How Ethiopia’s New Economic Policies Would Impact Coatings Market

Ethiopia has recently unveiled its 25-year Construction Industry Transformation Initiative (CITI), a government-driven plan to transform the country’s construction industry. The scheme, which ends in 2050, is likely to create higher demand for a variety of eco-friendly and durable paints and coatings for the infrastructure.

The launch of the initiative in early August 2025 comes slightly more than a year after the government announced a ban on imports of internal combustion engine (ICE) vehicles.

It offers incentives to launch local production and importation of electrical vehicles (EVs), an automobile segment known to consume high-performance coatings, especially those with capacity to withstand the unique challenges associated with electric vehicle components, especially the EV battery system.

Boost Local Coatings Companies’ Competitiveness

These emerging trends in Ethiopia’s construction and automobile industries are expected to boost local coatings companies’ competitiveness both in the domestic market and across Africa. These offer the opportunity to form partnerships with foreign market players in the domestic manufacture and supply of world-class products.

Temesgen Tiruneh, Ethiopia’s deputy prime minister, was quoted as saying the launch of the CITI would not only make the country’s construction industry more competitive, but also enable the government and private sector to implement projects in an integrated manner.

In April 2025, Ethiopia’s Ministry of Finance said the government had spent 41.3% of its total capital expenditure of Birr 100.6 billion (US$713 million) on economic development, “with and most of this spending was on construction activities.”

“Specifically, Birr 31.6 billion (US$224 million), equivalent to 31.4% of the economic development spending, was apportioned to the Ethiopian Roads Authority (ERA),” the ministry said. ERA’s road network expansion underpins Ethiopia’s traffic road marking coatings market.

The multi-pronged economic transformation approach adopted by the Ethiopian government is expected to grow the country’s economy by 8.4% in the current fiscal year, which doubles Eastern Africa’s regional average of 4.2%, according to the Ministry of Finance.

EV Vehicles and Coatings

Part of the growth would come from the reduction of the fuel subsidy, as the ban on ICE vehicles is expected to reduce fuel expenditure and increase cash for capital development. The country ranks first in enforcing a ban on importing fuel-consuming vehicles.

The US International Trade Administration says in a previous report that Ethiopia is seeking to enhance its energy security and lower its reliance on imported fuels by “gradually eliminating fuel subsidies, promoting the importation of electric vehicles (EVs), and removing gasoline-powered vehicles from circulation.”

Ethiopia has an estimated 100,000 EVs, with the government committing to increase the number to 500,000 over the next 10 years. It will replace at least 95% of fuel-powered vehicles and convert 432,000 gas-powered vehicles to electric models. These developments are opening new opportunities for the introduction of modern technology in the manufacture of sustainable high-performance coatings targeting the local market.

Furthermore, the demand for eco-friendly and durable coatings is expected to grow from the planned installation of EV charging stations every 50 to 120 kilometers along major roads and highways. These include those used in branding the infrastructure as well as for decorative purposes.

Airport City Project

Meanwhile, the launch of the CITI coincides with the unveiling of one of Ethiopia’s largest construction projects, the US$7.8 billion Airport City Project at Abusera near Bishoftu, approximately 40 km from Addis Ababa’s Bole International Airport. This has the capacity to consume substantial amounts of decorative, protective, functional and specialty coatings for the airport infrastructure.

The airport project, which is expected to become Africa’s largest and a world-class aviation hub, is being developed by Ethiopia Airlines Group. The first phase has a 1.1 million square meter terminal with an annual capacity of 60 million passengers. It is expected to come online by 2029, according to the group’s project brief.

Official reports say the project, which is expected to break ground on October 2025, also features more than 100,000 square meters of cargo facilities and two parallel Code 4E runways. Two additional runways are planned in the second phase, and places the transportation sector as one of the key drivers in the growth of Ethiopia’s construction industry.

Eco-Friendly Coatings

A spike in the performance of Ethiopia’s economy, and especially its construction industry, has attracted both local and international investors into the country. These include those keen on expanding their existing business operations, while some are establishing manufacturing plants to produce modern market-driven paints and coatings brands.

For instance, Terraco Egypt Chemical Industries, which for nearly 10 years has been exporting eco-friendly paints and other finishing products to Ethiopia through Vivid Ltd, recently established the first factory for the production of its products in Ethiopia.

Ethiopia’s thriving construction sector, says the Netherlands Enterprise Agency (NEA) in a report, “has created an increased demand for interior and exterior finishing products, such as paints.”

“Because of a growing awareness about the potential harmful effects of some of the trace components present in most coatings, there is an increased demand for environmentally friendly products with no volatile organic compounds or formaldehyde and are mostly water based,” it adds.

Vivid Ltd and Terraco Egypt Chemical Industries, the two joint ventures in the paints factory in the Chancho area, say they “will combine the most stringent environmental guidelines for interior and exterior paints in the world and produce a range of products which fully complies with them all.”

The JV partners have pledged to “set an example of environmentally friendly paints and production methods which the other factories will have to follow in order to satisfy their clients.”

“Terraco Egypt Chemical Industries works conform to West European standards,” NEA says. Other project partners include K2 Coatings Holdings Ltd. and Netherlands Enterprise Agency.

NEA says Ethiopia’s construction sector will benefit from the new paint manufacturing plant “as the environmentally friendly paints will be available year round without long waiting periods at affordable prices and the paint factory will try to source its raw materials as much as possible in Ethiopia itself, benefitting at least four of five companies in the supply chain of the factory.”

The plant, the report indicates, will not work with solvents, but only produce water-based paints, hence protecting the environment from hazardous waste.

Furthermore, the European norm of the amount of volatile organic compounds (VOC) used in the paint is 30 grams per liter, while the norm of Terraco is 5 grams per liter, the report says.

Statista, a German online platform that specializes in data gathering and visualization, estimates Ethiopia’s revenue in the paint, wallpaper and supplies market is US$1.31 billion in 2025, and would likely experience an annual growth rate of 3.45% between 2025 and 2029.

“The demand for eco-friendly paint products is growing in Ethiopia as the country prioritizes sustainable development,” it says.

With Ethiopia’s determination to increase its national budgetary allocations for the expansion of the construction sector, and growing interest from private sector investors to bet their money on key transportation and construction sectors, the country’s paints and coatings market has reason to remain optimistic about better business growth opportunities going into the future.