💔 No Donor, No Cry?

Welcome to the latest edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

Here’s what’s coming your way:

• 🛒 Donor Shopping After USAID Says “It’s Not You, it’s Me”

• 🦄 A Love Story That Hasn’t Happened: Venture Capital x Ethiopia

• 🗝️ The Key Takeaways

Thanks for reading!

Wink, Wink: Ethiopia is Dating Donors After USAID Breakup

Finance

Along with the rest of the world, Ethiopia just got dumped by its biggest donor, and now we’re back on the market—swiping right on any country with deep pockets and a soft spot for development aid.

For decades, USAID has been covering a bunch of tabs—while we nodded along like, “Yeah, yeah, we got this… eventually.” 

Well, eventually just showed up, and now that the money tap is off, we need to figure out who’s paying next.

Are we about to go knocking on another donor’s door with our best “you up?” text? 
And more importantly, should Ethiopia have been on this train for so long in the first place?

Let’s delve into this.

Wait, How Much Money Are We Talking About?

USAID isn’t just any aid organization—in Ethiopia, it’s the aid organization. Indeed, we’ve been on the receiving end of a whole lot of their cash:

• $21.9 billion – Ethiopia’s total USAID funding since 2001. በለው!

• #1 in Africa – Ethiopia has been the largest USAID recipient on the continent over the span of those 20+ years, with Kenya trailing behind at $17 billion.

• $1.8 billion – USAID funding received in 2023 alone, ranking third globally—just behind Ukraine and Israel. That’s 1-2% of Ethiopia’s GDP, to put it in perspective.

• $300 million+ – Dedicated to humanitarian aid in 2023 (food, medical supplies, crisis response).

• 40%+ – The estimated portion of Ethiopia’s healthcare aid that USAID funds.

This means USAID money has been everywhere—from hospitals and schools to agriculture and humanitarian aid. And now? It’s about to disappear.

Who’s Getting Hit the Hardest?

This isn’t just a government problem—it’s a real-world, everyday-life problem. Here’s where the pain will be felt the most:

🏥 Healthcare

• HIV/AIDS treatment programs? USAID funds over 70% of them. Without this, thousands could lose access to life-saving medicine.

• Maternal health, vaccines, emergency clinics? All at risk.

🌾 Agriculture & Food Security

• Ethiopia has been struggling with food insecurity for years. USAID funds millions in food aid. Now what?

• Farmers who relied on aid-backed seeds and irrigation projects will need alternative funding fast.

🏢 NGOs & Jobs – The Hidden Impact

• Thousands of aid workers in Ethiopia—locals and expats—are about to lose jobs.

• Local & International NGOs that relied on USAID grants will either shut down or scale back operations.

• Indirect job losses from NGOs’ local supply chains (logistics, transport, suppliers) are coming too. Think of all the Ethiopian businesses that supply NGOs with all sorts of products, and contracted to carry out all kinds of work.

Conflict-affected regions and areas hit by drought for example will suffer the most, as emergency relief programs run out of funding. Other International NGOs like Oxfam and GIZ might try to step up, but let’s be very clear—their combined budgets for Ethiopia is a fraction of USAID’s funding. It won’t come close to filling the gap. Simply put: this “aid problem” could turn into a bit of a crisis.

So, Who’s Going to Bridge the Gap?

The Ethiopian government can’t just let essential programs collapse—but without USAID money, there’s a huge budget gap. And how do governments usually fill budget gaps?

Taxes. More of them.

Possible scenarios:

• Higher VAT: Ethiopia’s VAT rate is currently 15%—not the highest in Africa, but increasing it would hit consumers hard, especially as inflation remains high.

• New levies on businesses: The government could raise corporate taxes or introduce special levies on financial transactions, imports, or telecom services.

• More aggressive tax collection: The Ministry of Revenues has already been cracking down on tax evasion—expect that to intensify.

Higher taxes would slow economic growth and make it harder for local businesses to expand—the exact opposite of what Ethiopia needs right now.

Will This Hurt Ethiopia’s IMF Deal & Economic Reforms?

Short answer: It could. This aid cut comes at a terrible time for Ethiopia’s economic reforms. The government has been working to privatize industries, attract foreign investment, and secure an IMF bailout. But losing USAID funding could shake investor confidence and make Ethiopia look less stable.

• The IMF cares about economic stability. If Ethiopia loses aid money and can’t replace it, the IMF might slow down lending or tighten conditions.

• Foreign investors are watching. If losing USAID money creates social unrest or economic slowdown, investors might hold back on Ethiopia’s stock exchange (ESX) and other new ventures.

Bottom line? Less aid means Ethiopia needs to hustle harder for investment.

The Bigger Problem: Ethiopia’s Aid Dependency

Here’s the real issue: Why was Ethiopia still the #1 aid recipient in Africa after 20 years?

• Our government budgets expect aid money instead of prioritizing private sector growth.

• We should be leading in investment, not aid. Countries like Rwanda and Ghana have shifted away from aid dependency by prioritizing investment, startups, and trade.

• We need better capital markets. The Ethiopian Stock Exchange (ESX) just launched, but it needs real investors, not just forced listings.

• Ethiopia ranks 159th in business climate. Foreign investors love Ethiopia’s potential but hate its bureaucracy. Fixing that will bring more money than any aid program ever could.

So… What’s the Plan?

Ethiopia will have to survive without USAID, here’s a few ideas:

1️⃣ Attract Foreign Direct Investment (FDI)

• Open up more sectors (banking, telecom, and energy) to international investors.

• Cut the bureaucratic red tape that makes Ethiopia a nightmare for investors.

2️⃣ Strengthen the Private Sector

• Encourage local businesses to grow without needing aid-backed grants.

• Offer tax incentives for Ethiopian entrepreneurs and SMEs.

3️⃣ Fix Capital Markets & Banking

• The Ethiopian Stock Exchange (ESX) needs real investors, not just big banks forced to list.

• The currency and forex crisis needs real solutions—investors won’t come if they can’t move their money.

4️⃣ Secure Other Funding Sources

• If aid is disappearing, Ethiopia needs to double down on trade agreements (AfCFTA, China, Gulf investors, etc.).

• Develop public-private partnerships (PPPs) to replace lost aid money with sustainable investment.

Key Takeaways

1. USAID is dumping us—after USD 21.9 billion in aid over a 20+ year relationship, Ethiopia is single and ready to mingle!

2. Brace for taxes—the government needs cash, which might mean higher VAT, new business levies, and tax collectors working overtime.

3. No more donor-shopping—time to start wooing investors, not handouts. 

ፍራንክ Picks 

🚶🏽 Event: Dubai Real Estate Event @ Skylight [Feb 22 -23, 2025]

🗞️ In the news: No light ahead as EEP revenue improves but records 10B ETB loss

♟️ Innovation: Mogzit: Finding Nannies Made Easy

Venture Capital x Ethiopia

Venture Capital

In 2010, Uber, a relatively unknown small ‘startup’ (cute little name we use to describe a potential juggernaut), was given a $1.25M investment from a Venture Capital (VC) firm called First Capital. (A cute little amount by VC standards)

Uber pioneered ride hailing, enabling anyone with a car to provide transportation services through an app.

It might seem so ubiquitous today but the novel idea became a universal disruptor, giving birth to followers around the world, like RIDE and Feres. 

13 years later, Uber made $37B in one year. That’s a B for Billions, fyi.

But that’s ሀገረ America, where funding is aplenty. Especially VC funding.