Despite Ethiopia having one of the fastest-growing economies in the world, it also remains one of the world’s poorest countries. Corruption has played a huge role in hindering the development of this Horn of Africa nation. Credit: Elias Asmare/IPS

Ethiopia may be one of the fastest-growing, non-oil producing economies in Africa in recent years, but corruption in this Horn of Africa nation is a deterrent to foreign investors looking for stable long-term partnerships in developing countries.

“Bankers, miners and developers presenting projects to investment committees in countries that fare badly in corruption rankings frequently struggle to get investment. Corruption raises red flags because it makes local markets uncompetitive, unpredictable and therefore largely hostile to these long-term players,” Ed Hobey, the East Africa analyst at the political risk firm Africa Risk Consulting, told IPS.

On May 11, in the biggest crackdown on corruption in Ethiopia in the last 10 years, authorities arrested more than 50 high profile people including government officials, businessmen and a minister.

Melaku Fanta, the director general of the Revenue and Customs Authority, which is the equivalent rank of a minister, his deputy, Gebrewahid Woldegiorgis, and other officials were apprehended on suspicion of tax evasion.

But the arrests have raised questions about the endemic corruption at the heart of the country’s political elite.

Berhanu Assefa of the Federal Ethics and Anti-corruption Commission of Ethiopia told IPS that these arrests highlighted how corruption has insinuated itself into the higher levels of officialdom.

“Corruption is a serious problem we are facing. We now see that corruption is occurring in higher places than we had previously expected. Areas vulnerable to corruption are land administration, tax and revenue, the justice system, telecommunications, land procurement, licensing areas and the finance sector,” he said.

Ethiopia ranks 113 out of 176 countries on the Corruption Perceptions Index of Transparency International, a global civil society coalition that encourages accountability. The country has also lost close to 12 billion dollars since 2000 to illicit financial outflows, according to Global Financial Integrity (GFI), whose statistics are based on official data provided by the Ethiopian government, the World Bank, and the International Monetary Fund (IMF).

Dr. Getachew Begashaw, a professor of economics at Harper College in the United States, told IPS that there was a fear that the recent high profile arrests were merely political theatre designed to placate major donors such as the World Bank and the IMF, and to give credibility to the new regime’s fight against corruption. Prime Minister Hailemariam Desalegn took over leadership of the country after Prime Minister Meles Zenawi died in August 2012.

“They are using this as a PR stunt to appease not only the donors, but to also dupe the Ethiopian people. Because many non-party affiliated Ethiopians in the business community are complaining, and this complaint is trickling down to the average people on the streets,” he told IPS.

According to the World Bank, companies held by business group the Endowment Fund for the Rehabilitation of Tigray (EFFORT) account for roughly half of the country’s modern economy. The group is closely allied with the ruling Ethiopian People’s Revolutionary Democratic Front (EPDRF), an alliance of four parties.

EFFORT is a conglomerate formed from assets collected in 1991 by the EPRDF to rehabilitate the Tigray region in northern Ethiopia after it had been decimated by poverty and conflict. The Tigray People’s Liberation Front (TPLF) is the lead party in the EPDRF coalition.

Tigrayans, however, only account for eight percent of the country’s 90 million people. According to Abebe Gellaw, an exiled Ethiopian journalist and founder of Addis Voice, a web platform that provides news that is otherwise censored by the Ethiopian government, EFFORT has become a business racket for the Tigrayan elite who are monopolising major sources of the country’s wealth.

“The TPLF controls key government institutions and a significant portion of the economy. For over 15 years, EFFORT has been used by the TPLF to channel public resources and funds to the coffers of the TPLF through illegal deals, contracts, tax evasion, kick-backs and all sorts of illegal operations,” he told IPS.

Azeb Mesfin, Zenawi’s widow, currently manages the multi-billion-dollar business empire.

She claims her husband paid himself a modest salary of 250 dollars a month, yet the online website “the Richest.org”, which publishes the net worth of the richest people in the world, recently divulged that Meles was in fact one of Africa’s wealthiest leaders having amassed a personal fortune of three billion dollars. This has led many to question the provenance of the erstwhile leader’s wealth – when he had no known business engagements.

Illicit financial flows as a result of corruption are a major hindrance to a country’s development, undermining institutions, economies and societies. According to the Africa Progress Panel’s Africa Progress Report 2013, the continent is losing more through illicit financial outflows than it receives in aid and foreign direct investment.

A commitment to greater accountability and transparency to curtail illicit financial flows should occur on both the national and international levels, according to E. J. Fagan, deputy communications director at GFI.

“Reforms and policies are needed to strengthen customs enforcement and make governing apparatuses more transparent. The international community can create a multilateral system of automatic exchange of tax information that African countries like Ethiopia can access, so as to make it difficult for illicit actors to hide money and transfer large amounts of illicit money without detection,” he told IPS.

Begashaw added that corruption in the social sphere also breeds social inequality, disenfranchisement and a breakdown in national unity and civil society.

“The very existence of parastatals and TPLF-affiliated endowed business conglomerates like EFFORT is a major source of corruption. The Birr (Ethiopian currency) will depreciate and inflation will skyrocket. The capacity of the state to provide public goods and services will decline. Free market competition will be eroded. Government revenue will be reduced and the budget deficit will rise.

“If they are really serious about combating corruption, they should start doing so from the top,” he said.

Ethiopia invests more of its resources in hydropower than any other country in Africa. Pictured here is the Grand Ethiopian Renaissance Dam, situated in Ethiopia’s Benishangul-Gumuz Region on the Blue Nile. Credit: William Davison/IPS

Ethiopia’s long-term hydropower strategy is proving to be both a source of economic sustenance and contention. In becoming Africa’s leading power exporter through the construction of a series of dams across the country, Ethiopia could threaten the lives of millions who depend on the Nile River’s waters.

This Horn of Africa nation invests more of its resources in hydropower than any other country in Africa – one third of its total GNP of about 77 billion dollars.

But at the centre of Ethiopia’s hydropower development is a tough ethical question: which has the greater negative impact?

Alessandro Palmieri, a lead dam specialist at the World Bank, told IPS: “Is it the impact on Ethiopia’s population (who will not have electricity) … or the negative impact on half a million people (who will be displaced by the construction of the dams)? One tree falling always makes more sound than 10,000 trees growing.”

Ethiopia has ambitious targets. It currently generates 2,000 MW from six hydroelectric dams and will increase its power generation to 15,000 GWh, according to state power provider Ethiopian Electric Power Corporation (EEPCO).

According to a World Bank report published in 2010, only 17 percent of the country’s 84.7 million people had access to electricity. EEPCO states that by 2018, 100 percent of the population will have access to power.

Despite the ethical issues, Ethiopia’s hydropower focus is fuelling growth and development and is offering an example for other African countries to follow. “Africa is currently only using seven percent of its hydropower potential. Per capita consumption of water in Africa is shameful,” Palmieri said.

Ethiopia’s plan to become the powerhouse of Africa gained momentum when it began to divert the Nile River’s waters to start filling the Grand Ethiopian Renaissance Dam on May 28. On completion in 2017 it will be Africa’s largest power project, generating 6,000 GW.

