12 investment opportunities in Ethiopia’s packaging industry

There is an unmet and growing demand for packaging products in Ethiopia, according to a recent study by Manufacturing Africa, a programme funded by the UK’s Foreign, Commonwealth & Development Office (FCDO) that supports investment into the manufacturing sector.

Ethiopia will have a packaging manufacturing opportunity worth $971 million by 2030, with more than 50% of the potential lying in packaging for the food and beverage sectors. About 20% of packaging is imported in the country, which is highly inefficient for consumer goods companies. Opportunities exist across Ethiopia’s packaging value chain, particularly in manufacturing of paper/plastic intermediate inputs and recycling.

Ethiopia’s manufacturing output doubled in over the past five years and is expected to expand at 13% annually. The fast-growing agro-processing industry is a major consumer of packaging.

The food and drinks sector collectively represent about half of total demand for packaging (about $333 million of $649 million).

There are an estimated 59 companies producing packaging in Ethiopia, focusing mainly on paper and plastics.

Almost all packaging manufacturing takes place in the vicinity of Addis Ababa and outside industrial parks. Several industrial zones now under review/development are being located next to existing packaging players and could become sources of additional demand.

Investment opportunities

The study highlights the following 12 investment opportunities in Ethiopia’s packaging sector:

PLASTIC

1. Secure supply of PET bottles to domestic market – opportunity ranging from blow-moulding to end-to-end production

Rigid plastic is one of top substrates currently and in terms of expected growth, with several agro-processors (e.g. in fruit juices and edible oils) resorting mostly to imports.

Market opportunity by 2030: $95 million
Investment required: $20 million

2. Secure supply of flexible plastic packaging

Growing popularity of type of packaging with limited local offer in terms of quantity and quality that could be used for key export commodities.

Market opportunity by 2030: $200 million
Investment required: $35 million

3. Set up cutting plant for tubes for toothpaste

Consumer goods manufacturers are importing toothpaste tubes at a high premium.

Market opportunity by 2030: $8 million
Investment required: TBD

4. Incentivise production of bio-plastics from sugar cane to reduce environmental impact of plastic use

Increasing global pressure to shift from traditional plastic to alternative materials, as well as increasing global demand for eco-friendly packaging due to awareness, esp. in Europe and USA. Ethiopia’s large sugar production can supply sugar cane waste to produce plastic.

Market opportunity by 2030: <$120 million
Investment required: TBD

5. Boost production of recycled plastic to replace imports for local producers to use as feedstock or for gasification (fuel)

All raw materials for plastic production are imported currently, yet both rigid and flexible plastics are highly consumed locally, ensuring sufficient supply of feedstock for the recycling process.

Market opportunity by 2030: $30 million
Investment required: $25 million

6. Recycle PET plastic to converted polyester fibre for textile sector

Add value to exported PET flakes and provide raw materials to the textile sector by converting plastic to polyester fibre.

Market opportunity by 2030: $30-40 million
Investment required: $75-90 million

PAPER

7. Set up liquid carton converting hub

Growing presence of product in Africa by Tetrapak, which could be looking for other African countries which are well connected to set-up as hubs.

Market opportunity by 2030: $140 million
Investment required: TBD

8. Set up supply of forest-certified bamboo wood pulp for paper packaging producers

Increasing demand for eco-packaging due to consumer awareness and preferences, particularly in Europe and North America, that could be served by large local supply of bamboo that is easy to ship in the pulp form.

Market opportunity by 2030: export
Investment required: Up to $2 billion

9. Development of local production of corrugated paper – opportunity ranging from local cutting of imported corrugated paper, to boost of end-to-end production

Demand for corrugated paper across all key industries with local supply being limited in quality and quantity.

Market opportunity by 2030: $70 million
Investment required: $38 million

10. Boost paper recycling to replace imports for local producers to use as feedstock

Only few local players have access to locally produced feedstock while others face difficult importing processes, harming their competitiveness.

Market opportunity by 2030: $40 million
Investment required: $10-20 million

METAL

11. Increase metal cans production for food and beverage segment

There is currently only one local player providing metal cans with fast growing demand.

Market opportunity by 2030: $70 million
Investment required: $25 million

GLASS

12. Increase glass packaging production for beverages

Local demand is being satisfied with expensive and inefficient imports.

