Eritrea

Eritrea port

Foreign Investment Overview

  • FDI inflow, 2017: USD 55M
  • Eritrea has historically struggled to attract large investments because of its unfavorable business climate.
  • Despite this, Eritrea’s mineral resources have attracted many investors including China – the country’s largest investor, creditor and trading partner.
  • FDI inflow to Eritrea has increased over the past five years at a compound annual growth rate of 6%, from USD 41M to USD 52M. Mineral resources drive this inflow.
  • Several US and European companies considered investing in tourism, cement, mining and oil in 2017.
  • A joint venture between a Canadian company (NEVSUN) and the Eritrean government established the Bisha Mining Company. It’s one of the largest mining conglomerates in the country and mines gold, copper, and zinc.
  • There was only one Greenfield investment in Eritrea in 2017 in mining.
  • The majority of Eritrea’s non-mining foreign investments are private equity investments, with a small percentage of reinvested earnings.
  • Germany, United States and Canada are the largest investors in Eritrea.
  • The United States FDI inflow to Eritrea has been decreasing since 2003, but more Middle Eastern and Asian countries have begun investing in Eritrea.

Composition of Eritrea’s total GDP and FDI 

Investment Attractiveness

  • The government has created a Free Zone Authority in Massawa to attract new investors, primarily in energy, tourism, and fishing.
  • The Port of Massawa is a transit point for goods to the Middle East, European, and Asian markets given its strategic location along the Red Sea. It now has been opened to landlocked Ethiopia, which has the second largest population in Africa.

Sectoral View

  • Eritrea’s natural mineral resources are copper, potash, zinc, oil, natural gas, cement, gypsum, granite, marble, ceramics, limestone, and iron ore.
  • Mining contributes significantly to the GDP of the country, after trading. This is driven primarily by natural gas, oil, gold, zinc, and potash.
  • Eritrea’s government is investing in agriculture as a way to support rural livelihoods and strengthen trade with the Middle East and Asia. Its largest export is pepper.
  • The government is investing in infrastructure (with construction playing a big role) and human-resources development.
  • Infrastructure investments have focused mainly on gold mines, but include a power station and a port.
  • The services sector is driven by transportation, real estate and business services contribute the most to Eritrea’s GDP. Transportation contributes significantly to GDP, thanks to the country’s port location.

Recent Developments

  • Eritrea recently opened its borders to Ethiopia for the first time in 20 years, allowing landlocked Ethiopia to use Eritrea’s Massawa port for direct access to the Red Sea. This act may strengthen investor confidence as well as economic growth.

South Korean Alignment

  • Eritrea has limited exports to Korea: USD 22M in 2016 driven by minerals.
  • Eritrea contributes less than 1% to South Korean imports and receives less than 1% of export goods from South Korea, low despite Eritrea’s strategic port locations.
  • Eritrea’s current development priorities align with South Korean expertise and prior African experience in construction.
  • Eritrea’s ongoing trade relationship with North Korea may pose challenges for South Korea – for example, the USA has imposed sanctions on Eritrea as a result of its relations. However, with the momentum seen with Ethiopia, there may be appetite for change.

Contact us to learn more about investing in the Horn of Africa.

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