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On June 25, 2025, Afriwise and Mekdes & Associates brought together key stakeholders from the Ministry of Finance, the Ministry of Health, Ethiopian Electric Power, the African Legal Support Facility and a transaction advisory firm to discuss Ethiopia's progress, challenges, and prospects in implementing PPP projects. The webinar's objectives were to understand key policy priorities, implementation strategies, and opportunities for PPPs in Ethiopia.
Why Ethiopia Adopted a PPP Framework
The discussion opened with reflections on the rationale behind Ethiopia’s decision to adopt a Public-Private Partnership (PPP) framework. A consistent theme across participating public institutions was the country's need to address financing gaps and improve service delivery.
Fiscal Constraints and Financing Gaps
- Ethiopia is facing growing demand for infrastructure and public services, but traditional public financing sources, government budgets, and donor funding have proven inadequate.
- This is particularly evident in the health sector, where investments have historically depended on public expenditure and external grants.
- As a result, PPPs were seen as a necessary response to mobilize private capital, supplement public resources, and expand access to services.
Operational and Technological Efficiency
- Beyond funding, PPPs are expected to drive innovation and operational improvements in capital-intensive sectors such as energy and health.
- Long-term partnerships with private operators are intended to bring not just capital, but also new expertise, systems, and technology to improve efficiency and service quality.
Clarifying Misconceptions
Several common misconceptions about PPPs were addressed during the discussion:
- PPPs are not joint ventures or co-investments. Instead, they are long-term contractual arrangements with clearly defined roles, responsibilities, and risk-sharing mechanisms.
- Not all public services are suitable for PPP procurement and delivery. Project selection depends on the service type, its potential to deliver value for money, and financial viability.
- Sovereign guarantees and currency convertibility guarantees are not automatically granted. Eligible projects are determined on a case-by-case basis, and mostly reserved for strategic PPP projects.
Feasibility Study Financing
- A major constraint in project preparation is the cost of feasibility studies, which are critical for developing bankable PPPs.
- These costs are not typically covered by government budgets, making the role of development partners essential in financing and preparing early-stage project documentation.
Implementation Challenges
Despite a strong start, the implementation of PPPs in Ethiopia has encountered several hurdles. Key insights shared during the webinar include the following:
Overestimation of the Legal and Policy Framework
- Ethiopia has adopted a robust legal and institutional framework for PPPs. However, early expectations that this alone would unlock financing were overly optimistic.
- Broader investment climate issues continue to limit project bankability, such as:
- Ethiopia’s historical reluctance to offer sovereign guarantees.
- Its non-membership at the time in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which weakened investor confidence.
External Shocks
- The COVID-19 pandemic and internal conflicts significantly disrupted project timelines and stakeholder engagement, compounding existing implementation delays.
Complexity of PPP Transactions
- PPPs are inherently complex, involving multiple stakeholders such as public sector agencies, private investors, and financiers.
- Aligning objectives, responsibilities, and risk-sharing mechanisms across these actors has proven challenging.
- This complexity is amplified in sectors like health. For example: In the Integrated Diagnostic Service Center (IDSC) project, the participation of multiple referral hospitals and the public insurance provider made project structuring and risk allocation particularly difficult. Achieving institutional alignment required significant time and negotiation.
Capacity Gaps
- The government faces substantial capacity gaps in structuring and managing complex PPP projects.
- Awareness and understanding of PPP modalities remain limited across many public agencies.
- While the PPP Directorate within the Ministry of Finance has built considerable expertise, sectoral institutions often require extended support to reach a comparable level of capacity.
- Development partners such as the African Legal Support Facility (ALSF) and the International Finance Corporation (IFC) have played a vital role in bridging these gaps and moving key projects forward.
Governance and Decision-Making Bottlenecks
- The PPP Board, though essential for strategic oversight, is composed mainly of senior government officials.
- As a result, its meetings are infrequent and its approval processes slow, creating bottlenecks that hinder the timely advancement of projects, especially those that are time sensitive.
Lessons from Other Jurisdictions
Ethiopia’s experience with PPP implementation is not unique. Many African countries face similar challenges in bringing PPP projects to financial close, including:
- Capacity constraints within public institutions
- Limited fiscal space and access to affordable financing
- Lack of guarantees and de-risking instruments
- Underdeveloped capital markets
These shared barriers have resulted in stalled projects and prolonged procurement processes across the continent. However, this common ground creates valuable opportunities for cross-country learning and collaboration. Speakers emphasized that while establishing legal and policy frameworks is essential, these alone are not sufficient. A credible and functioning PPP program requires:
- Transparent procurement processes
- Effective contract management
- Strong inter-agency coordination
- A visible, well-structured pipeline of priority projects to maintain investor interest and momentum
Most importantly, Ethiopia must now build a track record of successful PPP implementation. Demonstrating the ability to deliver projects on time and within scope is essential to reinforcing investor confidence and unlocking a broader pipeline of private sector investment and ultimately positioning Ethiopia as a credible partner in the African PPP landscape.
Lessons Learned
- Strengthen project preparation and procurement capacity at the sectoral levels.
- Improve investor confidence by addressing currency convertibility and legal enforceability issues.
- Engage early in the PPP process to ensure project bankability and financial viability.
- Expedite PPP Board approvals to maintain project momentum.
- Promote standardized documentation and early lender engagement to enhance project bankability.
- Build a track record of successful projects to attract sustained private investment.
Opportunities and Outlook for the Future
Despite existing challenges, the outlook for PPPs in Ethiopia is optimistic. A promising pipeline of projects is emerging across various sectors, including:
- Solar, wind and hydro power projects
- Waste-to-energy
- Healthcare and diagnostic infrastructure
- Digital infrastructure
- Affordable housing and logistics
- Ambulance fleet management
Additionally, the incorporation of sustainability aspects and the use of blended financing to de-risk projects and increase private sector appetite is a growing trend in Africa. Beyond traditional commercial and concessional financing, more opportunities in climate finance and philanthropy are emerging.
Developers and investors are encouraged to engage with key public sector counterparts, the Ministry of Finance, the Ministry of Health, and Ethiopian Electric Power, to explore partnership opportunities. In addition, the government is open to unsolicited project proposals, if they align with national development priorities and meet the technical, legal, and financial criteria outlined in the PPP framework.
With continued reforms, strengthened inter-agency coordination, and transparent implementation, PPPs can significantly contribute to Ethiopia’s infrastructure transformation and service delivery goals.