The dam is situated in Ethiopia’s Benishangul-Gumuz Region on the Blue Nile, a tributary of the Nile River and the supplier of most of the Nile River’s waters. The Blue Nile originates in Ethiopia’s Lake Tana.

However, the project has been beset by controversy regarding its potential environmental impact since it was announced in 2011.

The first provisional impact study by a technical committee

has only just been released this year, on Jun. 1, two years into construction, and states that the dam will have no significant effects on downstream countries. Egypt called the report “inadequate”.

The Gibe III Dam, which will generate 1,800 MW, is being built in southeast Ethiopia on the Omo River at a cost of 1.7 billion dollars and is expected to earn the government over 400 million dollars annually from power exports.

But it will not bring development to Ethiopian communities along the Omo River.

“The Gibe III dam will wreak havoc and destruction on the lives and livelihoods of hundreds of thousands of tribal people in Ethiopia’s Lower Omo Valley and the peoples living around Kenya’s Lake Turkana who depend on the Omo River for survival,” Elizabeth Hunter, from Survival International, an organisation working for the rights of local ethnic groups across the globe, told IPS.

According to the World Water Council (WWC), an international think tank for world water management, strides in Ethiopia’s hydropower development over the last decade have increased the annual average water storage per person from 40 cubic metres to 240.

Water storage in large dams makes ecological sense, provides a key adaptation measure to mitigate the effects of climate change and is a boost to growth and development, according to Ben Braga, president of WWC.

“Water storage is a good solution to the problems of climate variability and uncertainty. In terms of energy generation and the water needs of industry and agriculture, hydropower is a good solution. Our policy is: more storage equals more resilience,” he told IPS.

However, there is still a long way to go to catch up with the United States, which stores 5,000 cubic metres per citizen per year.

Diverting the flow of the Nile to the Grand Ethiopian Renaissance Dam will provide hydroelectricity not only for Ethiopia but also for neighbouring countries. Ethiopia plans to sell 2,000 MW to northern Kenya while Djibouti currently receives 80 percent of its electricity (50 to 70 MW) from Ethiopia.

“After meeting national demand, surplus electricity will be supplied to neighbouring countries. Our hydropower will benefit economic development in the Horn of Africa region,” Miheret Debebe, chief executive officer of EEPCO, told IPS.

Upstream countries like Egypt have had to enter into a new era of dialogue and cooperation with Nile basin countries to safeguard future access to the Nile waters. It was a critical move for 160 million people who are said to live downstream along the Nile and depend on its waters.

“When Ethiopia announced its plan to build the largest dam in Africa on the Blue Nile in 2011 we entered a new era of riparian politics. Since then the Nile Basin Initiative has been crucial to ensuring cooperation and long-term water access between the Nile states,” Braga said.

However, human rights violations damage the country’s hydropower policies, according to international rights groups such as Human Rights Watch and Survival International. These organisations have reported cases of violence and intimidation, which have been carried out to forcefully move indigenous tribes from their land in the Lower Omo valley for the hydropower project and large-scale commercial plantations.

Media access to the Omo Valley has become very difficult and much of the area has been ring-fenced by government security forces. However, a researcher for Survival International managed to speak to members of indigenous groups affected by the dam’s construction.

One member of the local Mursi ethnic group, a pastoralist community, told Survival International: “The government says cattle and people have to move from the Omo Valley to where there is no grass and no crops. So that means we and the cattle will die together.”

An electricity pylon in Somaliland being repaired by Edwin Mireri. Somaliland’s first Electricity Energy Act will be launched this year and it will be the country’s first legal and regulatory framework aimed at managing energy production and distribution. Credit: Ed Mckenna/IPS

A wind turbine, situated some 20 kilometres outside of Somaliland’s capital Hargeisa, has become a significant totem of the country’s changing energy landscape.

The breakaway semi-autonomous region that was once part of Somalia has struggled to develop its economy despite dilapidated energy infrastructure that makes it almost impossible for businesses to function.

But later this year, Somaliland’s first Electricity Energy Act will be launched. It will be the country’s first legal and regulatory framework aimed at managing energy production and distribution, with a focus on piloting alternative energy solutions, including wind farms in four major cities.

“Businesses have been unable to operate to their full potential as there is no regular or reliable supply of electricity in Somaliland. This is slowing economic activity and development in the region. We need to look at alternative and renewable sources of energy to reverse this trend,” Minister of Mining, Energy and Water Resources Hussein Abdi Dualeh told IPS.

Somaliland has one of the world’s highest electricity rates. While the rest of the world pays an average 15 to 30 cents per kilowatt hour, Hargeisa’s residents pay one dollar per kWh. High energy prices and a lack of an energy policy framework have blocked competition and stifled investment in the region’s private energy sector. Investors have little confidence in any long-term financial return due to limited regulation.

Local businessmen frequently complain that high energy bills are causing fewer products to be produced in Somaliland, giving foreign imports an unfair competitive advantage.

“When so much of our income is spent on electricity bills, we lose our ability to compete with foreign imports in the local market,” Faisil Wadani, the owner of a small factory, told IPS.

The streets of Hargeisa are densely populated with kiosks and vendors who pay independent power providers approximately 10 dollars a month to run a single 100-watt light bulb. For the majority of these small kiosks their improvised lighting system has no switch and the bulb is likely to burn all day and night unless unscrewed.

After the collapse of Somalia in 1991, the new Somaliland government retrieved wires, poles and generators from the bombed debris in Hargeisa to try and assemble a functional, albeit crude, infrastructure for generating electricity for its citizens.

Independent power providers quickly began to appear when it became apparent that the government had no funds to invest in the power grid. This rapidly gave rise to an unregulated system that has endured since 1991.

Somaliland’s antiquated electricity infrastructure is now run by a decentralised network of local power providers in Hargeisa, which involves neighbours paying neighbours for electricity.

The lack of government support for power creation has compelled many of Hargeisa’s wealthier residents to import diesel generators from the Middle East to power their homes and businesses. The majority of Hargeisa’s power is now generated by diesel generators and transmitted through the capital city’s hazardous electricity network.

A disorganised supply of electricity in the hands of independent power providers makes consumers vulnerable to high costs and erratic power access, said Dualeh.

“The government manages only 20 percent of the electricity market while independent providers are responsible for the majority of Somaliland’s electricity. Somaliland rates are very high due to this spaghetti network of independent power providers where each has their own grid using outdated equipment,” he said.

According to the government, 40 percent of electricity is lost due to the poor electric infrastructure used to generate and distribute energy.

To help Somaliland draft its first Electricity Energy Act, the United States Development Agency (USAID) has been working closely with the Ministry of Mining, Energy and Water Resources, local power providers and consumers to expedite the process of creating a more regulated electricity supply.

This has created a mood of confidence among the business community that they will soon be able to be open for business for longer periods of time without interruption from frequent power cuts.

“A supply of affordable electricity without frequent daily interruption will increase my business activity and make my job less of a daily fight for financial survival,” said Wadani.

The Electricity Energy Act is expected to standardise the sector’s infrastructure and establish safety standards by building on the existing electric grid infrastructure in Hargeisa.

