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Month: August 2024

Rape Crisis Calls for Systemic Change

Posted on by Web Master

The story of Feven Awot, an eight-year-old child who was brutally raped and killed, shattered my heart. As a woman and a mother to a baby girl, I could not get it out of my mind. I am terrified, haunted by thoughts of what happened to an innocent child and her family afterwards. It is unbearable to imagine a young girl, who had her whole life ahead of her, suffering such horror.

Reading about the predator’s gruesome crimes in the court files was nauseating. The medical report detailing the horrific final moments of the little girl’s life made me weep with anguish. The witness testimonies were traumatic to read. The court documents describe how Feven, who had left her relative and younger sister at home to use the toilet, fell into the trap of a cruel predator and met a grim end.

Her tragic death at the hands of a predator underscores the worsening state of rape in our society. Countless rape cases fill the courts, with these crimes occurring everywhere—from homes and daycare centres to religious institutions and schools. Despite cultural barriers, victims and their families courageously seek justice.

The sexual crimes courts adjudicate, and the stories received by organisations reveal the pain women and children endure daily. Most rape victims are from impoverished households, targeted by someone within their own family or neighbourhood. Unattended children are particularly vulnerable to predators nearby. Countless cases never reach the courts and those that do usually face difficulties.

The profound disappointment of seeing felons released after serving only a few years for raping minors led me to abandon my practice of law. The lifelong agony endured by victims cannot be alleviated by the perpetrators serving short sentences for the heinous crimes they committed, only to be freed and potentially repeat these acts, traumatising victims and their families.

While individuals suspected of corruption are denied bail and must follow their cases from jail, rape suspects frequently walk free on bail, causing further distress to victims and their families. These suspects usually attempt to silence, threaten, and shame victims, their families, and witnesses during the legal process, trying to destroy evidence and intimidate those seeking justice. This discourages victims and their families from pursuing their cases in court.

There remains a marked gap in the law concerning comprehensive victim protection. The lack of strict precedents for rape criminals allows it to remain rampant. While the criminal law lists punishments for rape—ranging from five to 20 years in prison, or life imprisonment if the crime results in serious bodily or mental injury or death—some judges, seemingly desensitised to the prevalence of these cases, often impose the minimum sentences, even when the victims are minors.

The law fails to acknowledge that rape robs victims of far more than just their physical dignity. It overlooks the potential and opportunities lost by victims like Feven. It fails to account for the profound moral, physical, and future damages inflicted by such heinous acts, not only on the victims and their families but also on society at large.

As Feven’s case is currently on appeal, it is not permissible to discuss specific legal errors. Hopefully, the prosecutors and higher courts will address any mistakes to ensure justice is served appropriately in this horrific case, thereby deterring similar crimes in the future. The heartbreaking story calls for a revision of the laws on rape to provide justice and curb the rise of these crimes, which emboldens perpetrators.

Rapists are also learning how the legal system works and how sentences are applied. Even if the law were to change to include the death penalty for rape, most criminals know that executions are rare here. Although death sentences require the president’s signature to be carried out, judges frequently avoid imposing the death penalty due to the emotional burden it places on them. Likewise, the difficulty presidents face in approving executions has left many on death row for decades.

Authorities and lawmakers need to investigate the factors contributing to the growing number of rapes to address the systemic failures that leave women and girls vulnerable. Rape is a crime against humanity that inflicts inhumane and degrading suffering, yet the conviction and punishment rates have consistently been lower than for most other crimes.

Learning from countries that have taken serious measures to combat rape could help reduce the incidence of this crime. Training police officers on investigative procedures and prosecutors on effectively charging rapists, alongside legislative reforms, could help resolve the crisis in the prosecution of these cases. Rape should be treated as a severe offence, with the law and communities unequivocally condemning it.

Citizens should not live in constant fear of what might happen to their children when they are at home or school. Authorities and communities must unite to fight this crime that is robbing women and children of their precious lives and futures.

Misreading the Impact of Monetary Policy

Posted on by Web Master

This year’s Jackson Hole Economic Symposium, which brings together central bankers from around the world, is right to focus on the monetary transmission mechanism, the channel through which monetary policy influences broader economic and financial conditions. Although the US Federal Reserve raised interest rates by 500 basis points between March 2022 and July 2023, it seems that little damage has been done to the US real economy or its financial system.

