ETHIOPIA IN 2015

Note: all quotes in italics are from Meles Zenawi (MZ), late Prime Minister of Ethiopia. The Prime Minister is referred to here as ‘Meles’ as this is how he was universally known throughout Ethiopia. It does not imply familiarity or disrespect. Up to 8 Financial Times articles may be accessed for free by following the links.

Is Ethiopia’s state led model sustainable?

For Ethiopia, green growth is a necessity as well as an opportunity to be seized. It is an opportunity to realize our country’s huge potential in renewable energy and a necessity so as to arrest agro-ecological degradation that threatens to trap millions of our citizens in poverty (MZ) – Climate Resilient Green Economy strategy document, 2011.

After more than a decade of outstanding success stories, 2015 is a critical year for Ethiopia as the government’s democratic credentials, economic performance and development plans will be under close scrutiny worldwide. National elections will take place in May and Prime Minister Hailemariam Desalegn will face the electorate for the first time. The second phase of the Growth and Transformation Plan will be announced and there will be much debate about the achievements of Phase I and searching questions about Phase II.

This falls at a time when the sustainability of Ethiopia’s stellar growth and rising public debt are being questioned by the International Monetary Fund, the World Bank, other global institutions and leading economists. There are also voices of caution within the government itself. According to the Financial Times, Ethiopia’s December 2014 maiden $1 billion bond sale came with ‘unfamiliar investor warnings’ about ‘famine…war… political tension…high levels of poverty and strained public finances’. The IMF has, uncharacteristically, added ‘weather related shocks’ as a further threat to Ethiopia’s growth.  

With uncertainties surrounding Ethiopia’s future increasing, the first session of The Economist’s Ethiopia Summit in Addis Ababa on 4-5 February - ‘Driving Continued Growth’ - asks the most important question in Ethiopia today: Is the state led model sustainable?

Before answering this question it must be remembered that the state led development model in Ethiopia is not new but has been tried twice before, first under emperor Haile Selassie and then under a military dictator. In both cases the model was not sustainable. Its main problem was that it was based on the planning, technologies, economics and accounting system of the western inspired development model of the day.

This model is largely driven by foreign debt, oriented towards exports and funded by the public. Large-scale infrastructure projects in remote and challenging environments are centrally planned by a limited number of professions using a limited number of calculations and inappropriate technologies. Local knowledge is irrelevant. Projects are studied for feasibility and not sustainability and are often politically motivated which reduces their chances of success.

  

This model contains a wide range of ‘hidden costs’ or externalities, trade-offs, side effects and unintended consequences. The costs remain ‘hidden’ by an accounting system using gross domestic product as a measure of economic performance. GDP tells us nothing about sustainability. The economic, social and environmental costs can lead to rapidly diminishing returns. For instance, by 1980 most of the large-scale developments in the Awash Valley, where Ethiopia’s major investments were focused, had failed because the hidden costs were too high.

At the historic Lem, or Green, Meeting in June 1992, just one year after assuming responsibility for one of the most challenging countries on earth, Meles acknowledged this failure by blaming Ethiopia’s “suffering…hardship…and senseless” natural resource destruction on the “top down” and “irresponsible” decisions of the previous regimes.  Surrounded by the wreckage of a failed development model, and in the spirit of Agenda 21, Meles called for a “conservation-based, people-led, people-centred” development that would require a “multidisciplinary, broad-spectrum approach for there are no piecemeal solutions to the problems at hand.”

With this speech and the subsequent division of Ethiopia in 1995 into 9 ethnic federal states, Meles broke with the centralised, top down and irresponsible model of the past and began leading Ethiopia on a new green journey for the 21^st century, away from extreme vulnerability towards resilience, sustainability and economic independence.

Inspired by this vision, over the past 23 years Ethiopia has confirmed its legendary ability to field large numbers of people and raise productivity in remote and challenging conditions. Ethiopia has become a world leader in terms of small-scale developments, environmental rehabilitation and green economy initiatives. Tigray, for instance, has been called ‘the land of 40,000 micro-dams’.

The culmination of Meles’ green thinking is the Climate Resilient Green Economy strategy, the first of its kind in the world and a model for Africa’s sustainable development. Never before in Ethiopia’s modern history have things looked so promising. This ancient land’s legendary ‘great abundance’, which foreigners for centuries looked at with envy, is again within reach. Ethiopia’s current renaissance, which is based on the green foundations laid since 1992, will be good for Africa and good for the world.

