefera, chief technology officer of MMCY Tech. ‘The association gives us more power when it comes to influencing policy from government and other institutions. Our challenge was previously I would go to a certain ministry to say, for example, we’re having challenges with telecom. We always went to the government to explain how we lose business, and when we lose business we have to lay off people,’ he said. ‘Each one of the association members had a similar experience. When we create an association, we have a more powerful voice and we are taken more seriously than if we speak individually.’ Growing the impact of tech hubs The International Trade Centre (ITC), through the Netherlands Trust Fund V Ethiopia Tech project, supported the association’s creation by bringing an international expert to help design its strategy. That’s part of the program’s mission to work with digital businesses and business support organizations, including tech hubs, to increase their impact. For Ethiopia, harmonizing regulations and the tech ecosystem can help attract more business to a growing sector — key points that emerged during the strategy sessions. ‘This was a three-day course that was very beneficial to us,’ Tefera said. Their strategy boils down to two key planks. Within Ethiopia, they want to create a conducive environment for outsourcing, by engaging with the government to make sure they have the right policies for the industry. The second part is marketing outside of Ethiopia to attract business to the country. Outsourcing businesses here see a model in India, where tech companies turned the country into a back office for global businesses. Zewdie sees outsourcing as a way to create jobs in his country, where 70 percent of the population are youth and eager for decent work. ‘The domino effect is quite big,’ he said. ‘The $4 billion that Ethiopia exports every year, that is an amount that we can generate in the coming years just in this industry.’ About the project The Netherlands Trust Fund V (NTF) (July 2021 – June 2025) is based on a partnership between the Ministry of Foreign Affairs of The Netherlands and the International Trade Centre. The program supports MSMEs in the digital technologies and agribusiness sectors. Its ambition is two-fold: to contribute to an inclusive and sustainable transformation of food systems, partially through digital solutions, and drive the internationalization of tech start-ups and export of IT&BPO companies in selected Sub-Saharan African countries, including Ethiopia. Related Blogs All Posts Blogs How tech companies are positioning Ethiopia for the outsourcing boom October 10, 2024/ Advancing Ethiopia’s Digital Economy: A Collaborative Endeavor by ICT Park Corporation and R&D Group October 10, 2024/ Ethiopia’s Outsourcing Industry: A Bright Spot in the Economy October 10, 2024/
Advancing Ethiopia’s Digital Economy: A Collaborative Endeavor by ICT Park Corporation and R&D Group
Advancing Ethiopia’s Digital Economy: A Collaborative Endeavor by ICT Park Corporation and R&D Group Ethiopia’s Information Technology Park Corporation (ICT Park) is driven to play a pivotal role in driving the nation’s digital economy forward. In a recent development, executives from the R&D Group engaged in a constructive meeting with the CEO of ICT Park Corporation and the General Manager of ICT Park. The focus of this meeting was on collaborative strategies aimed at elevating Ethiopia’s digital landscape. This meeting holds significance as it aligns with ICT Park Corporation’s initiative to reinvigorate one of the park’s key original purposes: serving as a hub for promising private sectors, especially outsourcing enterprises. The objective is to provide these enterprises with a supportive environment within the park, facilitating growth through sustained assistance and market connections. ICT Park aspires to evolve into an ecosystem aggregator, streamlining services for businesses in the ICT sector and acting as a comprehensive destination for their diverse needs. Discussions also explored strategies to enhance the park’s value and attract interest from the private sector. R&D Group’s executives highlighted that Shared services should be a key consideration to streamline operations and reduce costs, ultimately enhancing efficiency for both new entrants and existing park residents. This approach is designed to alleviate administrative burdens, enabling businesses to focus on operations and contribute to economic growth through increased foreign currency income and employment. The park’s strategic location, offering proximity to affordable housing, food, and transportation options, positions it as an ideal partner for ICT Park’s initiatives. According to Mr. Henok Ahmend, the park is actively working on initiatives to make it an attractive destination for enterprises to relocate. The resident program is structured to foster partnerships between resident companies and relevant public stakeholders for onshoring opportunities and market linkages, aligning with the vision of facilitating overseas outsourcing activities. Concurrently, Ethiopia’s