Mounting violence in Ethiopia has seen over 500 killed, as protests against the government’s economic and human rights policies continues. The tensions at the heart of the crisis are systemic ones, yet what makes the violence particularly worrisome is that foreign investors have become prominent targets. Foreign businesses are being systematically attacked in protest of the government’s development-centric approach, with protesters citing land grabs and unfair competition as key issues.
Foreign investors under attack
Government estimates claim that around 40,000 workers at foreign companies have been affected by the disruptions; as cement, textile, flower, and agribusiness firms have been attacked. Popular sentiments that the benefits of growth are not being felt by all, combined with worries about foreign goods undercutting local producers has made Ethiopia a verydangerous investment locale.
In recent weeks, eleven factories have been burned, and 90% of flower farms between Ziwag and Hawassa, in Oromia have been attacked. This has already led to one American flower firm pulling out of the country. Similarly, the Dutch owned, 2,000 worker, fruit farm of Africa Juice BV was set alight in September, with other Dutch and Israeli firms also attacked.
Moreover, Angela Merkel is in Ethiopia to discuss issues of trade and migration, and has expressed concerns about German interests in the country, as Germany constitutes one Ethiopia largest export destinations. Specifically, Germany consumes 30% of Ethiopia coffee production – a major cash crop and source of foreign currency. These exports could be threatened as unrest in agricultural areas continues, and protesting farmers continue to hinder the movement of goods to the capital.
Add to this attacks on Turkish textile factories in Sebeta and on holiday lodges at Lake Langano, and Ethiopia’s plight becomes even direr.
Anuradha Mittal, executive director of the Oakland Institute sums up the state of affairs in Ethiopia:
“If I am a foreign investor, I look for opportunities. I understand that there are risks but in the face of this growing unrest where foreign companies have been targets, given all that has happened in terms of displacement of people and their lands given away to foreign investors, it would be astute to not go into a country like that.”
Ethiopia’s uneven response hurts investor confidence
Alongside the unrest, the government’s response has only further unsettled foreign investors, as a whole week of silence followed the October 2nd uptick in violence, with the government only belatedly issuing a state of emergency. This occurred after the country’s state-run internet service was shut off for two days in August to disrupt protests. This move only further damaged investor confidence, and mainly hurt businesses, not protesters. In a country where a third of the population lives on less than $1.90 per day, most protesters do not have internet access, as support for the movement is largely located in rural areas. Shutting off the internet only further compromised the position of foreign companies in Ethiopia.
Despite the delay, communications minister Getachew Reda highlighted the impact on business as part of the reason for the government’s October 9th state of emergency declaration. “The kinds of threats we are facing, the kind of attacks that are now targeting civilians, targeting civilian infrastructure, targeting investment cannot be handled through ordinary law enforcement procedures” noted Reda. This echoes statements by PM Hailemariam Desalegn, who has also warned of the danger to the country’s infrastructure projects, projects such as the newly unveiled $3.4 billion, Chinese backed, railway from Addis Ababa to Djibouti.
These projects, alongside foreign businesses are prime targets as protesters are angered about the focus given to development over human rights, and the favouritism shown to the capital, whose growth is leaving the rest of the, largely agrarian, country behind. The protests began in November 2015, in response to plans to expand the capital, plans which were later abandoned, yet which hit a nerve among a population angered about land grabs and inequality.
Likely inspired by the success of the Chinese Communist Party, Ethiopia has sought to strongly push development, in the hope that growth will distract from the country’s human rights abuses. Unfortunately for the government, Ethiopia does not have Beijing’s clout or hard power, and faces are far more divided and diverse country.
Unsurprisingly, the government has sought to blame foreign influences on the the unrest, seeking to claim the Oromo Liberation Front (OLF) is behind what is clearly a grassroots movement. To this end Ethiopia haspicked a fight with Egypt – claiming that Cairo is aiding the OLF – something which Egypt denies. The two countries are already at odds over Ethiopia’s plans to construct the 6,000 MW New Renaissance Dam on the Nile, which would severely impact downstream water resources in the Sudans and Egypt.
Throw in the obligatory accusation to Eritrea as well and this sloppy reaction is par for the course for the Ethiopian government.
This ham-fisted and belated response from the government only further undermines Ethiopia’s image in investment circles. This is especially unfortunate given that Ethiopia had, until recently, been a regional darling, citing double-digit growth and earning the moniker of ‘Africa’s Lion’. These days are gone as Ethiopia’s growth prospects have seen a significant drop, as domestic unrest grows, commodity prices have sunk, and regional growth slows.
This problem is here to stay
The problem for investors going forward is that the current unrest is based on longstanding, systemic problems at the heart of the Ethiopian state. While last week saw the imposition of Ethiopia’s first state of emergency in 25 years, this state of affairs has direct links to the last state of emergency a quarter of a century ago. In 1991, the historically dominant Amhara ethnic group was ousted from power by the Tigrayans, a group that comprises only six percent of the population. In the last 25 years, the Tigrayans have solidified their hold on the government, resulting in a state of affairs in which the Oromo and Amhara – sixty percent of Ethiopia’s nearly 100 million people – are underrepresented and marginalized.
Consequently, the economic focus on the capital and its pet development projects is seen as further favouritism towards the ruling Tigrayan governing elite who comprise the main governing party – Ethiopian People’s Revolutionary Democratic Front (EPRDF) – which focuses on urban centres, and neglects the countryside.
