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Uncertain Future for Ethiopian Development

November 27, 2007


The Economist reports that “while things are getting better for much of Africa, Ethiopia risks getting left behind [“A brittle Western ally in the Horn of Africa,” 3 November 2007 print edition]. With all the turmoil that has taken (and continues to take) place in the Horn of Africa, it isn’t too surprising that a country in that area is having trouble. Ethiopia, however, had a couple of things going for it that had inserted a ray of hope into the picture — one of those things was the political support of Western powers. The Ethiopian Government proved its value to many of those powers when it routed a militant Islamist group in Mogadishu that Western powers feared would provide protection to terrorists hiding in Somalia. However, with renewed fighting in Mogadishu and Ethiopian soldiers being dragged through the streets in “Blackhawk Down” fashion, things aren’t looking too good at the moment.

“As America surveys the map of eastern Africa, it finds little to take comfort from. Somalia is in anarchy, riven by competing warlords and a haven for Islamist militants. Sudan is involved in the bloody suppression of blacks in its western region, Darfur. Both countries are deaf to outside complaints and seem chronically unstable. America is thinking of putting Eritrea, briefly a beacon of hope after it split from Ethiopia in 1993, on its list of countries that sponsor terrorism. But between that grim trio stands Ethiopia, America’s hope. This ancient country has become an essential ally of America in the ‘war on terror.’ Last year Ethiopia invaded Somalia in support of a UN-backed transitional federal government, which had been threatened with jihad by the Union of Islamic Courts (UIC) that had taken over Mogadishu, the capital. The Americans joined in, giving vital intelligence, to catch al-Qaeda people whom the UIC was sheltering. These men, it believed, were responsible for the bombings of the American embassies in Kenya and Tanzania in 1998, killing more than 220 people. … Certainly the Bush administration has been unstinting in its praise of Meles Zenawi, the prime minister. It has also vilified Ethiopia’s neighbour and mortal enemy, Eritrea, which it accuses, among other things, of arming and funding the Somali Islamists.”

It wasn’t just Zenawi’s support for efforts to route terrorism that garnered praise it was his apparent desire to bring Ethiopia out of the dark ages.

“Mr Zenawi won the West’s friendship, too, for his efforts to tackle Ethiopia’s deep poverty. These have met with some success—so much so that Tony Blair has put Mr Zenawi in the vanguard of an ‘African Renaissance.'”

So far, so good. But The Economist reports that the West’s honeymoon with Zenawi was a short one.

“Ethiopia’s upward track as development poster-child and dependable ally was rudely interrupted in 2005. That year’s presidential and parliamentary elections were marred by mass killings on the streets of the capital. Police fired on opposition supporters and others who were protesting against what they claimed were rigged elections. Tens of thousands, including journalists and NGO workers as well as opposition activists, were rounded up in a general dragnet; many spent weeks, or months, in prison without charge. Opposition leaders were accused of hugely inflated crimes, such as high treason and genocide. Seventy-one of them were freed only last summer, after having to sign a letter admitting their part in inciting violent protests. These events shattered the West’s cosy image of the modernising, progressive Mr Zenawi. Appalled Western governments abruptly switched off direct financial support to the Ethiopian government, though aid has been resumed through indirect channels. And an anti-Zenawi lobby, largely funded by the big Ethiopian diaspora in America, now issues a stream of anti-government criticism from the United States. A few weeks ago the House of Representatives passed a bill condemning Ethiopia’s human-rights record and pledging money to help opposition politics. Though it stands almost no chance of becoming law, it shows that Ethiopia is now a subject of fierce controversy.”

This is an old story in Africa — bad leaders and corruption squandering opportunities. No African country can afford setbacks caused by such leadership, but even among African countries Ethiopia is remarkably unresilient.

“Ethiopia likes to do things differently. In September it started celebrating the new millennium, more than seven years after everybody else. The country has been out of step in this respect since 1582: while the rest of the Christian world changed to the revised Gregorian calendar, Ethiopia stuck to the Julian. It also still keeps its own time, measured in 12-hour cycles rather than 24-hour ones. Uniquely in Africa, Ethiopia was never really colonised by Europeans. But its singular history has been a curse as much as a blessing. As the rest of Africa decolonised and modernised, albeit fitfully, after the second world war, Ethiopia remained stuck fast in a feudal fantasy presided over by a diminutive emperor, Haile Selassie. He was deposed only in 1974, by which time the modern world had largely passed Ethiopia by and the country had become known for poverty and famine. It still is. Ethiopia was further damaged by the committee of military officers, known as the Derg, that overthrew the emperor. That regime degenerated into a “red terror” of gulags and summary executions; it also lost an expensive, wasteful war with Tigrayan and Eritrean separatists over what would become, in 1993, the new country of Eritrea. The Derg produced the dreadful famines of 1984-85, the first to be alleviated mainly by the efforts of Bob Geldof and a phalanx of rock stars.

The story in Ethiopia, however, has been a mixed one under Zenawi. While he may be a tyrant, he has not been a complete tyrant.