This low cost of disinflation is shocking (though certainly welcome). Even if we have strong hypotheses to explain ex post why the United States has been able to combine growth with disinflation for the last two years – notably high immigration, a surge in productivity, and (above all) well-anchored inflation expectations – the lack of a visible direct impact from rate increases is remarkable.

Evidently, current US monetary policy is meaningfully looser than many Federal Open Market Committee (FOMC) members and market participants think it is. What is more, the impact of monetary policy on the economy is more conditional and probably weaker on average than commonly believed. This assessment is directly relevant to the FOMC’s upcoming monetary-policy choices but even more so to policymaking further in the future.

This past June, multiple FOMC members expressed concern that monetary conditions have been tightening further as declines in inflation lead to higher real interest rates. But, this view fails to account for the magnitudes and channels of monetary transmission. Here, the focus on the policy instrument, the federal funds rate, is misleading. It is a mistake to assume that the settings of the instrument are close to optimal at any given time, or that they must be fine-tuned with each twist and turn in the inflation forecast.

The assessment of monetary conditions should focus more on actual financial-market outcomes than on preconceived notions of the effect of policy.

As we saw with the 2008 global financial crisis, financial markets are segmented, and central banks often must intervene directly in particular markets to have an impact. For example, interest rates and (the lack of) supervision affect commercial lending by non-bank financial intermediaries differently than traditional bank lending. Private equity and unlisted investments react differently to policy adjustments than commercial paper, bonds, and even traded equities do. Even in the absence of financial-liquidity constraints, regulation and international barriers impede the transmission of credit flows uniformly across jurisdictions.

Thus, as a forward indicator, financial conditions are at least as important as the slightly backwards-looking signals sent by the labour market. Financial indicators remain quite accommodative. Equities have returned to high valuations, and the decline in longer-term Treasury rates has persisted. Interest-rate spreads (such as those between lower-rated corporate bonds and comparable duration Treasuries) have widened somewhat but remain very low by historical standards, let alone for the end of a Fed tightening cycle.

The same holds true for delinquent auto and consumer loans and for real-estate losses. These have come off their lows, but not by much. It is rather odd to call monetary policy “tight” when credit remains easy and balance sheets are barely distressed.

Another problem with focusing primarily on changes in the real federal funds rate (assuming all else is equal) is that it ignores a more important benchmark for the impact of monetary policy: where that interest rate is about the neutral interest rate (r*), the rate where monetary policy is neither “loose” nor “tight” for an economy growing near trend. The gap between the underlying long-term return to safe capital in the economy and what the Fed sets as the minimum lending rate for very short-term loans thus reflects the traction of monetary policy on the economy. If the neutral rate has moved up a lot, any rise in real rates as inflation declines could be more than offset.

As Fed Chair Jerome Powell rightly pointed out at previous Jackson Hole conferences, the economic stars (neutral interest and unemployment rates) are not directly observable, or even robustly estimated. Yet there are overwhelming reasons to believe that r* has risen substantially above its pre-COVID levels, meaning that monetary-policy settings have become looser over time. Foremost, US federal deficits are much higher on a sustained basis, and spending on defence, environmental, and industrial policies will keep them up. These additional outlays will drive up rates on government borrowing, which is a key determinant of r*.

At the same time, Chinese and American officials alike are discouraging capital flows from Chinese investors into US markets, shrinking the pool of savings available to finance US deficits – which also increases long-term rates. But after the pandemic, US savings rates fell as consumers bought into a “YOLO” (you only live once) mindset and internalised the lesson that there will always be government support in times of crisis (thankfully). Again, this will cause rates to go up as debt levels rise.

Finally, if the recent acceleration in productivity growth is sustained – perhaps because AI or green-tech becomes more widespread – that, too, will raise the real return on capital, and thus r*. However, when one weighs these various factors, all trends point to an increase in r* by as much as 1.5pc.

To be sure, the fact that US monetary policy is looser than many believe should not discourage the Fed from cutting rates in September and November. From a risk-management perspective, if inflation is forecast to continue on a downward trend and unemployment is rising, loosening policy to forestall a recessionary slide is prudent (at least until the economic impact of November’s US election becomes clear next year).