“We cannot guarantee that the new electricity law will reduce costs but we can expect the supply of electricity to be more efficient. It is more often than not to do with inefficiency that electricity rates are so high in Somaliland,” Suleiman Mohamed, head of USAID partnership programme, told IPS.

But Dualeh said that the new electricity regulations “will support more efficient distribution, enhanced safety in the sector and higher levels of investment from the private sector, as they will have greater confidence in the energy market.”

Wind power in Somaliland is also rapidly emerging as a promising alternative source of energy. The government has realised that the potential for renewable sources of energy should be exploited to help revitalise the region’s power supply and provide a cost-effective alternative.

“We must seriously look at sources of renewable energy such as solar and wind power, especially when Somaliland has over 340 days of sun and some of the fastest wind in the world,” says Dualeh.

To confront Somaliland’s ongoing energy crisis, with the support of USAID the Ministry of Mining, Energy and Water Resources has erected five turbines worth over 350,000 dollars on a wind farm pilot project near the Hargeisa International Airport. Wind data stations have also been installed across the country, to offer investors information about wind power potential.

Somaliland’s independent power providers are also learning about the economic benefits of generating renewable energy.

The Abaarso Tech Secondary School in Hargeisa had a wind turbine in their storage room for nearly three years before finally setting it up in January 2012. Once fully operational, the 20 kW turbine provided enough electricity to run the high school. The city government subsequently came up with an income-generating plan for the school to sell the surplus electricity it generated to neighbouring villagers.

In the long term, harnessing alternative energy solutions such as wind power should have higher returns for consumers and providers than using diesel would.

“We just spent 240,000 dollars on new diesel generators. After seeing the projected returns for wind energy, I wish we could have spent that money on wind turbines and saved on diesel costs. Diesel is the past, wind is the future,” Yusuf Aaaden, a local Hargeisa independent power producer, told IPS.

A combination of an abundance of bamboo and eager foreign investment is making Ethiopia a frontier for the bamboo industrial revolution in Africa, according to this country’s government.

“Ethiopia has the resources, the investment, a rapidly-developing manufacturing industry and a strong demand for our bamboo products from foreign markets. We have what we need. The expansion of Africa’s bamboo sector has begun,” Ethiopia’s State Minister for Agriculture and Rural Development Mitiku Kassa told IPS. 

Ethiopia currently has the largest area – one million hectares – of commercially untapped bamboo in East Africa, making it attractive to investment partners from the bamboo industry. However, the Ministry of Agriculture and Rural Development told IPS that they were unwilling to disclose any figures on the bamboo economy, but added that there had been no formal bamboo economy in Ethiopia until 2012.

“The market potential of bamboo in Europe is massive. We believe that there can be a reliable and effective supply chain built here in Ethiopia to create a bamboo manufacturing industry,” said Felix Boeck, an associate engineer at Africa Bamboo PLC, a public-private partnership set up with Ethiopian partners and supported by the German Development Cooperation in 2012.

The partnership plans to invest 10 million euros over the next five years in their Ethiopia-based manufacturing operation, which will supply competitive flooring products to European and United States markets. The company plans to export 100,000 square metres of bamboo flooring products by 2014. By 2016 this figure is expected to rise to 500,000 square metres.

“The fastest-growing market in Europe for the wood industry is flooring and outdoor decking. We expect our products to play a large role in this market,” Boeck told IPS.

In comparison to soft wood trees that can take 30 years to reach maturity, bamboo is a fully mature resource after three years, making it commercially and environmentally sustainable.

Sub-Saharan Africa has three million hectares of bamboo forest, around four percent of the continent’s total forest cover. Ethiopia plans to increase its bamboo cover to two million hectares over the next five years.

Small-scale Ethiopian bamboo farmers like Ghetnet Melaku are enthusiastic to participate in the development of the bamboo sector, if investment in its expansion is inclusive of small farmers.

“I am just making enough money to subsist by producing bamboo for the local craft market and, if I had the opportunity, I would like to increase my capacity for skilled production and a better financial return,” Melaku told IPS.

The International Network for Bamboo and Rattan (INBAR) is an intergovernmental organisation that assists governments, businesses and local communities to identify innovative bamboo-based opportunities for human development.

It is helping sensitise African governments to the high potential of bamboo as a versatile and renewable resource that can generate sustainable development. According to INBAR, one billion people around the world use bamboo in their daily lives as housing material, fencing and food, and in craft production, etc.

“If properly managed, this highly versatile resource could spur economic growth in a world export market valued at two billion dollars in 2011, reduce deforestation and cut carbon emissions,” INBAR director general J. Coosje Hoogendoorn told IPS.

Deforestation has ravaged Africa’s environment – the carbon emissions from burning timber on the continent alone are expected to reach 6.7 million tonnes by 2050. As 90 percent of the population in sub-Saharan Africa use firewood or charcoal to cook, the development of an alternative resource like bamboo has become essential.

“Sourcing fuel for cooking food is integral to food security,” said Hoogendoorn. “Rice, maize and pulses all require heat to become edible. Renewable alternatives like bamboo can help minimise deforestation caused by the logging of soft timber wood for cooking fuel and house materials.”

Ethiopia’s government has prohibited the creation of charcoal from burnt wood for retail and is actively advocating sustainable alternatives such as bamboo.

“Bamboo is a major untapped resource for Ethiopia. We are pushing to grow and conserve our bamboo resources. We are starting to work with farmers and enterprises to encourage and develop this sector for the country’s economic and environmental benefit. We are working to undo unsustainable practices and advocate new alternatives,” State Minister Kassa told IPS.

Although Ethiopia has one of the highest deforestation rates in Africa, it has increased its national forest cover to seven percent from three percent a decade ago, out of an original 40 percent. Hoogendorn said that governments needed to make financial resources available to enterprises that wished to develop Africa’s bamboo industry.

“We want governments to put structures in place that offer financial support such as micro finance and that remove any hindrance for investors in the bamboo market, so that when companies want to set up a bamboo industry they have access to financial support,” he said.

High demand for Ethiopia’s agricultural output such as bamboo can drive growth and development for the country’s poor if it generates employment opportunities and remains non-exploitative towards farm workers and the land, said research fellow Steve Wiggins from the Overseas Development Institute (ODI). The ODI is the United Kingdom’s leading independent think tank on international development and humanitarian issues.

“It is good if there is another source of demand for farm produce, so long as the economics of bamboo offer decent returns to land and labour, equitable deals can be struck in the supply chain, and the crop is environmentally sustainable,” Wiggins told IPS.

While bamboo production in Asia carries connotations of unsustainable forestry practices and illegal logging, INBAR is working to share lessons learnt and bring bamboo production in Africa’s market up to the highest standards.

“Sustainable management of a country’s bamboo sector is extremely important to the future of a country’s market, especially if that country is wanting to export its products to the European market where laws stipulate conformity to high sustainability standards,” Hoogendoorn said.

As the industrial development of bamboo in Africa is in its infancy, investors have until recently been cautious about ploughing large amounts of money into a market whose dividends are relatively unknown.

“We are ready for the same industrial revolution in bamboo development that Ethiopia is currently experiencing,” Andrew Akwasi Oteng-Amoako, the chief research scientist at the Forestry Research Institute in Ghana, told IPS.

