Terms of Reference (ToR)

Investment opportunities and priority areas in Addis Ababa

1. Project Background

The governments in developing countries, especially in sub-Saharan Africa, face the challenges
in terms of scarcity of funds, corruption, poor planning and project formulation, as well as
inefficient capacities to bring sustainable investments development (UNDP, 2011). This resulted
in public dissatisfaction with the quality and coverage of government provided investment and
the slowness with which national and local governments extend investments often have a
pressure (Dennis A. & Iacono M., 1998). According to (UNDP, 2000), in developing countries
the current and projected revenue base of most municipalities is inadequate to finance
investments activities and associated operating costs and many municipalities have large debt
obligations, leaving little room for major new loans.

United Nation argued that private firms should have to take into account not only the economic
and financial but also the developmental, social and environmental implications of their
undertakings (UN, 2000a). However, the state of investments in many developing countries
tends to be poor and inadequate to meet the rising demand (UNDP, 2011). Ethiopia has managed
to register double-digit economic growth over the past 13 years. This high growth has
contributed to a sustained increase in per capita income and a decline in absolute poverty, as well
as improvement in standards of living of the population (MOFEC, 2017). It’s known that,
investment is without a doubt, one of the primary engines of development in all economies.
However, in Ethiopia, investment sector is not well developed to meet the growing population of
the country.

Addis Ababa, which is sometimes referred to as the capital of Africa, is a buzzing hub of economic, social
and political activity and home to such notable offices as the African Union and the United Nations
Economic Commission for Africa (https://www.tripadvisor.com). Population of the city is expected to
grow to exceed 6.5 million residents with the annual growth rate estimated to be 3.8%
(http://worldpopulationreview.com).

Addis Ababa has better access to infrastructure (road, railway, cargo), market (inhabitants have
better purchasing power), demanding society (awareness of new products), access to better
information (4G internet access), better labour (skilled) availability, availability of institutions
and so more than other regional cities. These makes the city to be the first destination of
investment by investors.

Addis Ababa with all the aforementioned resources and seat of organizations can’t compete to
attract more visitors than other African cities. For instance, Cape-town (RSA) and Kigali
(Rwanda), they are ranked 1st and 2nd as conference destination in Africa. Similarly, Lagos
(Nigeria), Accra (Ghana), Kigali are ranked the top in real-estate investment (Akua, 2019).

Though, the relationship between population growth and of economic growth remains controversial, the
issue remains being studied by different scholars with debatable findings. Several scholars depicted
existence of positive association between population growth and growth of economic output (Heady and
Hodge (2009); Baker, Delong, and Krugman (2005). Whereas, others argue that population growth has
been and will continue to be problematic as more people inevitably use more of the finite resources
available on earth, thereby reducing long-term potential growth (Linden, 2017; Heady & Hodge, 2009).

Population growth embraces many issues such as population demographic structures, socio-cultural,
economic and political demand. Whereas, economic growth is important for raising living standards of
the population of a city, growth in economy output is unthinkable without the human recourse. Citizens,
to contribute their share in the city’s socio-economic development, they should be productive and active
workers than being jobless. Currently, unemployment is the chronic problem for the youth which creates
socio-economic crisis. Since this problem is multifaceted, managing this problem requires intervention of
many stakeholders.

2. Objectives
Literally, the main objective in seeking investment opportunity and conducting feasibility study is to
show the likelihood of proposed action succeeding or failing, through a careful look at the costs and
opportunities involved. Feasibility study is essentially important for the start-up business undertaking to
exploit available potential business opportunities and to determine if a proposed strategic action makes
sense operationally and will produce the desired results.
While undertaking opportunity scouting and feasibility analysis, primarily we will consider the
economic; social; human; national and global objectives as core objectives of our mission.
In addition, the following specific objectives will be addressed;
 Scouting potential investment opportunities for small and big scale business undertaking
 Scanning recognized opportunities systematically
 Undertaking thorough feasibility analysis through feasibility analysis criteria
 Prioritizing the identified promised investment opportunities
 Packaging of promised investment opportunities based on their operation scale
 Developing draft of business model and preliminary strategies for the prioritized business ideas
 Creating enabling environment for the investment
 Identifying benefits of investment activity for the society

3. Importance of opportunity seeking and feasibility analysis

Its importance is to have rich knowledge about all potential opportunities and threats to projects which will be
distinguished as promising investment ideas. Since, the aim of this task is generating information which
increase knowledge of government and other stakeholders in decision-making concerning what investment
opportunities are available and practicable in Addis Ababa city, our beneficiaries will learn the following
issues which will support their decision-making:

