Ethiopia: Why Open-Up Strategic Enterprises Now?

 

In what appears to be a dramatic reversal of three decades long policy, the government of Ethiopia has decided to partially and fully privatize big public enterprises.

The decision to initiate a new economic reform and allow both domestic and foreign firms to buy minority shares in big public-owned companies, like Ethio-telecom, Ethiopian Airlines, power generation utilities as well as Maritime and Logistics Enterprise, and fully privatize other public enterprises was made last week by the Executive Committee of the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF). The question is: Why now?

Speaking to The Ethiopian Herald, Zemedeneh Negatu, an Economist and Manager of Private Equity Firm, says the change in the size and complexity of Ethiopia’s economy, and its growing integration into the global economy are the major factors that effected the decision.

According to Zemedeneh, the timing is accurate. It might not have been appropriate to privatize these strategic enterprises some 15 or 20 years ago since the economy was small and there was no significant interest from global companies and local companies that were short of capacity, he argues.

“Ethiopia has been registering 8-10 percent annual GDP growth, and has become the third largest economy in sub-Saharan Africa with 80 billion USD. The economy is projected to hit the 100-billion mark in near future and that forces the country to follow a new approach in opening the economy.”

Furthermore, citing the foreign exchange shortage the country is facing, he says, it is high a time for the country to acquire hard currency from the sale of companies. The Economist states that the partial ownership of foreign investors in big corporations like Ethio-telecom could bring in several billions of dollars that would help the government supplement the reserves.