By Patrick Smith, in Addis Ababa
Two days after Prime Minister Abiy Ahmed picked up his Nobel Peace Prize in Oslo, the IMF has announced a $3bn loan package to back the country’s complex economic reforms over the next three years.
It is the biggest ever finance deal from the IMF to Ethiopia, whose government has been historically sceptical of policies advocated by the international financial institutions in Washington DC.
Officials in Addis Ababa insist that their strategy of liberalisation of the telecoms and financial sector is distinctively “home grown” but that “pragmatism rules”.
Last week, Dr Arkebe Oqubay, minister and special adviser to Prime Minister Abiy, told The Africa Report in Addis Ababa that 2020 would be “…a year of challenges”.
- “Multi-party elections are due in May 2020, we have to address political reforms […] and we have a critical need for productive investment,”said Arkebe.
Last month, the people of Sidama in southern Ethiopia voted overwhelmingly to establish their own regional authority in a government-organised referendum, the first of its kind.
Much work remains to be done on how to set up the new authority, which will be carved out of the current Southern Region, and how to deal with demands from other ethno-nationalities for more new regional authorities.
In a year that will test the viability of the Abiy government’s fast-track reforms, Arkebe said it was vital to keep up the economic momentum: “We have to have companies that target exports […] Ethiopia has to maintain double-digit growth.”
Those ambitions are coming up against a harsh economic environment.
- Although the government targets economic growth rates of 11%, independent analysts such as the Economist Intelligence Unit forecast growth will average 7.6% from 2019 to 2023.
Briefing journalists in Addis Ababa on 11 December, state minister for finance Dr Eyob Tekalign Tolina said the government has been able to raise: “…over half the estimated $9-10bn we need to finance our economic programme over the next three years from the IMF, the World Bank and the African Development Bank.”
The coincidence of Abiy collecting the Nobel Peace Prize and the IMF’s funding decision comes after several difficult months in the country, which have led many to question whether the government’s reforming zeal has been derailed.
- At least 50 people were killed during outbreaks of violence in the south in July in which some campaigners for the Sidama referendum targeted their opponents.
- In a separate incident a month earlier, dissident security officers assassinated the premier of Amhara region and the chief of army staff in what the government called an attempted coup d’etat.
These clashes lie behind the bigger question of the country’s political direction, and the balance of power between the centre and the regions.
This comes after a year of political ouverture in which Abiy released thousands of political prisoners, allowed hundreds of exiles to return and unbanned many groups stridently critical of the government.
To cap it all, he has launched a new national grouping known as the Prosperity Party to contest next year’s elections.
As factional battles have intensified among leaders in the Tigray, Amhara and Oromo regions, critics have rounded on Abiy.
Some admonish him for being too liberal, loosening the bonds that held together the ruling coalition; others lambast him for presiding over the use of state violence against dissenters and periodically shutting down the internet.
These loud debates, following clashes on the ground, made for an awkward run-up to Abiy’s trip to Oslo for the Nobel prize ceremony on 10 December. He cut short the schedule in Norway and declined to speak to the international media.
- Olav Njølstad, secretary of the Nobel Prize committee, offered a rare criticism of a laureate: “Yes, we would very much have wanted him to engage with the press during his stay in Oslo […] we believe that freedom of expression and a free press are vital components of peace.”
Hell of war
In the event, Abiy’s emotive speech about the “hell of war” to the prize committee – describing how he was the only survivor of an artillery attack on his unit in the Ethiopia-Eritrea war – provided context to his political ideas.
Some 100,000 people were killed in the border war between the two countries and one of Abiy’s first actions on coming to power in April 2018 was to open talks with Eritrea’s President Isaias Afwerki about consolidating a peace accord and restoring close relations between the two countries.
That initiative – which remains a work in progress – is what prompted the Nobel committee to award Abiy the prize. Though the committee did not spell this out, it was clearly more of an award to encourage progress than to congratulate a leader on a job well done.
The payback for many of Abiy’s bold reforms is yet to come, the premier conceded in his comments at the ceremony, while insisting that he was committed to maintaining multi-party politics, media freedom and human rights.
Yet the difficulty of restructuring the political system in a country with over 80 ethnic groups and making radical changes in the economic system at the same time raise huge questions about the prospects for Abiy’s project.
The victory of his new party in next year’s elections is far from assured.
Long-termism may go
Critical to all of this will be stronger economic growth, and more benefits delivered to the regions, according to the impressive team of technocrats steering policy at the centre.
Political liberalisation means the old government’s strategy of keeping people in check to allow for long-term policies to work through is no longer practical, according to William Davison, senior analyst for Ethiopia at the International Crisis Group.
- “Trying to do economic reforms is a piecemeal thing at the moment,” says Davison. “Post-election there should be a more positive environment for reforms.”
Businesspeople in Addis say they don’t expect movement on questions like floating the Ethiopian birr or public-private partnerships until after the vote next May.
Last week, Eyob told The Africa Report and businesspeople on a trade mission organised by London-based Invest Africa that the preliminary work for the liberalisation of the telecoms and financial sectors would be completed by the end of the first quarter of 2020.
- “We have a roadmap which includes the establishment of an independent regulatory authority, a valuation for Ethio Telecom, appointing a financial transaction adviser and requests from qualified bidders.”
Industry sources say the sale of up to 49% of the state’s Ethio Telecom, which currently has a monopoly in the sector, could raise as much as $3-4bn.
Its revenues last year were 36bn birr ($1.4bn) and it is one of biggest companies in a developing economy still wholly owned by government.
- South Africa’s MTN, Britain’s Vodafone and France’s Orange have all expressed strong interest in Ethiopia’s tech and comms sector.
- The government is also planning to auction two more licences for telecoms service providers, a move which could generate several more billion dollars.
Last month, Jack Ma, co-founder of Alibaba Group in China, and Jack Dorsey, co-founder of Twitter, paid high-profile visits to Addis Ababa, extolling the potential for rapid growth of the tech and communications sector.
Ethio Telecom has just over 44 million subscribers out of the country’s 105 million people.
European suitors, leading women
On her first foreign trip since taking office, Ursula von der Leyen, the new president of the European Commission (EC), flew into Addis Ababa on 7 December to meet Prime Minister Abiy and Moussa Faki Mahamat, chair of the African Union Commission, talking up the EC’s new “geopolitical” aims to establish a stronger international role.
Von der Leyen came bearing a €170m ($189m) loan package to support health programmes and the modernisation of the electoral commission.
- She was pictured being greeted by President Sahle-Work Zewde alongside a stuffed lion at the presidential palace in Addis.
Sahle-Work, the first woman head of state in Ethiopia, who has a distinguished record on human rights campaigning, is one of Abiy’s pioneering appointments of women to top posts.
The other two are Meaza Ashenafi as chief justice and former opposition politician Birtukan Mideksa as chairwoman of the National Electoral Board.