Business
Ethiopia’s Farms and Finance
It is unclear, however, how successfully Ethiopia can simultaneously pick winners and prune bad companies, a hallmark of successful developmental states. Building developmental states requires sacrifice and the ability to forge a national project that a majority accepts, something that Ethiopia’s federal character both helps and hinders.
Many people have lost their land for dams and big agribusiness projects. The villagization project that agglomerates nomadic peoples has also been unpopular. The ruling party runs a closed-off political system, as seen in the 2005 elections. There was a large turnout for the opposition, and the government responded with a wave of intimidation and arrests.
In its 2013 annual report, Human Rights Watch says “freedom of expression, assembly and association have been increasingly restricted in Ethiopia”. One criterion for success of a developmental state is a sustained rise in industry’s share of gross domestic product.
In Ethiopia’s case, the sector’s contribution has remained steady at around 12 percent. Boosters say Ethiopia is only in the very early stages of development. There are a number of projects that will come together in two to three years: a railway to the port of Djibouti, a large motorway that runs alongside the railroad, the dam to generate cheap electricity and a light rail line in Addis Ababa. “It’s a jigsaw puzzle that is only just starting to come together,” says Zemedeneh Negatu, a partner at Ernst & Young Ethiopia.
Financial repression
But the tension between ambition and the funding reality is ever present. Ethiopia’s debt levels are still low. But when vendor financing is factored into deals, such as the loans for the telecoms upgrade being carried out by Chinese companies Huawei and ZTE, the picture is less clear.
“These are only projected liabilities. The huge $2.4 billion loan from China EximBank has not actually yet been approved because the Chinese government is also concerned about Ethiopia’s ability to repay,” says Guang Chen, the World Bank country director for Ethiopia.
