Booming Ethiopia Is the New Face of Africa

(Here’s a man-bites dog story from Cam Fitzgerald, a frequent contributor to Rick’s Picks  who lived for a while in Ethiopia. Cam paints a picture of an African nation that will be unfamiliar to many readers; for in fact, even though Ethiopia has only begun to emerge from poverty, its economic prospects are as bright as you will find anywhere on the African continent. To understand why, read Cam’s first-hand report RA)

This is a growth story. A few years ago, I spent some time living in Ethiopia. I was in the suburbs of Addis Ababa, getting to know one terrific family in particular: the mother, who was the real head of the household; the father, Abba, a shoemaker; and his four single daughters, all in their thirties. What could possibly go wrong? OK, I am already getting off track. This is supposed to be an article about Ethiopia’s boom and the inflation that has come in its wake. I call the daughters “my gals” when I talk about them with friends, and we keep in touch almost daily via e-mail.  One is a student, and the other three work: as a translator, a seamstress and a secretary. They all have good educations, speak English and are in every way typical of women you might meet anywhere in the world: the same hopes and dreams, the same troubles with men and the same daily worries about meeting the bills, making ends meet and trying to save.

Ethiopia's rapidly growing airline has one of the best safety records of any major carrier

Well almost the same. You see, these women earn a grand total of 2900 Ethiopian birr in monthly income between them. That’s roughly $175 dollars for six people to share — a fairly typical income in Ethiopia.  However, I never thought of the family as poor during the time I knew them. They own a home, are well educated, eat well, and the girls were always “dressed to kill,” so on the surface it all looked pretty normal to me. Expenses are regional and relative, and so daily costs there are generally incredibly low. But come on! A buck a day per person is just not enough money! Nevertheless.

16.5% Devaluation Overnight

So the cost of living is low. At least it was. Until the Central Bank, in a surprise announcement last month, devalued the currency by 16.5% in a single day, making it the fourth devaluation in less than two years.  Monetary policy was being used as a means for the country to retain a competitive export advantage, and to manage its currency’s float against the U.S. dollar. A falling dollar in effect precipitated the action by the Ethiopian Central Bank. So, this was no stealth devaluation — it was all in-your-face.

Compounding worries for my girls is the recent commodity boom and an attendant, sharp price increase in cotton, coffee, cocoa, wheat, canola, and of course cooking fuel (kerosene). The problem they are facing is that commodities, while locally sourced, are not locally priced, as they are subject to global competition and speculative forces. Prices are set in the futures markets. So despite being an agricultural country and net food exporter, Ethiopia and its people face the same market dynamics and price hikes that we are about to experience in the West. (This story is indirectly about us, as you will see). And because Ethiopia is primarily an agricultural exporter, the new prices hit the streets almost as fast as they changed on the boards in New York and London. It is no joke that Ethiopians are now unable to afford buying some of the produce of their own country. Following this last price spike, coffee is almost out of the question.

Coffee a Luxury

Since the summer, the cost of a kilo of coffee has climbed from about$ 2.20 U.S. to more than $4 –a price spike of almost 100%.  Buying coffee on a daily budget of a dollar is not just prohibitive, it is a sacrifice and a luxury. This irony is not lost on the people living right in the midst of the country where coffee was originally discovered, and where it is still a primary exports.

The gals have been pretty worried lately. They are stoic, though, and rarely complain, even though the price of flour is also up over 70%, cooking oil by 50%, and onions (of all things) by an incredible 250%. And you thought we had inflation worries in the U.S.! Ethiopia’s Central Statistical Agency (CSA), meanwhile, reports for 2010 that tobacco has risen 34%, clothing 25% and rent, fuel and power have collectively risen by over 16%. Yikes! All of this is an outgrowth of a shifting, global  investment dynamic that has made paper investments risky; where bonds pay nothing; and where holding cash is a surefire way to go broke over the long run. There has been a shift, particularly amongst hedge funds, from certain equities and debt instruments and into hard assets, gold and resources.

Exacerbating this trend is the widespread belief that quantitative easing is leading to dollar devaluation.  This makes resource investments very appealing as a long-term hedge against inflation. Stimulus leakage itself, as well as the outcomes of investment changes that flow from quantitative easing, are now driving the African growth story even as they exert tremendous inflationary pressures. These are the sources behind some of the stresses the people there are now facing.

Inflation’s Hardships

An unfortunate outcome of the new dynamic is big price increases that negatively impact not only Ethiopians, but people who live in the poorest countries in the world. Keep in mind that in many countries across Africa and parts of Asia, food and transportation are the largest components of household budgets. Double-digit inflation therefore inflicts hardship in a way that very few North Americans can fully comprehend.  Today, Ethiopia is one of the largest coffee exporters in the world, and not so surprisingly, government revenues have surged on the back of commodity price increases and export growth. Increased incomes from both private and corporate sources including the VAT tax have reportedly shot up a staggering 150% in just the last three months, and the government is on track to fully exceed its wildest estimates.