However, there is still far to go to realize Meles’ green vision in Ethiopia and there is a great danger that history might be repeating itself as the ‘top down’, state led model has returned. For Meles was a leader with one foot in the 21^st century and one in the 20^th. Whether this time round will be ‘irresponsible’ or not remains to be seen.

Meles looking back – ‘development-as-usual’

The future of the world is green and when we plan for our future we must do so on the basis of green technologies.  All the more so because we have not heavily invested in old technologies and we are as it were investing in a green field (MZ) –‘ What does the green economy have to do with us (Africans)’, Perspectives on Rio+20, 6^th African Economic Conference, 2011.

Meles’ 21^st century vision was born of his years as a freedom fighter living close to the severely degraded and vulnerable landscapes of Tigray. After 1991 this green vision evolved as he masterminded the transformation of Ethiopia from failed state to one of the fastest growing economies in the world. It required a profound rethinking of Ethiopia’s development in a little known, highly volatile and dangerous part of the world at the forefront of climate change. On the subject of developing the country’s remote lowlands Meles said, “We went in there blind”. (quoted by John Markakis in ‘Ethiopia: the Last Two Frontiers’, 2011.)

Based on his knowledge of life on the land Meles was convinced that the micro-management of small-scale, or ‘bottom up’, developments within an ethno-federal system whereby local knowledge was essential, was the only way to heal the environment, tackle poverty, end the wars and build a 21^st century green economy as a path towards sustainability and resilience. By 1998 Ethiopia had become a leader in what US president Bill Clinton called the ‘New Africa’.

But it has not been a smooth ride and the growth of Ethiopia’s green economy is by no means assured. Beginning in 1998 a series of events conspired to cloud Meles’s people-led green vision. The 1998-2000 war with Eritrea, the events of 9/11 and the ‘war on terror’ in the Horn of Africa remilitarised both governments and caused a dramatic shift back to central control. Rift Valley fever in livestock, the drought of 2002 and the subsequent negative GDP in 2003 dealt a severe blow to Ethiopia’s green growth plans and reemergence onto the world stage. Green development was an expensive trial and error process, the ‘green’ economy was still in its infancy and green investors were few and far between.

Ethiopia’s need for what Meles called ‘rapid and sustained growth’ coincided with China’s ‘big push’ into Africa and the beginning of the biggest global economic boom in history. With Addis Ababa one of China’s major ports of call in Africa and Meles playing a key role in the Africa-China relationship, the Prime Minister turned towards Beijing not only for investment but also for inspiration.

Between 2003 and 2008 Meles announced a series of centrally planned, mostly publically funded projects – dams, farms and sugar enterprises - that he believed would ‘supplement’ his people-led, small-scale developments. By 2008, just before the financial crash, Ethiopia was registering double-digit growth and had become ‘the China of Africa’.

These three main investment categories followed the same pattern as the two previous regimes, except this time on mega scales that will transform the fragile landscapes and cultures of the Horn of Africa in ways never before seen, with mega hidden costs to match.

After Meles’ death in 2012 the new government led by Prime Minister Hailemariam Desalegn quickly confirmed its commitment to Meles’ mega plans. As part of Meles’ brainchild, the Growth and Transformation Plan, the Ethiopian government continues to invest billions of dollars of public money on projects whose hidden costs are well known. Today there are more of them and they are increasing as the planet heats up, populations increase and ecosystems break down.

Many of Ethiopia’s mega projects are based on 20^th century plans. The Grand Ethiopian Renaissance Dam was designed in the 1960s by the same Italian company building it today. The Gibe III and Takezze dams were first conceived in the 1980s. Some projects are on or near sites of schemes that had previously failed such as the Tendaho mega sugar project on the lower Awash where the Dergue’s more modest cotton scheme rapidly turned to salt, one of the major hidden costs that destroyed many other large-scale irrigation projects in Ethiopia.

Many too-big-to-fail projects in Ethiopia’s lowlands are well advanced and some have begun production. Hidden costs, including huge time and cost overruns, have already started to appear. The $360 million Takezze dam in Tigray completed in 2009 has been plagued by unforeseen problems including severe water shortages and a landslide causing $42 million worth of damage. In 2010 the Awash River overflowed the Tendaho dam destroying 18km of irrigation canal and 4,000 hectares of productive land. Some privately run mega irrigation schemes in the Gambella region are experiencing the same sort of operational and management problems encountered in the post-colonial era only on far greater scales. This is only the beginning.

Based on these and many other hidden costs it is becoming increasingly difficult to see how 20^th century, climate vulnerable development projects can play a sustainable role in Ethiopia’s 21^st century climate resilient green economy. These are high-risk strategies in a country where risk aversion has been central to survival for thousands of years. One long drought like the one that raged across the Sahel between 1968 and 1973, including Ethiopia, will cripple project revenues. 

