Ethiopia’s Sovereign Wealth Fund Scraps Dodai MoU, Eyes Venture Capital Fund

Ethiopian Investment Holdings (EIH) has terminated its Memorandum of Understanding (MoU) with Addis Ababa-based electric vehicle (EV) startup Dodai Inc. five months after it was signed. The Ethiopian government's investment arm attributed the termination to a realization that a venture capital fund (VC), currently under formation by EIH, would better manage such investments. In a statement shared on Saturday morning, EIH indicated that a VC would be better suited for risk management, realizing targeted investment returns, and enhanced operational support for early-stage ventures.

“Pursuing the battery-swapping initiative directly through EIH is not deemed feasible at this stage,” reads the statement.

The October MoU entailed support from EIH to deploy 100 battery swap stations in the capital over the next year, with plans to expand to 300 stations over three years. Estimates during the period suggested that investments ranging between 30-40 million dollars would be needed to realize the partnership targets. Dodai which is currently working to scale up and diversify its operations, announced plans in March to cover license plate fees for 250 members of an EV association as it navigated regulatory hurdles in Addis Ababa.

EIH revealed that it has received interest from other start-ups in the sector reinforcing the need for a broader investment approach that aligns with the Fund’s long-term strategic goals. Despite the importance of VCs in spurring growth within the startup sector being a longstanding recommendation, Ethiopia’s financial landscape has yet to see any prominent players. While VCs can operate in private markets, they benefit greatly from vibrant capital markets for liquidity, fundraising, and an exit strategy. Ethiopia’s recent strides in establishing capital markets are expected by industry insiders to channel much-needed investments into the startup sector. Establishment of the EIH backed VC fund is in its early stages with details about capital and timeline currently in the pipeline.

EIH is currently spearheading reforms across the 40 state-owned enterprises (SOEs) under its portfolio in a bid to usher in global competitiveness and efficient practices. At least five of the companies within the Holding are set to list shares in the country’s maiden securities exchange.