Spotting opportunities in Ethiopia: The story of serial entrepreneur Addis Alemayehou

How We Made It In Africa, published a story about Addis Alemayehou. Partner, managing partner, board member, senior advisor … the list of positions Addis holds concurrently is impressive. Many of these roles are at his own companies, which include one of Ethiopia’s biggest advertising agencies, a popular television channel and a telecommunications start-up in South Africa. Yet Addis comes across as pretty calm and collected. He admits that on the inside, though, the pressure often gets to him. Excerpts.

“There are nights I don’t sleep and there have been times where the stress has threatened my health. Things don’t always work out the way you want them to, or the numbers don’t come in the way you expected, or clients have an issue with your service. It is a never-ending rollercoaster but it is part of being an entrepreneur,” says the 49-year-old Addis.

In 1980, when Addis was a young boy, his family relocated to Nairobi, Kenya, to escape Ethiopia’s then socialist government. At 16, his parents sent him to North Dakota in the United States where he completed his last year of schooling. After living in the States for a year and a half, Addis moved to Canada to join his family who had in the meantime emigrated there. He enrolled at the University of Toronto but ended up studying for only about a year, opting instead to work a variety of odd jobs and to pursue his business ambitions.

It was in Canada that Addis started his first entrepreneurial venture: buying and leasing properties. “I bought my first real estate when I was 18 and by the time I was 21, I owned three properties. When the Toronto real estate market crashed in 1989, guys like me could afford to buy property. There was a huge immigrant community coming into the city, particularly Somalis, and they needed a place to stay.”

In the late 1990s, while still living in Canada, Addis began researching Africa’s mobile telecommunications industry, which was still in its infancy. At the time, several international mobile network operators were looking to acquire operating licences in Africa. Sensing an opportunity, he submitted a proposal to South African mobile operators MTN and Vodacom to partner with him to acquire a licence in Ethiopia. “I had no clue how a licence would work, but I was 29 and just anxious to get back home to Ethiopia to do something.”

Vodacom was interested, and invited Addis and the partners he had assembled for a meeting in South Africa. “I was crazy nervous. It was my first boardroom meeting. I called my brother-in-law and said: ‘Man, I don’t know if I can do this. My hands are sweating.’ I’ll never forgot what he told me: ‘They are not going to beat you up. They can just say no. The worst that can happen is that they don’t like the deal. They will say no, and then they will say thank you and goodbye – what do you have to lose?’”

Although Vodacom signed a memorandum of understanding with Addis after the meeting, nothing came of the deal, as the Ethiopian government didn’t allow any mobile operator besides the state-owned Ethio Telecom into the country. It wasn’t before 2018 that the government for the first time indicated its intent to open the telecoms industry to private investors.

“We had a few contacts in Ethiopia and, being inexperienced, we simply assumed that if we came in with a company such as Vodacom willing to invest hundreds of millions of dollars, the Ethiopian government would welcome us with open arms,” he says. “It was obviously not the case.”

These days, obtaining a mobile network licence in almost any African country is costly and requires high-level negotiations. It certainly is not something one would expect an inexperienced 20-something to attempt. But Addis looks at the experience as a learning curve. “Sometimes being young and clueless is good because you learn things as you go, rather than sitting behind a desk and reading about it. It taught me the basic things: how to dress, how to shake someone’s hand at a corporate meeting, how to put together a pitch document.

“For me, it’s always about finding a gap and an opportunity I can exploit. At the time, the opportunity was to get into mobile in one of the biggest countries on the continent. It didn’t work out but at least it got me back home so that I could look at the next opportunity.”

After abandoning his mobile licence plans, in 2003, Addis began working at the United States Agency for International Development (USAID) in Ethiopia. The American government had just introduced the African Growth and Opportunity Act (AGOA), which allowed qualifying African countries to export a wide range of products to the United States duty-free. It was Addis’s responsibility to find Ethiopian companies which had products ready for export and connect them with buyers in the States.

His five-year stint at USAID was a deep dive into the Ethiopian economy and served him well to this day. “It was the ideal opportunity to learn how local businesses operate. The job also allowed me to work with the Ethiopian ministries of trade and industry and learn how government works. Furthermore, it gave me insight into what the donor world is all about. I began to understand Ethiopia on a different level without having to spend my own resources to do it.”