To look at it one way, the price increases for food are coming out of the pockets of the average person on the street and then miraculously reappearing on government ledgers. While it is not quite simple, the differences between export revenues and increased consumption costs could hardly balance equitably. But this is not a bad-news story, and while Ethiopians are paying the price at the till, the country is experiencing powerful growth on the other. Why?  Because the country possesses abundant natural resources. Ethiopia is a veritable cornucopia, and China (amongst others) wants in on the action. So they have shown up with what the country badly needs: hard cash, engineering expertise and generous assistance with infrastructure improvements. They even send in their own people and equipment to get the jobs done. No hurry of course. Pay the bill later.

A Happy Surprise

The happy surprise is that the commodities boom is beneficial to Ethiopia in many ways. The country’s natural resources are only now being explored, even as known quantities of gold, potash and natural gas are being exploited beneficially. Diamond exploration is under way in Welega Province by an Australia miner, Nyota (ASX:NYO). From what I know, they are almost certain to find some there. As a result, employment numbers are up across the country and there has been a significant infusion of foreign investment over the last few years. Capital is flowing from India, Malaysia, Singapore, China, Australia and many other sources. Not so surprisingly, there has also been inflation to match the rapid growth, and this has made life difficult for the working man or woman.

The most recent inflation data show that the annual rate is above 11% even without considering commodities. This is on top of last year’s 9%, and an astounding rate of 45% in 2008.  If you can believe this, people there hold U.S. dollars as an inflation hedge! This actually makes perfect sense, since inflation is relative.  And when both Gold and Silver lie beyond the financial means of virtually everyone, then a store of greenbacks seems as good as gold itself. Especially when the value of your own currency is shrinking by the day. According to the CIA fact-book, Ethiopian GDP growth was running at 8.7% for 2009 while industrial growth exceeded 10%, making Ethiopia the world’s fifth fastest-growing economy. Exports were worth a paltry $1.6 billion U.S. versus $7 billion in imports. Obviously, there is much progress needing to be  made. However, as U.S. contributions to programs and aid have added to remittances from the Ethiopian diaspora, IMF forgiveness of some indebtedness and Chinese direct investment have made up the difference, bringing the country’s budget nearly into balance.

Chinese Investors

As noted above, the Chinese, among others, are taking a very serious interest in the region, which is enjoying a construction boom. According to The Economist, Ethiopia and Eritrea will be among the three fastest-growing economies in the world in 2011. Wow! Growth there is anticipated to exceed 10% annually. Surprise! And you thought it would be China, didn’t you? Nazret.com, the Ethiopian news portal, just reported Chinese investments exceeding $800 million in a wide variety of projects and activities, including cement factories that are creating thousands of new jobs. This might sound like chump change, but it is in fact very significant relative to Ethiopian export incomes.

Imagine for a moment that a single country invested in the U.S. a sum equal to half of America’s exports trade, and you can see what is happening to Ethiopia. In the background, up to 16 new universities are being constructed or are near completion, courtesy of the German government and related agencies. According to Wiki, nearly half of Ethiopia’s population is below the age of 14, and 60% of it is below 30. Quite a contrast to the burgeoning retiree population of Western nations. Furthermore, health initiatives from a multitude of sources including the U.S. Government, the Gates Foundation, Canadian International Development Agency (CIDA) and a host of others are making the country stronger and healthier than ever. At 2%, AIDS rates are among the lowest in Africa and dropping due to education and health initiatives. Relatively low wages have also enticed some of Asia’s overheated economies into outsourcing to Ethiopia. This might seem surprising, since many people think of Asia itself as one monstrous factory. Rarely do we consider that production costs, particularly in China, have spiked due to the ongoing real estate bubble, and that the Chinese themselves are eager to hold down production costs by outsourcing. Much of Africa beyond Ethiopia has been benefiting from this development.

A Friendly Place

As a result, Ethiopia has been ramping up its textile business at a feverish pace, and factories have been springing up across the country. The government of Meles Zenawi has openly welcomed new investments, and resource rights are being sold to interested parties as exploration for minerals ramps up. The government is stable and has been for many years, and the country is more or less at peace. It would be hard to find a friendlier, warmer place to visit.

But there is so much more to this story. China’s growing demand for construction materials has seen them investing in no fewer than three cement facilities recently to supply voracious demand in Asia’s big cities, but also to build dams in Ethiopia. Dams? Yes.  Few of you reading this will know that the Nile River’s main source of water – as much as 85% of it, according to one recent estimate —  lies in the Ethiopian highlands. This has raised concerns that Egypt may someday receive less than what it currently believes is equitable. Ethiopia is by no means the parched wasteland that many imagine it to be. To the contrary, although almost devoid of trees, much of the country is wet and green, particularly in the highlands, and this is why hydroelectric  is such an obvious solution to the country’s growing power needs.

