From Fiscal Burden to Job Engine: Ethiopia’s State-Owned Enterprise Transformation

In just nine months of the 2024 to 2025 fiscal year, Ethiopia’s state-owned enterprises (SOEs) paid ETB 98 billion ($600 million) in taxes and ETB 19 billion ($120 million) in dividends to the government. This meant more resources were available to fund salaries, provision of electricity, and public services, while easing pressure on the national budget.

For years, these same enterprises did not generate enough income to sustain themselves. Instead of contributing to public finances, they depended on them. A 2021 World Bank review found that revenues and net worth rose for 41 federal SOEs from 2013 to 2019, but profitability fell. Many operated without audited accounts and some had not produced financial statements for more than five years. This created a system where decisions were made without reliable financial information. The government did not have a complete view of the assets it owned or how they were performing. Losses were absorbed into the broader budget, and risks were difficult to measure in advance.

Turning this around required a reset in how public assets were managed. The government needed to know what it owned. It needed to control how these companies were run. It also needed to manage its fiscal risk and hold the SOEs accountable for results.

Now, most federally owned enterprises are producing financial statements on time. Many have completed external audits and begun disclosing their results. Regular portfolio reviews were introduced to track performance, set targets, and guide investment decisions.

Importantly, these reforms are shaping Ethiopia’s jobs outlook. Better managed and more financially stable enterprises are now able to expand their services and invest in new areas, while also creating space for skills development and new employment across key sectors of the economy.

Progress to this point reflects a sustained and deliberate reform effort. Starting in 2019, the World Bank initiated a program to support Ethiopia’s SOE and public asset management reform, financed by the Ethiopia Reform Support Multi-Donor Trust Fund. Through the support, the Ministry of Finance built the country’s first comprehensive database of state-owned enterprises. For the first time, policymakers could see how much each company earned, spent, and owed, and assess the risks linked to state ownership. An SOE Oversight Directorate was established to monitor performance and track exposure. Instead of relying on fragmented reports, the government could now work with a consolidated view of the sector.

With better information in place, the next phase focused on how these enterprises were governed. A new privatization law introduced in 2020 set clearer rules for transparency and process. It defined how transactions should be managed and reduced discretion in decision-making.  

A year later, Ethiopian Investment Holdings (EIH), the country’s first sovereign holding company, was established to manage the state’s commercial assets as a single portfolio. It marked a major institutional advance that allows the government to manage public assets more strategically and transparently. The shift was reinforced by a new state-owned enterprise law requiring professional and independent boards and management teams. It strengthened the oversight role of the Ministry of Finance and established rules to ensure that state-owned enterprises compete on fair terms with private firms. The law also required companies to adopt international financial reporting standards and to publish audited financial statements each year. Public service obligations were defined more clearly, along with a framework for how these responsibilities should be measured and financed.

Changes were implemented within the enterprises themselves. Ethio Post, which is the national postal service, for example, moved from years of losses and audit backlogs to one of the strongest performers in the sector, while the Ethiopian Trading Business Corporation restructured its operations to focus on removing barriers that had limited private sector participation in agribusiness. Across the sector, management teams began operating against defined annual targets. Performance reviews were introduced to assess progress and adjust strategies where needed. This created a link between operational decisions and measurable outcomes.

Aligned with the government’s ambition to mobilize private capital, selected enterprises underwent assessments to determine their readiness for potential listing of their shares in the capital market. The objective was to attract private investment while leveraging capital market compliance requirements to put discipline and transparency in the operations of commercial SOEs.  

The reform agenda also expanded to include the assets held by these enterprises. Land, equipment, and other holdings began to be assessed more systematically. Pilot programs by EIH tested approaches to valuation and management, leading to Ethiopia’s first Asset Management Guideline for SOEs that standardizes how public assets are recorded and used in decision-making.

Together, these reforms are improving financial performance and helping reshape how public assets contribute to Ethiopia’s broader economic transformation. Stronger, more transparent SOEs can play a catalytic role in creating jobs by expanding services, supporting key sectors, and crowding in private investment.

As Ethiopia continues to modernize its SOEs, the focus is shifting from managing risks to unlocking opportunities—ensuring that public wealth is preserved and actively used to generate growth, support businesses, and create more and better jobs for Ethiopians.