But, warnings that Fed policy is potentially dragging the economy down are unjustified. When the US economy proves resilient yet again, and the time for rate increases returns, the FOMC should be prepared not only to raise rates more than it is used to, but also to track how its hikes transmit across diverse financial markets.

Kenya’s Lesson on Curbing Debt-Fueled Unrest in Emerging Markets

Posted on by Web Master

The effects of recent contractionary monetary policy in the United States (US) are still playing out. It has often been said that the world catches a cold when the US sneezes. More broadly, advanced economies can easily spread economic ” pathogens, ” especially to small, open developing economies. But the maladies they cause vary, and so do the necessary remedies.

In recent years, Kenyan President William Ruto’s government has been attempting to service large foreign loans – taken out largely to finance infrastructure construction – amid a series of negative international shocks. The same has been true for Zambian President Hakainde Hichilema’s government. But whereas Zambia’s external debt reached 80pc of GDP in 2020 – a clearly unsustainable level, Kenya’s stands at 37pc. Any intervention in Kenya should thus focus on easing short-term funding constraints, rather than full-blown protracted debt restructuring.

So far, neither country has gotten the medicine it needs.

In 2020, Zambia became one of the first countries to apply to the G20’s Common Framework for Debt Treatments (CFDT), which involved the coordination of a large and heterogeneous group of creditors, including the Paris Club of advanced-economy sovereigns, China, India, Saudi Arabia, and private actors. Nearly four years later, Zambia’s debt restructuring has still not been finalised, though the country has endured a harrowing economic adjustment (with little financial support).

Kenya has been the guinea pig for a different approach. It developed a three-pronged strategy involving economic adjustments aimed at boosting growth, support from international financial institutions (IFIs), and rescheduling debt repayment to other creditors. This is the right approach for an economy that is illiquid but not insolvent. But, given the level of international coordination required, implementing it successfully is no easy feat, especially at a time when capital markets are cautious, geopolitical tensions are deepening, and demand for IFI funding is rising.

Ruto has learned this firsthand. For two years, he has been travelling the world – from the Paris Forum to the UN General Assembly to the Belt & Road Forum – attempting to marshal support for his strategy. Most recently, he made a state visit to the US, where he and President Jeo Biden issued a joint statement endorsing the plan. But, three important weaknesses have impeded progress.

The first was an excessively short timeline for restoring fiscal balance. Kenya reached an agreement with the International Monetary Fund (IMF) in 2021 on a multiyear program to support the country’s COVID-19 response and help reduce its debt burden. But the agreement’s requirements  – especially to shrink the fiscal deficit by four percentage points (as a share of GDP) over three years – were unusually stringent and ultimately proved unrealistic. Making matters worse, when early targets were missed, Kenya faced pressure to raise taxes by a whopping two percent of GDP in a single year (2024).

What Kenya needed was a more gradual adjustment, but that would have required more finance.

This brings us to the second weakness: Kenya has struggled with very high amortisation payments since 2019, and this situation is expected to persist through 2028, with debt service to private and Chinese creditors hovering around 2.5 billion dollars a year. While Kenya did secure very large funding commitments from both the IMF and the World Bank, they were insufficient to offset these payments.

Starting in 2022, on a net basis, financial flows were moving out of Kenya, and the balance continues to worsen. Capital markets initially stopped extending new finance to Kenya, as it did to other African countries in 2022. When it finally became possible to borrow again in 2024, the two billion dollar Eurobond that fell due in June could only be (partly) rolled over at a very high interest rate (10.4pc). With the risk of default apparently growing, bilateral creditors, like China, were unlikely to agree to the three-to-five-year rescheduling that Kenya needs.

The third weakness is that Kenya’s growth strategy, which requires major investments, lacks credibility. After all, if Kenya cannot refinance its debt externally, it would need to do so domestically, which crowds out private investment, increase financial-sector risk, and weaken the currency, leading to more inflation and instability. None of this is conducive to growth.

Kenya is the tip of the iceberg; illiquidity affects many other lower- and lower-middle-income countries as well. It is important to draw what lessons we can from Kenya’s experience.