The rains unfortunately are not always predictable, and this has been at the root of some past disasters and famines, as irrigation has not been sufficiently developed to ensure steady agricultural productivity. But growth has been phenomenal, due in large part to the needs of a burgeoning Asia.  The Chinese in particular have moved into the country in a big way and are busy building roads, dams, irrigation systems and bridges across the country. Things are changing for the better, and quickly.  Thus, in a surprise twist, what is arguably the poorest country on Earth is actually one of the world’s biggest investment and growth stories of the year. Don’t believe me? Go and see it for yourself. Ethiopian Airlines is well known as the best carrier on the continent, sporting the newest fleet of Boeing 737’s and 777-200’s, as well as one of the safest flight records anywhere.

This year alone, Ethiopian Airlines have acquired or placed on order 38 new aircraft including ten state-of-the-art 787’s. An expansion of the Bole International Airport, which is considered Africa’s primary air hub and which hosts almost four million passengers annually, is ongoing to accommodate growing air traffic and congestion. The on-board food, incidentally, is terrific.

Capitalists Welcome

Back in Addis, meanwhile, my gals are feeling very stressed. Their wages are on the rise but are not keeping pace with the loss of buying power caused by the recent birr devaluations, nor with the fast pace of rising costs for nearly all of the things they need.  I can send cash to help out, of course (and I do), but the girls represent only one small family in a country of more than 80 million people. What about everyone else? I worry, too, for my friends over there, and I can only hope that the recent developments eventually lead to a higher standard of living, and that Ethiopia can escape the grip of poverty that has been its hallmark for most of the past century. Industrialization and resources are clearly the keys to Ethiopia’s future, the fuel behind its recent growth story. It is still early in the game for capitalists to get involved. The country is open to investment, and even a relatively small sum can yield potentially explosive results.

If that sounds like advertising, consider that fewer than 1.5 people in 100 have cell phones, according to a recent report. That is the lowest concentration in all of Africa, and among the lowest in the world. There is huge pent-up demand for technology of all kinds, a youthful population and a growing (although still tiny) middle class. Like much of Africa, Ethiopia has energy to burn and a desire to break from the bonds of the past. Demographics tell us there is tremendous potential there and a lot of future customers. Asian direct investment tells us that development is being fast-tracked. This is a country you will want to follow if you are an investor who is interested in emerging markets. And last, Ethiopians themselves are telling us they want to be an integral part of the global community. This is truly a growth story.

If you remain doubtful that Ethiopia has potential, check out this short video of a concert in Addis Ababa. It is a little rough and almost certainly made with a cell phone, but if this does not convince you the country has energy, then nothing will. Beyonce is center stage, and she kicks off a show featuring Teddy Afro, one of Ethiopia’s most famous musicians.

This five-minute clip should tell you everything I cannot say in words alone. Hopefully, it will open your eyes to one of the very biggest development stories in the world today. It is about the New Africa, the world’s last big frontier, and a Wild West of investment opportunities. The potential is tremendous.  All of those people look hungry, all right — but in a way you probably never expected. So forget the sad, sad imagery of the past. These people are hungry to join the party!

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  • Cam Fitzgerald December 29, 2010, 6:01 pm

    I just read that “Reporter” interview with Zemedeneh of Ernst and Young and was pretty impressed with his approach and agree with many of his sentiments.

    There is tremendous potential building in Ethiopia and with the right policy approach the country will be second only to South Africa in twenty years time.

    All efforts to build domestic processing and production facilities that take advantage of the countries many agricultural products is a good strategic move as Zemedeneh mentions. I agree it would be a mistake to abandon the agricultural backbone of the nation as it embraces industrialization. Building on existing strengths is a better and more sustainable model.

    The last thing Ethiopia needs now is for everyone to move to the few large cities in a rush as has happened in China. The huge dislocations from rural to urban have become one of the countries biggest struggles and so I commend the thoughts and analysis presented in the Reporter article.

    Opening of markets to investment from overseas is also a priority and on that point there is much work that needs to be done to build out the financial network and aggressively reform land ownership, property rights and the judiciary as it revolves around these key areas. Westerners in particular will remain doubters as long as issues over property rights and access are not satisfactorily addressed.

    I am very optimistic about Ethiopia and all the potential that country has to offer. One message that needs to get hammered home to the rest of the world though is that Ethiopians want investments in their country; not more charity.

    As soon as we can all get past “the gift of giving” attitudes we can start to move toward a normalized system of trade relationships where the establishment of contract creates a balance beneficial to all parties.

    And that is a goal worth working towards.

  • Daniel Beyera December 29, 2010, 12:12 pm

    Dear Cam Fitzgerald,
    To respond to your request, domstic stock market is at its inception and early pahse despite some good start-ups. Over the last decades,several private domestic banks started to emerge and their share is also inreasing over time. Besides, the commodity exchange market and pivate share companies through moblizing money from the public are on raise. The regulatory bodies are also revisting their regulations in related matter.

