Ethiopia, Kenya have shared economic destiny: Minister

Ethiopia’s Minister of State in the Ministry of Finance Dr Eyob Tekalgn Tolina recently led a delegation from Addis to Nairobi for a series of meetings.

In a wide-ranging exclusive interview, he talks with Sunday Nation on the situation in northern Ethiopia, Safaricom’s entry in Ethiopia, progress of the economic reforms to open up the country to foreign investors and Lapsset.

What is your visit to Kenya about?

We are talking about economic cooperation, including the power infrastructure.

We have made good progress, so you will see concrete results very shortly.

For the last 15 months there has been fighting in Ethiopia. What is the status of the conflict between government forces and the Tigray People’s Liberation Front (TPLF)?

Ethiopia went through a very difficult time last year—a combination of internal rifts and external forces. But as is the tradition, when Ethiopians come together, we win.

We’ve overcome that and are back to stability in most parts. Of course we still have challenges in Tigray, but we are working on a broader political solution.

When you talk about a political solution, do you mean negotiations?

The Prime Minister (Abiy Ahmed) has initiated national dialogue (with a commission being set up) and has released a number of prisoners, among other steps.

But even though we can say we have won the war, winning peace is what we have to embark on; I am confident we will achieve this.

We are trying to find a solution to some of the most controversial issues in the nation. This dialogue will have enormous significance in creating political settlement in Ethiopia.

What has been the impact of the war on your economy?

Undoubtedly, fighting is destructive. That is why we should always say no to war, guns should be silent in every part of Africa.

It is time we worked together to fulfil our aspirations. But despite the challenges we have undergone, the economy has shown great resilience. Key indicators like revenue collection or exports have actually significantly grown.

Investment has also increased, including the consortium led by Safaricom. Generally, financial sector profits have grown by large margins, we have compensated for losses in conflict-affected areas.

But Covid-19 and the uncertainties around the conflict have had an impact on the economy and that is why we are working on a quick recovery plan—the reconstruction plan, as we call it—especially for conflict-hit areas.

Investors are sensing the rebound. Look at our Eurobond: people were talking about it as the worst-perfoming bond at the beginning of the year, but it is now the best-performing bond, an indication the fundaments of the Ethiopian economy are intact

As part of the fallout from the conflict, you lost access to African Growth and Opportunity Act (Agoa). What has been the effect of this and are there efforts to resolve it with the US?

It was completely wrong for the US to revoke Ethiopia’s Agoa eligibility. It was unwarranted, unjust and wrong.

That said, we have worked with key stakeholders to find a solution to the loss of market access and tax privileges that our exporters to the US would use.

So they are looking at ways of cutting costs or working with other buyers to diversify the market. We are also reviewing with the US and we are hoping there will be an out-of-cycle review to reinstate Ethiopia’s eligibility to Agoa.

You have talked about attracting foreign investors, most recently in the telecommunications sector. What is the status of setting up the consortium led by Kenya’s Safaricom?

When we launched Ethiopia’s economic reform, we had looked at key sectors. One area was telecoms and we sensed the need to create a world-class, vibrant telecoms industry.

We have carefully studied what should be the approach and we decided to open up the sector for competition and strengthen the incumbent (Ethio telecom) by partially privatising it.

So we went through a series of bids transparently. I am pleased that Safaricom won.

They have been very active. I think they are planning for a launch, possibly sometimes in April [this year], and have so far kept their momentum in attaining the critical milestones.

Safaricom’s entry has serious implications for our digital economy, the digital transformation we have embarked on, and signifies what Ethiopia and Kenya can do together.

Our destinies are intertwined, and that is how we live and our founding fathers lived. This rhetoric needs to be backed by actual economic opportunities for Kenyan businesses in Ethiopia and vice versa.

There are bigger engagements like the Lamu Port, and power interconnection that is almost complete. So there are a number of areas for Kenya and Ethiopia to cooperate and Safaricom’s entry is one of those areas.

Which other sectors are being targeted by the reforms to open up your economy?

We have taken a deep-dive approach in all sectors—energy, transport, railway and so on. The reforms are on course and we are intensifying the efforts of opening our economy.

