FILE PHOTO: Ethiopia's newly elected Prime Minister Abiy Ahmed.

Addis Ababa - Businessmen who have to deal with Ethiopia's customs system like to joke that if you get a permit to import yellow paintbrushes, make sure every last one is yellow.

If an orange brush slips into the batch, let alone a red one, forget it - your shipment will be tied up for months.

Ethiopia has achieved one of Africa's fastest growth rates over the past decade, averaging up to 10 percent a year.

But investors complain about its stifling and antiquated socialist bureaucracy, where the default answer from fearful civil servants is “no” and importing something as mundane as cotton can take six to 12 months.

Now they hope things might change. Since taking office in April, Prime Minister Abiy Ahmed has made peace with Eritrea, freed political prisoners and promised to liberalise the economy.

The 41-year-old says outdated ways of thinking and working are holding back his country of 100million people, nearly half of whom are under 15. Overhauling the sclerotic government bureaucracy is arguably his biggest challenge, businessmen say.

Abiy, a former military intelligence officer with a doctorate in conflict resolution, is up against an entrenched fear of making decisions by civil servants that delays even routine matters.

Tradition

“To deliver on our grand reform agenda requires a change in mindset,” said Belachew Mekuria, head of the Ethiopian Investment Commission. “It’s going to be a very interesting - and at the same time challenging - journey.”

Investors agree, although they remain cautious.

“You don't break down bureaucracy with a couple of speeches. It will take a while, and there's the risk of disappointment,” said a European investor whose firm began financing two projects several years ago.

Reuters spoke to more than a dozen Ethiopian and foreign investors, from entrepreneurs to multinationals.

All of them applauded Abiy’s fresh approach and hoped it would awaken Africa's second-most populous nation from its security-obsessed, socialist slumber.

Fear of the kind of innovation demanded by local businesses and foreign investors has held back what could otherwise become the world's most dynamic economy over the next decade, said a Western investor in the media and e-commerce sectors.

Another problem is that Ethiopia is acutely short of dollars because the government has spent heavily on infrastructure before export earnings from new sectors such as manufacturing have taken off.

Several investors said getting dollars for imports from local banks takes between three and 12 months as weary clerks navigate the central bank's paper-based FX allocation system.

Ethiopia scores poorly in the World Bank’s Doing Business rankings - 161 out of 190 - and lags behind its east African peers in terms of cutting red tape.

Registering a business takes 33 days, compared to an average of 24 in sub-Saharan Africa and just four in Rwanda, frequently touted as a leading example of a state that has streamlined and modernised its bureaucracy to benefit the private sector.

Many pray Abiy can last the course. 

- Reuters