OVERVIEW OF THE ETHIOPIAN ECONOMY

The latest Economic update, Ethiopia has a large domestic market of over 100 million people,
making it the second most populous country in Africa after Nigeria. Over the last decade,
Ethiopia has had one of the fastest growing economies in the world, with average annual growth
rates ranging from 7% to 12% (depending on data sources). In 2018, Ethiopia’s real Gross
Domestic Product (GDP) expanded by 7.7 percent, and is expected to grow by 8.5% in 2019,
according to the World Bank.

The business climate is undergoing significant changes with broad policy reforms implemented
under the new leadership of the current leading government. Government plans to privatize
leading state-owned enterprises signal a significant shift toward market based reforms and a new
flexibility with respect to economic policymaking. The acute foreign exchange shortage remains
the leading challenge for U.S. suppliers, for which there is no quick fix.

While the economy is growing rapidly, presenting many opportunities, there are also hurdles to
doing business in Ethiopia. The 2019 World Bank’s Ease of Doing Business report (EODB)
ranked Ethiopia 159th out of 190 countries; an improvement of two positions from that of 2018.
The new leadership has a focused target to improve the country’s ease of doing business ranking
and has formed an interministerial committee led by the Prime Minister to improve specific areas
of the ease of doing business. The World Economic Forum (WEF) has identified burdensome
customs administrative procedures, the high cost of logistics, and access to credit and foreign
exchange as major challenges to small and medium-sized enterprises (SMEs) in Ethiopia.

The agriculture sector has historically been the engine of the Ethiopian economy, but it has
recently given way to the expansion of the service sector. The National Bank of Ethiopia (NBE)
notes agriculture, industry and services have contributed 35%, 27% and 39% to GDP
respectively during the 2017/18 Ethiopian fiscal year as opposed to 36.3%, 26% and 38.8%, to
GDP in 2016/2017. The agriculture sector’s share of GDP shrank by more than 25% between
2005 and 2018, while the service sector’s share grew by 27% during the same period. The
construction industry, particularly roads, railways, dams, industrial parks and homes, is the main
driver of growth in the industrial sector, contributing more than half of the sector’s growth.
Service sector growth is dominated by expansion in communication and transport services, hotel
and restaurant businesses, as well as wholesale and retail trading.

In March 2019, Moody’s reaffirmed Ethiopia’s credit worthiness at ‘B 1 stable,’ while S&P and
Fitch maintained their original rating of ‘B.’ These ratings reflect Ethiopia’s stable outlook and
prospects for continued economic growth in the short and medium term and are on par with
neighboring Kenya and Uganda. As a result of the 15% currency devaluation of October 2017
inflation rose to double digit levels during the final quarter of 2017 and the first half of 2018. In
the spring 2019, Ethiopian inflation stood at 12.9 percent.
Real interest rates are largely negative. The minimum bank deposit rate of 5.00%, bond yield of
3.67%, and Treasury bill yield of 3.67% are lower than the annual inflation rate of approximately
13 percent. The NBE controls the exchange rate and has officially devalued the Birr by
approximately 97% against the U.S. dollar between January 2009 and January 2016. In October
2017, the National Bank of Ethiopia (NBE) devalued the birr by 15 percent relative to the U.S.
dollar, thereby reducing overvaluation and enhancing competitiveness. As of May 2019, the
official exchange rate stood at 28.71 Birr per dollar. The Birr has continued to follow a steady
depreciation, with the NBE following a controlled floating exchange rate policy. The parallel
black market exchange rate for the same period was approximately 39.00 Birr per dollar, a
premium of 36% over the official rate.

Ethiopia faces a growing trade deficit with total imports steadily increasing on average by 12.5%
per year during the previous 10 years. The rise in imports has exacerbated the trade deficit,
which ballooned from $3.6 billion in 2010 to $14 billion deficit in 2016/2017. Concerned by the
widening trade balance, the Government of Ethiopia works to suppress imports and took other
macro-economic measures in recent year, which has resulted in a slight narrowing of the trade
deficit to $12.41 billion in 2017/18. Ethiopia’s total merchandise exports were $2.84 billion in
2017/2018, while imports for the same period were $15.28 billion, a 3% decrease from the
previous year.