Efforts to mobilise domestic revenues should be realistic and stretched into the medium term. To lower refinancing rates, IFIs should more credibly signal their commitment to a multiyear growth program, such as by pledging to guarantee a portion of refinanced debt. Lastly, official lenders should be brought on board early, and their pledges must be contingent on refinancing private debt at a reasonable rate.

As we have proposed elsewhere, these actions can be brought together under an ambitious new IMF-World Bank framework offering scaled-up financing and debt-rescheduling support to solvent countries that present a credible growth plan.

As the recent protests show, Kenya has considerable governance weaknesses, including inadequate service delivery and high levels of corruption. But like many other lower-middle-income countries, it also has plenty of growth potential, rooted in structural strengths. Impressive progress in advancing a green transition – its energy mix includes nearly 80pc renewables – further improves its prospects. Improved fiscal health would go a long way toward enabling Kenya to address its weaknesses and build upon its strengths.

While G7 leaders acknowledge at their latest summit the need for active coordination in resolving debt issues, and G20 leaders are likely to follow suit at their summit in Rio de Janeiro this November, the task now is to translate good intentions into effective action.

Craft Titans, Master Networkers’ Hidden Struggle for Corporate Power

Posted on by Web Master

In the array of intellect constituting the business and professional realms, we can uncover three broad strata of individuals. There are the socially adept, the intellectual giants, and the mainstream, although occasionally, someone could straddle the socially inclined and genius categories. Blessed with social acumen and those imbued with intellectual prowess, these individuals represent a rarity.

Individuals who possess what could be termed ‘social radars’ are adept at reading others, skilled in managing intertwining interpersonal relations. They can engage anyone in riveting conversation.

Their ease often propels them towards marketing, sales, event planning and related fields. Such individuals subscribe to marketing’s procession over other operational or technical considerations and risk overstating their role in team successes, a bias that can be attributed to what is known as “ownership bias.” This bias reflects the tendency to prioritise and overvalue the skills, tasks, and roles that we engage in simply because we are more familiar with them. Their orientation is externally focused, which leads them to be active on media platforms and speaking circuits, continuously promoting their achievement and ability.

On the other end of the spectrum lurk the “genius”, the intellectual giants. These are the consummate professionals whose technical and operational brilliance surpasses their social tact. They seldom surface in the public eye, preferring instead to toil behind the scenes, strengthening their team and honing their craft. However, their social skills can be lacking, and they may come across as socially awkward or even insensitive to others’ emotions, making those around them uncomfortable. To them, excellence in work is the master key to success, considering marketing and sales secondary. Their brands outshine them, in contrast to the socially adept who outshine their brands.

The relationship between these two types of individuals can be highly productive if managed wisely. A successful company requires both a social radar’s marketing prowess and a genius’s operational excellence. Together, they can create a powerful synergy that drives success. However, this partnership cannot be without potential conflicts. In the absence of clear communications, well-defined roles, and an established decision-making process, the partnership is likely to dissolve. The parties may become convinced that their contribution is more critical than the other’s, an understandable belief given the “ownership bias” that could evolve into greed if left unchecked.

To make such partnerships work, social radars could acknowledge and credit the contributions of their genius partners during public exposure. This not only promotes goodwill but also ensures that the genius feels valued for their work, which often goes unnoticed in the public eye. Conversely, geniuses could avoid making assumptions about the balance of work and instead communicate openly about any perceived imbalances in workload, credit, or compensation. Such conversations should happen early in the partnership, before resentment builds and the relationship deteriorates beyond repair.

While it is true that both social radars and geniuses could achieve success independently, the strength of their partnerships is often essential for building large organisations and accomplishing great things.

A key question in such partnerships is who should take on the CEO role. While conventional wisdom might suggest that a social radar is better suited for this role, given its people skills and public visibility, there is an argument to be made for the genius taking the helm. The genius’s focus on operational excellence can be a more forceful driver of long-term success, especially in industries where the quality of the product or service is important. However, the issue may depend on the specific context of the business.

Ultimately, neither social radars nor geniuses are inherently right or wrong. Both approaches are valuable and necessary. What matters most is recognising our strengths, understanding where we excel, and embracing that reality. Success is not about fitting into a particular mold but about leveraging unique skills to create value and achieve our goals. Knowing the self and playing to our strengths is essential, whether a social radar or a genius.