standing in the global outsourcing sector is gaining momentum. Despite the industry’s growth within the country, Ethiopia’s global market share remains relatively low. Mr. Henok Ahmed, CEO of ICT Park Corporation, and R&D’s founders, Rahel Boon-Dejene and Mr. Wondwesen Zewdie, share the vision of establishing Ethiopia as the preferred Business Process Outsourcing (BPO) destination in Africa. R&D Group’s executives emphasized the substantial benefits of joining ICT Park for outsourcing companies during their discussions. Collaborative support for offshore outsourcing companies in the same geographic location is deemed the most impactful way to create a significant industry influence. This support encompasses a well-functioning infrastructure, easier market linkage, and collaborative policy dialogue. The collaboration between ICT Park and R&D Group aims to attract more outsourcing companies, creating job opportunities for Ethiopians and propelling the outsourcing sector to generate immense foreign currency for the country. Mr. Henok Ahmed, CEO of ICT Park Corporation, encourages potential partners to initiate conversations and join the park resident program, provided that they align with the park’s vision. As Ethiopia’s outsourcing sector expands, it stands at a pivotal juncture with a young workforce, a conducive business environment, and a growing ICT sector. To capitalize on this growth, investments in infrastructure, training, and marketing are imperative. The proactive approach taken by ICT Park Corporation is a significant step forward in creating a conducive environment for the private sector to thrive and drive economic momentum. As a pioneer in the outsourcing sector since 2010, R&D Group is committed to propelling this movement forward and supporting initiatives that contribute to making the outsourcing industry a significant contributor to Ethiopia’s economy. Through strategic partnerships, tailored strategies, and a collective vision, Ethiopia has the potential to establish itself as a key player in the global outsourcing market, fostering economic growth and providing opportunities for businesses and individuals alike. Related Blogs All Posts Blogs Entrepreneurship Programs Featured Projects Advancing Ethiopia’s Digital Economy: A Collaborative Endeavor by ICT Park Corporation and R&D Group October 10, 2024/ Ethiopia’s Outsourcing Industry: A Bright Spot in the Economy October 10, 2024/ TAF (Technical assistance facility) of Ethiopia’s Innovative finance lab (IFL) October 10, 2024/ Diaspora Entrepreneurship Accelerator October 10, 2024/
Ethiopia’s Outsourcing Industry: A Bright Spot in the Economy
Ethiopia’s Outsourcing Industry: A Bright Spot in the Economy Outsourcing has become a popular business strategy for many companies around the world. Outsourcing is the practice of hiring a third party to perform services or create goods that were traditionally performed in-house by the company’s employees and staff. It is a business practice that can affect a wide range of jobs, ranging from customer service representatives/ customer support, manufacturing up to the ICT sector to the back office. One example of outsourcing is when a company hires a third-party vendor to handle its customer service operations. Instead of managing an in-house customer support team, the company contracts with an external call center or customer service provider to handle inquiries, complaints, and other customer-related issues. This allows the company to focus on its core business functions while benefiting from the expertise and resources of the outsourced vendor. This helps enterprises to focus most of their resources on the main activity. Why business chooses Outsourcing Cost savings: Outsourcing can help businesses to reduce their costs by hiring third-party providers that offer lower wages and other operating costs. Increased focus on core competencies: By outsourcing non-core functions, businesses can free up their resources to focus on their core competencies. Improved access to specialized skills: Outsourcing can give businesses access to specialized skills and expertise that they may not have in-house. Ethiopia’s Outsourcing landscape In Ethiopia, there are various outsourcing service provider companies that have been operating for over a decade. However, many public and private companies are unaware of their existence, and the government has not provided sufficient coverage for this sector. In 2020, the formerly Jobs Creation Commission and the now Ministry of Labor & Skills, recognizing the impact of the gig economy, established the Freelancing, Outsourcing, and Gigs (FROG) Taskforce. The aim was to place FROG at the core of Ethiopia’s service sector transformation. A significant milestone in the sector is the recent establishment of the Ethiopian Outsourcing Association, which serves as the representative body for offshore outsourcing services and providers in the country. The association’s main objective is to promote Ethiopia as a global outsourcing destination, while also focusing on enhancing the policy framework and