He lamented that although his West African country had an abundance of bamboo, it failed to secure the same investment as Ethiopia.

“We anticipate a revival of investment interest in Ghana’s bamboo industry in the near future thanks to Ethiopia’s success,” Oteng-Amoako said.

An Adivasi tribesperson walks down a forest path in India’s Chhattisgarh state. Credit: Virppi Venell

Over a decade ago, the Dongria Kondh tribe – tucked away in the Niyamgiri hills, a mountain range in the eastern Indian state of Orissa – found itself under attack.

For centuries the tribe had lived peacefully in the hills, worshipping the sacred ‘mountain of law’ and protecting the forests surrounding it. But when the London-based Vedanta Resources mining conglomerate discovered a rich deposit of bauxite atop the same mountain, the community found their ancient land suddenly up for grabs.

A huge push by international NGOs, local forest rights groups, tribal representatives and legal advocates here finally managed to shut down the factory in 2012.

A crucial step along the way to victory was the amendment of the 2006 flagship Scheduled Tribes and other Traditional Forest Dwellers (Recognition of Forest Rights) Act, making it mandatory for developers to first obtain the consent of gram sabhas (or village councils) before commencing work on projects that would affect forest dwelling communities.

Today, the fruits of that hard-won struggle – which secured some degree of protection for the rights and environment of endangered tribal communities in India – are once again under threat.

Earlier this month the ministry of environment and forests (MoEF) retracted the clause in the 2006 Forest Rights Act (FRA) that gave tribal groups the power to reject major infrastructure projects that endanger their land and livelihoods.

The ruling, made public on Feb. 5, stated that “linear” projects – meaning those involving the construction of roads and canals, and the laying of pipelines, optical fibres and transmission lines — will all be exempt from the need to acquire consent of village communities affected by the clearance, diversion and pollution of their forest land.

The government thus gave itself – and its many private partners — the green light to divert forests or displace tribal communities at will.

The ruling also effectively renders powerless the guideline contained within the FRA that ”no member of a forest dwelling Scheduled Tribe or other traditional forest dweller shall be evicted or removed from forest land under his occupation till the recognition and verification procedure is completed.”

Dr. Swati Shresth from the Global Forest Coalition told IPS the MoEF’s ruling is “a continuation of land grabbing and a violation of the rights of traditional forest dwellers in the name of development, economy and national good”.

The decision to exempt linear projects is the first step towards diluting the FRA, according to Ashish Kothari from Kalpavriksh, one of India’s oldest development and conservation NGOs.

“Over the last few years the government has hardly implemented the FRA, and now that communities are asserting their rights by using it to resist projects they consider damaging to their environment and livelihoods, the government is desperate to find ways to bypass them,” Kothari told IPS.

The recent controversial decision has sparked an outcry resulting in letters of protest to the Prime Minister’s Office (PMO) signed by a coalition of international rights organisations including Oxfam and Rights and Resources, as well as a letter of protest signed by a large group of Indian lawyers.

Ruling against resistance?

The Bhumia tribal community practices sustainable forestry: these women returning from the forest carry baskets of painstakingly gathered tree bark and dried cow dung for manure. Credit: Manipadma Jena/IPS

For over seven years, India’s village councils have leveraged provisions in the FRA to block attempts by the South Korean Pohang Steel Company (POSCO) to forcibly acquire their land.

In early February there were attempts to evict farmers from their land in the Jagatsinghpur district of Orissa, in order to make way for a giant, 12-billion-dollar steel plant with a capacity of four million tonnes.

Various Indian and international organisations – including South Korean NGOs – have registered their disgust at the violent attempts to forcefully acquire the land.

According to a statement released on Feb. 3 by the All India Forum of Forest Movements (AIFFM), “Around 4,000 families who will be affected by the project do not want their homes and livelihood sources to be ceded for construction of the integrated steel plant.”

Thanks to the new ruling, these communities no longer have a legal leg to stand on in defense of their land.

In response to concerns that the recent decision could diminish the state’s capacity to safeguard tribal rights, Tribal Affairs Minister Kishore Chandra Deo assured IPS that the government “will always remain committed to strengthening the gram sabhas of India”.

That even this “bare minimum” requirement has now been revoked does not bode well for tribal rights.

“By withdrawing this major provision, the government can pretend to hold ‘consultations’ in the form of public hearings but negate the core principle of the FRA – the right of communities to determine what happens to their environment,” Shresth told IPS.

Making way for growth

According to Sanjay Basu Mallick from the AIFFM, “This (decision is supposedly) about the county’s flagging GDP and creating access for mining industries in the name of economic development.

“But in human terms this is an undemocratic step towards total neglect of the development and welfare of forest communities,” he told IPS.

Growth in Asia’s third-largest economy slowed to its weakest in nearly a decade to 6.2 percent in the fiscal year ending in March 2012, announced the International Monetary Fund in a report released early February.

“In 2011/12, India’s growth rate was 6.5 percent. That figure is expected to drop to 5.4 percent in 2012/13,” said the IMF.

The international lending organisation blamed a lack of investment in infrastructure and delays in land clearance for industrial projects as major reasons for the drop in GDP.

Prime Minister Manmohan Singh’s government is taking steps towards boosting the economy, including a raft of pro-market reforms announced in 2012. Despite these reforms to restore growth, the IMF believes that “more needs to be done”.

Last November, a leaked report from the Prime Minister’s Office recommended “diluting” tribal rights, likely in response to pressure from mining conglomerates and related industries to expedite clearance on major projects. According to the National Highways Authority of India, a total of 101 infrastructure projects, including 32 road projects, have been stalled due to clearance delays.

“The PMO has been lobbying the MoEF to amend the 2009 order due to increasing pressure from the private sector on him to speed up clearance for large mining operations to commence,” Basu Mallick told IPS.

The MoEF finally buckled last December, when it announced that existing coal mining projects could bypass the process of a public hearing, as stipulated in the FRA, and receive a one-time capacity expansion of up to 25 percent.

That move now finds echo in the recent reversal of the FRA provision for tribal consent, experts say.

“The broad context to this is that in the blind pursuit of economic growth, processes such as local community consent are seen as impediments rather than essential aspects of a genuine democracy,” Kothari noted.

Ethiopian entrepreneur Bethlehem Tilahun started Sole Rebels in 2005 in order to create jobs and sustainable prosperity in her country. Courtesy: Sole Rebels

Innovative Ethiopian footwear manufacturer Sole Rebels will open its second retail outlet in Taiwan this year. With ambitions to open 30 more franchise stores across the world in countries like the United States, Australia, Italy and Japan, Sole Rebels, the largest African footwear brand, is now fast becoming a global competitive brand.
The company currently sells its innovative range of artisan shoes made from recycled materials in 55 countries and is now one of Ethiopia’s thriving businesses with a major presence on e-commerce sites such as Amazon. Its success reflects this Horn of Africa nation’s growing footwear-manufacturing industry as Chinese businesses are increasingly investing in the sector here.

Founded in 2005 by Ethiopian entrepreneur Bethlehem Tilahun, who wanted to create jobs and sustainable prosperity in her country, Sole Rebels made two million dollars in sales in 2011 and is expecting to generate over 15 to 20 million dollars in revenue by 2015.