The Ethiopian birr is a not a convertible currency, and private sector allocation to foreign
exchange (U.S. dollars) is determined by the the National Bank of Ethiopia (NBE). The NBE
operates within the context of a large trade deficit and the need to meet sovereign debt
obligations stemming from government infrastructure projects funded by foreign debt, which
enjoy priority in allocation of foreign currency.

According to the NBE annual report, 34.5 % of total imports ($5.27 billion) were spent on
capital goods and 31% ($4.7 billion) on consumer goods. U.S. exports to Ethiopia in 2018
amounted to $1,310,886,716, a 49% increase from that of last year, accounting for 9.4% of
Ethiopia’s total imports. Ethiopia’s imports from the United States have increased steadily
throughout the past decade, representing approximately a fivefold increase from 2007 to 2017.

In 2017/2018, Ethiopia's major exports included coffee (29.5%), oil seeds (14.9%), pulses
(9.5%), Chat (9.3%), cut flowers (8%), and gold (3.5%).Ethiopia’s total export earnings by value
declined by 2.3% in 2017/2018 from the previous year. Depressed commodity prices are the
leading cause of this drop in exports.

Major destinations for Ethiopia's exports in 2017/2018 were: Asia 39.8% (of which China
accounted for 22.3%), Europe 28.7% and Africa 20.9%. In FY 2017/2018, the United States was
Ethiopia’s leading export market representing 9.9% of total exports, registering a 2% increase
from the previous year. Ethiopia primarily exports coffee, leather, and leather products to the
United States.

The vast majority of Ethiopia’s imports come from Asia (64.2%) followed by Europe (19.3%),
the United States (9.4%) followed by Africa (7%). Imports from China accounted for 39.3 (a
drop of over 10% from the same period last year) followed by Kuwait (12.6%), India (10.1.8%),
USA (9.4%) UAE ( 5.4%) Japan (5.3%), and Saudi Arabia (3.6%). U.S. exports to Ethiopia
increased by 2.4%, a successive two years increase in a row. U.S. exports to Ethiopia are
primarily aircraft sales, construction equipment, agricultural machinery, farming, and
engineering services. Aircraft and aviation parts represented a majority of total U.S. exports to
Ethiopia.

Many U.S. companies based in the United Arab Emirates (UAE) do business in Ethiopia, using
Dubai as an intermediary export platform due to proximity and availability of reliable air
shipping and air services. Please refer to the following table of U.S. -Ethiopia bilateral trade
figures.

Currently, it is estimated that there are more than 1000 grocery in Addis Ababa. Amsalu Gashu
grocery store is one of service provider in this sector.

BUSINESS OVERVIEW

Amsalu Gashu is a grocery store business, in Addis Ababa, Bole sub-city Woreda 07, around
Segen hotele Established in 2000 E.C with an initial capital of birr 1000.00 by a founders of Ato
Amsalu Gashu.

We will serve the nearby residential community with all their grocery needs. We will focus on
providing our customers with fresh food, Beer, Alcoholic drink and a draft drink. Our store will
also include a home section that will sell cleaning products, household essentials and beauty
products. Despite the fact that we have several competitors, we are confident that our grocery
store has several competitive advantages such as home delivery service, pre-ordering of goods,
ambiance, and excellent customer service.

The grocery has no any branch till now. The company has a plan to open branches in Addis
Ababa and outside of Addis in near future to reach our potential customers and to operate in full
capacity as the demand is very high in the country.

SERVICE SECTOR IN ETHIOPIA

According to official data, the Ethiopian economy has grown at 10.9% on average in 2004/05-
2014/15. During this period a structural change is observed as agriculture declined in its share
and service sector dominates the economy. Hence, in this study we used a Shapely
decomposition method to identify the service sector contributions to per capita GDP and
employment growth during two periods of (1999-2005) and (2005-2013).Per capita GDP was
decomposed into employment rate, productivity, and demographic changes. The result shows
that during (1999-2005) growth periods, Ethiopian per capita GDP growth was mainly
contributed by employment rate changes originated from the agriculture sector. Whereas the
service sector has the highest Contribution in productivity but a negative contribution in
employment change. However, during the high growth period of (2005-2013) the growth in per
capita GDP is due to productivity growth which emanates from the service sectors specifically
from the distributive service sector.