Some economists consider Ethiopia’s state led model to be unsustainable in the long-term ‘as financing by the central bank leads to macroeconomic instability and hinders private sector development’. Put another way, too much public investment ‘crowds out’ the private investment needed to make growth sustainable. But what is just as important to consider is the type of investment the government makes on behalf of the public. As one report on Ethiopia’s public borrowing put it, Not ‘how much?’ but ‘for what?’ The question all Ethiopians should be asking therefore is ‘how efficient and effective are our investments?

Finding a balance

The [premise] that the public sector is inefficient and the private sector is efficient is a [destructive] myth (MZ) – World Economic Forum Africa, Addis Ababa 2012

In his pursuit of a ‘democratic developmental state’ Meles was famously doubtful of the private sector, and his rejection of free market neo-liberalism was vindicated by the financial crash of 2008. Giving too much free rein to the private sector searching for maximum, short term returns in such a complex and vulnerable country as Ethiopia could lead to a return to ‘landlordism’ and result in another disaster. But is Meles choice of the ‘China model’ through his developmental state any more sustainable? This model, which dates from the 1980s and involves massive public investment in infrastructure projects, might work well in the shorter-term but sooner or later cracks begin to appear as they are in China today.

A recent report shows that since 2009 China has ‘wasted’ a staggering $6.8 trillion in ‘ineffective investments’ and the country, according to the Financial Times, is now ‘overborrowed and overbuilt’. If the China model in China, as the country’s former leaders often said, has produced growth which is ‘unstable, unbalanced, uncoordinated and unsustainable’ these hidden costs in far more vulnerable Ethiopia could be greatly exaggerated.

The irony of this situation is that the size, complexity and physical challenges of a country like Ethiopia do require state led or ‘top down’ involvement at every level. But to be responsible it needs to be balanced with people led or ‘bottom up’ planning, management and investment. The IMF, for its part, has been urging the government to avoid ‘crowding out’ the private sector with too much public investment. To ensure sustainability Ethiopia’s development requires a unique combination of macro and micro planning, a balance between public and private activity.

Another question therefore, not only for Ethiopia but for all other countries still following the late 20^th century state led model, including China, is: ‘How can the state led model be made responsible?’ Put another way, ‘How can top down be coordinated with bottom up?’

This question cannot be answered easily. Like establishing democracy in Ethiopia after 2000 years of centralised rule it is what Meles might have called a ‘work in progress’. The next section proposes three early steps that could be taken in this work.

Three steps forward

Einstein is supposed to have said you cannot solve a problem by limiting yourself to the level of thinking that created the problem in the first instance (MZ) – What does the green economy have to do with us (Africans)?, 6^th African Economic Conference, 2011.

Of all the hidden costs in pursuing an outdated development model perhaps the greatest long-term cost to Ethiopia is the cost of failing to realize Meles’ green vision for the 21st century. Investing billions of dollars in 20^th century development strategies will lock up Ethiopia in a system and ‘level of thinking’ that in our fast changing world is fast becoming redundant.

If, as many people are saying, from US president Barack Obama to IMF managing director Christine Lagarde, that Africa’s true wealth lies in its people, the answers to Ethiopia’s challenges lies there.  Here are three steps that could be taken in the quest to find a balance between the government and the people, the public and private sectors, the top down and bottom up approach to development.

·       Open the green debate: Develop a strategy to put Ethiopia’s and Africa’s green growth stories into this year’s national and international Africa summits and conferences. Each year more and more Africa summits are taking place around the world with hardly any mention of the green economy. One way to start this process would be to hold a green growth summit in Addis Ababa where both public and private sectors are equally represented.

·       Spread the green news: Create a Meles Zenawi green growth web site including a green growth directory to show where such growth is happening in Ethiopia. A landmark 2013 OECD report - ‘Making Growth Green and Inclusive: the Case for Ethiopia’ - states that there are ‘already glimpses of a green economy in Ethiopia’. A green directory for Ethiopia would highlight these ‘glimpses’, discover their growth potential and reveal them to green investors.

·       Develop green measurements: Introduce a green component into the next phase of Ethiopia’s GTP to be announced in 2015. Since the early 1990s a vast amount of work has been done towards measuring sustainability. At Rio+20 the green economy was the main theme and Green GDP, or GDP+, was recognized as a key tool in its measurement. Ethiopia, which has done more than most countries in formulating green growth strategies, is well qualified for introducing new forms of measuring economic performance.