addressing talent gaps within the industry. One of the primary advantages of outsourcing for Ethiopia lies in the creation of employment opportunities. Numerous companies from developed nations opt to outsource their work to Ethiopian companies due to lower labor costs compared to their home countries. This cost differential allows Ethiopian workers to be employed at a more affordable rate, making the outsourcing business model in Ethiopia highly attractive to foreign companies. In addition, outsourcing possesses a distinct advantage over other sectors in Ethiopia due to its minimal resource requirements and conditions. Unlike manufacturing companies that demand substantial capital, equipment, and raw materials, or the tourism sector that necessitates extensive infrastructure and world-class hospitality standards alongside stable peace and security, outsourcing companies solely rely on skilled manpower, computers, and stable telecom infrastructure. As a result, outsourcing emerges as the optimal business model for Ethiopia, offering efficiency and accessibility without the need for extensive resources. Why Ethiopia is attractive for outsourcing Availability of abundant talent: Ethiopia has a large and young population, with more than 70% under the age of 30. It also has a high number of graduates in STEM fields, with over 200,000 students graduating each year from universities and colleges. over 42% of public university graduates are unable to secure employment after completing their studies. Of these graduates, more than 70% hold STEAM degrees, and considering that over 70% of the country’s population is under the age of 30, there is a significant need for job creation in the IT sector. These talents are eager to learn and grow in their careers and can provide quality services to global clients. Very low attrition rate: One of the challenges of outsourcing is retaining employees who may leave for better opportunities or higher salaries. However, Ethiopia has a very low attrition rate compared to other outsourcing destinations such as India, the Philippines, and China, as its workers are loyal, motivated, and committed to their employers. This reduces the cost and time of hiring and training new staff and ensures continuity and stability of service delivery. Strategic location and time zone: Ethiopia is located in the Horn of Africa, which gives it access to both African and Middle Eastern markets. It also has a favorable time zone, which allows it to work with clients from Europe, Asia, and North America with minimal overlap. This means that Ethiopian outsourcing providers can offer round-the-clock services and respond to customer needs quickly and efficiently. In conclusion: Outsourcing companies can help fill the gap in the employment market for Ethiopian youth talented graduates by offering a stable and competitive employment market. By partnering with foreign companies, graduates can gain valuable experience across industries and technologies. They also stand to benefit from salaries, professional development opportunities, and access to cutting-edge technology. In addition to creating job opportunities, outsourcing companies can boost market visibility and generate revenue for the country, making them an important player in the Ethiopian economy. Related Blogs All Posts Blogs Ethiopia’s Outsourcing Industry: A Bright Spot in the Economy October 10, 2024/ The BIC Ethiopia Project: A Promising Path to Revitalize the Agricultural Sector September 21, 2024/ R&D Ethiopia: a pioneer for change through the Ethiopian Outsourcing Association September 21, 2024/
The BIC Ethiopia Project: A Promising Path to Revitalize the Agricultural Sector
The BIC Ethiopia Project: A Promising Path to Revitalize the Agricultural Sector Agriculture is the backbone sector in Ethiopia’s economy due to its significant contributions to GDP growth, employment opportunities for a majority of citizens and substantial export earnings through key commodities like coffee and sesame seeds. The government’s unwavering commitment to promoting agricultural development through various initiatives underscores its recognition of this sector’s vital role in sustaining economic prosperity for the nation. Agricultural sector contribute to over 40% of the country’s GDP. Additionally, it serves as the primary source of employment for more than 80% of the Ethiopia’s workforce and accounts for a significant 83.9% of exports. The leading agricultural commodities in Ethiopia include coffee, sesame seeds, and pulses. The agricultural sector in Ethiopia showcases remarkable diversity, with a wide variety of crops and livestock being cultivated. Among the crops, cereals such as teff (ጤፍ), wheat, and maize are the major ones. Following closely are pulses, oilseeds, and fruits. Livestock also plays a crucial role in providing sustenance and income for the population, with cattle, sheep, goats, and poultry being prominent sources. Ethiopia boasts a rich history of agricultural production that has garnered continuous attention from the government over the years. To foster agricultural