Market opportunity by 2030: $70 million
Investment required: $120 million

Opportunity deep dives

1. Produce pre-form bottles and other rigid plastics

Imported PET pre-forms and other rigid plastic packaging amounted to about $70 million in 2019 showing there is an opportunity for new companies to fill the gap.

Opportunity: About $205 million by 2030

Other sources of value: PET and HDPE are relatively easy to recycle and Ethiopia has low levels of recycling with most of the solid waste ending up in landfills.

Key product: PET bottles; HDPE bottles

Key enablers:

  • Requires scalability and mass production.
  • Access to raw materials and forex.

Key assumptions:

  • Average price to become $1,779 /tonne in 2030.
  • Total demand for PET and HDPE plastics is equivalent to 70% of total rigid plastic packaging demand.

Capital requirements:

  • Chinese producer Zhejiang Zhengkai invested $507 million in a PET bottle chip plant with an annual capacity of 1.2 million tonnes ($423/tonne).
  • Required investment for 2030 demand levels: about $49 million.

2. Increase local production of flexible plastic packaging

Flexible plastics like pouches are gaining popularity as less material is required to package goods. This popularity can gain further momentum as the packaged food industry in Ethiopia is set to grow 1.7% p.a. between 2019 and 2024. Most of the volume growth will come from biscuits (3.2% p.a.), cereals (3.1% p.a.) and rice and pasta (2.6% p.a.) – all suitable candidates for flexible plastic packaging.

Imported flexible packaging amounted to about $76 million in 2019 showing there is an opportunity for new companies to fill the gap. This opportunity could enable exporters within the agro-processing industry meet the quality requirements from global markets and become more competitive.

Key product: Wrap film; pouches; cutter box and case ready film

Key enablers:

  • Requires scalability and mass production.
  • Access to raw materials and forex.
  • Strong commercial relationship between packaging manufacturers and agro-processors.

Key assumptions:

  • Average price will be $3,069 /tonne in 2030.
  • Capex requirement for extruding and converting flexible plastics is $571/tonne.

Capital intensity:

  • Extrusion plus converting option: The Borealis LDPE plant with an annual capacity of 350,000 tonnes per year cost $200 million (about $571/tonne).
  • Required investment for 2030 demand levels: about $50 million.

3. Set up bamboo pulp production (and additional bamboo products)

Ethiopia was the ninth largest exporter of bamboo raw materials in 2015, holding 3% of the global stock of bamboo with 1.4 million hectares, but only 0.02% of the international trade. Bamboo is regarded as environmentally friendly and its rising popularity makes it an option for several end-uses such as personal care (e.g. tissues).

The Government of Ethiopia plans to promote expansion of the national stock of bamboo to 1.6 million hectares by 2030 (about 14%). Bamboo pulp could be a competitive product as it is easily shipped to global markets with demand.

Key product:

  • Mechanical pulp (CTMP): yellowish/grey tone with high opacity, smooth surface, higher absorbency; low cost product.
  • Chemical pulp (Kraft): High quality pulp with better properties of strength and brightness.

Key assumptions:

  • Crop area: 1.4 million hectares of bamboo in Western Ethiopia, of which 0.93 million ha (67%) is lowland type.
  • Pulp yield: 1 hectare would yield 7.5 tonnes of kraft pulp, 12 tonnes of CTMP.
  • Price: $550/tonne for kraft pulp, $450/tonne for CTMP.

Capital intensity:

  • Higher capital intensity than for paper mill.
  • Capital costs: $1,500-2,000/tonne for kraft pulp ($5-7 billion); $1,000-1,500/tonne for CTMP ($4-7 billion).
  • Efficient size (world class greenfield mill): 1-2 million tonne for kraft pulp; 300,000-500,000 tonne for CTMP.

Key enablers to materialise the opportunity:

  • Proximity between pulp mill and bamboo forests.
  • Stable supply from bamboo crops.
  • Regulatory framework in place to provide assurance to investors regarding land use and to minimise frictions from a fiscal and environmental standpoint.
  • Logistic infrastructure to bring bamboo to mill and then from mill to port (e.g. 600 km asphalted road linking Benishangul Gumuz region to Addis Ababa).

This article summarises findings from a Manufacturing Africa report. Manufacturing Africa is an FCDO funded programme looking to support investment into the manufacturing sector across Kenya, Ethiopia, Rwanda, Uganda, Nigeria and Senegal. 

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