Ethiopia’s Dam-Breaking Trickle
Ethiopia, which hosts a World Bank-backed commodities exchange with $1 billion in coffee and agricultural trading volume and overnight settlement often cited as a model, hosted Africa’s World Economic Forum event in new China-built and funded premises as it launched a diaspora bond for the $5 billion Grand Renaissance dam and the UK’s CDC venture arm joined with a local group to launch a $100 private equity vehicle. The bond issue follows previous efforts aimed at tapping the savings of two million expatriates at denominations as low as $50. At home banks and individuals have been the main subscribers, with government workers often exhorted to participate. GDP growth at double-digits paces the continent’s non-oil economies, although 35 percent inflation also tops neighbors due to runaway state spending and borrowing to be curbed under a 5-year “transformation program” decades-serving President Zenawi has unveiled to secure donor support after criticism of political and press intolerance. In 2010 the ruling party and its allies won over 99 percent in elections amid an opposition roundup and platform of barring foreign investment in banking, telecoms, retailing and other strategic sectors. His administration has however opened vast land tracts to commodity cultivation including to the Schulze family interests which established multinational conglomerate Newmont Mining and is the domestic partner for the PE fund. International food and beverage firms have recently completed acquisitions despite limited purchasing power with the high poverty rate. Indian companies are the largest overseas investors with a total $4.25 billion commitment, while Saudi and Turkish projects are among the top single allocations. Gold and oils seeds are behind coffee as export earners, and education and infrastructure are core priorities of the current 5-year plan.
Officials also will press to improve rankings across a host of “Doing Business” benchmarks where they lag in the region and among low-income peers. Development Bank dominates the field but private competitors have introduced electronic payment and other innovations. Cement is controlled by family and non-state operations and tourism has attracted major global hotel chains. The country is a main target for the food security initiative organized by the G-8 and private agricultural giants at the May Camp David Summit. The US already has an active “Feed the Future” program under bilateral assistance which intends to soon emphasize small company and financial services development. In retail lending a cautionary tale may be next-door Kenya, where activity jumped one-third last year to $2 billion and has sustained a torrid pace despite central bank rate hikes to 18 percent. NPLs are modest at 5 percent of the book and residential property values continue to climb amid “bubble” talk and Nairobi bombings said to be perpetrated by Somali fighters flouting previous boundaries.