development further, numerous policies and programs have been implemented by the government. These initiatives encompass land reform measures, irrigation projects to enhance water management systems, as well as agricultural extension services aimed at providing farmers with valuable knowledge and support. The Ethiopian agricultural landscape confronts obstacles like periodic droughts, soil degradation, taxation burdens, and inadequate infrastructure. These elements contribute to reduced productivity, food insecurity and poverty. To counter these concerns, the government has pinpointed priority areas for intervention, targeting increased smallholder farm productivity and large-scale commercial farm expansion. Strategies include enhancing input access, credit availability, market reach, irrigation facilities, extension services, and land tenure security. Agriculture’s role extends beyond sustenance, propelling Ethiopia’s economic transformation. The Oxford Handbook of the Ethiopian Economy highlights the Agricultural Development-Industrialization (ADLI) approach as Ethiopia’s primary developmental strategy. By amplifying agricultural output and income, the rural sector stimulates demand and supply for urban and industrial counterparts, fostering growth and structural change. Yet, critics note ADLI’s limitations, emphasizing the need to facilitate urban and international demand for high-value crops and value-added products. Amid these dynamics, promising signals emerge. Over the past decade, the sector has achieved a consistent 5% annual growth rate, accompanied by improved productivity. Notably, the government and international donors have bolstered efforts. BIC Ethiopia represents a particularly promising development. BIC Ethiopia is a project that aims to support business incubators in Ethiopia, especially in the fields of agri-tech and agri-business. The project is funded by the European Union and implemented by a consortium of six partner organizations, led by Sequa, a German based non-profit organisation that promotes development cooperation. The project started in January 2022 and will run for four years. The main objectives of the project are: To enable existing and new incubators to support high potential start-ups with innovative business models that address market needs and potentials in terms of job creation and income generation. Additionally, to enhance business incubators’ ability to unlock the potential of agri-tech and agri-business by delivering necessary tools to enable business growth along different stages of maturity. The project strengthens incubators and start-up’s innovating in agri-tech and agri-business. BIC Ethiopia will provide critical tools and resources to unlock the potential of these ventures to create jobs, incomes and sustainable growth. The R&D Group Ethiopia office collaborates closely with Sequas in this endeavour to implement the starter and catalyzer programmes, bringing essential experience. By fostering this ecosystem, BIC Ethiopia can help revitalize and advance Ethiopia’s agricultural industry. The collaborations present a promising path to revitalizing Ethiopia’s agricultural sector, offering valuable insights and avenues for sustainable growth. 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R&D Ethiopia: a pioneer for change through the Ethiopian Outsourcing Association
R&D Ethiopia: a pioneer for change through the Ethiopian Outsourcing Association Introduction The Ethiopian outsourcing industry has been rapidly growing, thanks to the establishment of the Ethiopian Outsourcing Association (EOA) within the past year. This non-profit civil association plays a crucial role in providing global outsourcing services by representing the country’s leading service providers in offshore outsourcing. EOA is fostering growth and replicating the success of South Asian countries by keeping Ethiopia globalized enough to attract outsourced businesses and R & D group has played a crucial role in the establishment and promotion of such an association. The Ethiopian Outsourcing Association (EOA) and its Objectives The Ethiopian Outsourcing Association (EOA) was established by a group of industry leaders, including the R&D group, amidst changing times to boost efforts in attracting foreign investment, creating sustainable jobs, and developing the skills of the workforce. As a non-profit association, the EOA’s primary goal is to provide a platform for public-private relationships and advocacy mechanisms that foster a conducive environment for outsourcing companies and foreign investors.