ECONOMIC GROWTH OF ETHIOPIA

Ethiopia’s location gives it strategic dominance as a jumping off point in the Horn of Africa,
close to the Middle East and its markets. Ethiopia is landlocked, bordering Eritrea, Somalia,
Kenya, South Sudan, and Sudan, and has been using neighboring Djibouti's main port for
the last two decades. However, with the recent peace with Eritrea, Ethiopia is set to resume
accessing the Eritrean ports of Assab and Massawa for its international trade. With more
than 112 million people (2019), Ethiopia is the second most populous nation in Africa
after Nigeria,  and the fastest growing economy in the region. However, it is also one of the
poorest, with a per capita income of $850. Ethiopia aims to reach lower-middle-income status by
2025. Ethiopia’s economy experienced strong, broad-based growth averaging 9.8% a year from
2008/09 to 2018/19, Ethiopia’s real gross domestic product (GDP) growth rebounded to 9% in
2018/19. Industry, mainly construction, and services accounted for most of the growth.
Agriculture and manufacturing made lower contribution to growth in 2018/19 compared to the
previous year. Private consumption and public investment explain demand-side growth, the latter
assuming an increasingly important role. Higher economic growth brought with it positive trends
in poverty reduction in both urban and rural areas. The share of the population living below the
national poverty line decreased from 30% in 2011 to 24% in 2016. The government is
implementing the second phase of its Growth and Transformation Plan (GTP II) which will run
to 2019/20. GTP II aims to continue expanding physical infrastructure through public
investments and to transform the country into a manufacturing hub. GTP II targets an average of
11% GDP growth annually, and in line with the manufacturing strategy, the industrial sector is
set to expand by 20% on average, creating more jobs. Development Challenges Ethiopia’s main
challenges are sustaining its positive economic growth and accelerating poverty reduction, which
both requires significant progress in job creation, as well as improved governance. The
government is devoting a high share of its budget to pro-poor programs and investments. Large
scale donor support will continue to provide a vital contribution in the near-term to finance the
cost of pro-poor programs. Key challenges are related to: Like the rest of the world, Ethiopia has
been experiencing the unprecedented social and economic impact of the COVID-19 pandemic.
The COVID-19 shock is expected to be transitory with potential recovery possible in 2021, but
the overall adverse economic impact on Ethiopia will be substantial. The economic impact of
COVID-19 includes the increased price of basic foods, rising unemployment, slowdown in
growth, and increase in poverty. Ethiopia has been experiencing the worst locust invasion in
decades. This may undermine development gains and threaten the food security and livelihoods
of millions of Ethiopians. Political disruption, associated with social unrest, could negatively
impact growth through lower foreign direct investment, tourism and exports. Limited
competitiveness, which constrains the development of manufacturing, the creation of jobs and
the increase of exports. Underdeveloped private sector, which would limit the country’s trade
competitiveness and resilience to shocks. The government aims to expand the role of the private
sector through foreign investment and industrial parks to make Ethiopia’s growth momentum
more sustainable. According to major economic sources, Ethiopia will be Africa’s star
performer, with its industry continuing to improve in line with the country’s economic
expansion. With a population of over 107 million, it is definitely a market to target. Ethiopia’s
economy is projected to grow by at-least 7-9% in 2020. Ethiopia is Africa's oldest
independent country and its fastest Growing economy today. With a large population and an
average annual economic growth rate of 10% over the past 15 years, it presents a unique
opportunity. Ethiopia’s location gives it strategic dominance as a jumping off point in the Horn
of Africa, close to the Middle East and Europe markets. As one of the fastest growing economies
in the world, Ethiopia’s economy has achieved robust, broad-based growth averaging 10.3% year
since 2006/07, compared to a regional average of 5.4%. The fast economic growth, a conducive
investment climate, large market size and high-level government commitment towards FDI
attraction have contributed to the growth of FDI inflow into Ethiopia-making the country the
second largest recipient of FDI in Africa. East Africa, the fastest-growing region in Africa,
received $7.6 billion in FDI, of which Ethiopia absorbed nearly half and is now the second
largest recipient of FDI in Africa after Egypt. A closer look at Ethiopia: Strategic location
between Europe and Asia. In addition to its strategic positioning as a long-haul transfer hub,
Ethiopia is increasingly becoming an important destination for manufacturing, especially in the
ready-made garment (RMG) sector. With the success of multiple business models, suppliers are
pressurized to reduce the turnaround time between design and final delivery. One of the easiest
ways to achieve this is to stay closer to the brands. However, most big brands don't
currently have interesting alternatives closer to their regions, heavily relying on Asian countries
for cost reasons. Bangladesh's manufacturing sector is increasingly gravitating towards
Ethiopia to maintain its low-cost advantage and, additionally, stay closer to key brands in
Europe. With a strategic location and low-cost labor, Ethiopia is uniquely positioned to succeed
