An advisory council has been set up to ensoure partial privatisation of large state enterprises is undertaken transparently. Although it is commendable that members of the council bring a wide set of expertise to the table, there needs to be a robust code of conduct to protect against conflict of interests, writes Yemareshet Taye (email@example.com), a compliance advisor at a French asset management firm based in Paris.
In early August, Fitsum Arega, chief of staff at the Prime Minister’s Office, announced the formation of a 21-member advisory council.
He said that it would ensure that the partial privatisation of large state-owned enterprises “is managed with the utmost transparency and accountability.”
It is encouraging that the government is taking serious steps to make the process more transparent and able to stand up to scrutiny. However, in the absence of robust institutions and the lack of a strong culture of checks and balances, it is up to citizens to keep the government in check and raise their voices to ensure a just and equitable privatisation process.
Reading the list of names that are currently part of the council though, it is hard not to be reminded that the government has already put the wrong foot forward. This is because of the voices that are not represented, as well as the inclusion of private sector individuals who may have conflicts of interest.
Regardless of the lengthy discussion to be had about the performance of state enterprises, their lackluster service delivery and the need to infuse efficiency in most of them, the exclusion of labour union representatives is worrying.
Some of the most critical issues that undoubtedly will be discussed during a privatisation process are reforms of the labour laws, the impact of privatisation on the enterprises’ workforce and possible restructuring decisions that will potentially eliminate thousands of jobs.
Labour unions are integral to the privatisation process because they understand the issues that plague these enterprises. They may be biased and partisan, with the sole focus of delivering the best outcomes for their members, but they need to be included.
Leaving out such a large group that needs to be part of the decision-making process may lead to questions of legitimacy and eventually taint the council’s recommendations and proposals to the Prime Minister.
The council’s members that have been chosen are indeed seasoned professionals in their respective fields. It is undeniable that they will be playing an essential role in crafting Ethiopia’s future.
They are expected to act in the best interests of the Ethiopian people, with the utmost honesty and integrity, and to refrain from using knowledge or information acquired through their role in the council to benefit themselves or others.
When looking at the list of members, one cannot help but wonder how the personal interests of some of the members can be reconciled with the interests of the Ethiopian people.
How is the government aiming to mitigate the apparent conflicts of interest that individual members will be exposed to?
A conflict of interest can merely be any divergence between the members’ duties and their private interests that could improperly influence their duties or could compromise their impartiality, objectivity or independence.
It could arise in various ways – as a result of a direct or indirect financial interest of members personal associations or relationships with those affected or likely to be affected, or as an expectation of future interests such as future deals.
Examples of these conflicts could be a member accepting trips and gifts from a potential buyer and favouring that particular buyer. Or it could be a member hearing a possible deal that might affect the selling price of a state enterprise and then attempting to profit from this knowledge. It could also be members selecting a company that can hire them to consult on issues linked to the privatisation process. The possibilities are many, perception will matter a great deal and proving wrongdoing can be tricky.
Looking into the professions of the council members is thus crucial. It does not mean that they will act in bad faith. But it is essential to conduct assessments to ensure that all perceptions of conflicts of interest are addressed by implementing appropriate codes of conduct.
A look at the advisory council’s list of members shows why we should be worried about conflicts of interest. Kassahun Kebede is the Managing Partner of Cepheus Growth Capital Fund, a private equity fund focused primarily on investments in Ethiopia. Eyesuswork Zafu and Aynalem Megersa are board members of two private banks that could potentially be involved in the privatisation process. These kinds of banks often facilitate payments, provide loans or may have existing relationships with the enterprises.
Abebe Aemirosellasie, another member, is a director of the International Monetary Fund’s African Department. International financing institutions often provide loans, negotiate funding conditions and impose restrictions on governments. Their objectives are not always aligned with the government’s aim and do not necessarily take into account the impacts of the structural adjustments they often advocate.
How can potential conflict of interests be avoided then?
It can be managed by introducing a code of conduct that the council’s members must follow. The code of conduct must include, at a minimum, restrictions on personal transactions or transactions on behalf of third parties. This is a ban on personal transactions or on behalf of others, in the companies that will be privatised.
There also needs to have restrictions on outside activities performed by the members, rules regarding the non-disclosure of confidential information, as well as a description of the disciplinary actions to be taken in case of a breach of conduct.
The government will thus ensure that some of the nation’s largest assets are valued appropriately, that the transfer of ownership is open and competitive and that the interests of the thousands of hard-working employees of state enterprises are protected.
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