I recall a particularly frustrating experience from a couple of years ago, one that likely resonates with many of us. I visited a local retailer to buy some essential items—cooking oil and rice. The price quoted was shockingly high, significantly more than the standard rate just a week earlier. When I cautiously inquired about the increase, the shop owner responded with a dismissive shrug. “That is the price now,” he said. “Everyone is selling at this rate. You can take it or leave it.” His indifferent tone felt like a slap in the face, a moment that has become all too familiar for many.
In that moment, I wasn’t just a customer; I felt like a captive. My choices were to pay his inflated price or return home without dinner ingredients for my family. This situation is not merely about one rude shopkeeper; it reflects a much larger economic issue. This is precisely why the government’s recent decision to open the wholesale and retail sector to foreign competition is not just a policy shift—it offers a potential lifeline for every Ethiopian struggling with the cost of living.
For decades, Ethiopia’s wholesale and retail sectors have been reserved for local businesses. While the intention to nurture domestic enterprises was commendable, the lack of real competition has fostered complacency and unethical practices. We have all witnessed the symptoms: sudden, unexplained price hikes on essentials, the mysterious disappearance of items only to reappear at a premium, and a general attitude of exploitation due to the absence of alternatives. These are not isolated incidents; they form a consistent pattern of market failure.
Such practices are a primary driver of the cost-of-living crisis. When a limited number of players control supply and pricing without fear of competition, the result is inevitably inflationary. Monopolies and protected oligopolies serve the interests of sellers, not consumers. While local businesses cite challenges like access to finance, these difficulties cannot justify practices that harm the public and distort the economy. Decades of protection have done little to encourage these businesses toward the efficiency and innovation that characterize mature economies. This short-term mindset has backfired, limiting their potential and damaging their reputation.
The government’s decision to open these sectors is a pragmatic intervention rather than an ideological shift. Introducing foreign competition is the only proven remedy for market abuse. Imagine being able to leave an indifferent shopkeeper and take my business to a competitor known for consistent, transparent pricing. That simple act of choice is transformative. It compels every market player to elevate their standards, competing on price, quality, and service. The consumer, no longer held hostage, becomes a king whose loyalty must be earned.
Importantly, this move does more than enhance our retail sector; it sends a strong, clear message to the global investment community. Opening a long-protected sector is a tangible indication that Ethiopia is genuinely committed to economic modernization and market-led principles. For foreign investors, actions speak louder than words. This policy shift is a decisive step that fosters immense confidence, demonstrating the government’s willingness to implement challenging structural reforms to create a more open and predictable business environment. This confidence is the foundation for large-scale, long-term investments. When investors observe a nation transitioning from a protected, opaque market to a competitive, transparent one, they perceive lower risks and a stronger commitment to the rules of global commerce. The initial wave of investment in retail will serve as proof of concept, encouraging further investments in manufacturing, logistics, and technology, thus creating a virtuous cycle of capital inflow that benefits the entire economy.
The advantages extend beyond price tags and investor sentiment. Foreign entrants introduce sophisticated, technology-driven supply chains that significantly reduce waste, spoilage, and costs. This efficiency dismantles the bottlenecks often used to justify hoarding and price gouging. They also foster a culture of long-term investment, creating new jobs and providing valuable training that enhances human capital within the country. Their presence raises standards across the entire sector.
However, a strong counterargument persists: that this move equates to selling our economic sovereignty, replacing local exploitation with foreign domination. This fear, rooted in post-colonial suspicion, is powerful but ultimately misplaced. I contend that the true betrayal of sovereignty lies in allowing the current, dysfunctional system to persist.
Economic sovereignty is not solely about ownership; it involves control and the distribution of benefits. Who truly gains from the status quo? A narrow segment of local business owners. Who bears the cost? The vast majority of the Ethiopian public. By introducing competition, the government reasserts its sovereignty on behalf of its people, restructuring the market to serve the public good, which is the highest expression of national interest.
Moreover, the notion of foreign “domination” misunderstands modern retail investment. These companies are not colonial enterprises; to succeed, they must integrate into the Ethiopian economy. They will source products locally, employ thousands of Ethiopians, pay taxes, and invest in physical infrastructure. This is a partnership governed by Ethiopian laws, not an act of domination.
The goal is not to replace local businesses but to stimulate their evolution. The future should be a blended, dynamic ecosystem. The presence of efficient foreign players establishes a high standard of performance, demonstrating to local entrepreneurs what is achievable. Ambitious Ethiopian businesses will learn, adapt, and innovate. This is how local businesses transition from being protected infants into robust, competitive entities.
The opening of the sector represents a bold act of confidence, reflecting faith in the Ethiopian consumer and the potential of our entrepreneurs to rise to new challenges. This decision reclaims economic sovereignty for the benefit of all. While it may be disruptive, the appropriate response is not to retreat into fear but to adapt and improve. Ensuring the public’s livelihood and attracting global capital to shape our future is the highest form of sovereignty.
Befikadu Eba is the Founder and Managing Director of Erudite Africa Investments. A former banker, he has a strong interest in economics, private sector development, and financial inclusion. He can be reached at befikadu.eba@eruditeafrica.com.