“We are extremely excited to open a Sole Rebels store in the heart of Taichung. Taichung is a footwear epicentre, home to the Asian design centre for the planet’s largest footwear brands,” Bethlehem told IPS. 

The new outlet expands the company’s plan to exploit increasing consumer demand in Asia’s mushrooming retail footwear market and makes it the first African consumer brand to open franchise retail outlets in Asia.

Bethlehem is intent to defy the stereotypes about her country. A poverty index released by Oxford University and the United Nations in 2011 ranked Ethiopia as the world’s second-poorest country after Niger.

But the success of Sole Rebels is evidence of how Ethiopia is ready to make a transition from being foreign-aid reliant to being able to direct its economic future by exploiting home grown skills, resources and the many business opportunities in the country, according to Bethlehem.

“Sole Rebels is proud to be the planet’s fastest-growing African footwear brand and the very first global footwear brand to ever emerge from a developing nation. It stands as living proof that creating innovative world-class brands is the best road to greater shared prosperity for developing nations like Ethiopia,” Bethlehem said.

Sole Rebels is the world’s first certified fair trade footwear company. All of the shoes are hand crafted by a staff of over 100 people using traditional Ethiopian artisan practices and locally-sourced, hand-spun organic cotton and recycled materials. In a market where the majority of footwear brands are produced by machines, Sole Rebels shoes are a breath of fresh air.

“Our business model centres on eco-sensibility and community empowerment. Our model maximises local development by creating a vibrant local supply chain while creating world class footwear,” Bethlehem said.

Bethlehem, who was on the front cover of Forbes magazine in January 2012 where she was listed as one of Africa’s most successful women, has won many plaudits and a significant amount of international recognition for her work at Sole Rebels. She is now one of Africa’s most recognisable female entrepreneurs. Female entrepreneurship is, according to the World Bank, higher in Africa than in any other region of the world.

In 2011, the World Economic Forum selected her as a “Young Global Leader”. In June 2012, she won the award for “Most Outstanding Businesswoman” at the annual African Business Awards organised by African Business Magazine.

Eugene Owusu, Ethiopia’s representative at the United Nations Development Programme, told IPS: “Sole Rebels is taking advantage of the improving infrastructure and growing local skilled labour to exhibit all of the characteristics one looks for in Ethiopian entrepreneurs.

“It’s innovative, a jobs creator, environmentally sustainable, and globally competitive. Sole Rebels is indeed blazing a trail for other local companies to follow, as Ethiopia seeks to minimise its dependency on aid.”

The International Monetary Fund (IMF) reported that Ethiopia’s economy grew at a rate of 7.5 percent in 2011. This second-most populated country in Africa has been one of the fastest growing, non-oil producing economies in Africa in recent years, according to the World Bank.

The country’s export earnings increased by 15 percent to 3.2 billion dollars between 2010 and 2011, according to the Ministry of Trade and Industry of Ethiopia. The government aims to double exports as a share of economic output by 2015 with a much bigger contribution coming from the sale of minerals and manufactured goods.

Owusu said Ethiopia’s booming private sector would help the country continue with its growth trajectory and this should translate into poverty reduction and national development.

“Locally-grown private enterprises will be a foundation from which Ethiopia can consolidate the strong overall growth exhibited over the last decade, and to achieve the bold transformative vision that the country has set itself to become a middle-income country by the year 2025,” Owusu said.

According to a recent IMF report on Chinese investment in Ethiopia: “The manufacturing sector accounts for the largest amount of Chinese foreign direct investment in Ethiopia, attracted by low-cost labour and large-scale land leases, in addition to Ethiopia’s market size.”

Chinese manufacturers, particularly footwear manufacturers, are now starting to relocate production facilities to Ethiopia to escape rising production costs at home, but also because Ethiopia has one of the largest livestock industries in Africa to supply leather to producers.

Ethiopia also boasts one of the largest and cheapest labour forces in Africa. Ethiopia’s late Prime Minister Meles Zenawi wanted the country to become a major producer and exporter of leather shoes as part of his economic development plan.

Chinese company, Huajian Shoes, announced in 2012 that it would invest two billion dollars in Ethiopia’s footwear manufacturing industry. To date, Chinese companies have invested 900 million dollars into Ethiopia’s economy, according to Ethiopia’s Investment Agency.

Zemedeneh Negatu, a managing partner at Ernst & Young in Ethiopia, thinks that companies like Sole Rebels will help transform the economic landscape of Ethiopia and the continent.

“The company’s success is an inspiration to the newly-emerging Ethiopian private sector. It’s important to remember that until 1991, Ethiopia was a pseudo-socialist country with no private sector. Yet in a relatively short time it has started to produce success stories such as Sole Rebels, which is a good example of an export-oriented global success story from the private sector.

“I regularly use the phrase ‘It’s time for Africa’ precisely because I see more and more African Sole Rebels like Bethlehem and her company.”

In the forest in Gbarpolu County, northwest Liberia, a group of men work on a surface gold mine. Credit: Travis Lupick/IPS

Many of the fastest-growing countries in the world are in Africa, the poorest continent on the planet, but the potential for recently-discovered resources to generate broad-based inclusive development opportunities is massive and remains under-exploited.

“I don’t believe that African nations are even close to understanding the enormous wealth that is their natural resource endowment,” David Doepel, chair of the Africa Research Group at Australia’s Murdoch University, told IPS.

African countries preparing to cash in on mineral wealth in East Africa include Tanzania, Uganda, Mozambique and Ethiopia, based on recent discoveries of oil and gas.

In 2010, Guinea alone represented over eight percent of total world bauxite production, Zambia and the Democratic Republic of Congo have a combined share of 6.7 percent of the total world copper production, and Ghana and Mali together account for 5.8 percent of the total world gold production, while Ethiopia also accounts for one-sixth of the world’s tantalum production.

A World Bank report issued in October claimed consistent high commodity prices and strong export growth show that African countries need to value the economic importance of their unexploited natural resources.

Well-managed revenue from Africa’s resources could increase economic activity in the long term, create jobs, reduce poverty and improve access to health and education,said Doepel.

“It is vitally important for any resource-rich country to have a focus of maximising the total value of any of its natural resources over the lifetime of that resource – that is a combination of maximising returns and minimising negative consequences (both environmental and social). Opportunism and urgency to extract are not necessarily ingredients for maximising value,” warned Doepel.

African countries like Nigeria have been losing out to corruption and short-sightedness in pursuit of quick profits in the oil sector. Nigeria is Africa’s largest crude oil exporter, shipping more than two million barrels per day, and is also home to the world’s ninth-biggest gas reserves. An investigative report requested by Nigeria’s oil ministry released in October revealed that a lack of transparency in the West African nation’s oil sector led to a loss of revenue of 29 billion dollars between 2002 and 2012.

The Revenue Watch Institute is a non-profit policy institute that promotes the effective, transparent and accountable management of oil, gas and mineral resources for the public good. Alexandra Gillies, head of governance at the institute, told IPS that African countries need to be circumspect at every stage of exploiting their recently-discovered oil reserves.