    To reflect on a bit on Ethiopia’s History from economic point of view,from 1- 4th century, Ethopia was among few civilized ancient nations. Leaving the detail in between up to almost 1955 feudalism was the dominat system. It is only between 1955-1974 some elments of modern capitalism started to emerg within feudalsim system. For instance, establishemet of Addis Ababa University, Ethiopian Airlines, Property right ,revsion of Early constitutions of 1933…, however all the glimpse of hope were dashed out by socialism ideology followed by the military government from 1974-1991. Hence, It is since 1991, all the issues of transtion to democracy and free market economy has been practiced. Putting all supporting instituional framework: like new accomodative constitution, policy framework, institutional capacity building including infratructure, Clearing a lot of back-log of backwardness were among the thoughest assignements Ethiopia has handled sucessfully over the last two decades. Thanks to all international communities who stood all by our side.

    I believe Ethiopia has to gradually make itself more open to the world, work towards ensuring good institutions to follow the paths of Open acess society given its on reality without being mislead by external policy impostions to further grow and prosper.
    Finally, I kindly invite all to read on interview with Ernst and Young, managing partner in Ethiopia on December 25, 2010. ” Ethiopia had no economy 20 years ago” Just google it.

  • Addis kid December 28, 2010, 12:34 pm

    Cam Fitzgerald—-there is one market exchange, I am not a finance major so I don’t know if it is stock exchange or not but there is a trade place where local farmers, and merchants sell their products to outside, mostly western and Asian countries, (like a middleman—don’t know if it stock exchange) it just starting and needs to evolve to larger scale.

  • Daniel Beyera December 27, 2010, 11:06 pm

    Dear Rick,

    I greatly appreciate your assessement and attempt to depict the ongoing realties in my country [Ethiopia]. The point of view was comprehensive and optimistic. I have also considered some of the negative comments that tried to make a mountain out of a mole hill.

    Things are changing very rapidly in Ethiopia, but the fundamental trends seem positive. However, one should also notice that developments are not limited just to economic growth. Many other things are changing for the better. I agree that accommodating population growth will be challenging, but education and family planning can help to lower the birth rate in the years to come. Since primary-education enrollment has already reached 97%, the school system can help solve this problem.

    In the global marketplace, the price of raw materials, commodities and labor have been increasing — even in Asia, where labor used to be cheap. This will ultimately help Ethiopia and other African countries attract labor-intensive industries. The relocation of several textile factories to Ethiopia has already started and several more are expected. Under the circumstances, having a young population will be a great advantage in the years to come. Significant investments in infrastructure will pave the way for long-term economic development.

    In my view, the challenge lies in finding ways to improve governance, minimize the adverse effects of corruption, and put in place a sound tax system. Strengthen the rule of law as well, and eventually Ethiopia will be able to stand tall on its own.

    The problem of ‘ethnic tensions’ has been overstated. Federalism is simply evolving though its infancy and promises to ameliorate such tensions. Ethiopians by their nature are very accommodating, and this bodes well for the future. Besides, there are many public-sector reforms under way to improve the efficiency of Ethiopia’s bureaucracy. Business groups have been springing up, although for now they prefer to be in trade rather than manufacturing. That is a factor fueling inflation, since the country must import so much of what it needs.

    In general, I found the article very reasonable in depicting the current realities in Ethiopia. If you don’t believe there is good reason for optimism, we invite you to come and see for yourself — and to invest.

    • Cam Fitzgerald December 28, 2010, 3:16 am

      Thank you very much for your comments Daniel.

      Can I add that one of the greatest deficiencies and impediments to outside investments in Ethiopia right now is the lack of a domestic stock exchange. There is no easy or practical means for Western Investors to participate in your countries surging economy. There is interest but until a traditional avenue opens for investment and capital to flow through I believe Ethiopia will remain reliant on individuals and Asian direct investment alone rather than being opened to the world.

      The expertise is already out there to open your markets up to the outside. Do you know if planning is underway yet to create an exchange? Something that revolves around coffee as a starting point perhaps.

  • Addis kid December 25, 2010, 6:55 pm

    And Oh ADDIS —i want to point out one more thing—-what is the difference if a minority leads the country or not as long they are doing good —-in this case great. I sure you are one of the many Ethiopians who voted for Obama and yet you talk about minority as—well every one has to read what you said (I hate tribal epithets) but if you was white American—you would have called you a racist but in Ethiopia guys like you are called ‘temkehetena’. and I know you are old—-you have that old generation mentality of we ‘your tribe’ are the shit and deserve everything and the rest of you are our ‘slaves’. Be civilized or at least you are most probably living in Western world (b/c ethiopians in Ethiopia are busy making money—and don’t bother to look at the Internet for news that much–if not—not at all) but one thing if your generation cannot teach us (I am sure I am younger than you) then WHO WILL, if you guys cannot get along and teach us to get along and then WHO WILL but then again—-I sure I am smarter than you so WE WILL DO IT (I MEAN THE YOUNGER GENERATION) AND OH WE HAVE ALREADY DONE A LOT—YOUR GENERATION FAILED TO DO—LIKE BEING CIVILIZED. BUT WITH BROKEN HEART I WISH YOU WELL…