in the manufacturing space. Privatization of state-owned enterprises Ethiopia is one of the
world's largest untapped markets, and there is an increasing belief that privatization of
state-owned enterprises could be one of the ways to attract potential investments and spur the
economy. There are plans to offer minority stakes in airlines, power and telecoms to global
investors. In addition, the possibility of railway projects, hotels and key manufacturing
industries, have already created enough buzz to boost investor's confidence and in turn, the
possibility of attracting investments. The government has also created five industrial parks that
have spurred the creation of 45,000 jobs, with the aim to set up a total of 30 and increase their
manufacturing from 5% to 20% of GDP. Greater social stability Ethiopia is historically
recognized as a volatile country in sub-Saharan Africa - has been increasingly turning toward
openness and democratic processes. Ethiopia has received new political and financial support
from a number of parties, including the European Union, the World Bank and the IMF. The new
policies were also well received by the Ethiopian diaspora, a big contributor to the economy
through remittances. The steps taken towards national security and political reconciliation - such
as lifting of the state of emergency, releasing political prisoners, and reforming tough laws on
anti-terrorism, media and civil society - are considered positive by international observers. The
country’s large infrastructure investments are beginning to bear fruit and the provision of public
services such as education and health has increased dramatically. Youthful potential More than
70% of citizens in Ethiopia are under 30, and nearly 50% are under 15. In 2017, a World Bank
report found that enrolment in higher education had multiplied fivefold since 2005, with the
number of public institutions increasing from eight to 36 over that period. In a world where
service industries account for 65% of global GDP, these are the type of education policies that
seem adapted to the new global context. Technology and knowledge-based industries have the
potential to thrive, thanks to the cost advantages and the availability of human capital in
Ethiopia. Human capital is fast becoming a key economy-boosting asset. Promising start-up
ecosystem Local challenges around mobility, agriculture, infrastructure and healthcare for a
country of Ethiopia's size are being turned into a series of opportunities by the start-up
movement. Sustaining a strong Ethiopian economy requires the existence of a local start-up
ecosystem. The government is focusing on an environment where entities such as universities,
large companies, service providers, research and funding organizations come together to allow
local entrepreneurs to get off the ground and to scale up. Investors are optimistic as the
government plans to unlock two of the most heavily regulated sectors - banking and telecoms.
Key economic factors in Ethiopia’s growth story Ethiopia’s growth is expected to stay high in
the future, supported by continued economic recovery and export-import expansion as new
manufacturing facilities and infrastructure come online. Ethiopia is ranked 57th which, is higher
than its regional peers(Kenya, Rwanda and South Africa) for its conducive macroeconomic
environment (World Economic Forum, Global Competitiveness Report) Growth forecasts of
more than 7% from the International Monetary Fund and the African Development Bank place
Ethiopia among the world’s growth leaders over the medium term. Ethiopia is a member of the
Multilateral Investment Guarantee Agency (MIGA), a World Bank affiliate which issues
guarantee against Non-commercial risks in signatory countries, and of the World Intellectual
Property Organization (WIPO). Ethiopia has concluded over 30 bilateral investment promotion
and protection agreements, of which 11 are with individual European Union Member States.
Significant other partners include China, India, South Africa, and Russia, and a number of
regional economic partners (Israel, Egypt, and Sudan, among others). Addis Ababa has emerged
as a regional hub and is home to key international organizations such as the African Union (AU)
and the United Nations Economic Commission for Africa. Addis Ababa is also the main air hub
for Africa and the home of Ethiopian Airlines, which has won repeated recognition as the best
airline in Africa. Ethiopian Airlines offers flights to 101 international passenger destinations (57
in Africa, 20 in Europe and America and 23 in the Middle East and Asia), 22 domestic passenger
destinations, and 35 cargo destinations (21 in Africa, 11 in the Gulf, Middle East and Asia, and 3
in Europe). It carries two thirds of Africa’s air freight. Expanding road networks connecting
national and regional markets, and cheapest electricity rate in Africa and the whole world.
Expanding and improving telecommunication service. Power production has increased steadily
over the last ten years, with 99% sourced from clean energy in the form of hydropower. Ethiopia
offers a comprehensive set of incentives, particularly for priority sectors, such as, customs duty
payment exemption on capital goods and construction materials, and on spare parts whose value
is not greater than 15% of the imported capital goods’ total value; Tax exemption of up to 6
years for manufacturing and agro- processing, and of up to 9 years for agricultural investment.
Additional 2-4 years income tax exemption for exporting investors located within industrial
parks and 10-15 years exemption for industrial park developers.

