Ethiopia pushes retail door ajar to foreigners

* Foreign retailers blocked from Ethiopian market

* Government says it’s open to foreigners managing state firms

* “Archaic” distribution networks force prices up

* High public spending squeezing out private sector

By Richard Lough

ADDIS ABABA, May 26 (Reuters) – Ethiopia has pushed the door ajar for foreign retailers keen to enter the fast-growing market of 90 million people, welcoming them as managers but keeping the state in control.

It is a tantalising, if limited, offer for firms such as Walmart of the United States and Kenya’s Nakumatt supermarket, which already have stores elsewhere on the continent and would like a foothold in sub-Saharan Africa’s fifth biggest economy.

“It is a vibrant market. The population is huge, the income is there, they have a lot to go around,” Nakumatt’s managing director Atul Shah said. “Why are we not there?”

Ethiopia has said it needs to modernise its supply and distribution networks and encourage competition to cut costs and keep down inflation, which leapt to 40 percent in 2011 when food prices surged and government price caps led to hoarding.

On top of that, the arrival of big foreign competitors would hurt locally-owned supermarkets springing up in the country’s new malls while the small traders who still dominate retailing fear it would put them out of business altogether.

Instead of following other African countries which have opened up to foreign retailers, the nation that was once run by communists is launching a state-owned cash-and-carry wholesaler called Alle that it promises to run as if a private firm.

“Retail distribution is not competitive, it is archaic,” Finance Minister Sufian Ahmed told Reuters when asked about Ethiopia’s plans to shake up the retail industry.

“We are looking for outside management just to get international experience. We are open to any option, not only for Alle, but for any other major public enterprise,” he added.

It follows a well-trodden route for Ethiopia, one of Africa’s fastest growing economies that has spurned the liberalising approach of others by holding onto control of its telecoms monopoly and keeping foreigners out of the banks.

Management contracts have been offered to foreigners outside the retail business in the past, but these have usually been short. France Telecom won a two-year deal in 2010 to run Ethio Telecom, one of Africa’s few government monopolies in the sector. Control of management then returned to Ethiopia. [nextpage]

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