Economic Feasibility: this assessment typically cost and benefits associated with the implementation of
selected projects.
Technical Feasibility: under which the technical resources available for the practicability of the project
will be identified.
Legal Feasibility: this assessment investigates whether any aspect of the proposed project conflicts with
legal requirements and guide how to comply itself to regulatory requirements.
Operational Feasibility: this assessment scrutinizes and determine whether and how well the
organization’s needs can be met through the project undertaking.
Scheduling and Milestone Feasibility: since project completion time utmost determine project success,
we will guide project promoters with the right scheduling
Assist in the development of project documentation: business case, execution plan, strategic brief
When these areas have all been examined, the feasibility study helps identify any constraints the proposed
project may face, including:
Internal Project Constraints: Technical, Technology, Budget, Resource, etc.
Internal Corporate Constraints: Financial, Marketing, Export, etc.
External Constraints: Logistics, Environment, Laws and Regulations, etc.
 4. Scope of the project
This project will more focus on identifying investment opportunities in Addis Ababa city
administration. Experience of other similar cities will be taken to pinpoint the opportunities;
Documents of the city administration will also be explored so as to tailor the investment
opportunities to capacities and readiness of the city. To complete this project, it’s estimated to
take 8 months. Ethiopian Investment commission and the city’s investment commission will be
the main target to get supplementary data.
The main issues to be incorporated on the final report will include feasibility of the identified
investment areas, their expected ROI, city administration involvement and so forth.

In addition to the above issues, the project will includes the following activities
1. Prioritize investment projects: narrow down and identify few investment projects in consultation
with A.A investment commission based on the project worthiness in terms of labour force
employment, foreign exchange earnings, environmental issues, community services, resources
utilization etc.
2. Estimate market size per different investment projects: through both primary and secondary
sources, survey, interviews, FGD, or others, produce a detail estimates of the different investment
market and investment potentials in Addis Ababa.
3. Develop a database/list/ of all investment projects

5. Methodology
With the employment of both primary and secondary sources, survey, interviews and
stakeholders FGD, the research team is expected to produce detailed information on all
investment opportunities and priority investment areas to be given by the commission. To this
end, the research teams needs to develop both qualitative and quantitative data collection
instruments to address the objective of the project. Specifically, appropriate investment
evaluation/ impact model that would explain the potential contribution and impacts of each
investment projects on different explanatory variables should be clearly developed. The research
team, upon further discussion with AAIC may consider the following methodology components
and criteria in relation to the assessment of investment opportunities and prioritization.
 1. Investment project return (in terms of profitability, ease of starting the business,
employment opportunity creation, foreign exchange generation etc)
2. Market investment characteristics like investment project size, growth, trend barriers etc.
3. Bankability of investment projects
4. For scalability (replicability of project process)
5. Potential impact of investment projects (positive and negative externalities)
6. Institutional capacity and effectiveness
7. Availability of financing mechanisms to investment projects
8. Sustainability of investment projects (in relation to ecosystem)

6. Role of the researcher

The researcher will undertake the following tasks relating to collection and collation of
stakeholder feedback and survey conducted to assess the demand.
 The researcher will identify and proactively engage with investors and key stakeholder
groups, and communicate the importance, relevance and utility of the Standard and
Indicators. The researcher also will develop appropriate and accessible mechanisms for
stakeholder engagement, and will facilitate meaningful stakeholder participation and
contribution to the revision process.
 The researcher will ensure availability of all relevant documentation relating investment
opportunity and priority areas within the standard and performance indicators,
 The researcher provides sufficient and appropriate opportunities for Addis Ababa city
investment commission and other stakeholders to participate in the revision process.

7. Qualifications / special skills or knowledge required

A. Competencies
 Planning and organization: Ability to identify priority activities and assignments, allocation
of appropriate amount of time and resources for completing work.
 Curiosity and open-mindedness: ability to ask questions to clarify, and exhibit interest in
having two-way communication; demonstrate openness in sharing information and
keeping people informed.
 Teamwork: ability to work collaboratively with colleagues ; ability to solicit inputs by
genuinely valuing others' ideas and expertise. Capacity to work with transparency.

B. Qualifications
 Education: at least master’s degree in Investment, Economics, Business administration and
related fields.
 Professional Experience: Research experience (Publications, research paper review,
research conference participation, successful in research fund generation, etc)

C. Other skills: skills on softwares for research (eg. Stata, SAS, Mendeley, Amos, SPSS,
Eviews, etc)

8. Deliverables, time line and payment schedule

Sr.n Activity type Implementation time Facilitator
o
1 Signing memorandum of understanding To be scheduled The team and city admin.
2 Proposal document preparation To be scheduled The team
3 Designing data collection template To be scheduled The team
4 Undertaking preliminary environmental To be scheduled The team
observation
5 Conducting systematic opportunity scouting To be scheduled The team
6 Undertaking opportunity scanning and To be scheduled The team
feasibility analysis
7 Developing cluster for selected investment To be scheduled The team
opportunities
8 Developing report document To be scheduled The team
9 Communicating the report to the concerned To be scheduled The team
stakeholder
Estimated budget for the project ETB 500,000
References
Akua, L. (2019, 05 20). luxafrique.net. Retrieved from top 5 cities for real estate investment in africa :
www.luxafrique.net

Dennis A. & Iacono M. (1998). , Policies and Institutions for Managing Privatization: International
Experience,. Geneva: International Labor Office.

UNDP. (2000). , Joint Venture Public-Private Partnerships for Urban Environmental Services, PPUE
Working Paper Series, Vol. II, quote at p.8. New York.