Social radars often achieve greater short-term recognition and success due to their ability to steer social dynamics and promote themselves effectively. The genius category may struggle initially, as it takes time for people to recognise their excellence and to get accustomed to their idiosyncrasies. In the long haul, though, the geniuses often “rule the world.” While they may not dominate social media or television screens, they are the ones who control the platforms, goods, and services that shape our daily lives.

Despite Risks Loom Large Due to Economic Upheaval, IMF’s Deal Offers a Lifeline

Posted on by Web Master

The federal government’s recent engagement with the International Monetary Fund (IMF) under the Extended Credit Facility (ECF) represents a potentially transformative shift in Ethiopia’s economic strategy. Essential for a country gripped by economic ordeals on multiple fronts, it could stabilise and integrate Ethiopia more deeply into the global economy. However, it also presents considerable risks, particularly given Ethiopia’s precarious external debt situation. It demands vigilant management to avoid exacerbating existing vulnerabilities.

In July of this year, Ethiopia formally requested an arrangement under the ECF, submitting a letter of intent to the IMF. Two crucial documents accompanied this request: the Memorandum of Economic & Financial Policy (MEFP) and the Technical Memorandum of Understanding. These submissions paved the way for the IMF’s Executive Board to approve the request, setting a four-year program that could determine the country’s economic future in motion.

Estimated to be engaged in transactions totalling 53 billion dollars over the next four years with the rest of the world, Ethiopia faces a daunting financial gap of over 20 billion dollars. Pre-ECF negotiations had already led to the arrangement of 9.7 billion dollars from official transfers, privatisation, and debt restructuring. This leaves a residual gap of 10.6 billion dollars that its leaders expect to bridge with support from the IMF and development partners. Specifically, the burden is slated to be shared among IMF disbursements of 3.4 billion dollars, further debt restructuring of 3.5 billion dollars, and direct budget support amounting to 3.75 billion dollars.

Ethiopia’s concessions to secure the ECF were consequential, reflecting a bold commitment to economic reforms and a leap of faith towards greater integration into the global economy. If successful, the anticipated benefits of this program could be unprecedented, opening doors to foreign grants, loans, and partnerships and potentially leading to an upgrade in the country’s sovereign credit ratings.

However, it is crucial to recognise that while the ECF offers substantial opportunities, it is not a panacea for Ethiopia’s economic problems. Its success depends on the leaders’ ability to navigate the risks identified by the IMF, which include government insolvency, financial instability, runaway inflation, and social unrest.

Foremost among these concerns is the deteriorating debt-carrying capacity (DCC). The IMF has stressed this as the country’s primary risk, emphasising that any government unable to service its domestic or external debt would struggle to maintain financial stability. A government in such a position could find itself forced to borrow even more in a desperate attempt to stave off an inflationary spiral, which, if unsuccessful, could lead to social unrest. The IMF’s focus on DCC uncovers the seriousness of this risk.

There is also a legitimate concern among observers that the resources provided under the ECF could be squandered due to mismanagement, a fear without precedent. Past cases of misallocated funds have left scars on the economy, and the possibility of history repeating itself is a source of anxiety for many. However, recent reforms have introduced safeguards preventing such mismanagement. Notably, the National Bank of Ethiopia (NBE) is now required to make foreign currency available to commercial banks through forex auctions, a mechanism designed to ensure transparency and accountability.

The financial administration of state-owned enterprises, which have often been blamed for being the primary conduits for misappropriating external funds, is slated for a comprehensive overhaul. The IMF will closely monitor these entities as part of its oversight mandate. For example, indicative targets have been set to reduce gross claims by commercial banks on state-owned enterprises from 760 billion Br to 147 billion Br by June 2025. The joint technical memos reveal that budget support through loans and grants would be accounted for at exchange market prices, while specific targets will bind budget deficits and net foreign reserves.

Failure to meet these benchmarks could delay the release of scheduled disbursements, particularly addressing the risk of mismanagement.

