Finance

Ethiopia's privatization program threatened by security risks

Ethiopia's privatization program threatened by security risks
Tuesday, 26 January 2021 19:40

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

On the same topic
Côte d’Ivoire will receive $234 million for a sustainable urban mobility project in Abidjan. Gambia will receive $32.2 million to build...
Stanbic IBTC and Zenith Bank cut monthly card spending abroad to $500 and $200 Foreign reserves fall by $3.5 billion in six...
Cauri Money launches Gajo Money, an e-wallet for the Cameroonian diaspora, targeting €120 million in transactions by end-2025. The fintech...
• Kenya and ASR sign deal to reduce risk on projects worth up to $2 billion.• Risk cover will target infrastructure, energy, logistics, and trade...
Most Read
01

• Investors seem to keep focusing on yields, which are high for the moment• New Leadership might see...

Afreximbank Bonds Retain Market Confidence Despite Moody’s Downgrade
02

• Inflation within the West African Economic and Monetary Union (UEMOA) fell to a two-year low of 0....

UEMOA: Inflation Drops to 0.6% in May, Driven by Lower Food Prices
03

• Qatar Airways and Kenya Airways establish strategic agreement, introducing a third daily flight be...

Qatar Airways Expands its Network in Africa, Building Presence in Kigali, Johannesburg, and Nairobi
04

• EY is preparing to leave Francophone Sub-Saharan Africa by 2026• The exit could unlock $500 m...

EY’s Exit Creates $1bn Opportunity in Francophone Africa Consulting Market
05

• Interbank volumes rose 18.7% in May, while rates declined across the market• The BCEAO cut its mai...

WAEMU Sees Easing Conditions on Regional Interbank Market
Enter your email to receive our newsletter

Ecofin Agency provides daily coverage of nine key African economic sectors: public management, finance, telecoms, agribusiness, mining, energy, transport, communication, and education.
It also designs and manages specialized media, both online and print, for African institutions and publishers.

SALES & ADVERTISING

regie@agenceecofin.com 
Tél: +41 22 301 96 11 
Mob: +41 78 699 13 72
Média kit : Download

EDITORIAL
redaction@agenceecofin.com

More information
Team
Publisher

ECOFIN AGENCY

Mediamania Sarl
Rue du Léman, 6
1201 Geneva
Switzerland

 

Ecofin Agency is a sector-focused economic news agency, founded in December 2010. Its web platform was launched in June 2011. ©Mediamania.

 
 

Please publish modules in offcanvas position.