It seems that the United States, the global economic and political superpower that had been stirring the global decision wheel alone for over two decades, before the recent rise of the rest, including China, India, Brazil and Russia, wants to get engaged with Africa in a new way. Left with one year to end his stay at the White House, President Barack Obama has convened a historic gathering of African leaders.
From the way things stand, it seems that Obama likes to be depicted as a pro-Africa leader with a radically new strategy to reorder the US-Africa relationship. This could also be a very good starting point for appointment at any of the global institutions or even to establish a foundation with a global cause after leaving office – things that former presidents, from Jimmy Carter to Bill Clinton, continue to do.
Considering the changing global political dynamics, though, the objective behind the latest convention, dubbed the US-Africa Leadership Summit, is certainly more than individual interest. It looks like the US intends to have its share of influence, and maintains whatever amount it historically had, in the continent that emerging economies, from China to Turkey, are becoming very prominent. By and large, the Summit is indicative of America’s interest to outcompete China in Africa.
Considering the importance of the meeting, therefore, a large delegation of Ethiopian ministers has gone to the US. At the heart of the objectives for the Ethiopian delegation sits attracting as much of American investment as possible. Headed by Prime Minister Hailemariam Desalegn, the Ethiopian delegation held discussions with American investors.
Unlike any delegation that had gone to Washington DC before, the latest one is unique in size, composition as well as objective. This, by far, is the largest delegation that has travelled to the political capital of the global superpower. Almost all key ministries are represented in the delegation, aside agencies with responsibility related to investment attraction. What makes the delegation all the more unique, however, is its objective of attracting investment and selling the narrative of “a growing Ethiopia” to key American policymakers and businesspeople.
Of course, the economic reality favours the objectives of the delegation. Tailwinds of stable political and macroeconomic environment, rapidly growing economy, widening access to health and education services, superior security landscape and growing interests from emerging economies all complement the efforts of the Ethiopian delegation.
This, surely, will give the delegation sufficient economic talking points. And this will help them buy both the corporate interest and political acceptability from the American inner circle. But it does not end there.
For executives of corporate America, investment has little to do with talks. It rather involves thoughtful calculation of interests, risks, potentials and returns. As much as the talking points of the delegation matter, therefore, it could not outweigh the realities on the ground.
Ethiopia’s could be a story of a sprinting economy and widening developmental benefits. Its progress is well recorded in the books of multilateral institutions. But the story is still tainted with huge set of challenges.
Challenges ranging from unfavourable investment regime to unpredictable trade regulation practices continue to make investment all the more costly in Ethiopia. The landscape is also jagged by poor human rights record and volatile political environment. No doubt such unpleasant factors will affect the impact of the delegation’s effort.
If one is to be rationale about investment attraction, though, much of the work to realise it has to do with making the investment regime as favourable to investors as possible. The impact of very good talking points is reducing with each day for almost all nations are getting acquainted with the art of modern marketing.
A modern day investor makes her decision after analysing the risk of getting involved in a given country and the returns thereof. Even when she is presented with very good cases about a given investment opportunity, be it through a head of state or an independent consultant, she would take enough time to do her own analysis.
It is this behaviour of investors that brings much of the job to attract and retain them closer. No declaration from government representatives would replace the rational analysis an investor undertakes.
Closer, however, the investment regime is full of discouraging realities. According to the World Bank’s Doing Business Report, for example, opening a business in Ethiopia takes longer than in Kenya, Rwanda or Uganda. The records are as disappointing in leasing land, obtaining construction permit, accessing finance, exporting, importing and even closing business as in opening one.
What makes things worse is the fact that Ethiopia is sliding downwards in the global Doing Business ranking. This entails that the cost, time and number of procedures for doing business in the nation is increasing with time.
In addition, regulatory unpredictability makes doing business an increasingly costly engagement in Ethiopia. The state that wants to keep the economy in its grip often uses regulations to achieve its interests. It even goes to the extent of legislating its intents and making itself an overnight indispensable force in the market.
There seems to be no end point to this development. From the forceful investment of private bank capital in government bonds to frequent fixing of prices, the Ethiopian state seems to have a very confusing principle of market regulation.
In investment terms, unpredictable regulation entails higher market risk. No investor, especially one with huge capitalisation, would like to get involved in economies with higher market risks. And this has to do with the direct impact of market risks on investors.
Furthering the cost of doing business in Ethiopia are undeveloped trade laws and their uneven implementation. The trade laws of the country is not fit enough to administer modern and sophisticated companies, with advanced financing, operation, human resource management and input sourcing systems. For American companies with advanced nature and operation, therefore, these trade laws are direct hindrances.
It is upon these various sets of problems that cumbersome bureaucracy, undeveloped logistic system, lagging customs systems, infant financial industry and poor economic infrastructure add their own weight of negative impact. Of course, this is not to mention the damaging impact of poor human rights records and lack of good governance. A resultant outcome of a system tainted with all these negative forces is high cost of doing business.
It, therefore, is clear that such are things whose solution resides closer, not in the capitals of either the superpower US or the emerging China. And the solution is to put in place the essential reforms that could make the business sphere less cumbersome.
If anything, the ruling EPRDFites ought to take lessons from the popular commentary by Paul Kagame of Rwanda, Uhuru Kenyatta of Kenya and Yweri Museveni of Uganda, published on various media immediately before the Washington Summit, in which the leaders argue that the solution to a better, business-friendly Africa lays in the partnership of African governments and the private sector. As investing is the stake of the private sector, the argument goes, making the climate favourable is the job of governments.
That is exactly what is expected from the Ethiopian state. As the saying goes, actions tell a lot more than words. It is time to focus on initiating the reforms that could make the investment regime more favourable to investors. That is what counts more in the face of the American investors and policymakers.
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