Business & Economy

Abiy Ahmed outlines policies in Ethiopia’s shift towards economic liberalization

Ethiopia aims to complete a multibillion-dollar privatisation of its telecoms sector by the end of this year, followed by a sell-off of stakes in state energy, shipping and sugar companies, according to the new prime minister Abiy Ahmed.

Abiy Ahmed is pushing an agenda of ‘privatisation with zero corruption’

The government also plans to launch a domestic stock exchange in 2020, part of a gradual but decisive shift towards economic liberalisation in the fast-growing east African country of 105m people.

“My economic model is capitalism,” Mr Abiy said in an interview with the Financial Times, conducted in his refurbished headquarters in Addis Ababa. “If you give me $100bn now, I can’t use it. There is not only money, there is talent and experience. That’s why we need the private sector.”

Mr Abiy’s policies mark a break with the previous administration, which emphasised controlling the economy’s “commanding heights” and reinvesting profits in infrastructure, health and education.

This so-called “development model” pursued by Meles Zenawi, a previous prime minister, led to annual growth of 10 per cent for more than a decade until 2017, according to official statistics, but ran into capacity constraints and chronic shortages of foreign exchange.

Mr Abiy has pursued foreign loans and investment, especially from the Gulf and Middle East, to help ease the cash crunch, including a package worth $3bn from Abu Dhabi.

Appointed after a popular revolt against the government, the prime minister is likely to face resistance from some in his own four-party coalition, the Ethiopian People’s Revolutionary Democratic Front, which has run the country since 1991.

The government is planning to sell off a 49 per cent stake in Ethio Telecom, according to people familiar with its plans. Ethio Telecom is the biggest telecoms company in Africa in terms of customers in a single country, with more than 60m subscribers.

But its opaque debt structure and low earnings per customer mean it might fetch less than the government expects, say bankers.

Mr Abiy said that earning cash from a state monopoly was less important than launching services such as electronic money, e-commerce and virtual government, in which African peers such as Kenya are more advanced.

To promote competition, Ethiopia is also likely to auction off spectrum to two additional telecoms companies, with Vodacom, Orange, MTN and others expected to bid, according to bankers.

Miguel Azevedo, head of investment banking for Africa at Citibank, said: “When I speak with international investors about opportunities in Africa, the first name that pops up is Ethiopia.”

The prime minister said he would proceed cautiously on privatisation in order to avoid any hint of corruption. “We do telecom, we learn something, we evaluate seriously, we continue,” he said.

Debretsion Gebremichael, chairman of the Tigray People’s Liberation Front, part of the EPRDF coalition, said there were “serious dangers” in moving away from a planned economy.

“If we go the way the neoliberals advise, this will go off the rails,” he said, alluding to the country’s strong development record, which has seen it overtake Kenya as east Africa’s biggest economy. “The state still has its role in the economy. We have proved that.”

Mr Abiy is unpopular in Tigray where he is seen by many as biased against Tigrayans and the TPLF, which dominated the coalition before Mr Abiy’s selection. Mr Abiy is the first prime minister from the Oromo region, whose people make up a third of the population but who have long felt marginalised.

Asked about party unity, including rumours that the TPLF might quit the EPRDF coalition, Mr Abiy said: “I have never paid attention . . . whether the EPRDF is together or not. But I don’t think we’ll split apart.”

Mr Debretsion also strongly denied that the TPLF would consider leaving in spite of disagreements with Mr Abiy’s policy direction.

Outside the economy, among the most pressing issues Mr Abiy faces is an intensification of nationalist feelings among many of the country’s ethno-linguistic groups, which form the basis of the country’s nine regions. More than 1m people were displaced last year, mostly over land disputes. There is even talk of potential war between Tigray and the neighbouring Amhara region, which has recently stepped up claims to Tigrayan land.

Mr Abiy has stressed the unity of Ethiopia in what some regard as a threat to the federalist constitution. People must learn to co-operate “instead of killing each other”, he said.

Via Financial Times by Lionel Barber and David Pilling

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