Ethiopia’s leader aims to maintain tight rein on key businesses

By Katrina Manson in Addis Ababa
The Financial Times

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. PM Hailemariam DesalegnEthiopia’s new prime minister has ruled out loosening state control of key businesses, dealing a blow to foreign investors circling one of Africa’s fastest growing economies and sending a clear signal that his administration will stick closely to the statist policies advocated by his predecessor.

Hailemariam Desalegn, who took over from Meles Zenawi after the latter’s death nine months ago, said the telecoms, retail and banking industries in Africa’s second-most populous country after Nigeria were still too weak to withstand external competition.

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“This sector [telecoms] is a cash cow, and that’s why the private sector wants to get in there, and they’re trying to tell us all kinds of stories … to get the licence,” he told the Financial Times. “We want to use that money for infrastructure development.”

Mr Hailemariam’s stance on privatisation in the state-dominated economy is at odds with much of the rest of the continent, where private investment by African and global companies has transformed the quality and accessibility of services.

It does, however, match that of his predecessor, who was heavily influenced by Marxism during his time as a guerrilla leader but came during his 21 years in power to see Taiwan and South Korea as economic models. He termed his ideal state “democratic developmentalism”.

Under his rule industry and services from telecommunications to banking – as well as politics – remained tightly controlled by his ethnic-based party, the Tigrayan People’s Liberation Front, founded by northern guerrillas to oppose Ethiopia’s central government.

The sudden death last year of Meles, a linchpin of African diplomacy who juggled strong ties to both China and the US, left a vacuum both in the region and at home. Mr Hailemariam, who was Meles’s only deputy and is a southerner from a minority ethnic group, emerged as a compromise choice. Meles had groomed the quietly spoken and little-known academic, engineer and administrator, appointing him foreign minister and deputy prime minister.

Mr Hailemariam has broadly stuck with his predecessor’s policies and presided over a transition that has so far, thanks to the effectiveness of the ruling movement’s control of politics and policy and the absence for now of a well co-ordinated opposition, proved smooth.

“The most important legacy of late Prime Minister Meles was he has built institutions. People think that he is alone doing the business by himself, but that’s wrong. He has built strong institutions in the country, which is not shaken by any wind that is coming. That is the result you see now,” Mr Hailemariam said.

But in some ways he has begun to make his mark. Last month he directed state security to arrest dozens of high-level officials on suspicion of corruption. He has sought to bring down inflation and more closely monitor spending on the large infrastructure projects favoured by his predecessor. The International Monetary Fund, which predicts growth of 6.5 per cent this year, has urged the government to slow the pace of public spending and open up to the private sector.

Mr Hailemariam accepts Ethiopia could earn $3bn from selling telecoms licences but says it needs the annual 8bn birr ($430m) generated by the single state telecoms operator to develop railways. He said liberalising Ethiopia’s banking sector – a mix of state-owned banks and more than a dozen private Ethiopian banks – would benefit “only the [foreign] bankers themselves”.

Analysts and opposition parties also say Ethiopia’s prolific security services, which keep a tight rein on the activities of a panoply of opposition and secessionist movements, also want the state to maintain control of the communications sector. “There are elements of security issues [deterring us from privatising telecoms] but that’s not overwhelming,” said Mr Hailemariam, explaining the government could still monitor calls if the telecoms industry were privatised.

Mr Hailemariam accepts he is stepping into big shoes. Months after Meles’s death, poster images of the former prime minister adorn office walls and town squares across the capital and his face flickers nightly on television and government websites. “He was an extraordinary man … I am not of the same calibre,” said Mr Hailemariam of Meles.

Unlike Meles, whose only deputy was Mr Hailemariam, the new prime minister has three deputies. This suggests power is more dispersed than under Meles, whom detractors labelled a dictator. Despite fears that Mr Hailemariam, who is from Wolayta, in southern Ethiopia, would counter resistance from the ruling party, analysts say there is a tacit understanding that although the northern Tigray elite will remain influential it must make way for other ethnic blocs.

Mr Hailemariam, who won the support of the ruling party at a congress this year, suggested he planned to be more than an interim fixture. Elections are scheduled for 2015 and he said he would be ready to lead the country if his party wanted him. “I’m enjoying it, because the sacrifice has a result.”



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