CUSTOMER FOCUS

Amsalu Gashu will primarily serve the residents who live within a 10 mile radius of our store.
The demographics of these customers are as follows:

 6,827 residents
 5 workers
 Average income of 500,000.00 Birr
 42% married
 47% in Mgt./Professional occupations
 Median age: 38 years

MANAGEMENT TEAM

Amsalu Gashu is led by Amsalu Gashu who has been in the grocery store business for 2 year. He
has extensive experience at major grocery stores for the past 2 year. He began his career in 2021
when he received a certification from School and began work at major chain, where he worked
for 2 years.

ADMINSTRATIVE FUNCTION

 General & administrative functions including marketing, bookkeeping, etc.

 Sourcing and storing products
 Hiring and training staff

COMPETATIVE ANALYSIS

Direct & Indirect Competitors

The following businesses are located within a 5 mile radius of Amsalu Gashu thus providing
either direct or indirect competition for customers:

Shop and Save

Family owned and operated for 13 years, Shop and Save is a 22,000 square foot grocery store.
The full service grocery store features fresh produce (some farm-to-store), meats, bakery,
seafood, deli, dairy and other grocery items. They also offer specialty prepared foods such as
salads, soups, panini, custom made to order sandwiches, carving station meals to go, take and
bake pizza. Entrees include shepherd’s pie, rotisserie chicken, lasagna and stuffed shells.

Working with local farms for fresh summer vegetables including sweet corn and zucchini and
apples, cider and peaches, they estimate about one third of their produce is locally grown.

All Natural
In business for four decades, this all-natural supermarket carries a large variety of items
including vitamins, supplements, herbs, homeopathic, aromatherapy, greens, groceries, bulk
foods, coffee & tea, dairy, frozen and refrigerated foods. They also only carry certified organic
items and their wheat and gluten free section is currently the largest in the area.
Newly added, they now offer an expanding line of organic prepared foods such as, sandwiches,
salads, juices, acai and smoothie bowls, with many gluten-free, dairy-free, and vegan options.
But what’s really different from the mainstream grocery store is that the Market is also like a
boutique food shop, where part of the appeal is that you know that these products were carefully
chosen by someone with a passion for natural foods.

Competitive Pricing

The price of groceries varies widely depending on the product, but below is a comparison of the
competitor’s service fees in birr.

Grocery Delivery Grocery Pick-up

Shop and Save 9 5=
All Natural 12 7

Competitive Advantage

Amsalu Gashu enjoys several advantages over its competitors. These advantages include:

 Location: Amsalu Gashu’s location is near the center of town, giving us access to
commuters going and leaving the train station, local office workers, and passersby going
to local shops. We also offer adequate parking making it easy for customers to patronize
us.
 Great service at an affordable price: The store will offer home delivery and grocery pick-
up services, further extending our market reach
 Management: Our management team has years of business and marketing experience that
allows us to market to and serve customers in a much more sophisticated manner than our
competitors.
  Relationships: Having lived in the community for 5 years, Amsalu Gashu knows all of
the local leaders, newspapers and other influences. As such, it will be relatively easy for
Amsalu Gashu to build brand awareness and an initial customer base.

