Ethiopia’s initiative to privatize public companies could be hampered by security risks.
"In recent months, the conflict between Ethiopia's central government and the leaders of the Tigray region has dominated the news. Although federal government troops have regained control of Tigray, the conflict illustrates potentially serious flaws in Ethiopia's federal system," the Institute of International Finance (IIF) said.
The other conflict that could be of concern to investors interested in this privatization program is that between Ethiopia and its neighbors Egypt and Sudan over the Great Renaissance Dam (GERD). This project is however one of the strong pillars of the economic transformation of the country.
Reforms undertaken by the Prime Minister, Abiy Ahmed (pictured), led to the decision to organize the very first democratic election slated for June 5, 2021. In Africa, this type of transition often does not go smoothly.
Beyond being a political line, the privatization of Ethiopian public enterprises has become a necessity. Already, the growth model based on public investment has begun to show limits, even before covid-19. Data from the IIF indicate that after average annual growth of 9.5% between 2011 and 2018, the Ethiopian economy grew by only 2.4% in 2019.
The other challenge facing Ethiopia's public companies is the contingent debt they have accumulated. The debt of state-owned enterprises also affects the stability of the national financial system through the Commercial Bank of Ethiopia, one of the country's largest lenders. It has extended large loans to public enterprises at lower rates than private borrowers, the IIF says.
In such a scheme, foreign capital would help support the ongoing restructuring of the Ethiopian economy. The local government has pledged to allow minority private participation in some large public enterprises - including Ethiopian Airlines, EthioTelecom, and Ethiopian Shipping and Logistics Service Enterprise - and to fully privatize others. This announcement is being closely followed by large companies and investors targeting Africa.
Idriss Linge
• Investors seem to keep focusing on yields, which are high for the moment• New Leadership might see...
• Inflation within the West African Economic and Monetary Union (UEMOA) fell to a two-year low of 0....
• Qatar Airways and Kenya Airways establish strategic agreement, introducing a third daily flight be...
• EY is preparing to leave Francophone Sub-Saharan Africa by 2026• The exit could unlock $500 m...
• Interbank volumes rose 18.7% in May, while rates declined across the market• The BCEAO cut its mai...
• Ghana signs a deal with eLearning Africa to expand digital learning access across the country.• The partnership focuses on deploying modern digital...
Ghana launches the Oncology Nurse Leadership Program (ONLEP) to train specialized oncology nurses from seven African countries. The five-year...
Ivanhoe Mines signs deal covering 100% of Kamoa-Kakula smelter’s copper output. The smelter will process up to 500,000 tonnes annually, starting at...
African gas projects drive significant contracts for Asian shipbuilders, especially for Floating Liquefied Natural Gas (FLNG) units. South Korean...
Kolmanskop offers a haunting blend of lost wealth, colonial history, and the unstoppable force of nature. Located just a few kilometers inland from...
Located about 40 kilometers from Cape Town’s city center, Boulders Beach in Simon’s Town is one of the Cape Peninsula’s most iconic destinations. This...