Amidst fears and uncertainties about the worsening impact of the current drought, Prime Minister Hailemariam Desalegn tried to explain the country’s preparedness to reduce those impacts as the latest reports show 8.2 million people needing humanitarian assistance. To make matters worse, the UN Office for Coordinating Humanitarian Affairs’ (UNOCHA) projects a rise in numbers even after December, 2015, following an assessment of the Meher season.
The Prime Minister (PM) stood firm on his government‘s capability to manage the threats. He told MPs that the government is now purchasing food to overcome the challenges. He further reassured legislators that his administration is avidly ensuring that the shortage of grain will not increase inflation on the overall economy.
Two weeks ago, the federal Public Procurement & Property Disposal Service opened a bid to buy 10 million quintals of wheat of which four million will directly be used for the relief effort. The Service however only got offers from two bidders that can supply only 1.3 million quintals of wheat.
The nation’s state of preparation to mitigate the impacts of drought was one of the 16 questions submitted to the Premier on October 21, 2015. A week later the same questions were formally read to the parliament on its third extraordinary convention where the Prime Minister appeared to elaborate the motions raised before Parliament.
During the past two weeks the MPs were given a one week interval to settle in and assimilate the city life of Africa’s political capital; while the second week was dedicated to training MPs familiarising themselves with the amended Code of Conduct of the House.
The questions presented in relation to the Code of Conduct procedure touched upon various issues including balance of trade, agriculture and manufacturing. Outstanding social and political issues such as housing and platform for consultation with opposition political parties stood high in the Prime Minister address.
The stalled government housing projects in regional towns, according to Hailemariam, is due to the less pressing demand for houses, which made it difficult for regional states to repay their loans and its ever increasing interest rates, he explained.
One of the mega projects, construction of industrial parks in five major cities, however, is expected to revamp the housing projects. The industrial park projects will cost 30 billion Br over the course of the next five years, while the government allocated an additional 10 billion Br for housing projects in eight major cities. On the other hand, the Housing Bill to be tabled in Parliament has opened doors for players other than the government, including those in partnerships between the private and public bodies. Further, he stressed the need to review the design and the amount of money house seekers are supposed to pay.
Because people in the low income curve are not saving properly, the Prime Minister said a new design; a small one with a decreased price tag, is on the horizon.
Recently, Addis Abeba Housing Administration Agency announced that it will start new re-registration to let house seekers who are already in the scheme but who have been unable to accrue adequate savings, transfer from scheme to another based on their current income and potential.
A new design is already completed and submitted to Addis Abeba City Administration, a source from Ministry of Housing & Urban Development told Fortune.
Narrowing down the major economic underperformance, the negative trade balance, is another challenge Hailemariam did not address well.
The single solution he pointed to the mammoth problem is to increase the volume exports of agricultural products.
“If we’re able to increase the volume, we can manage to handle risks that come with price fluctuation in the international market,” he said. “And locally, special attention will be given to manufacturers.”
He mentioned challenges such as skilled manpower and infrastructural limitations.
“We need to solve this,” Hailemariam said. “Our ability to solve the problem will determine our success.”
Among the manufacturing sector he said export of sugar will start next year while he failed to mention specific causes of the delay. Currently, out of the seven new sugar factories that were projected to become operational last year, only the existing three sugar factories – Fincha, Methera and Wonji – which could not handle the local demand, are operating in a full-capacity. Last fiscal year, the plan was to produce 12.2 million quintals of sugar from the three existing and the seven new factories that were preplanned to be operational. However, only 3.6 million quintals were produced, far short of the local demand that is estimated to be from five million quintals to 6.5 million quintals. At the same time, it was proposed that some of the planed volume will be exported.
Moreover, Hailemariam talked about exports in horticulture and mentioned that because major flower exporters were unable to access land for expansion, which had negatively impacted exports.
While answering questions posed in relation to the rise of the country’s external debt level, Hailemariam said the fact that there was decreased revenues from exports, has an impact on the evaluation of debt.
“What is unique about this was most of the debt which came was allocated to government projects,” said Hailemariam.
The projects’ capacity to repay the money is high, he added. So far the debt ratio is not that much high.
Experts push a different perspective of the problem.
Loans are mostly injected into government owned corporations which must take credit for their capacity to pay, according to Alemayehu Geda (Prof.), a lecturer at Addis Abeba University.
He also criticised the terms of agreement that are tagged with the credits set by creditors. His arguments referred to loans given by the Chinese government. The terms put by the Chinese are too complicated, he argues.
Any credit has to be paid in 10 years and it should also have two to three years of grace period. On the other hand he compared the World Bank’s (WB) loan scheme which he says are simplified ones.
For him the debt was caused because of improper loans, exports and terms of reference.
Major financial institutions such as the IMF and development assistance groups have expressed serious concerns about the increasing debt.
In discussing the manufacturing sector and local investors’ involvement, Hailemariam highlighted problems within the sector, such as land supply for investment, corruption and logistics.
“If we need the sector to be durable, it is when locals start to invest,” said Hailemariam. “So far, the involvement by local investors is limited. “It is a must that we should let them invest.”
Most companies opt to invest in construction and service sectors, rather than the manufacturing sector, Hailemariam stated.
“Though there are incentives in the sector, because of cumbersome bureaucracy investors are not benefiting; rent seeking is among the biggest challenges.”
He emphasised upgrading the capacity of local construction companies to transition on manufacturing. In collaboration with the ministries of Construction and Industry, companies can invest in producing construction input materials.
Because of its linkage with other sectors, the construction sector has to overcome limitations in the competencies of construction companies; there is also need to address problems of finance and capital shortage and red tape facing the sector, according to Tsedeke Yehunie, CEO of Flintstone and deputy chairman of construction of the Contractors Association of Ethiopia. Tsedeke outlined his argument pertaining to the level of difficulty in accessing machineries and equipment for construction. As the government is engaged in promoting the export market through various incentives, it has to do the same for the construction sector too, he said.
One construction company will rely on a third party that imports machinery, he explained. It would be better if the government facilitated incentives for the construction companies to import equipment by themselves.
Appreciating the establishment of a dedicated ministry to regulate the industry, the Ministry of Construction, he added that the new ministry has to upgrade its human resource capacity.
“We should not spend the first GTP II year merely in preparation,” Tsedeke told Fortune.
Hailemariam has also expressed his administration’s willingness to have a consultation platform with opposition political parties. Two weeks ago, the government had a discussion with political parties over GTP I performance and plans in GTP II.
Medrek and Blue parties, the second and the third opposition political parties to have the highest number of votes during the May 2015 elections, were absent during the discussion, though the government had sent invitations to all political parties.
But for Mushe Semu, a veteran opposition political figure known for his leading role in the Ethiopian Democratic Party, the call by the Prime Minister is something that emanated out of desperation that the ruling party is embarrassed in the eyes of the international community.
It is just a duplication of works, Mushe told Fortune, while reflecting his impression on the composition and operation of the Parliament. Anything passed in the Parliament is something that is already decided by executives of the ruling party.
The Prime Minister has told the Parliament that the ruling party is willing to have a policy discussion with oppositional political parties.
For Mushe this seems irrelevant.
“It would be better if the government share a table with experts and professional associations in any policy discussions rather than political parties.”
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