Ethiopian Investment Holdings (EIH) is experiencing mounting tension with investors as it seeks to monetize government land resources. Now in its fourth year of operation, this sovereign wealth fund stands at a pivotal crossroads. While EIH has been lauded for consolidating state-owned enterprises valued in the billions, a new point of contention has arisen regarding foreign direct investment: the valuation and monetization of government land.
Meleket Sahlu, Deputy CEO of EIH, notes that the organization is currently “navigating a path” fraught with challenges related to how land is contributed as an investment for joint ventures. This tension originates from a fundamental disparity between the government’s desire to offer land as high-value equity and investors’ preference for lower lease payments and a transparent leasing system.
Since its inception, EIH has sought to shift the traditional approach of providing land solely through low lease payments. The fund aims to assign high commercial value to land, using it as a principal “skin in the game” to secure minority or majority ownership for the government in strategic projects.
“In the early years, we hoped to monetize the land by ensuring investors recognized its high value,” Meleket stated. “However, this has led to some tension, and we are still navigating that path.”
For many international investors, particularly in the manufacturing and real estate sectors, valuing land as a high-equity contribution can dilute their ownership stake or increase the initial capital required to accommodate “free carry” shares. Investors contend that even if the land is strategically located, poor infrastructure, such as unreliable electricity, water, and roads, should decrease its perceived value.
This tension presents a significant challenge for EIH: balancing its role in “market shaping” with commercial viability. Although the fund currently manages 27 large state-owned enterprises, its new greenfield projects heavily rely on land as the primary government contribution.
To address this friction, EIH is exploring “innovative and new” solutions, including a “head-hunting” approach to attract investors who prioritize long-term impact over short-term gains. By engaging institutional investors, such as sovereign wealth funds from Gulf nations or specialized European infrastructure funds, EIH aims to find partners who view high-value land equity as a sign of government commitment rather than a financial hurdle.
Recently, EIH provided insights into “free carry” shares, warning that “cheap and free things are often expensive.” This means that when land is easily given away or undervalued to quickly attract investment, it can force the government to assume unsustainable risks or forfeit long-term profits.
As Ethiopia moves toward opening its retail and wholesale trade sectors, the “land question” remains a highly sensitive issue. The manner in which EIH resolves current tensions will serve as a crucial indicator of how future multi-billion dollar urban redevelopment and industrial projects will be structured.