“For new African producers, striking a good deal can be a real challenge. They often lack capacity and familiarity with the oil sector as compared with the oil companies, and political agendas can make leaders overly anxious to begin production quickly, sometimes at the expense of better, long-term deals.”

Current working models that ensure the private sector and the government are held to account are starting to succeed in countries like Ghana.

“Ghana has taken some promising steps with its young oil sector. They have created a citizen-led Public Interest and Accountability Commission to oversee the collection and allocation of oil revenues,” said Gillies.

Countries endowed with natural resources have a tendency to heavily depend on economic activity solely based around extracting and exporting the resource as a primary product. This approach limits economic opportunities for development and makes a country vulnerable to fluctuations in commodity prices and levels of demand, according to Doepel. For example, Nigeria possesses 2.9 percent of the world’s oil and gas reserves and hazardously depends on oil and gas for 90 percent of its export revenue.

Focusing on maximising revenue by taking oil out of the ground and exporting it without any value addition could be seen as dangerous short termism and as a barrier to long-term inclusive development, he said. It is not just the resources that are a source of development but also the potential for local industry to be built around the extraction of resources.

Extraction industries offer huge opportunities for job creation and skill enhancement to improve the lives of ordinary Africans, said Doepel. He is convinced that many of the skills required by the extractive industries are transferable and could be utilised to help generate and expand economic activity in developing countries with an emerging industrial base.

“Mechanical engineers and civil engineers can work on building an open cut mine and just as easily work on water purification plants and roads and bridges,” he said.

Economic benefits can be achieved “as long as the extraction industry is deeply linked to the national and local economies and the ‘mining spend’ is captured rather than ‘exported’ along with the ore,” said Doepel.

There are many opportunities ahead for enterprising Africans to play a role in their country’s development based on the continent’s untapped resources, said Francis Steven George, CEO of Innovation Africa, an organisation that provides consulting to companies and institutions on how to exploit business opportunities for development and poverty reduction.

“Citizens can benefit by participating in the exploration of the resources. They can gain employment or can become suppliers or service providers to the industry. Governments need to help by creating an enabling environment. For example, investment in the education system to enable the relevant degree programmes to meet the needs of the industry, or by providing soft loans to local entrepreneurs who participate in the industry,” he told IPS.

Countries like Ethiopia, which has recently discovered vast mineral reserves such as gold, tantalum, oil and potash, are taking inspiration from countries like Botswana as they strive to maximise development opportunities. In early 2012 Botswana demanded that diamond company De Beers move much of its diamond-sorting operations from the United Kingdom to Botswana in an effort to localise value addition.

Citing this as a good example of how mining can enrich a country, the Ethiopian government seems determined to exercise maximum transparency and caution to ensure mining revenues benefit its population of over 90 million, which makes it Africa’s second-most populous nation.

“We want our country to benefit from our resources in the broadest sense. Development for all and not just a few is our goal,”  Ethiopia’s State Minister of Mines Tolesa Shagi told IPS.

British Nyota Minerals is set to be the first foreign company to receive a mining license to extract gold on the basis of its own exploration in western Ethiopia in the coming months.

Recent surveys indicate an estimated 500 tonnes of gold reserves in Ethiopia. According to mining experts, extraction of gold could rise to 40 tonnes a year from just over four tonnes last year, earning the country around 1.7 billion dollars based on current commodity prices.

Ethiopia is planning to sign up to Publish What You Pay, an international initiative subscribed to by over 70 countries, early next year. It holds governments of resource-rich nations accountable for the management of revenues from extraction industries.

Organisations like the Revenue Watch Institute are emphatic about the need for transparency from governments to ensure countries make the most of their resources and embark on a course of sustainable development that improves the lives of ordinary Africans.

“After the deals are signed, governments must regulate operations, maximise complex revenue streams like profit taxes, manage these revenues which are very volatile, and spend them on valuable development projects. Across all these functions there are risks of corruption, of decisions driven by patronate, favoritism and short-term political considerations,” said Gillies.

The message is clear – by having 30 percent of the world’s extractive resources, Africa has one of the greatest opportunities it will ever have to graduate its people out of poverty.

Development organisations are promoting the view that sustainable development in African countries should be generated by a partnership between large corporations and small farmers. Credit: Elias Asmare/IPS

Africa’s smallholder farmers, who contribute 80 percent of food and agricultural production in sub-Saharan Africa and much of the world’s food supply, are being encouraged by big business, governments and NGOs to become less subsistence based and more entrepreneurial by tailoring production to market forces.

“Increased productivity and value-chain involvement should address weaknesses in Africa’s food economy and create employment opportunities by engaging smallholder farmers in agro-processing, packaging and the marketing of their products,” John Moffett, director of policy and strategy at Self Help Africa, an NGO that works with rural communities to bring sustainable solutions to the causes of hunger and poverty, told IPS.

The question is: can Africa balance the task of feeding a population of two billion by 2050 and at the same time accommodate the interests of global food retailers who are hungry to capitalise on the continent’s resources, markets and smallholders?

Michael Hailu, director of the Technical Centre for Agricultural and Rural Cooperation, which works to advance agricultural and rural development in African, Caribbean and Pacific countries, told IPS that the private sector needed to play a greater role in smallholder agriculture as their increased participation in agricultural value chains was essential to stabilising global food supply and developing the livelihood of Africa’s smallholders.

“More than at any other time in the past, agriculture has been getting considerable global and national attention, particularly after the 2007-2008 food price crisis. As a result, the sector is attracting the policy and investment support it needs to fulfil the goals of food security and economic growth.”

Against a backdrop of volatile food supply and climatic uncertainty, global food retailers and agribusinesses want to prioritise smallholder farmers more than ever. Many large companies like Unilever and Walmart are claiming that the livelihood of smallholders is critical to the commercial expansion of giant food retailers.

David Hughes, professor of food markets at Imperial College, London, told IPS that the emphasis on smallholders was a commercial imperative and not just a corporate social responsibility afterthought.

“If they don’t get on the green train then they know they won’t have a long-term business. I think we will start seeing businesses making radical changes to their business models over the next 10 years.”

Development organisations are also promoting the view that sustainable development in African countries should be generated by a partnership between large corporations and small farmers.

Farm Concern is an Africa-wide market development organisation that advocates smallholders need to be market savvy and strategise production to satisfy the demands of the market in order to break out of subsistence agriculture.

The NGO promotes a smallholder “Commercial Village” model to help producers respond to the needs of food security and market forces.

“We take the total number of hectares in a village and promote three categories of commodities. Food and nutrition commodities are produced using 35 percent of the available land; the second category being inedible commercial crops occupies 65 percent, leaving five percent of land for natural resource management,” Mumbi Kimathi, strategy director for Farm Concern, told IPS.

The United Kingdom is also busy promoting the role of the private sector in smallholder agriculture.

Its Department for International Development is funding the creation of smallholder farmer linkages with the U.K.’s food retail industry and supermarkets to create opportunities for Africa’s farmers to export more of their products to U.K. supermarket shelves.

The partnership between Taylors U.K., a Yorkshire tea brand, and Rwandan smallholder tea growers is one example of how the U.K. government has helped facilitate the entry of giant retailers into Africa. This alliance resulted in the training of 10,000 farmers and 1,800 producers, and a 40 percent increase in the minimum wage for Rwanda’s small-scale tea producers.