“We can see that it’s going to create an immense amount of jobs, and not just jobs but dignified jobs,” said Wondwessen Zewdie, President of the Association and COO of R&D group at an interview conducted by the ITC. One notable achievement in the establishment of the EOA was the support provided by The International Trade Centre (ITC) through the Netherlands Trust Fund V Ethiopia Tech project. This support included bringing in an international expert to help design the association’s strategy, as part of the ITC’s mission to work with digital businesses and business support organizations. By harmonizing regulations and the tech ecosystem, the EOA aims to attract more businesses and investment to the growing sector. Creating a Conducive Environment To keep Ethiopia globalized and attractive to outsourced businesses, the EOA and its members actively engage with government bodies and advocate for policy changes. By fostering public-private relationships, the association ensures that the necessary regulations, incentives, and support systems are in place to facilitate growth in the outsourcing industry. Harmonizing regulations is a key focus for the EOA, as it helps streamline processes and creates a predictable environment for foreign investors and outsourcing companies. This approach helps Ethiopia align with global standards and gives businesses the confidence to invest in the country. Additionally, the EOA recognizes the importance of the tech ecosystem in attracting outsourcing businesses. By working with tech hubs and business support organizations, the association aims to create a thriving digital landscape that can meet the needs of global clients. This involves providing training, support, and networking opportunities for tech entrepreneurs and professionals. Talent and Skill Development The Ethiopian Outsourcing Association (EOA) is dedicated to bolstering the competence and capacity of the outsourcing sector through effective networks. The association achieves this by establishing an institution that transforms the talent pool into highly skilled professionals. By enhancing existing institutions, the EOA revises frameworks to align with the evolving requirements of global outsourcing ventures. Moreover, the association offers a platform for professionals to connect with other members of the association and foreign investors. This networking opportunity facilitates knowledge exchange, cultivates partnerships, and fosters the growth of the Ethiopian outsourcing sector. Through its strategic initiatives, the EOA is nurturing a skilled workforce and positioning Ethiopia as a competitive player in the global outsourcing market. Marketing Services and Trade Shows The International Trade Centre (ITC) also plays a role in the EOA’s efforts to market services internationally. With a mission to promote business growth, the ITC supports the EOA in showcasing its outsourcing services in foreign countries. By participating in trade shows like GITEX Global and GITEX Africa, the EOA can attract the attention of potential clients and demonstrate the capabilities of Ethiopian outsourcing service providers. Boosting the Ethiopian Economy: R&D’s Efforts to meet the association’s objectives The growth of the outsourcing sector brings significant benefits to the Ethiopian economy. By attracting foreign investment and creating sustainable jobs, the EOA helps generate revenue and improve the livelihoods of the workforce. As outsourcing services continue to contribute to the economy, Ethiopia can enhance its economic growth and development. The Ethiopian Outsourcing Association (EOA) plays a pivotal role in fostering growth and globalization in the outsourcing industry. R&D has been and continues to be a pioneer, playing a vital role in making Ethiopia a more attractive destination for outsourcing companies. R&D’s efforts can be highlighted as such: Developing new technologies and solutions, Providing training and education, Producing research and reports, and Building partnerships Through its advocacy mechanisms, public-private relationships, and marketing efforts, the EOA is keeping Ethiopia globalized enough to attract outsourced businesses. With the support of organizations like the International Trade Centre (ITC), Ethiopia is bringing in resources and making the outsourcing sector a significant revenue generator, contributing to the overall growth of the Ethiopian economy. Visit Our Webiste: https://www.etoutsourcing.com/ Related Blogs All Posts Blogs The BIC Ethiopia Project: A Promising Path to Revitalize the Agricultural Sector September 21, 2024/ R&D Ethiopia: a pioneer for change through the Ethiopian Outsourcing Association September 21, 2024/ Financing for Startups in Ethiopia: How New Initiatives Are Addressing the Gap September 21, 2024/
Financing for Startups in Ethiopia: How New Initiatives Are Addressing the Gap
