Assessment of Private Domestic Investment Challenges and Prospects in the Service Sector in Addis Ababa Ethiopia
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Date
2024-02
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Addis Ababa University
Abstract
This study aimed to examine the landscape of domestic private investment in Addis Ababa, Ethiopia, by focusing on the challenges and Prospects. The study used mixed study design. The data was collected from 298 investors operating in Addis Ababa. Among the significant challenges were issues related to macroeconomic stability, with concerns over access to foreign currency and fluctuations in exchange rates standing out prominently. The dominance of micro and small enterprises in certain sectors such as transport, waste management, and media were noted, contrasting with larger firms' prevalence in the real estate, health, and hospitality industries. High loan costs posed another substantial obstacle, alongside challenges stemming from inflation, an unreliable electricity supply, and contraband activities. While taxation and corruption were perceived as manageable, policy uncertainty and political instability emerged as growing concerns. Despite these challenges, key service industries like finance, education, and ICT were identified as holding potential for private investment, albeit with access barriers. Moreover, Prospects for expansion in credit extension and insurance were noted, albeit modestly. The quality of public infrastructure, particularly in power, water, and telecom reliability, was deemed in need of improvement. Workforce gaps, especially in skilled labour availability and raw material access, were also highlighted. Challenges in Addis Ababa's investment landscape include macroeconomic instability, high loan costs, and infrastructure deficiencies, while Prospects lie in key service sectors like finance, education, and ICT. Addressing these challenges and capitalizing on Prospects requires stabilizing the macroeconomic environment through comprehensive reforms and targeted initiatives across strategic sectors to foster a conducive ecosystem for inclusive growth and job creation.
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Keywords
Domestic, Private, services sectors, challenges, Prospects, Addis Ababa, Ethiopia