Global food retailers are also getting excited about the high growth potential within emerging markets in sub-Saharan Africa. The International Monetary Fund (IMF) forecasts a 5.7 percent economic growth in 2013. This growth, according to the IMF, is being driven by rising commodity prices.

Global food retailers have seen these trends as opportunities for integrating smallholders into more sophisticated value chains to satisfy the new demand.

The world’s biggest food retailer, Walmart, made profits of 460 billion dollars last year– 15 times the size of Ethiopia’s GDP. Walmart is now extending its monopoly into Africa. The company purchased South Africa’s Massmart supermarket chain in 2011, providing them entry into 13 sub-Saharan African countries.

They aim to sell one billion dollars in food from small-scale farmers by 2015 in a bid to demonstrate a commitment to sustainable development.

Resource-constrained African smallholders are being lured by promises of greater access to credit, inputs, improved seed varieties, and market training opportunities, and the promise of a greater financial return.

Agricultural growth is more important for Africa than for any other continent. Africans depend on agriculture and non-farm rural enterprises for their livelihoods, yet they are also unable to meet their basic food needs due to population pressure, the effects of climate change and land degradation.

According to the New Partnership for Africa’s Development, an African Union programme for pan-African socio-economic development, nutrient depletion in Africa represents a significant loss of natural capital valued at an estimated one to three billion dollars per year. If most of the nearly 70 million smallholder families in sub-Saharan Africa fail within the next decade to adopt sustainable land and water management practices on their farms, long-term food security, productivity and income will be jeopardised.

There is also a risk that cash crops like tea, coffee, tobacco and flowers will become more attractive to smallholder producers than staples, which could damage efforts to make Africa more food secure.

Patrick Mulvay, co-chair of U.K. Food Group, is opposed to the industrialisation of smallholder agriculture and the participation of small African farmers in the corporate food economy. He told IPS that although it might boost production and provide a supply of raw commodities in the short term, in the long term it is unsustainable and destructive.

“African farmers really need support to sustain these food systems, which currently feed more than 70 percent of the world’s population, and they need protection from the industrialised commodity production as they will capture and trash the farmers’ markets, livelihoods and environment in the long term.”

He said he was concerned about how sustainable it was to divert food production towards the demands of giant foreign retailers and global volatile markets when 63.6 percent of household income in sub-Saharan Africa was spent on food. Mulvany was also worried that African countries that are unable to feed their growing population would become vulnerable to revolt as experienced in Tunisia in 2011.

Heinrich Böll Foundation country director Patrick Berg said the current NGO law makes it impossible for the foundation to carry out its mandate to encourage inclusive political debate. Credit: Ed McKenna/IPS

The world received contradictory signals about Ethiopia’s human rights record when in the same week it was elected to the United Nations Human Rights Council, a major German charity closed its Ethiopian office in protest against a restrictive political environment.

“If the qualification to be elected to the UNHRC is the human rights record of a country – then Ethiopia should not have been appointed…. the condition of human rights in this country is disastrous,” Endalkachew Molla, director of Ethiopia’s oldest rights organisation, the Human Rights Council (HRCO), told IPS.

Ethiopia, together with four other African countries – Kenya, Gabon, Côte d’Ivoire and Sierra Leone – was elected on Nov. 12 to serve as a member of the UNHRC for a three-year term beginning on Jan. 1, 2013.

In the same week, one of Germany’s major civil rights groups, the Heinrich Böll Foundation (HBF), decided to close its office in protest against the human rights restrictions in the Horn of Africa nation. The closure is the most high profile so far in Ethiopia.

Named after the German Nobel Prize winner for literature, the Heinrich

Böll Foundation is an NGO that promotes democracy and human rights, with 30 offices across the globe.

“Our mission, to work together with local partners for democracy, gender equality and sustainable development, can no longer be carried out. The closure of the office in Ethiopia is a sign of protest by the foundation against the ongoing restrictions on civil rights and freedom of speech,” said Barbara Unmüßig, director of the HBF, in a statement on Nov. 7.

Unmüßig was referring to the controversial NGO law passed in 2009 known as the “Charities and Societies Proclamation”.

This law places restrictions on the work, operations and funding of human rights organisations in Ethiopia. It prohibits any human rights organisation from receiving more than 10 percent of their funding from foreign sources.

Because of this law, the HBF office, which opened in 2006, was forced to shrink its mandate over three years from the promotion of democracy and gender equality to doing mostly environmental work to be consistent with the new law, according to country director Patrick Berg.

“We are allowed to provide crafts training for women, but we are not allowed to help them demand their constitutional rights. Our mandate is to encourage an inclusive political debate – but the current law makes that impossible,” Berg told IPS.

In addition, a recent guideline to the law states that a maximum of 30 percent of an NGO’s budget can be devoted to administrative costs. Berg studied the definition of what an administrative cost was and he was alarmed to discover that the definition was extensive enough to account for the majority of costs incurred by his organisation.

“Overnight, our core work of producing and disseminating information and providing space for public dialogue is now seen as an administrative task. There is no way to comply with these rules without changing who we are. We are not willing to do that,” Berg said.

In 2009 the HBF had accepted working under the restrictions with the hope of reaching an agreement with the Ethiopian government that would fully restore the organisation’s previous scope of work. However, after three years of fruitless negotiations, the foundation finally decided to close.

The “Charities and Societies Proclamation” has become notorious for granting the government latitude for interference, surveillance and direct involvement in the management and operations of organisations.

Currently there are nearly 3,000 international civil society groups, NGOs and charities operating here, and 400 of these have been warned about operating against the rules and regulations of the law.

The importance of preserving human rights in countries like Ethiopia was stressed by U.N. deputy secretary general Jan Eliasson, who told IPS that “the four crucial pillars of a post-2015 MDG (Millennium Development Goal) world are peace, development, the rule of law and human rights; if one of these pillars is weak then the whole structure is weak.”

Ethiopia’s government spokesman Bereket Simon explained to IPS that “the purpose of the NGO law is to limit foreign intervention, to better enable citizens to participate in political life.” According to Bereket, the recent appointment to the UNHRC “gives the government more energy to pursue democracy and human rights in Ethiopia.”

However, Endalkachew believes that restricting foreign involvement in human rights creates a rationale that is inconsistent with the Universal Declaration of Human Rights adopted by the U.N. in 1948.

“Human rights know no borders, they are universal. It is an agenda for all human beings. Why can’t human rights in Ethiopia have the same unlimited access to resources as agriculture and infrastructure do?” he asked.

The HRCO and the country’s leading women’s rights organisation – the Ethiopian Women Lawyers Association (EWLA) – had their bank accounts frozen in December 2009 after the passing of the Charities and Societies Proclamation, despite the fact that all their foreign funding had been received prior to passage of the 2009 legislation.

The EWLA had provided free legal aid to over 17,000 women. In 2011, the organisation effectively ceased to function.

In October, Amnesty International and Human Rights Watch protested against the decision by Ethiopia’s Supreme Court to uphold the freezing of assets amounting to 500,000 dollars belonging to the HRCO.