“Since the early 1990s, … Ethiopia has recovered somewhat under Mr Zenawi. Signs of that are evident on the big, pristine campus of the University of Arba Minch, more than 500km (311 miles) south of Ethiopia’s capital, Addis Ababa. The university’s president, Tarekegn Tadesse, has welcomed 8,000 students this term, a huge number for an obscure provincial town of 50,000-odd people. The crowd of freshmen, he says, testifies to the government’s rapid expansion of tertiary education; in the case of Arba Minch, enrolment has increased fourfold in seven years. It is an inspiring story. The new university buildings springing up all over the south are tangible evidence that the aid and development money pumped into Ethiopia reaches the people it is meant to. Roads are clearly being built, funded largely by the Chinese; schools and water-treatment plants are being opened. And there are few complaints of corruption, a fact that continues to make Ethiopia popular with foreign donors. Some of the results are encouraging, too. Infant mortality is said to have dropped from 141 per 1,000 live births in 2000 to 123 per 1,000 in 2005; over 70% of children are now in school, and access to clean water has more than doubled in ten years. Furthermore, the government can point to the rapid expansion of a few sectors in what is still mostly an agricultural economy. The great volcanic lakes of the Rift Valley south of the capital are now ringed by vast flower farms, mainly exporting to Europe. Flowers earn the country about $88m in exports annually, creating some 50,000 jobs in the past few years.”

So why is Ethiopia’s future so bleak? The answers are myriad, but include a bad demographic outlook,
political patronage, inflation, and a moribund market economy.

“After almost a decade of well-intentioned development policies, Ethiopians remain mired in the most wretched poverty. Officially, about 80% of them live on less than $2 a day. Often it is a lot less than that. An area like Sidama, in the south, looks green, tropical and improbably fertile, but existence there can be precarious. One foreign charity, Action Contre la Faim, recently found that the average cash income for households in one area was six cents a day. Shocked researchers concluded that the depth of poverty there was ‘far beyond what had previously been thought.’ Visiting the nearby villages confirms these cold statistics. In Garbicho Lela, high up in the hills, a nurse estimates that 13% of children are severely malnourished. The one shop in the village betrays the low level of economic activity; on the weekly market day, when over 500 people will walk for hours from the surrounding hill-villages to sell a few things, the shop will do only about 200 birrs ($23) of business. On an average day, it sells two Pepsis. After three years of good rains, aid workers reckon that the risk of severe food shortages has, for the moment, receded. But so marginal are the reserves of food and money here that one bad season could still spell disaster. The fact is that for all the aid money and Chinese loans coming in, Ethiopia’s economy is neither growing fast enough nor producing enough jobs. The number of jobs created by flowers is insignificant beside an increase in population of about 2m a year, one of the fastest rates in Africa. Since every mother has about seven children, it is conceivable that Ethiopia, with 75m-plus people today, could overtake Nigeria (now 140m-strong) as Africa’s most populous country by mid-century. Just to stand still, let alone make inroads into poverty, the country must produce hundreds of thousands of jobs a year. It is hard to see where they will come from. The government claims that the economy has been growing at an impressive 10% a year since 2003-04, but the real figure is probably more like 5-6%, which is little more than the average for sub-Saharan Africa. And even that modestly improved rate, with a small building boom in Addis Ababa, for instance, has led to the overheating of the economy, with inflation moving up to 19% earlier this year before the government took remedial action. The reasons for this economic crawl are not hard to find. Beyond the government-directed state, funded substantially by foreign aid, there is—almost uniquely in Africa—virtually no private-sector business at all. The IMF estimates that in 2005-06 the share of private investment in the country was just 11%, nearly unchanged since Mr Zenawi took over in the early 1990s. That is partly a reflection of the fact that, despite some privatisation since the centralised Marxist days of the Derg, large areas of the economy remain government monopolies, closed off to private business.”

For those who might question the role of a program like the Enterra Solutions® Development-in-a-Box™, they need look no further than Ethiopia to understand why such a framework is required. Ethiopia is locked in an agrarian mindset, where large families are considered necessary to help run the farm. But with no real farms to work or markets in which products can be sold, progress is as fallow as the fields. Education normally brings down birthrates, but with no jobs being created for those being educated, the result is tension and despair. Development-in-a-Box is designed to create better conditions for a market economy and to help generate jobs. Government patronage and international dole create dependencies rather than build capacities. People need work and entrepreneurs need a supportive climate in order to create jobs. Since Ethiopian policies have produced just the opposite conditions, it is no wonder it remains locked in poverty.

“This is where Ethiopia misses out badly. Take telecoms. While the rest of Africa has been virtually transformed in just a few years by a revolution in mobile telephony, Ethiopia stumbles along with its inept and useless government-run services. Everywhere else, a plethora of South African, home-grown and European providers has leapt into the market to provide Africans with an extraordinary array of cheaper and more efficient services, now used even by the poorest of farmers, for instance, to check spot prices for agricultural goods in markets miles away. And the mobile-phone revolution has created thousands of new livelihoods; at times it seems as if every boy on a street corner is hawking a top-up card. Not in Ethiopia. It is the same story in financial services, where, despite the growth of some smaller private banks, no foreign banks are allowed. Micro-finance schemes have expanded exponentially, but it remains almost impossible to find start-up loans for small or medium businesses.”

Zenawi’s hit and miss policies must be replaced by a more holistic vision that addresses challenges throughout the country simultaneously. You can’t simply address one sector, like education or clean water, and ignore the economic sector that produces jobs and improves livelihoods. The article notes that Ethiopia remains fractured by tribal disputes and Zenawi’s leadership has only sharpened differences between tribes. At a time when millions are being lifted out poverty by connecting to the global economy, Horn of Africa countries, including Ethiopia, are creating conditions that almost guarantee that they remain of little interest to the West except when terrorists hide there or money must be raised to alleviate the humanitarian disasters caused by bad leaders, poor policy, or tribal feuding.

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