Thanks to Meles, Ethiopia has regained its position as a leading influence in African affairs and has a key role to play in making Africa heard on the world stage in 2015. Reviving Meles’ green voice and his vision for pioneering fairer, greener, climate resilient and sustainable economies in Africa is urgently needed. Rethinking the government’s mega development strategies is integral to this work.

Enough foundation work has been done in Ethiopia over the past two decades to make this happen. The knowledge and information are there; the tools and technologies have been developed; the skills have been learned and the people are ready. Ethiopia is now in a position to take the lead in pioneering green growth strategies from which the rest of the world can learn. The contribution of Prime Minister Hailemariam Desalegn and Minister of Environmental Protection Belete Tafere at the October 2014 Global Green Growth Forum in Denmark shows that there are many who are ready to listen.

A tough man in a tough neighbourhood

If you don’t open the doors and windows of a house, those confined will break the doors and walls and run out to get fresh air. So leave the doors and windows open for the people to feel free and relax inside the house (MZ) - quoted by John Markakis: ‘Ethiopia - the Last Two Frontiers’.

All Ethiopians, from the central highlands to the remote periphery, are justifiably proud of their long-standing cultures and traditions. If Ethiopia is the Cradle of Mankind sustainability has been practiced here longer than anywhere on earth. For many good reasons Ethiopians are reluctant to listen to foreigners making suggestions for their country. The Finance Ministry recently rejected proposals from the IMF as ‘not wise advice to take’.

When foreigners question the government’s mega hydroelectric schemes they are often accused of wanting to ‘keep Ethiopia in the dark ages’. Two recent reports from the Financial Times – ‘US energy: Off the grid’ and ‘Thinking beyond the grid’ – suggest that such schemes might do just that.

When foreigners write about Meles Zenawi more issues arise. To some, Meles was a hero, a saviour, a visionary, one of Africa’s greatest sons. To others he was a ruthless dictator, a tyrant who would stop at nothing to hold on to power. The truth is somewhere in between, for as Alexander Solzhenitsyn once wrote, ‘The battle line between good and evil runs through the heart of every man.’

Anyone who has only rudimentary knowledge and experience of Ethiopia can begin to understand the battle line running through Meles as he wrestled for 21 years to solve Ethiopia’s enormous challenges and to reconcile Ethiopia’s complex contradictions, while trying to generate balanced, economic growth in one of the most unbalanced and impoverished regions on the planet. Without condoning any of his more controversial actions, Mark Malloch-Brown, former UK Minister for Africa, said at the London Memorial for Meles in April 2013: ‘He was a tough man in a tough neighbourhood’.

Meles himself often referred to the challenges of working in such a tough neighbourhood. The Horn of Africa is arguably the toughest and least known neighbourhood on the planet. With the effects of climate change accelerating, resources disappearing and populations set to double in the Horn over the next 30 years, unless Meles’ green vision for Ethiopia, which will allow ‘the people to feel free and relaxed inside the house’, receives due attention from all concerned it is likely to get tougher.

This has been written by a foreigner, or feranji, who, like countless other feranjis has been enchanted by Ethiopia’s great diversity, beauty and hospitality. And like many feranji’s, from the first Portuguese travellers in the 16^th century to modern day agronomist’s, this writer has also been mystified why in a land of such abundance so much poverty exists. This is the Ethiopian paradox. Resolving it was Meles’ greatest challenge and is the greatest challenge of Prime Minister Hailemariam Desalegn.

This has not been written ‘to bury or to praise’ Meles Zenawi but to look at his green vision for Ethiopia and for Africa and what might prevent that vision from being fulfilled.

RELATED POSTS:

The paradox of Meles Zenawi – 22/08/12

Ethiopia ahead of the curve: the green legacy of Meles Zenawi – 06/09/12

Rethinking Ethiopia’s growth and transformation – 05/11/12

Africa’s green voice falls silent: 2013 London memorial for Meles Zenawi, 30/06/13

LETTERS TO THE FINANCIAL TIMES RELATING TO ETHIOPIA:

Now is the moment to rethink Ethiopia – 28/08/12

Green voices silent as Ethiopians rally to outdated cause – 01/07/13

Green bonds are the answer to Africa’s investment needs - 23/12/14


OTHER LETTERS TO THE FT ON AFRICA AND THE GREEN ECONOMY (link)


RECOMMENDED READING – Ethiopia: the last two frontiers by John Markakis, 2011

BIO-SUMMARY AND ETHIOPIA BACKGROUND – MICHAEL STREET

My connections with Africa began over 40 years ago. After an engineering training in the UK, I began travelling in Africa in 1972 and have visited over half of African countries. From 1974-1992 I worked in Africa and Asia (1) as a development ‘expert’ on various agro-industrial projects (2) financed by international development banks as well as the private sector. For nearly 20 years I witnessed first hand the ‘hidden costs’ of the western, post-colonial, top-down development model, and by the late 1980s my work in Africa as a management consultant was focused on ‘rescuing’ failing projects that had not accounted for these costs.