Financing for Startups in Ethiopia: How New Initiatives Are Addressing the Gap Starting a new business is thrilling but securing financing can be a major obstacle for many entrepreneurs. While venture capital and angel investing receive a lot of attention, banks and financial institutions also play a key role in funding startups – especially in developing economies. However, limited collateral and lack of credit history can make accessing traditional business loans difficult for young entrepreneurs and startups. In Ethiopia, securing financing from banks without collateral is especially challenging. But new initiatives are emerging to address this gap. Recently, the Ethiopian Youth Entrepreneurs Association (EYEA) partnered with the Commercial Bank of Ethiopia (CBE) to launch two new financial products aimed at supporting startups. CBE’s new “idea finance” product provides loans to early-stage entrepreneurs and startups without requiring collateral. To qualify, applicants need a patent from the Ethiopian Intellectual Property Agency and a detailed business plan. By removing collateral requirements, this innovative loan product helps get innovative business ideas off the ground. CBE has offered similar financing for over a decade, but uptake has been low. This highlights an opportunity for expanded marketing and education to raise awareness. EYEA and CBE also initiated an advisory service called KENA to provide capacity building and mentorship to young startup founders. Programs like KENA are crucial to setting entrepreneurs up for success by building their skills. EYEA’s networking platform Zelela connects young founders with stakeholders like government officials and investors. These connections are invaluable for securing financing and other support. Zelela conferences have focused on topics from information access to policy advocacy. More institutions should follow CBE’s model and develop creative financing solutions for startups. Alleviating collateral requirements can unlock funding for young entrepreneurs to turn ideas into reality. In Ethiopia, financial technology and digital lending are expanding access to financing for small businesses and startups. Traditional collateral requirements have been a major obstacle, but new digital platforms are using alternative data for credit scoring to provide loans without collateral. Promising Progress Through Fintech Alongside these efforts, financial technology and digital lending are also expanding access to capital for small businesses and startups nationwide. New platforms are applying alternative data and algorithms to provide collateral-free loans. For example, Michu (ሚቹ) from the Cooperative Bank of Oromia leverages artificial intelligence (AI) to assess creditworthiness and offer micro, small, and medium-sized enterprise (MSME) loans without collateral. By removing this barrier, Michu helps address the unmet financing needs of underserved micro and small enterprises. Dube Ale (ዱቤ አለ) from Dashen Bank is another digital credit product reinventing lending by making it more convenient, accessible, and affordable. Customers can get approved for lines of credit up to 700,000 birr based on income and credit history, without collateral. Easy access to working capital can help MSMEs better manage cash flow. Other new platforms like Alegnta (አለኝታ) from Lion Bank also provide collateral-free loans tailored for diverse needs, from rideshare drivers to SMEs. Alegnta’s 500 million birr revolving fund demonstrates growing investment in digital finance. These innovative services showcase how fin-tech is driving financial inclusion in Ethiopia. By using alternative data and digital delivery, lenders can serve MSME segments once considered too risky. Financial regulators should continue updating frameworks to enable responsible digital credit while protecting consumers. Expanding access to finance helps MSMEs and startups invest, create jobs, and build resilience. Digital lending still has room for growth in Ethiopia, but early movers like Michu, Dube Ale, and Alegnta provide promising models for how technology can democratize financing for unserved entrepreneurs. Other countries are also pioneering collateral-free small business financing. In Kenya, microfinance institutions like Kiva leverage crowdfunding and technology to provide low-interest loans. Creative models like these help African startups access seed capital. The R&D Group, in collaboration with UNDP and the National Bank of Ethiopia (NBE), is actively engaged in capacity building for Ethiopian SMEs. As part of their efforts, they are implementing the Technical Assistance Facility (TAF) program, which aims to provide support to innovative small and medium-sized enterprises in Ethiopia. The primary objective of the TAF program is to assist SMEs in growing and developing their businesses while also contributing to job creation and the overall Ethiopian economy. To enhance their support for SMEs in Ethiopia, the Innovative Finance Lab (IFL) from UNDP and NBE have partnered with the R&D Group. This partnership aims to strengthen the implementation of the TAF program, which is a joint initiative between NBE and the UNDP. Through this collaboration, technical assistance will be provided to small and medium-sized enterprises (SMEs) across Ethiopia. Conclusion The challenges of securing financing for startups in Ethiopia are significant, but there are a number of innovative solutions emerging to address these challenges. By leveraging fintech and digital lending, entrepreneurs can gain access to capital that would otherwise be unavailable to them. This is good news for the Ethiopian economy, as it will help to spur innovation and job creation. Related Blogs All Posts Blogs Financing for Startups in Ethiopia: How New Initiatives Are Addressing the Gap September 21, 2024/