Digitization Outside Addis: A Look at Technology and Transformation in Dire Dawa

Digitizing the Ethiopian economy has been a government priority for the last few years and, although gradual, it appears the country is coming to grips with the concept of digitization as a driver of economic development.

The “Digital Ethiopia 2025” strategy is the administration’s primary roadmap for digitization. It details the roles regional governments are expected to play in the process, including the promotion of digital literacy and digitization of government services.

However, most investments, projects, experiments, and research in digitization is concentrated in Addis Ababa – the country’s primary economic hub.

As part of an initiative to take a look at the status of digitization outside of the capital, K-flip visited Dire Dawa.

Digitalization in Dire Dawa

Dire Dawa, one of only two chartered cities in the country, is located close to 500Km east of the capital. It is one of the largest cities in Ethiopia – home to an estimated half-million people.

Proximity to Djibouti and a major trade corridor makes Dire Dawa a vital economic hub. Present day Dire Dawa owes its foundation to the construction of the Addis Ababa-Djibouti railway over a century ago. The city’s residents have since developed a reputation for their laid-back lifestyle and eagerness to adopt new technology.

Its location, economic importance, and forward-mindedness make Dire Dawa a prime candidate for progress in digitization outside of the capital. But how has this been working out so far?

Infrastructure

Infrastructural readiness and capacity are essential for both digitization and overall economic development. The availability of telecom services, power, roads, and technological devices is crucial in connecting individuals with the world around them. Connectivity enables greater access to information, and opportunities to develop or improve skills, increase income and drive creativity.

Increased internet usage, for example, can both fuel economic development and boost GDP growth.

Ethiopia’s telecom connectivity has improved significantly over the past few years. The state-owned Ethio telecom claims its geographic coverage reaches over 85% of the country. The number of users has also nearly doubled in the past five years.

Dire Dawa and its residents enjoy dependable access to telecom services. Telecom is a lifeline in the city; important to trade and social interaction.

The internet is ubiquitous in Dire. Ethio telecom’s strategy of lowering prices for home-based broadband services has led to their quick adoption in the city and in Addis Ababa as well.

Although regional and city breakdowns are hard to come by, Ethio telecom recently announced its fixed broadband subscriber base has grown by 765% to half a million customers across the country in four years. The operator launched its 4G LTE in Dire Dawa in May 2021. Ethio telecom had 1.3 million users in its Eastern District, which includes Dire Dawa, as of 2021.

Estimates from Facebook ADs reveal that close to 150,000 people use Facebook in Dire Dawa.

Safaricom Ethiopia Plc, the country’s  first private telecom operator, selected Dire Dawa as its launch pad when it began its large-scale network pilot a few weeks ago. The city’s residents welcomed the development enthusiastically, with thousands queuing up outside Safaricom shops to buy SIM cards.

Based on K-flip’s observation vast majority of Dire Dawa residents own a smartphone. Smartphone penetration is likely to grow as Safaricom has availed mobile devices for sale alongside the launch of its network.

The city’s transportation system is a strong suit. Its main roads are asphalt while most of its side streets and thoroughfares are laid with cobblestone. In the mid-2000s, Dire Dawa was chosen as ground zero for cobblestone roads, which have since spread across the country.

Dire’s streets are packed with three-wheel rickshaws – the most common form of public transportation in the city. Some of these vehicles are assembled locally.

Financial Services

The relationship between access to financial services and economic development is unquestionable.

Ethiopia ranks among the lowest in terms of financial inclusion, but recent years have shown gradual signs of improvement with the boom in digital financial services and a growing number of banks. 

Nearly all commercial banks, including recent industry entrants, have a presence in Dire Dawa. This includes the state-giant Commercial Bank of Ethiopia (CBE), Awash Bank, the Bank of Abyssinia, Dashen Bank, and Wegagen Bank. Smaller ones such as Enat Bank and Debub Global Bank also operate branches in the city.

Newly-established Amhara Bank as well as the interest free ZamZam and Hijra banks are serving clients in Dire Dawa. Siinqee and Shebele – microfinance institutions that have relicensed as banks – are also present.

Goh Bank, the only mortgage bank in the industry, has been operating in the city for close to eight months. It has thus far provided one mortgage loan to a Dire Dawa resident. Goh has registered profits of six million Birr through its nationwide mortgage and commercial loan operations in its first year of operation.