Among the financial institutions, none pose a greater risk to the economy than the Commercial Bank of Ethiopia (CBE). It is a central pillar of the country’s financial system, and the public relies heavily on its stability. Although details remain sparse, likely due to the sensitivity of the information, the World Bank’s support, reportedly involving an injection of 900 billion Br, is expected to be as much about providing technical assistance as it is about financial relief. Such substantial support may alleviate immediate concerns about the CBE’s solvency but also raise questions about other potential financial risks.

Liberalising the foreign exchange market has introduced new systemic risks, particularly for the banking industry. Currency trading exposes banks to technical and moral hazards, with technical risks arising primarily from the lack of options to hedge against unfavourable currency movements. Banks typically hedge their forex positions in more developed markets by investing in currency pairs. However, the limited availability of currency options in Ethiopia in sufficient volumes constrains their ability to engage in such practices. Capital account restrictions also prevent them from containing these risks by investing in foreign assets like stocks and bonds.

Banks may be tempted to lend to or invest in related parties without effective hedging mechanisms, a practice that carries its own risks. While related party rules enforced by the Central Bank provide some protection against this, they do not offer a solution for hedging forex exposure. Ironically, this situation might lead banks to increase their investments in foreign currency, constrained only by the NBE’s limits on their net open position. Should the ECF work as intended, the Birr could strengthen, leading banks to realise lower returns in Birr for the dollars they initially buy, thereby exposing them to exchange rate risk.

On the social front, the IMF’s Risk Assessment Matrix (RAM) identifies a high probability that external price volatility could exert inflationary pressure on local prices, reduce the volume of critical imports, and push for increased social spending within a tight monetary policy framework. Runaway inflation is the bane of any central bank; it is notoriously difficult to predict or control it. Where the forex market is liberalised, inflationary pressures could emerge through three primary mechanisms: monetary expansion, commodity price shocks, and exchange rate pass-through.

IMF’s facility includes provisions to respond to these risks posed by monetary expansion and commodity price shocks, mainly through controls on deficit financing and subsidies. However, the exchange rate pass-through mechanism, whereby adjustments to the exchange rate lead to changes in domestic price indices, is intrinsic to the facility’s strategy, especially with the floating of the Birr. The process involves the alignment of exchange rates by market forces, followed by corresponding adjustments in consumer and producer price indices.

In a market economy, prices are primarily influenced by competitive forces among buyers, producers, suppliers, and potential entrants. At a broader level, these forces interact through institutional arrangements involving consumers, entrepreneurs, and the state. As part of the IMF’s program, the recent introduction of interest-based monetary policy and open market operations equips the Central Bank and the Treasury with tools to stabilise the forex market using funds from the IMF and other development partners.

Successful stabilisation of import prices through such coordination is often referred to as “sterilisation.” The IMF and the Ethiopian authorities have emphasised the need for capacity building in various areas, including price statistics, foreign exchange regulations, monetary operations, and public financial management.

It is worth noting that the Birr has not been a reliable measure of value in recent years. Correcting its value through inflationary adjustments could send crucial signals to importers to reduce imports, exporters to increase shipments, and consumers to brace for austerity. However, these economic arguments may carry little weight in the face of political pressures. Globally, leaders from various political spectrums often attribute sudden price surges to entrepreneurial greed, a sentiment that could resonate in Ethiopia if inflation spirals out of control. The IMF’s risk analysis acknowledges this possibility, warning that inconsistent implementation or reversal of key fiscal or exchange rate reforms could widen financing gaps and lead to the withdrawal of support from development partners and creditors.

Despite these risks, the potential rewards of the IMF program are substantial. It projects that Ethiopia’s revenue will increase by four percent of GDP, inflation will be tamed to 10pc, and gross foreign reserves, currently at a mere one billion dollars, are forecasted to grow to 10.2 billion dollars by June 2028. Given these prospects, Ethiopia can hardly afford not to take these risks in pursuit of such rewards. The success of the IMF program could mark a turning point for Ethiopia, unlocking new opportunities for growth and stability in an increasingly interconnected global economy.

Post-Olympic Bitter-Sweet Taste

Posted on by Web Master

The love affair between the people of Ethiopia and Olympic games dates back to Abebe Bikila’s historic barefoot marathon win in Rome over half a century ago. Since then, generations of athletes have risen to the occasion, though recent performances have not always met public expectations.