Launching Ethiopia’s first English radio station

While working with USAID, Addis frequently travelled to Nairobi where he still had many contacts because he grew up there. During one such trip he asked his friend, Chris Kirubi – a well-known Kenyan businessman with interests in property, insurance, media and manufacturing – which one of his investments he enjoys the most. Capital FM, replied Kirubi, his radio station.

That got Addis thinking about doing something similar in Ethiopia. “I convinced Chris to let me spend a week at Capital FM with him and his management team. I sat in on every meeting, listened to advertising sales calls, observed the DJs and spent time with the tech guys. I came to the conclusion that there was an opportunity to do this in Ethiopia as there wasn’t a single English FM radio station in Addis Ababa.”

Back home, Addis applied for a licence to operate a radio station. He convinced the regulators by stressing that Addis Ababa, the home of the African Union, was one of the world’s largest diplomatic capitals with many English-speaking residents and visitors – a group that couldn’t be ignored.

In 2008, he received a licence and called his station Afro FM. The business made money from advertisers, which were keen to market to the affluent expats the station was targeting.

Helping multinationals market them selves

Ethiopia, a country once synonymous with famine in the 1980s, has made significant economic progress. In the decade between 2000 and 2009, its economy grew by an average of 8.5 per cent every year. This, coupled with a large population (about 98 million today), attracted the interest of multinational companies and brands.

 Having already had some experience with the advertising industry through the radio station, Addis saw potential in catering for the marketing and communication needs of these companies. Therefore, in 2011, he launched the advertising, branding and public relations agency 251 Communications. (251 is Ethiopia’s international dialling code.)

“Although the government still didn’t allow foreign investment in a range of sectors, we already had the likes of Coca-Cola, PepsiCo and Tiger Brands in the country. Ethiopia was moving away from a communist business environment to one that would attract more big international brands. We certainly have a population size that excites consumer brands. I anticipated that sooner or later, these multinationals were going to start spending some serious money on advertising,” he explains.

251 Communications today employs over 40 full-time staff and counts Pfizer, The Coca-Cola Company, DHL and the Bill & Melinda Gates Foundation among its clients. But when it first opened its doors, the staff consisted only of Addis, his business partner and a few interns. They counted their pennies. “We had a tiny one-room office. We had the furniture made rather than buying it. We had used-laptops because we couldn’t afford new ones. We started on a very tight budget.

“I see many entrepreneurs who over-invest without really looking at the market and the returns on their investment. You should put in only what you need to start and gradually put in more money as you grow. Nobody starts off earning revenue on the first day. Getting your business up and running is where you should spend your energy and resources, not on nice furniture and a nice office,” says Addis.

With few competitors in the market, 251 Communications landed Heineken – which at the time had just bought two state-owned breweries from the Ethiopian government – as its first client. The first time Heineken came to see them, they used a friend’s office next door. “The lesson here is that you can overcome any hurdle. When we met with the Heineken marketing manager, I was dead honest. I said, ‘We’re new, we’re just starting up, we’re hungry, we will do whatever it takes to make you successful. Please stick with us.’ And they did.”

To further capitalise on growing international interest in the continent, Addis, in 2013, co-founded PR company Africa Communications Media Group (ACG) with his friend Mimi Kalinda. “ACG was set up because we had a lot of multinational PR firms from the European Union and the United States looking at doing work in Africa and not really getting the gist of what the different markets need in terms of local insight,” he explains. ACG operates from Johannesburg and its clients include MTN and Dalberg.

Swapping radio for TV

Addis sold his stake in Afro FM right after starting 251 Communications but kept exploring possibilities in broadcasting. Initially he wanted to launch MTV Ethiopia but after a meeting with MTV, they declined. MTV did not believe the channel would generate enough advertising revenue to cover the licensing cost and operational expenses. The MTV representative told him, “If I were you, I would start my own channel.”

Addis and his partner went back to the drawing board and researched the Ethiopian television market. They found that most Ethiopians who have TVs also have satellite dishes to watch free satellite channels such as ArabSat which broadcasts throughout the Middle East and parts of Africa. However, these shows were only in Arabic or English, not in the local Amharic language. Many Ethiopian children have even learnt to speak Arabic because of ArabSat.

