Financial times || New generation with international experience appointed to turn around tightly controlled, state-led economy
Prime Minister Abiy Ahmed has broken with tradition in Ethiopia by appointing young technocrats with international experience to important economic jobs as he seeks to turn the country’s tightly controlled, state-led economy into a competitive free market powered by private capital.
The officials, including Eyob Tolina at the finance ministry, Abebe Abebayehu at the investment commission and Mamo Mihretu in the prime minister’s office, are leading the most ambitious aspects of Mr Abiy’s promised reforms, investors said. Since taking office a year ago, the reformist leader has promised to overhaul the Ethiopian economy and open previously blocked sectors, such as telecommunications and energy, to foreign investment.
To succeed, his youthful disciples need to push reforms through Ethiopia’s sprawling bureaucracy and navigate conservative political officials in the ruling coalition, many of whom remain suspicious of relinquishing too much control of the economy after 28 years of state-led growth. For Mr Eyob, a former private equity executive and now state minister at the ministry of finance, the ruling party has no choice but to evolve.
“We had public-led economic growth and it did run its course, it was obvious,” Mr Eyob told the Financial Times in an interview in Addis Ababa. “If you didn’t make some pragmatic decisions and shift the course, it would have been a full-blown crisis so you needed to avert that.” In 2016 and 2017, thousands of Ethiopians poured on to the streets, many of them frustrated by the lack of employment generated by an economic policy that had favoured infrastructure over job creation.
Recommended The Big Read Ethiopia’s Abiy Ahmed: Africa’s new talisman At the same time, Ethiopia was facing a fast-approaching debt crunch.
Much of the economy’s double-digit growth in the past decade was driven by borrowing — largely from China. Although Ethiopia’s debt was low as a percentage of gross domestic product, compared with regional averages, its ability to service that debt with export revenue had become precarious, the IMF said in December. In response Mr Abiy halted all non-concessional borrowing. “There was a need to pause, to finish what we already had, not to jump into new projects,” Mr Eyob explained.
Having stemmed the bleeding, the focus in the next fiscal year would shift to attracting investment and boosting revenues, he said. The first step is a privatisation programme, headed by Mr Eyob, which will include the sale of what is likely to be a large minority stake in Ethio Telecom, the state-owned mobile operator.
Mooted ever since Mr Abiy took office, Mr Eyob rejected suggestions the telecoms sale was already behind schedule. The government had undertaken a detailed market study, including researching regulators in 25 countries to understand the best model for Ethiopia, he said. The “fully-fledged process” would start in no more than a month, he said.
In a country where almost 70 per cent of the population is youth, it is only fitting that the administration reflects that age group Abebe Abebayehu, investment commission Mr Abebe, commissioner at the Ethiopian investment agency, said the prime minister had commissioned similar studies for the energy, rail, industrial parks and logistics sectors to identify how best to sustain growth, boost export revenues and create jobs. “[Mr Abiy] is extremely interested to see a strong private sector that can generate jobs for the millions of youths that are currently unemployed,” said Mr Abebe, 38, who worked at the World Bank before Mr Abiy asked him to join the commission.
“And I think that is consistent with the whole economic reform agenda. For so long economic growth has been fuelled by state investment and now the state should cede space to the private sector and play its natural arbiter role as a regulator,” he said. “In a country where almost 70 per cent of the population is youth, it is only fitting that the administration reflects that age group,” he added.
For some Ethiopians, the talk of private enterprise is an abrupt departure from the developmental state envisioned by its architect, former prime minister Meles Zenawi, where the government controlled the economy’s commanding heights. But other observers say the shift is subtler.
Cepheus Capital, an Addis-Ababa based private equity firm, argued that, as it was under Meles, the government would still prioritise growth and was likely to continue to take an interventionist approach on issues related to land, industry and finance. The objectives for policymakers were expected to remain the same and it was the “tools” and timeframes that were being modified, Cepheus said in a recent report. “We see economic policy shifting its attention in three areas — from public to private activities, from capital to current spending, and from debt to equity,” the report said. Mr Eyob said those changes were imperative to creating the jobs the Ethiopia population craved. Ethiopia’s population has doubled since 1992 to at least 105m, according to the World Bank, and is expected to reach 190m in 2050, by some estimates.
About 25 per cent of those aged 15 to 29 are already underemployed “I am not worried at all, especially with this reform and the right thinking,” said Mr Eyob. “We have significant assets, and as we open up, and as more private sector investment comes, this country can achieve a major breakthrough.”