We have established the sovereign wealth fund, what we call the Ethiopian Investment Holding, to bring all state-owned enterprises together.

This will be absolutely critical to leveraging our assets for more investments in critical areas and overhauling SOEs management.

What other sectors are you focusing on for opening up?

Logistics sector is one. We need to build a number of dry ports, we need private sector participation in the railway sector. We are talking about the entire value chain from road transportation to air to shipping. These are all opening up.

Also, critical sectors like sugar where we have a big investment in 12 assets would require some private sector participation. In the energy sector, the generation is generally open and we took a cautious approach with the independent power producers where we have learned from Kenya.

But on transmission line and distribution, strong investment is required. But again, we are taking a very measured approach to improve the sector. We do not take a prescribed solution; we study each sector, then decide how best to approach it.

For companies looking to set up in Ethiopia, forex controls have been a concern. What have you done to resolve this?

This is part of the reform agenda. We have a three-year reform plan. There have been delays due to the conflict, but we have decided forex shortage will not be the defining feature of our economy.

Has the war hurt the forex situation?

One amazing thing about Ethiopia’s economy is its resilience. The conflict is costly, including on humanitarian needs, but despite that, we have balanced it all and still have reasonable reserves.

Exports have significantly increased and remittance played a very important role. Ethiopians have also come together and increased remittance flow.

Have you made headway in establishing the securities exchange in Addis?

We have established a strong team working on background technology selection, setting up of the authority.

We have the Ethiopian Exchange Commission Authority established by law, but we need to set it up properly so that it can be up and running. This year we should make significant advancement and hopefully early next year, or towards the end of this year, we will have more concrete steps of establishing it.

Ethiopia-Kenya partnerships was highlighted by commitment to the Lamu Port-South Sudan-Ethiopia-Transport (Lapsset) Corridor project but this has since gone quiet. Are there efforts to revive this?

When I talk about collective destiny, that is what I have in mind. The two leaders (President Uhuru Kenyatta and PM Abiy) have driven down there and made it clear to Ethiopians and Kenyans that our interests are intertwined.

Covid-19 and this internal conflict might have delayed some operational things, but the commitment is still intact and now we actually plan to start utilising Kenyan transport firms for some of the shortfalls we have in Ethiopia; this is already in the process. This is another indication of how our economies are highly integrated.

Has Kenya extended any concessions like lower tariffs to attract Ethiopian businesses?

Kenya and Ethiopia always have a special relationship, that special status goes all the way to all areas. So, yes. But, of course, some of the things need to be defined in agreements.

The two countries also opened the one-stop border post in Moyale. Has it increased trade?

The logistics and customs clearance cooperation has seen increased volume but not to our collective expectations. We want to do more. There will always be a learning curve. We just need to adjust to the new way of doing things.

What feedback have you got from businesses using the post?

Generally, businesses are happy that the border has been set up; the feeling is mutual. There will be operational constraints, which the two customs seek to resolve.

On the Grand Ethiopian Renaissance Dam, have you began generating electricity?

Gerd is advancing very well, we have done the second filling, the first power generation will be commissioned pretty soon, early this year. I cannot give you a timeline but we are very close.

Generally, this region is better off working together. Where there is excess energy like hydro, this can be of huge benefit to Kenya and other neighbouring countries.

So, Gerd is for us an African project and tells a story, that Africa needs to utilise its resources and the most important thing about it is that Ethiopians invested in this. There is no single donor penny that went into this— our mothers have contributed a dollar or two from the little they had, not from abundance. It is built by the collective effort.

We are very pleased that it has reached this stage. But we also feel it is a project of cooperation.

But it is also a flash point with the US, Egypt and Sudan?

Unnecessarily, unduly so— it is very unfortunate that such a useful project has become contentious when it should not have been. If you really sit down and look at the profile of this project, its economic and social impact you just wonder why it has become controversial there is no single reason why it should be.

Sudan, essentially, should have invested in this project because its usefulness to the Sudan is very significant. Same thing for Egypt. t is just unfortunate sometimes very useful things become controversial for unknown reasons. We hope Gerd should be source for cooperation and not source for confrontation.

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