The HRCO’s outreach and capacity have been severely restricted by the 2009 law. They have been reduced from 12 branches to three, from 60 staff members to 12 and have had to close offices across the country. The scope of their aid services to victims of human rights violations has been quashed.

“We can remain a human rights organisation but only as a resource-less organisation,” Endalkachew said.

According to Endelkachew, the deterioration of human rights in the country stems from the civil unrest that followed the 2005 elections, when a large number of the opposition was voted into power.

“In the eyes of the ruling party the majority of NGOs and journalists were seen as supportive of the opposition, so they believed something had to be done to restrict their activities.”

After these events, the government introduced a series of proclamations including the 2009 “Charities and Societies Proclamation”.

If the rationale behind the appointment of Ethiopia to the UNHRC is to encourage the new government to improve its human rights record under the watchful gaze of the international community then Enadalkachew believes “there could be reason to be hopeful about the future of human rights in Ethiopia.”

Radisson Blu hotel in Addis Ababa. Credit: Ed McKenna/IPS

The death of Ethiopia’s leader of 21 years has raised fears of instability in one of Africa’s fastest-growing non-oil producing nations, which could potentially slow investment activity.

Former Prime Minister Meles Zenawi, who passed away in August, saw foreign direct investment (FDI) as key to his development plan for Ethiopia. This attitude helped shift Ethiopia’s economy from being wholly reliant on the export of agricultural commodities to, for example, utilising abundant labour and cheap power to begin developing a manufacturing industry.

“Without Meles, Ethiopia will struggle to control unrest (ethnic/religious) that could easily spill across regional borders,” a recent International Crisis Group report said.

According to the National Bank of Ethiopia, FDI in this country climbed from 150 million dollars in 2005 to 1.1 billion dollars in 2010. To bring in scarce foreign exchange, Meles channeled investment to export-oriented sectors like floriculture, horticulture, textiles, and leather.

Ethiopia’s foreign earnings increased 15 percent last year to 3.2 billion dollars, according to the Ministry for Trade. The government aims to double exports as a share of output by 2015, with a much bigger contribution coming from minerals and manufactured goods.

Dr Getachew Begashaw, professor of economics at Harper College in the U.S. city of Chicago, questions to what extent foreign investment is translating into jobs and improved quality of life for Ethiopians.

“Ethiopia has the lowest per capita GDP (only 351 dollars) in Africa; it is one of the last four countries in Africa. Similarly, it stands at the bottom of all countries reviewed for the human development and prosperity indices (171 out of 178 for HDI and 108 out of 110 for prosperity),” he told IPS.

By citing China as his model for governance, Meles may have mistakenly presumed that investors were only interested in receiving a good return on finance, according to Getachew, who believes that if the government’s repressive approach continues it could deter companies in the future.

“The political climate in the country is not conducive for investments; the degree of human rights abuses in the country dampens the sense of economic security; the lack of a free, secure, and safe political environment will discourage bold economic initiatives. The current uncertainties following (Mr. Meles´s) death could slow investment decisions,” Getachew said.

In speeches, Meles outlined his vision of how state-rooted protectionist capitalism would benefit Ethiopia.

Although he used FDI to spur economic transformation, he also wanted to nurture a competitive productive base and expressed concern that laissez-faire economics would undermine that goal, reducing the chances of lifting a population of 94 million out of poverty.

In keeping with this rationale throughout his reign, Meles maintained a state monopoly in telecommunications and barred foreign banks.

This approach meant a natural affinity with East Asia’s statist powerhouses. Chinese banks and firms have funded and built roads and dams, and more recently have moved into leather and footwear manufacturing in Ethiopia.

According to a recent International Monetary Fund report, Chinese firms are attracted by cheap labour, large plots of land and a growing market of 94 million people.

Chinese factories like shoe manufacturer Huajian are now relocating production facilities to Ethiopia to escape rising costs at home. The company was also drawn by one of the largest livestock industries in Africa.

The firm may generate four billion dollars in exports a year, according to a recent Bloomberg report that cites the company’s vice president. Chinese businesses have invested 900 million dollars in the country, Ethiopia’s Investment Agency reports.

Foreign firms are also eyeing up services. This year the number one hotel group in Europe, the Carlson Rezidor Hotel Group, expanded its upscale Radisson Blu brand into Ethiopia. The company says it sees this country as its vanguard in east Africa.

Also this year, Schulze Global Investments, a U.S. firm, announced a 100 million dollar Ethiopia fund, the first private-equity scheme focused exclusively on this Horn of Africa country. The fund will invest in sectors from agribusiness and cement to health care and natural resources.

Meles’s economic policies resulted in improved bilateral trade relations with some countries. The UK Trade and Industry (UKTI) office in Ethiopia enthuses about growth in trade: Exports from the UK quadrupled to 248 million pounds in the last five years, while imports from Ethiopia doubled to 105 million pounds over the same period.

Rival beverage companies Diageo and Heineken made a total combined investment of 400 million dollars last year in privatised breweries, solid evidence that Western firms are beginning to follow the trail blazed by Chinese, Indian and Middle Eastern firms, says Zemedeneh Negatu, managing partner of Ernst and Young in East Africa.

“FDI is increasing steadily, and Ethiopia could receive 1.5 to 2.0 billion dollars each year up to 2015, excluding possible additional investments in the oil and gas sector,” he told IPS.

Although investors experience problems with costly transport and cumbersome customs procedures, Ethiopia’s ranking in the World Bank’s Doing Business annual survey has improved to 111th out of 183 countries, higher than the oft-vaunted emerging giants of India and Brazil.

Four UK companies are at an advanced stage of gold and oil and gas exploration, according to UKTI’s Dessalegn Yigzaw, with Nyota Minerals planning to invest 200 million dollars to develop the Tulu Kapi gold mine once it acquires a mining license later this year.

Gold reserves may be around 500 tons, a recent study claimed. If potash, oil and gas deposits are found by companies such as Allana Potash Corp of Canada, Ethiopia’s South West Energy and the London-based Tullow Oil, billions of dollars will be needed to develop them.

One area of controversy has been the government’s commercial farming drive. In 2008 Karuturi, an Indian floriculture company, leased 100,000 hectares in a remote province near the South Sudan border to grow corn, rice, palm oil, sugar and other crops.

Critics argue that a food-aid dependent country should not be exporting cash crops. But the government maintains that investments like Karuturi’s will bring jobs and expertise and boost fragile hard currency reserves.

At the Ethiopian Investment Summit earlier this year, a characteristically bullish Meles announced to investors: “Ethiopia has over four million hectares of fertile and unutilised agricultural land that we intend to avail to the private sector.” Meles’s protectionist rationale continues to prohibit the purchase of land.

Meles displayed an impressive aptitude for attracting investors. While the new administration has vowed to achieve his vision, strong leadership is required by his successor Hailemariam Desalegn to continue Meles’s grand project of modernising Ethiopia. For the time being, there are no signs of the feared instability, or of jittery investors cutting and running.

According to Ernst and Young’s Zemedeneh, “Ethiopia has to continue an aggressive but focused strategy to attract even more FDI since there is a lot of global competition from many other countries around the world, including right here in Africa.”