I first visited Ethiopia in early 1975 and again in 1976. I followed events there as closely as possible over the following 20 years and returned in 1995 to travel and to lead history, cultural and environmental tours. During the late 1990s and early 2000s I travelled extensively in the Horn of Africa and lectured internationally on Ethiopia, including at the Royal Geographical Society in London, on the architecture of Asmara and on the life and work of Sir Wilfred Thesiger. I also assisted in the establishment of Bishingari, Ethiopia’s first eco-lodge, cataloging the bird life and teaching local guides bird watching techniques and other relevant subjects.

In 2004 and 2005 I made two month-long journeys down the Awash River and around the Aussa oasis on foot where I discovered, not the lush environment described by travellers like Thesiger in the 1930s, but an ecological disaster. Subsequent studies of the development history of the Awash Basin, and the destruction of the main Awash Valley up to the present day projects, led me to explore late prime minister Meles Zenawi’s green vision for Ethiopia and how it might be applied on the Awash.

In April 2012 I started a blog – Working Towards a Green Economy in Africa. My first post on Ethiopia was on 22 August 2012 – ‘The Paradox of Meles Zenawi’. Posts on Ethiopia can also be found on Meles Zenawi.com. The current focus of the blog is to ‘put the green economy into Africa’s growth story’ including writing letters to the Financial Times which has probably the best Africa coverage of any daily international publication. I have also attended a number of Africa summits and meetings, and entered on-line debates always with the same question: where is the green economy in Africa?

Since 2001 I have been based in Sicily (‘one foot in Africa’) where I am establishing two small pilot biosphere reserves as part of an initiative to understand and develop Sicily's green economy.

(1) Rwanda, Burundi, Sudan, Zambia, Tanzania, Congo, Papua New Guinea, Indonesia, Yemen.

(2) Tea, Coffee, Palm Oil, Sisal.

"I DON'T KNOW ENOUGH ABOUT THE GREEN ECONOMY"

After several years of upbeat "Africa Rising" narrative, in the past month the Financial Times has been painting a very different picture. In "Africa's falling commodity prices curb bullishness of recent years" (Jan 20) FT West Africa editor William Wallis has confirmed that a new chapter in Africa's growth story has begun.

In addition to falling commodity prices, Mr Wallis highlights a wider range of additional challenges that will make 2015 a “testing year” for Africa, including the rising cost of debt, dwindling aid donations, Ebola, Islamist extremism and turbulent politics in a “heavily charged election timetable”.

Quoting Charlie Robertson of Renaissance Capital could not have been more appropriate as Mr Robertson was one of the most bullish economists on Africa whose 2012 book "The Fastest Billion" played a big part in generating the Afro-euphoria of 2013. It has been easy, he says, to be bullish about Africa with commodity prices going up. Falling prices, he adds, are now “the biggest challenge to the Africa-rising thesis”.

I had the good fortune to hear Mr Robertson speak at The Economist’s groundbreaking Africa Summit in February 2013. Talking with him afterwards I thanked him for his presentation and congratulated him on his book. I also asked him why he does not mention the green economy, as the consensus among Africa’s leaders is that this is the only viable route to economic, social and environmental sustainability. His honest reply was “I don’t know enough about it”. I got the same sort of honest response from other speakers and delegates at The Economist’s and other Africa meetings I have attended since then - "I don't now enough about the green economy".

In this “testing year” for Africa two critical international negotiations are taking place and knowledge of how the green economy might work there is needed more than ever: the adoption of the Sustainable Development Goals by the UN General Assembly expected in September and the UN’s Climate Change Summit in Paris in November.

2015 also promises to be another record year for Africa summits and conferences (more than one a week by my count), yet hardly any have the green economy in their otherwise excellent programs.

I propose that the easiest and most effective way to raise awareness of the green economy in this "testing" year for Africa in 2015 is to put the subject into this year’s Africa summits. As Mr Wallis points out: “There is a wall of money” out there looking for commercial opportunities. Why wait another year to start exploring opportunities that are green?