Local investors in Ethiopia are facing significant financial pressure following a recent decision to double the rental fees for working sheds in industrial parks. This increase comes in the wake of changes to the foreign exchange market, which have further complicated the financial landscape for businesses operating in the country.
The new rental fees, which have increased dramatically, are causing distress among investors who previously paid their rents in birr. According to industry insiders, the cost to rent one square meter of shed space has surged from an average of $2.75 to a level that has effectively doubled the overall rental payments. For example, investors who previously paid 100,000 birr for rent are now facing bills of 200,000 birr.
Investors have expressed their concerns about the sustainability of their operations under these new financial burdens. Many are calling on the government to intervene, citing difficulties in hiring workers, importing raw materials, and maintaining their market presence. Reports indicate that some companies are on the brink of bankruptcy, leading them to consider relinquishing their current rental agreements in favor of alternative market options.
At a recent forum held at the Sky Light Hotel, organized by the Industrial Parks Development Corporation (IPDC) and the Ethiopian Investment Commission (EIC), stakeholders discussed the implications of the increased rental fees. Ashenafi Muse, President of the Addis Ababa Investors Forum, stated, “The amount of fees has doubled, and investors are not in a position to pay.”
The industrial sector, which is labor-intensive and requires substantial investment, is particularly affected by these changes. Investors noted that while they have historically engaged in various manufacturing sectors, the recent shifts in the foreign exchange market are prompting many to retreat from their commitments.
Fisseha Yitagesu, CEO of IPDC, acknowledged the pressures that the new rental rates have placed on investors. He indicated that while the increase is a result of policy changes, it was unexpected and has prompted the formation of a committee to explore potential solutions.
The challenges facing local investors come at a time when Ethiopia has invested over $1.6 billion in developing industrial parks over the past nine years. However, the returns on this investment have been modest, with exports from these parks totaling only $1.2 billion.
Local investors are urging the government to provide support and consider subsidies similar to those offered in other sectors. Without intervention, the future of many businesses operating in Ethiopia’s industrial parks remains uncertain.
