Last week was an exceptional week for the EPRDFites. Having the most powerful person on the planet, United States President Barack Obama, as a guest, was both a tough task as well as an extraordinary privilege for the developmentalists. It was one of the most important, if not the most important, event in the leadership history books of the EPRDFites.
Hosting President Obama, a leader often considered as a living witness to the ever evolving American democracy, is one thing. But looking him in the eyes and discussing with him, in earnest, sensitive matters, such as internal stability, human rights, freedom of expression and political competition is another thing. It is in the latter that the ruling Revolutionary Democrats may have felt a bit uneasy for they rightly know that the system they oversee is far from symmetrical. The fault lines are multiple and the risks ever growing.
Seeing the discomfort Prime Minister Hailemariam Desalegn was feeling in addressing the questions raised by journalists, at a joint press conference with President Obama, the disequilibrium under the fault lines seems be so shaky that it deprives the ruling elite of essential confidence on the global stage. Of course, as the Premier noted, much of it has to do with the lifespan of the system and its elements.
It is natural, unless deliberately hindered through systemic influence, for the pillars of democracy and the rule of law to progress with time. It would be naive to expect perfection from a system that, in the words of the premier, is nothing but “fledgling”. This, however, does not mean that excuses would fill the gaps.
An equally sensitive issue, at least for the Revolutionary Democrats, if not their North American counterparts, was the issue of perception and reality. As Hailemariam responded to a question directed to him, the belief in the camp of the Revolutionary Democrats seems to be that Ethiopia’s efforts are not rightly recognised. There seems to be a line of thinking from the side of the ruling elite that their labour in changing the nation, once considered as the hotspot of deprivation and instability, is not given due recognition from global powers, mainly the United States.
This feeling is even more elaborated when it comes to investors from the West. The Revolutionary Democrats think that presumptions, largely informed by history and misinformation, are the guiding rules of the investor circles in western capitals. For them, the reality is very far from the perceptions. As they see it, and as is often reflected in the lines of arguments they adopt on this issue, there is a sort of rigidity and fixation in within the capitalist circles of the West that improperly inflates the level of risk felt about investing in Africa and Ethiopia.
If one is to follow their line of argument, with the latest showcase being Hailemariam’s reflection at the joint press conference, it may take much in the form of positive information to change the perceptions about investing in frontier markets, such as Ethiopia. They seem to believe that the perceptions are largely unsubstantiated.
True, part of the problem with the view of Western investors, not least American investors, about investing in Africa, and Ethiopia, relates to presumptions. There is still a prevalent association of Africa with droughts, war, poverty, humanitarian crises and social volatility. Out of the matrix of investment indicators that define the probability of investing, the weight of political risks seems to stand taller. Little has changed over time in the investment permutation.
Things have started to change over the past six years with Africa’s gross domestic product (GDP) growing at an average of 5.5pc, and Ethiopia’s sprinting at 10.1pc. In a gloomy world where crisis is the dominant feeling, Africa has risen as the last frontier of growth. Ethiopia, with a growth double the regional average, has even become one of the best performers.
For investors that take everything by the rate of return their investment brings, this change will be a factor to reconsider their fixations about investing in Africa. Indeed, the numbers add rightly to give returns way higher than can be reaped at any edge of the world.
Yet, it will not be easy to shed the fixation that has been built for ages. As Hailemariam underlined, a continuous positive information effort may have to be done.
Nonetheless, the real job lies in changing the reality. No positive information could be as powerful as a changed reality that brings higher returns to the investors. Certainly, in the eyes of investors, positive figures are more powerful than public relations.
Therein lies the challenge for Hailemariam’s administration. As powerful as hosting Obama will be in terms of positive information, it could not bring change to the numbers. And the numbers are not as promising as the overall story of Ethiopia rising.
Doing business in Ethiopia is still cumbersome, costly and challenging. The essential deficits in terms of infrastructure, trained manpower, technology, institutions and systems are furthered with burdensome bureaucracy, corruption, regulatory unpredictability and state hegemony. Key factors of doing business, such as the enforcement of property rights, the functioning of markets, the independence of judicial and arbitration systems, and the effectiveness of contracts remain to face considerable challenges in the economy, under the rule of the EPRDFites.
Global indices of economic freedom, competition, and doing business, calculated by Freedom House, World Economic Forum (WEF) and the World Bank – institutions the EPRDFites often label as neo-liberal – put Ethiopia as one of the poor performers. Shown in all these indices is the significant uncertainty and overall risks that businesses ought to deal with if they are to invest in Ethiopia. Though the indices can be criticised for their methodology, there can be little doubt about the reality they try to analyse.
It is in changing this very reality that the ruling Revolutionary Democrats, and their African peers, ought to focus, if they are to attract big and well capitalised Western firms to their nations and create more jobs for their ever growing population. The task, therefore, is all about making the numbers add up to represent higher returns and lower risks.
Surely, this is easier said than done. But it is not impossible. Many countries, in Africa, Asia and Latin America, have managed to shift the numbers from the lower combination to a higher one. And they have done this through systemic reforms and comparable political commitment.
The EPRDFites are not short of political commitment. Of the two sides then, it is the reform aspect that is at the low end of the equation.
Putting in place reforms that make doing business easy is crucial to attract and retain foreign investment. Doing so entails reforming business registration, tax clearance, Customs, quality approval and financing. In areas where reforms have been initiated, such as tax clearance, there is a need to infuse a sense of urgency in the reform efforts.
Shifting the balance between perception and reality towards the latter could only happen by changing the landscape. And it takes more than words. After all, words can take things only this far. What is needed now is action.
Mere complaining about unrepresentative perceptions will not do the miracles. Neither will the quest for positive information be helpful. The trick lies in changing the reality on the ground in a way that produces higher returns and lower risks.
It is better for the EPRDFites to focus on the essential reforms that they need, to attract American businesses and create more jobs for Ethiopians, than being taken away by the ecstasy of Obama’s visit. That is what the reality, and most importantly, Ethiopians, demand.
Leave a Reply