Two-thirds of the banking industry branch network is located outside the capital. In contrast, more than half of the insurance industry’s 670 branches are confined to Addis Ababa.

Automated teller machines (ATMs) are readily available across Dire Dawa.

Much like the rest of the country, microfinance institutions (MFIs) have a significant presence in Dire Dawa. Among them is Dire Microfinance, which was established in 2003 by the city administration following a feasibility study that identified gaps in financial inclusion.

Business owners in Dire Dawa say microfinance institutions are a significant source of financing. Dire Microfinance is the major player, providing a range of financial services including lease financing.

As of March 2022, the MFI had over 8,000 active borrowers and outstanding loans of 287 million Birr. Half of Dire Microfinance’s loans went to the trade sector, followed by unclassified sectors and construction.

The city administration also facilitates the provision of credit to enterprises. Over 1,397 existing micro and small enterprises (MSEs) run by 1,822 individuals received 283 million Birr in loans with help from the city administration. Another 94 million Birr went to 580 new micro and small enterprises, while 33 enterprises received capital financing valued at 27.2 million Birr.

Dire’s population has been receptive to digital banking services. The Commercial Bank of Ethiopia’s CBE Birr, Ethio telecom’s Telebirr, E-birr, and Hellocash have a presence in the city. The CBE’s mobile banking platform is widely used for account transfers. E-Birr is also commonly utilized for payments.

Residents that K-flip spoke to say Telebirr has yet to gain widespread acceptance in Dire Dawa. It is in contrast to the mobile money platform’s success elsewhere in the country which has managed to attain over 23 million users since its launch in May 2021.

Innovation & Technology

Speaking at a training programme organized by the Dire Dawa City Administration and the Ministry of Innovation & Technology in June 2021, Ahmed Mohammed, former deputy mayor of Dire Dawa, said the city’s municipal authorities are in the infancy stage of using science, technology and innovation to alleviate problems in the city and bolster its economy.

The statement still holds true. Innovation trails behind despite strong infrastructural enablers, high trade activity and adequate digital literacy.

Much of the city administration’s services are yet to see digitization, but there are some positive signs. The Dire Dawa Tax Authority has integrated its payment system with Telebirr. Ethio telecom has struck a similar deal with tax officials in Addis Ababa.

There are still shortcomings in digitized services, and some trendsetters are attempting to delve into the digital space to make their mark. Among them is Bama Entertainment Center.

Born and raised in Dire Dawa, Daniel Tadesse is the man behind Bama Entertainment – a chain of businesses such as a game zone for kids, a restaurant and an ice cream parlor.

Daniel had an order placement system developed when he opened his restaurant in Dire Mall, located in the city’s Sabiyan neighborhood. Daniel commissioned professionals in the capital to develop the system, which he hoped would help maintain accountability and allow him to monitor his business remotely.

He has noticed that many of his customers are placing orders by phone, pushing him to begin working on the development of an online order and delivery system. 

There are other examples of private sector digitization in Dire Dawa as well. Reagan Technologies is the most prominent tech firm in the city, engaged in software development. The company developed the management system deployed at the city’s ART Hospital. It has also developed a digital payroll system and car simulator software for gaming.

Taxiva, a ride hailing company, runs an office in Dire Dawa with plans to digitize transportation services provided by the city’s ubiquitous rickshaws. Feres, one of the biggest players in Addis Ababa’s ride hailing industry, is also gearing up to expand its services to Dire Dawa.

Transportation in Dire is costlier than in the capital. Rickshaw drivers have upped fares for contract work since the last adjustment to fuel prices. Prices are higher than ordinary partly because the federal government’s dual-rate system under its fuel subsidy phase-out is not yet fully operational in Dire Dawa.

Though the city administration’s Labour Skills & Technology Development Office hosts various competitions and provides consultation and training to startups, there are no dedicated startup incubation centers in Dire Dawa.

Skills & Learning

Two state-run vocational schools provide training in areas of technology, among other disciplines, to Dire Dawa residents. Dire Dawa University, the city’s only public higher learning institution, is augmented by several nationwide private institutions such as Rift Valley University and Lucy college.

The city administration and some private institutions occasionally provide short courses and training programmes in technology and ICT as well.

Dire Dawa University is leading technology awareness initiatives in the city and runs multiple training programmes. In 2019, Dire Dawa University, in collaboration with the Dire Dawa Information & Technology Directorate, launched a digital literacy program aimed at SMEs.