This explains why the protests are centered in Oromia, yet it also warns of further escalation. Oromia produces much of Ethiopia’s food, and any disruption there could have serious impacts on national food security. Up to 18 million Ethiopians rely on food handouts, and unrest in Oromia threatens not only domestic food production, but attacks on foreign agribusiness also deprive the government of the foreign reserves needed to purchase additional food.
To make matters worse, Ethiopia has suffered from severe El-Nino related drought since September 2015. The timing of the drought and the first protests in November is likely no mere coincidence. While so far the government has been able to respond to the drought, unrest in Oromia could be the tipping point that disrupts national food distribution. If events do take a turn for the worse, Ethiopia is likely to find little foreign assistance, as donor fatigue has only increased in recent years. The international community is already distracted by Syria and other humanitarian issues, and Ethiopia’s drought has largely gone unnoticed.
The EPRDF was created out of the Tigrayan People’s Liberation Front (TPLF), which took control in 1991 from the Derg regime. The Derg used famine as a weapon against the TPLF and other restive elements, leading to the infamous 1983-1985 famine. This famine in turn undermined the Derg regime and led to its downfall. The current regime is well aware of the risks of famine, which will likely result in a heavy-handed response to quell unrest and prevent wider instability. The problem is that this could easily back-fire as economic issues reignite lingering ethnic tensions, plunging Ethiopia into greater civil unrest.
Under the Radar uncovers political risk events around the world overlooked by mainstream media. By detecting hidden risks, we keep you ahead of the pack and ready for new opportunities.
Under the Radar is written by Jeremy Luedi.
German chancellor Angela Merkel is received with military honours in front of the presidential palace next to Prime Minister Hailemariam Desalegn in Addis Ababa, Ethiopia, on 11 October 2016. Source: PA
Biftu Bole Lutheran Church holds a prayer and candle ceremony for protesters who died in the town of Bishoftu. (Tiksa Negeri/Reuters)
The deadly protests that have rocked Ethiopia over the past several months, resulting in the declaration of a six-month state of emergency, stem from many regional and national grievances, most of which reflect a sense of economic and political marginalisation by wide sections of the country.
The unrest in the south dates back to November 2015, when demonstratorsopposed a government plan to expand the boundaries of Addis Ababa into the Oromo regional state. Farmers were particularly upset, worrying that they would lose their farms in the government’s notorious “land grab” policy. Those protests have claimed the lives of hundreds of people and still counting.
In July, another wave of protests began in the Amhara region when the government arrested members of the Welkait Committee, who were demanding the reversal of a 1991 decision by the ruling party to annex three districts of the Amhara region into the Tigray regional state. The inhabitants of these districts identify as ethnic Amhara and want to be reintegrated into the Amhara regional state, of which they have been a part for centuries.
In a word, the TPLF owns the government. Although the federal constitution was designed to empower the major ethnic groups of the country to form their own states as the main framework for their governance, none of the member states (with the sole exception of Tigray) have any real powers to take care of its internal affairs.
As a consequence, the Oromo and Amhara ethnic groups – who together constitute close to 70% of the population – are deeply resentful about playing second fiddle. Naturally, this has been a deep source of political disaffection for vast numbers of the members of these communities.
At the same time, the ethnically based federal system has left minorities trapped in their respective regions. They are treated as second-class citizens, lacking access to education, civil service employment, business licenses, bank loans and land leases on a nondiscriminatory basis. Even worse, they are liable to be expelled from regions in which they are considered “outsiders”.
This has particularly been the fate of the Amhara, who have faced mass killing at various times since the current government came to power. Yet the central authorities have shown no willingness to take protective measures or to provide any legal redress for these minorities.
Compounding the problems thrown up by ethnic division is endemic corruption. Ethiopia ranks 103 out of 168 countries on Transparency International’s corruption perceptions index, a global civil society coalition that encourages accountability. It has also lost about $25bn since 2000 to illicit financial outflows, according to Global Financial Integrity.
Government officials and party loyalists receive preferential access to credit, land leases and jobs. Areas vulnerable to corruption are land administration, tax and revenue, the justice system, telecommunications, land procurement, licensing areas, and the finance sector.
Particularly egregious is the government’s practice of leasing large tracts of landto foreign governments and local investors in opaque deals that have displaced thousands of people. Also disconcerting is the fact that 50% of the modern economy is controlled by conglomerates affiliated with the ruling party.
A further factor fuelling the protests in Ethiopia is youth unemployment and the sense of hopelessness it has engendered. In recent years, the country has been producing thousands of college and university graduates each year but only a limited number are able to obtain productive employment. A sizable number often risk their lives to brave the Sahara desert and Mediterranean Sea in a desperate search for better opportunities. Others remain unemployed for long periods or are engaged in cutting cobblestones for streets.
Freedom of assembly and association are guaranteed by the constitution but they remain a dead letter in practice. The government often resorts to its anti-terrorism law to stifle political dissent and to terrorise its political opponents. The judiciary is officially independent but in practice it rarely deviates from government policy. As of 2014, Ethiopia holds the second highest number of journalists behind bars.
The TPLF-government has to be held to account. The donor communities, particularly the UK, the US and the EU, should stand with the Ethiopian people by ceasing all military, financial and diplomatic support to the tyrannical government, supporting instead the opposition’s call for an all-inclusive transitional process to replace the current government.