Trend Assessment: Ethiopia's restart after the grace period
Boeing 777-300ER of Ethiopia's flag carrier in Frankfurt, Germany - Cecil Bo Dzwowa /Shutterstock.com
A little revolution with mixed results
When Abiy Ahmed took office as Ethiopia's new prime minister (P.M.) in April, he re-ignited hopes of a new beginning for the country. He quickly announced an amnesty for and consequent liberation of thousands of political prisoners in a bid to end nearly two years of often violent anti-government protests, principally in the Amhara and Oromia kililoch (regional states) where the majority of the population lives. In addition, Abiy is the first P.M. who hails from the Oromo ethnic group, the largest in the country. In addition, Abiy reshuffled the government and the management of state security institutions, and presented plans to partially privatise the ownership of key state assets, including in aviation and telecommunications. To the surprise of many, on 5 June, the government announced that it fully accepted and would implement the 2000 Algiers accord, an agreement that ended the Ethiopia-Eritrean war that began in 1998 and established a commission in charge of the demarcation of the countries shared border. On 18 July, the state-owned Ethiopian Airlines conducted its first commercial flight in 20 years to the Eritrean capital Asmara. Relatedly, in early September the leaders of long-standing arch foes Ethiopia, Eritrea and Somalia met in Asmara and an Ethiopian commercial vessel would dock at Eritrea's port of Assab, again for the first time in two decades. To top it off, the House of Peoples Representatives the lower house of the legislature removed the terrorist designation from three indigenous non-state armed groups: Patriot Ginbot 7, Ogaden National Liberation Front (ONLF), and Oromo Liberation Front (OLF). Many believed they were witnessing a revolution, until an unidentified assailant threw a grenade into a crowd in the capital Addis Ababa on 23 June, killing two people and injuring over 150 more during a pro-Abiy rally. The incident put a brake on the initial excitement around Abiy�s transition.
Meanwhile, insecurity has been growing in the eastern Somali kilil (regional state), where inter-communal and ethnically motivated fighting flared up again in early August. Although fighting has been ongoing since September 2017, at least 80 people have been killed in the latest spate of hostilities in mid-July between Oromos and Somalis in and around the Somali provincial capital Jijiga. In total, nearly one million people have been displaced since last September. While having had its terrorist designation removed in June, leaders of the ONLF in mid-September called for a referendum on self-determination for the Somali kilil, increasing the momentum ahead of planned peace talks with Abiy. These hostilities come in addition to inter-communal fighting between residents in West Guji zone, Oromia, and Gedeo zone in the Southern Nations, Nationalities, and Peoples' Region (SNNPR) kilil. Almost 1 million people have been displaced by the fighting there since April. Finally, in the middle of September, mobs of Oromo youths were reported to have looted the businesses and homes of other ethnic minorities in Burayu, a town less than 15km from Addis Ababa. Police confirmed at least 23 people had died and 200 more had been arrested following the unrest.
ASSESSMENTGrowing insecurity in the Somali region The expanding insecurity in multiple regions is the first test for Abiy's tenure. Failure to contain the violence is likely to seriously challenge his ability to lead the country along a continued path of double-digit GDP growth, as seen over the past decade. This has strategic and operational implications for businesses currently with manufacturing units in Ethiopia or investors considering market entry. This should also concern contractors developing strategic infrastructure across the Horn of Africa region as their success will depend on Ethiopia's continued success.
Ethiopia's situation as a landlocked country has forced it to rely on its coastal neighbours ports to facilitate its trade in goodsEthiopia's situation as a landlocked country has forced it to rely on its coastal neighbours' ports to facilitate its trade in goods. Currently, Ethiopia relies on the port of Djibouti for 95 per cent of its trade. Likely in a move to reduce the reliance on Djibouti, Ethiopia has bought a 19 per cent stake in the port of Berbera, located in Somaliland a self-declared state in north-eastern Somalia. The unrest that has gripped the Somali region has been localised around Jijiga, the capital of Somali kilil. The city lies on the N10 road that runs from Addis Ababa to Jijiga, and on to Somaliland and Berbera. The road is also a key thoroughfare for goods manufactured in Dire Dawa and Harar, of which the latter is soon to become home to a USD220 million industrial park that is currently being built by China Civil Engineering Construction Corporation (CCECC), a Chinese state-owned enterprise (SOE). This raises the risk of disruption along the way to Berbera and the rest of the Ethiopian market. This, in turn, seriously raises the stakes for Abiy to bring a peaceful end to the current spate of fighting as a matter of calming interested foreign investors. What's the deal with Eritrea? Equally, despite the rapprochement with Eritrea, issues relating to the border demarcation remain unresolved, while the move has faced hostility from some within the local opposition. On 12 June, 25,000 people marched through Badme, a border town that was at the epicentre of the Eritrea-Ethiopia war and part of the territory gained by Addis. Most of the residents there are part of the Tigray ethnic group. Although it only accounts for 6 per cent of the Ethiopian population, its elites have dominated Ethiopian politics since the return to democracy in the 1990s. The Tigray People's Liberation Front (TPLF) an intellectual-driven Marxist-Leninist rebel movement was instrumental in the overthrow of the dictatorial Derg regime as well as during the inter-state war with Eritrea. Recognising the peace deal is therefore understandably likely to be perceived as an affront to some of the locals who fought during the conflict. This could reignite friction within the ruling Ethiopian People's Revolutionary Democratic Front (EPRDF), which was a negotiated coalition of political actors at the end of the Derg regime but which has shown signs of growing internal divisions since the charismatic Meles Zenawi passed away in 2012. Elite ambitions and corruption risks Abiy's privatisation drive is likely due to his government's ambition to attract more foreign capital to finance Ethiopia's infrastructure needs, which could facilitate the fast-expanding economy and rapidly growing population. The move could increase competition between economic actors on the local market, which could improve both governance and the quality of output in the longer term. In the medium term, however, the decision elevates the risk of corruption. In a report analysing corruption risks by sector of the Ethiopian economy, the World Bank in 2012 emphasised sectors with high primary barriers to entry but where the long-term rewards are high as sectors where corruption risks are most elevated. This includes both telecommunications and mining, which hitherto have been dominated by SOEs. Such risks, coupled with ambitious elites competing for power and personal fulfilment, poor governance and mounting insecurity, could therefore stain Abiy's privatisation plans...