MARKETING STRATEGY

The Amsalu Gashu Brand

The Amsalu Gashu brand will focus on the Company’s unique value proposition:

 Convenient location
 Significant personal attention
 Moderate price point
 Friendly, customer-focused environment

Promotions Strategy

Amsalu Gashu expects its target market to be individuals working and/or living within a 5-mile
radius of its location. Amsalu Gashu’s promotions strategy to reach these individuals includes:

Local Publications
Amsalu Gashu will announce its opening several weeks in advance through publicity pieces in
multiple local newspapers and publications. Regular advertisements will run to maintain
exposure to relevant markets. Community newspapers, school publications, youth sports
programs, and similar channels will be a major promotion effort.

Community Events/Organizations
Amsalu Gashu will promote itself by distributing marketing materials and participating in local
community events, such as school fairs, local festivals, homeowner associations, or sporting
events.

Commuter advertising
we will drive attention toward Amsalu Gashu by hiring workers to hold signs alongside [route or
highway]. Advertising on heavily traveled commute routes are an opportunity to alert large
numbers of working individuals with disposable income of our opening.

Customer Loyalty Programs

Amsalu Gashu will create a winning customer loyalty program to keep its best clients coming
back again and again.

Direct Mail
Amsalu Gashu will blanket neighborhoods surrounding its locations with direct mail pieces.
These pieces will provide general information on Amsalu Gashu, offer discounts and/or provide
other inducements for people to visit the salon.
Ongoing Customer Communications
Amsalu Gashu will maintain a website and publish a weekly flyer promoting grocery specials
and events

Pre-Opening Events
Before opening the store, Amsalu Gashu will organize pre-opening events designed for
prospective customers, local merchants and press contacts. These events will create buzz and
awareness for Amsalu Gashu in the area.

Pricing Strategy

Amsalu Gashu’s pricing will be moderate so customers feel they receive great value when
patronizing our store.

PURPOSE OF THE LOAN

Expanding a business is a common reason to get a business loan. Whether you're looking to open
a new location or add to your existing space, a loan can provide the financing you need to make
your expansion plans a reality. This can be an exciting time, but it can also be overwhelming,
especially if you're unsure where to start. So it is to be recalled that we will have been financed
by your esteemed bank for expansion purpose. Here are some tips to help you get started.

FINANCIAL PROJECT

Revenue and Cost Drivers

Amsalu Gashu’s revenues will come primarily from the grocery items sold.

As with most businesses, cost of goods sold and labor expenses are the key cost drivers for
grocery stores. Employees are paid through a combination of salaries and bonuses, rewarding
them for performance and making them an active part in business retention and development.

The major cost drivers for the company’s operation will consist of:

 Cost of goods sold

 Salaries
 Lease

Ongoing marketing expenditures are also notable cost drivers for Amsalu Gashu.

Capital Requirements and Use of Funds

Amsalu Gashu is seeking total funding of 3,000,000 birr of debt capital to expand its grocery
store. The capital will be used for funding capital expenditures and location build-out, hiring
initial employees, marketing expenses and working capital.
Specifically, these funds will be used as follows:

 Store design/build: 2,100,000 birr

 Working capital: 900,000 birr to pay for marketing, salaries, and lease costs until Amsalu
Gashu is cash-flow positive

AMSALU GASHU’S PROJECTED STATEMENT OF PROFIT OR LOSS

FOR THE NEXT THREE YEARS

Expected Growth Rate: 20%

Historical Projected Actual Growth Rate

Year

2023 3,000,000 3600000 20%

2024 4500000 5400000 20%

2025 5000000 6000000 20%

 Sales forecast

7,000,000

6,000,000

5,000,000

Historical
4,000,000
Projected
Revenue

3,000,000

2,000,000

1,000,000

0
2023 2024 2025

Year

Key Assumptions

The following table and graph reflects the key revenue and cost assumptions made in the
financial model for the next three years.