  • Addis kid December 25, 2010, 6:38 pm

    Addis—–I am dead sure you have no idea what you are talking about—-I am not going to point out all your flaws in your argument (b/c I have other things to attend to) lets take election—-I would understand 2005 was not a good year for Ethiopia. remember we just started this process and even in 2005 election most of the violence was perpetuated by both sides. opposition party paid youngsters to create violence and the government handled it in the worst way possible but last election–after what the opposition party did last time —the people rejected them and plus remember—
    Ethiopia has a parliamentary system so if one party has 51% majority and 99% majority it is the same—-but this shows you the degree to which the people in Ethiopia are at odds with the opposition party and I don’t think the government would want to get 99% vote b/c if the f***** up (excuse my French) they will have a really difficult time in the next election but if they have 40% opposition at least they can say we tried. So, it is actually counterproductive for the government to plan to have 99% vote and I think they have demonstrated they are not stupid so—-the people did not want to elect opposition party b/c they don’t have clue what they are doing and Ethiopians know they are giving them a whole country with more 80 million population and plus if they cannot defeat the leading party how in the world are they going to face Egypt or other countries (think about that)
    peace

  • Addis kid December 25, 2010, 6:12 pm

    Gemoraw—–your name tells it all–Gemoraw—-you are Negative and ‘temkehetena’–for Americans it means some one who thinks his tribe is the shit and all others should follow thier lead (here in Western world you call them Racist), instead of saying what can I do to better my country or my people, you voice your -ve tribal epithets for the rest of the world to see. Unlike you I am not going to mention your tribe to slander your background. I know your tribe and you are at least 35 b/c of the name you choose to refer yourself—Gemoraw. try to be Civilized—but then again you sound like those ‘Derge’ communist who escaped to America and post awful tribal epithets b/c they think thye lost the war (in 1991) to minority and it is eating them alive—cool down—try to get some rest and visit Ethiopia if you can

  • Zemenu December 25, 2010, 5:58 pm

    I like this article in the sense that it is fair, comprehensive and well thought. Keep it up. We Ethiopians are not as such good to promote our things. We usually internally focused and very reserved to talk about our affairs, but we always proud in our histories. As you said there a lot of worries & hopes in our sky.

    Good, Thank you,

  • cosmo December 24, 2010, 8:07 pm

    From this article, again, I say that speculating in food commodities is morally WRONG. I cannot say this loud enough. The rise in prices is starving a large percentage of the population in the world. To speculate in something as necessary as food is despicable and is what gives capitalists a bad name. Please refrain…Thanks

    • Mark Uzick December 25, 2010, 8:17 am

      Business men and speculators are always made the scapegoats for high prices and shortages that are caused by the folly of the state or the unpredictable surprises of mother nature.

      Speculation is the way that the market gives notice to the producers – In this case farmers. – and the consumers, through the price mechanism, that there may be looming shortages; telling them that it is time to ramp up production and to institute conservation.

      The speculators allow the producers to proceed without undue risk that these predictions may be wrong by guaranteeing the sale of their product at a given price at some future date.

      To the extent that increases in the future price causes the spot price to rise, that is the effect of warehousing product to lock in a higher price by selling futures against it; an effective form of conservation that keeps supplies from becoming dangerously low while attempts are made to increase supply.

      Attempts by self righteous anti-free market types – be they fascists, communists, theological moralizers and other assorted socialistic intervenors to interfere with liberty is moronic and despicable. Theirs is a legacy of poverty, mass starvation, persecution of scapegoats, wars and genocide and is what gives humanity a bad name. Please refrain…Thanks

  • David R. (Canada) December 24, 2010, 3:24 am

    There was absolutely no mention of religion in the article. The silence on the subject was deafening.
    With about 2/3 of the population Christian and 1/3 moslem one has to wander what the respective population’s birthrates are. Moslems, if they cannot take over a country by force, will do it slowly with high birth-rates. This is a problem that isn’t going away. Ethiopia has the largest standing army in Africa; this may be a contributing factor in the inflation rate. The costs of maintaining Christianity as the state religion is going to be very high.

  • ababu December 24, 2010, 2:45 am

    Rick – very well written an hopeful. As a native Habesha, it is heartwarming to see the outside world see in whatvwe Ethiopians had known for a long time – namely the human resources ofu the country. Ethiopians have excelled in a lll walks of life, from very limited means. However, the system, whether political, or cultural has been a hinderance. Now perhaps finally, our fill potential will be fulfilled. one thing I have to say though is that we should be less individualistic, and more willing to work in a team concept. A last comment, if the current regime is serious about the development of the country long term they should embrace more competition and less government monopolies.

  • Addis December 24, 2010, 1:02 am

    Rick, his take may be good for tourism not investment, the devil is in the detail. A tourist assessment of boom is as dangerous as gloom and doom of western’s parachute journalism.