Under its business development directorate the university has also continued providing computer and digital skills trainings to government employees including members of the Federal Police.

The Employment Dilemma

Urban unemployment is an increasingly pressing problem facing policymakers. Ethiopia has one of the most youthful populations in the world, with more than 70% under the age of 29.

Ordinarily, a high proportion of youth is an asset for development but this holds true only when there exists matching employment creation and entrepreneurship fostering. Otherwise, the unused potential coupled with a fall in purchasing power will prove a hindrance to economic growth.

The significant youth demographic, higher rural-urban migration, a growing number of students graduating from higher education, and a lack of job opportunities leave a sizable gap in employment.

The unemployment figures for Dire Dawa mirror the national high unemployment rates. The city ranked second-worst out of all regional administrations surveyed by the  Central Statistics Agency (CSA) in its Urban Employment and Unemployment Survey conducted in 2020. Tigray topped the list at 23.3% followed by Dire Dawa (21%) and Amhara (20.4%). Female unemployment in Dire Dawa is the highest in the country at 32%.

CSA’S estimates indicate 21,000 potentially economically active individuals are unemployed in Dire Dawa.

The newly-established Labour Skills & Technology Development Bureau is tasked with job creation; enterprise development and support; market development; facilitating financial services; registering jobseekers; providing industrial extension, audit and inspection services; and availing working spaces, among others.

Last fiscal year, the Bureau’s administrators had registered over 13,300 job seekers of which under 2,000 were higher education graduates. Employment opportunities for over 12,000 individuals were created over the same period. The industry sector accounted for the majority with opportunities in the service sector being secondary. In addition, a number of of temporary jobs were created across various sectors.

The major portion of employment opportunities are generated in the trade, service, manufacturing and agricultural sectors. K-flip’s assessment in Dire Dawa found there are no medium or large tech firms operating in the city, which shrinks the pool of potential tech-related employment opportunities.

Despite the city’s high unemployment rate, employers complain that a lack of a skilled and professional workforce remains a stumbling block.

Development agencies are collaborating with private institutions and the government to implement youth empowerment programs in Dire Dawa aimed at increasing employability, widening access to finance and fostering youth contribution to economic growth.

Kefeta and Ra’ey, both National projects are actively being implemented in Dire Dawa, along with other regions. Kefta is a project that seeks to help the youth find meaningful jobs,innovate and expand their voice in Ethiopia’s civil discourse, While the latter is engaged in helping young people transition to dignified and fulfilling jobs.

Bright Future?

The growth of digital  services all over the country positions Dire Dawa to transform into a major digital hub of the country mainly due to its residents’ openness to adapt to new trends. However, insight gathered from residents highlights that a one-size-fits-all approach will not do for Dire Dawa. The city presents its own peculiar challenges. Understanding these challenges would go a long way in successfully implementing a digital transformation.

There is reason to hope, however.

The recent inauguration of the Dire Dawa Free Trade Zone (FTZ), the country’s first, is encouraging. Dire Dawa Industrial Park and Dire Dawa Dry Port are expected to comprise the FTZ, which will feature flexible trade laws. For instance, trade conducted within the FTZ will be duty free. The FTZ, which is expected to have adequate infrastructure in place, will host specific economic activities (trade, logistics and manufacturing).

After the federal government finalizes the legal frameworks necessary to implement the FTZ, Dire Dawa is expected to take off as a hotspot for trade. Experts foresee this will open a vast array of opportunities for employment and technology adoption as local and foreign investors look to get in on the action. The FTZ can also serve as a sandbox for new policies, such as the liberalization of the financial sector.

“The Free Trade Zone we are building is a way to integrate into a rapidly changing world. I have no doubt it will not only facilitate trade and investment, but also enhance our technological capabilities,” wrore Prime Minister Abiy Ahmed after the FTZ groundbreaking ceremony held last month.

2 Responses

  1. I found the article to be very informative and hopefully eager to hear from the author about other towns in the county in this regard. I am surprised that no branch of Oromia bank and cooperative bank of Oromia is present in Dire Dewa while the smaller banks are there.

  2. It is an uplifting story that you brought us. Thank you! I came here directed by a friend who is working in the IT sector. We hope our towns including mine, Debre Birhan, have more digital hubs and benefit from the technological advancement of this time.

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