“We felt if we brought that same content to the Ethiopian market in Amharic, a language which people understand, that it would do well.”

Addis and his partner formed Kana TV in 2015 and teamed up with Moby Group, a television and radio broadcasting company founded in Afghanistan with operations throughout south and central Asia and the Middle East. In the beginning, most of the programmes were international television dramas, such as the Turkish series Kara Para Aşk and Indian soap opera Saraswatichandra, which had been dubbed into Amharic. Although much of the content is still dubbed, Kana TV now also produces original programmes like an Ethiopian music and entertainment show as well as a regular news insert.

It took Kana TV two years to break even – it earns most of its revenue through advertising – and it currently commands around 37% of Ethiopia’s prime-time market. It has been so popular that some conservative voices have even blamed Kana TV for corrupting traditional Ethiopian values.

Lately, Ethiopian media comp anies reliant on advertising have been negatively impacted by restrictions on the advertising of alcoholic beverages. “Ethiopia’s major breweries are continually vying for market share, which is good for advertising. However, the ban on alcohol advertising in print, TV and radio slashed the revenues of media companies by probably 40% to 60%. Everybody took a hit on that,” Addis says.

And while Ethiopia has so far had only 261 confirmed infections and five deaths from Covid-19 (at the time of publication), the business environment is affected by the depressed global economy as well as some curbs on local trade. “With Covid-19 a lot of businesses are in a slowdown and investing less in advertising, which is impacting the media space. So it has been a tough time. The problem with Covid-19 is that no one knows when the situation will be over, which makes it difficult to plan for the future.”

Partnering for success

Addis has built most of his ventures by identifying a gap in the market and then partnering with companies that have the necessary technical expertise. And in a few instances, he has simply copied and pasted successful international business models. In all his businesses, though, he is very hands-off, and says, “I’m usually the guy who comes up with the idea and puts the team together. The rest of the time I’m a shareholder who spends maybe 20% of my time on each entity.

“It takes a bit of management and discipline, which I’m still trying to learn, but it has worked out. That is how I see my role, rather than being pinned down to one company.”

The trick, he says, is to work with the right partners. “For me, the number one thing is to pick the right people to work with, because they will take the burden off your shoulders and share the risk and stress. “I always look for a partner who has something I don’t have. For instance, I’m good in the marketing and strategy space, but I’m not good at numbers. With Kana, I didn’t know anything about the technical aspects of running a TV station or about production. If you are just going to add more of the resources you already have, why look for a partner?”

Addis again employed this partnership strategy for one of his latest businesses, called Arada Mobile, which offers preferential call-home rates and Ethiopian digital content to the hundreds of thousands of Ethiopians living in South Africa. “I needed local expertise, so I have a partner who has lived in South Africa for 16 years and understands the Ethiopian community there and knows how to talk and market to them.”

Looking beyond Covid-19

Despite the dampening effect of Covid-19 on the Ethiopian and broader African economy, Addis remains optimistic and continues to seek out new business opportunities. He says no matter how Covid-19 plays out, Ethiopia will still have a large population demanding basic products and services.

One of his most recent investments is a sock-manufacturing business which will target the domestic market. Production is expected to start in the next few months. “We’ve got 100 million people, of which at least 40 million are men, and we need socks. The average age in Ethiopia is about 17. In the coming years, millions of young people will be getting their first jobs or move from rural areas to the cities, and many of them will have to buy socks. It’s a very basic commodity but one that’s in demand,” he notes.

Addis has also started backing Ethiopian tech-enabled startups. One of these ventures is Sira, which links informal workers – such as drivers and waiters – to employers through a mobile app. “Most of these folks don’t have CVs or email addresses. The app works with GPS location technology, so if there is a job within a specific area that fits your profile, it sends you a notification,” he explains.

Within the startup space, Addis is also upbeat about the potential in areas such as fintech, delivery and transportation, and education. To take advantage of these opportunities, he and a handful of friends recently established the Addis Angels Network, which aims to back early-stage ventures. The group has already heard a few pitches from entrepreneurs and expects to make its first investments in the coming months.

“Ethiopia has tremendous opportunities. Covid-19 has slowed down some of the sectors but it has also opened up a few new opportunities. So you just have to be nimble and look at what’s available,” he says. The Ethiopian Herald May 21/2020

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