    The fundamentals are not there; I am surprised as knowledgeable as you are in risk you skipped the basic fundamentals and became too sentimental to take the article on face value. Could it be your low expectation of Africa got the better of you?

    Here are some pointers he should have look in to before he mislead your readers. .

    Political risk is very high and requires better assessment than glancing over it as a tourist that leads him in a false assessment of stability.

    The regime is a one-man dictator of a minority extraction of 6% of the population with a half a dozen insurgencies that challenge its minority rule and the recent 99.6% rigged election win. The regime also plays ethnic politics as a mechanism to extend its rule and economic dominance. Because of lack of political and economic equity investment is build on sand-a recipe for disaster.

    Accordingly, the parliament is filled with by the ruling party’s yes-men of 547 seats and only the remaining one seat filled with the opposition; unprecedented even by any totalitarian regimes.

    Land is under the control of the regime, and private ownership is prohibited. That allowed the regime complete monopoly of the major means of production, and political and economic clout to do away with competition to its benefits. What you see on the ground is the ruling party’s crony investment fueled by foreign investment and Foreign Aid. Be reminded; the ruling regime is the largest domestic investor in the country. Also, as a government it operates all government owned industries, including Ethiopian Airline.

    Market risk: The domestic market is the domain of the ruling party’s owned businesses enterprises. Without the regime permission and blessing no private enterprises can operate in the country.

    The International market for raw material and agriculture commodities are excellent opportunities and if every thing is equal growth is expected rapidly. Export lead development with the ruling party’s owned enterprises on the driver seat are where the regime banks on to accomplish its development scheme and it is well positioned to benefit handsomely. That explains the land grab rash from Middle East and Asia by the regime’s design. Surprisingly, not from the west that provides the largest portion of Foreign Aid, including budgetary and military support for the last 20 years.

    There is more to be said. A fell good article is a disservice to your reader. If he decide to do a serious analysis, I wish him good lack to find primary data from the regime’s only source the world relies on, including the World Bank. Data is the exclusive domain of the ruling regime and the biggest hindrance to assess the true nature of the voodoo economy created.

    A final note; the country has a potential to grow rapidly if only the regime stay out of running businesses and dominating the economy. Submitting to the basic democratic principle of good governance would also go a long way to create the necessary stability. Any thing else would be investment build on sand with no foundation.

    I would not put my money in it, but again, there is a short term gain to be earned if one tags along with the regime before it collapses.

    Be aware; the double standard in assessing risk is what brought about totalitarian regimes to emulate China as a role model for development.

  • Abe December 23, 2010, 7:05 pm

    Rick, I realy enjoyed your story. I have recently visited Ethiopia and i am a witnesse to everything you said .Infact I thought you missed the tourist potential of the country. Ethiopia have such a reach history and wildlife to showoff.In short Ethiopia is Eygpt and Kenya put together in one.The future of the country and your gals is certain, give it another five years you will see completely transformed Ethiopia.

  • Benjamin December 23, 2010, 6:29 pm

    All the population-bombers might want to take a gander at this…

    http://wattsupwiththat.com/2010/12/23/3-of-earths-landmass-is-now-urbanized/

    Not that I don’t see a lot of garbage in there. World Bank, policy institutes… Pathetic how we rely on these things, which are so unstable and ultimately unable.

    But it’s the 3% that I want to emphasize. In all this time man has been here. 3%.

    So stop telling the Ethiopians what they can and can’t do with their private parts, in their own bedrooms.

    And as far as China and their “smart” one-child policy goes, it should be apparent that prior decades of tyrannt-inspired poverty prevented them from doing what they needed to freely do, which was to spread out as well as condense. There’s no wrong answer, just a right way or wrong way that affects the timeliness and efficiency of what people must do and ultimately end up doing. Put all that under a few deciders, though, and all of a sudden you can’t have kids anymore, along with all the destruction, lag, and other horrors that take place (but aren’t ever talked about; more because that would implicate other popular, “all-important genius” memes being promoted).

  • Gordon December 23, 2010, 5:23 pm

    Population increases described are unsustainable. An ecological, and human, disaster.
    Pass around the pill immediately, get power to women so they are in control of their fertility,

    • Benjamin December 23, 2010, 6:01 pm

      Only under the ongoing system.

      Every single thing about human civilization is problem management. There is no avoiding problems, as the mainstream Western attitude has taken to, steadily over the last 30-40 years (which isn’t a surprise, given that we won’t ditch the indulgence in total nonreality). They can only be managed, and to accomplish that successfuly, a sound system is required.

      But like the 16 new universities opening up in Ethiopia, what are going to do nothing but promote the lies of addiction’s virtue, the Western universities today teach that “unsustainable practices” (except the GD central banking system, which is of course beyond innocent and pure, more so than even God) are what is causing the system to go haywire.

      Unfortunately, I can’t make my brain cells bend that far to suck it up, hook, line, and sinker. I know what is unsustainable from not. Ethopia, or anywhere in the world, for that matter, can have a bright and growing future so long the truly unsustainable is forever abandoned.

    • Steve December 23, 2010, 6:52 pm

      Geez Gordon !!! Choice is not spreading one’s legs.

  • Gemoraw December 23, 2010, 2:22 pm

    It is booming but at what price and who is benefitting. Addis Abbabans are bulldozed and thrown out of the city in the name of development and giving way to the new Monarchs – Tigreans and greedy Ethiopians from every ethnic city. What is development if it is not sustainable and does not benefit all of the people? What is development without freedom? Saddam Hussien of IRAQ was also relatively developed but it requires only a month to bomb it. Ethnic politics in Ethiopia is a time bomb, and when it explodes it is hard to imagine what will be the consequence on these so-called boom (s). I wish only that Meles returns to his sense and call for a national reconcilation even if this means of endangering his power or existence.

    • Ababilawa December 24, 2010, 4:03 am

      It seems you are confortable in living in the dark side. Well, sweet dreams dear. As to the rest of Ethiopans we will proceed are we know there is always a price to pay when moving forward.

  • Benjamin December 23, 2010, 2:06 pm

    Well, Cameron, it wasn’t quite what I thought I was looking forward to. Not that I disagree that this is happening. I never did confirm it, nor do I travel the world or anything like that. But no one can tell me, given the trends in place for years, that it wasn’t going to happen before the halfway point of my lifetime.

    I just hadn’t expected to be disappointed by one glaring point. Okay, so you obviously know people over there that you care much about. Point-blank, is one of the reasons you lose sleep at night because you view them as central bank-fueled investment opportunities?

    Mmm hmm… all sorts of folks worry themselves sick over how the central bank is destroying their home. But how they scuttle to the same old illusions in some other country!

    Now, don’t get the impression that I’m being all preachy and pointing the finger in condemnation. It’s just that I happen to know an addict when I see one, because I was one (heroin). But the other day I said for all hope to be lost, all hope must first be found to all be lost. Well, there’s corrolaries to the laws of the universe. There ain’t any hope in addiction. Can’t even ever touch it, never even glimpse it. Not even ever imagine it… until it isn’t malinvested where it simply does not belong (and until that day comes, it’s my job to keep pointing that out to all. I’ve nothing else better to do, besides).

    Maybe, maybe not, but beyond Africa, I see nowhere else for the world to scuttle to in order to receive their central bank fixes. Unless somehow millions of people can be relocated to Antarctica. But beyond that HIGHLY unlikely scenario, I think the next meal will taste as great as rubber squid (I, uh, had a dream last night about a bunch of rubber toy squids)

    Anyway, get some _good_ sleep tonight. Some people, they get nightmares after eating those fake squids. Don’t eat the fake squids, you should have no such troubles!

  • Cam Fitzgerald December 23, 2010, 6:58 am

    Ethiopia is a touchy subject. Few want to hear about it.

    I actually expected some negative reaction to this article Martin and your concerns are valid. Population growth is running ahead of itself in North Africa but that is no reason to write it all off.

    There is hope for Ethiopia and I had rather wished Rick had published the final copy of the article instead of this early version. What most don’t know is that people in that country greatly resent the handouts they are given.

    Nobody wants to feel beggared by their neighbors around the world. So Ethiopians are seeking opportunity and a chance to get ahead just like everyone else. And change is now on the horizon and is taking place in a surprising way.

    China may have seen some success because of a one-child policy but I don’t believe for a moment that was the real reason for it’s ascent. Cheap labor, a willing government, plenty of raw materials and energy and an educated population were some of the other keys to it’s growth.

  • Jonas December 23, 2010, 10:18 am

    I really enjoyed reading your article. Perhaps, it is one of the best articles written about recent developments in Ethiopia. Most people still want to read about biblical drought and famine that ravages the country. Despite some sort of reversal on the democratization process and human rights record, it seems that the country is emerging out of poverty. However, since it is just the beginning there is no doubt that the country still needs lots of FDI and humanitarian assistance to break out of the vicious circle of poverty. Thanks!

    • Steve December 23, 2010, 6:50 pm

      Why do the people seek democracy when it is a tyranny run by despots leading to violent destruction according Mr. President James Madison?

  • Deep Ethiopian December 23, 2010, 8:29 am

    “Wow!” – That’s all I can say. There will always be doubts about Ethiopia and Africa in general, as can be seen from the previous comments. But like you, unless they themselves come and feel the pulse of the Ethiopia, they will still be blinded by the reports on CNN and BBC.

    To the doubters: they said the wars would put us under. We’re still here. They said HIV/AIDS would have a catastrophic effect on the future of the country. We beat HIV/AIDS, and even the United States itself is admitting that the policy that we followed saved us when they were looking to solutions of the fast rising infection rates States-side. They said the dams that were built would be too ambitious, but we built them. They said that the Chinese influx would do more damage than good, well we’ve seen more change in a few years than when the rest of the world snubbed us. So, my dear friends, it is with turning a deaf ear to your statistics that this country will forge ahead. If you want to put forward ideas about Ethiopia, how about coming over and seeing it for yourself? Rick did it, and his enthusiasm is almost Ethiopian.

    Well done, my brother from another mother! :O) People like you are what this country needs: honest, unbiased and openhearted…in other words an Ethiopian.

    • Benjamin December 23, 2010, 5:53 pm

      CNN and BBC? I don’t even watch them, so how could I possibly be spoon-fed my information about yet another delusional country relying on central banking? I’ll tell you how… Because it’s incredibly easy to see and accept when you look at reality, and only reality, and just see and accept it for what it is.

      And not that this isof any importance, but how about I come vist you for my great awakening in, say, 30 years rather than right now this instant?

      Yep, P.T. Barnum was right. Thousands per second, they are.

      I’m sorry. I meant to say that you’re absolutely right.
      See folks? Even someone born yesterday in Ethopia knows that central banking is the solution to all problems, and that there is absolutely nothing that they can’t do. Sad that one such person is so, so much brighter than the lot of ya put together…

    • Steve December 23, 2010, 6:48 pm

      One cannot sell the heart of “value” to foreigners, that is the natural resources, and expect anything other than slavery.

  • Martin Snell December 23, 2010, 3:39 am

    I enjoyed your description of life in Ethiopia, a country I would love to visit some time.

    Unfortunately I fail to share your optimism. From the time I have spent time in Third World countries (mostly in Asia) I’d have to say that the countries with rapid population growth run into a lot of trouble, and rarely develop stable economies.

    One of the major reasons China has done so well is its one child policy. Without it China would have never grown like it has – and even it has serious troubles.

    From the stats on the census web site, 56.5% of Ethiopia’s population is 19 or under. That is a ticking time bomb of massive proportions. Simply put fertility of 6.1 children per woman is unsustainable in a country that already has 88 million people (and where infant mortality has been almost halved in the last 15 years – so each woman now has almost double the number of surviving children).

    Ethiopia is expected to have close to 140 million people in just 15 years (an increase of 52 million – or 60% – in just 15 years!). If that does not stretch the environment, food supply, arable land supply, housing supply, etc. I don’t know what will.

    • Rob P December 23, 2010, 5:58 pm

      Martin, I think your infant mortality figures are beyond credulity. If infant mortality is halved, and at the same time the number of surviving children doubles, then you have to start from some very high mortality rates to meet both assumptions.

      Like going from 80% mortality to 60%.
      Or from 70% mortality to 40%.
      Or from 51% mortality to 2%.

      Even the most squalid conditions rarely have 50% mortality to start with, unless you’re talking about “getting to adulthood” mortality instead of infant mortality.

      The error in your assumption comes because mortality is given as a percentage, x%, while the surviving rate is (1 – x%).

      The high birthrate comes because the women (girls) start their childbearing while young and fertile, just as they always have. They now are educated enough to treat the more common ailments between ages 1-18 as well as in infancy. The improved health care shows in the exponential rise in population.

      I suspect that as living standards and education improve, birth rates will decline and children will become precious treasures rather than commodities. The same decline has happened in western Europe and Japan even to below replacement rates.

    • Martin Snell December 23, 2010, 6:56 pm

      Rob P.

      You are of course correct, I obviously was too quick to throw out the numbers.

      So what we have is fertility of 6.1 births per woman (incredibly high!) , down from 6.4 in 1995 (not much of a drop).

      Infant deaths (below 5 years old) went from 190/1000 to 111/1000 (2010 and 1995).

      So doing the math correctly this time, an average woman today can expect to have 5.43 children surviving to 5 years of age, versus only 5.18 in 1995. Obviously not as big a change as my original erroneous calculation, but still in the wrong direction.

      I would still like to find a country that went through a population boom, while simultaneously building a strong economy. I understand Ethiopia has a lot going for it, but population growth has very severe impacts on an economy. In fact Ethiopia’s not too distant neighbor Rwanda faced a genocide due in large part to overpopulation that triggered sectarian disputes.

    • Cam Fitzgerald December 23, 2010, 7:45 pm

      I am not sure what your real objections are Martin.

      There are plenty of overpopulated countries that have not destroyed themselves in sectarian violence nor fallen into anarchy. Rwanda is just not a good example to use as a comparison to Ethiopia in the same way Zimbabwe is a terrible example to compare the US too.

      Is it not preferable that Ethiopia now stands on the verge of being able to carry it’s own weight, that the growth prospects there mean the world community has one less worry than it had yesterday or that Ethiopia has finally come to a critical juncture that will see it’s regional influence grow as it brings power and electrification to all North Africa?

      Population growth will certainly level off once the ever present fear of insecurity wanes and employment levels rise bringing some level of prosperity to the nation.

      Cheap hydroelectric energy, irrigation, resource discoveries, Chinese investment and industrialization are keys to what is a growing success story over there.

      And if the people there are hopeful for the future why would we view their growth prospects as dismal? Should they just pack it in and give up because everything looks hopeless through Western eyes?