At the Paris Olympics, the country won a single gold and three silver medals, a result that fell short of the country’s historical achievements. Tamrat Tolla’s record-breaking win in the men’s marathon brought joy, but in the women’s marathon, Tigist Assefa narrowly missed out on gold, finishing just three seconds behind Sifan Hassan, a naturalised Dutch athlete originally from Ethiopia.

Ethiopia’s medal count has been on a downward trajectory in recent years, with fewer medals won in Rio and Tokyo than in the more successful Sydney, Beijing, and London Olympics. This decline has sparked debates among pundits, with explanations ranging from administrative issues and training regimens to internal conflicts. These discussions frequently intensify when results fall short of expectations, but all is celebration when success is achieved.

Ethiopia has long nurtured its athletes, even when resources were limited. Athletes like Abebe and Miruts Yifter competed with minimal support, receiving only modest state salaries and prize money. Today, prize money from prestigious events like the Diamond League has dramatically improved athletes’ livelihoods, allowing them to hire professional trainers, doctors, and physiotherapists, enhancing their performance.

However, this shift towards professionalisation has also led to increased competition and individualism, with some arguing that the era of centralised training and teamwork has ended. Internal conflicts over athlete selection, leadership positions, and fund management have also negatively impacted performances. These disputes, usually well-documented and public, have been counterproductive and confused the public.

Perhaps the past victories made us set expectations high.

Abebe showed no signs of fatigue after completing the 42Km race with remarkable strength and resilience. While some competitors collapsed at the finish line, he continued doing warm-up exercises, a display that amazed many spectators. He made history by winning the first Olympic gold medal for Ethiopia and the continent, but he also set a new world record.

He paved the way for generations of runners by defending his title with another record-breaking performance at the Tokyo Olympics four years later. His legacy ignited a passion for athletics in the country. Ethiopian flags have been waved in honour at numerous games, with legends like Miruts Yifter, Derartu Tulu, Haile Gebresellassie, Tirunesh Dibaba, and Kenenisa Bekele continuing this proud tradition. Although many have achieved great success on the global stage, Abebe remains a unique figure due to the extraordinary nature of his achievements and his role as a pioneer.

Abebe holds a special place in the hearts of people globally as well. The late Japanese Prime Minister Shinzo Abe fondly recalled watching his triumph in Tokyo during his childhood. During a state visit to Ethiopia, Abe honoured the legacy on the 50th anniversary of his Tokyo win while Abebe’s son, presented him with a framed photo of his father in action. Similarly, Rome honoured Abebe by unveiling a plaque in his memory, an event attended by Ethiopian Prime Minister Abiy Ahmed (PhD). His victory was particularly symbolic, as he ran past the Axum obelisk that had been taken to Rome, nearly two decades after the Italian colonial soldiers were ousted from Ethiopia.

Tragically, Abebe’s athletic career was cut short by a car accident that left him paralysed from the waist down. However, he remained undeterred, competing in the Paralympics and demonstrating that true heroism is measured by resilience.

Fast forward to the current affairs, the public expectations are high. While silver and bronze are valuable, the national psyche is focused on being number one. It is important to remember that sports are competitions, and all participants compete to win. Good sportsmanship requires accepting losses gracefully and maintaining positive relationships with competitors. Being fiercely competitive is desirable, but this competitiveness should be confined to the event itself, followed by camaraderie and learning from the experience.

While it is natural to hope for great achievements, excessive pressure can negatively affect athletes’ performance. Expecting gold every time can create undue stress, hindering their performance.

The fascination with the Olympics and other global events remains strong in Ethiopia, a nation that loves its athletes and their sport. The Paris Olympics exposed weaknesses that need addressing, but as the dust settles, the focus will shift to future events, like the upcoming Los Angeles Olympics. A renewed emphasis on good sportsmanship, leadership, and teamwork could help restore athletic success. Our athletes have repeatedly proven that with coordinated leadership and a team effort, good results are a natural outcome.

Climate Strains, Missed Opportunities Dwindling Lifeblood of Agriculture

Posted on by Web Master

Ethiopia’s agriculture sector is indeed the spine of its economy, but it is increasingly challenged by a confluence of factors – from the harsh realities of climate change and natural disasters to civil unrest and a rapidly growing population – that threaten its viability and, by extension, the country’s economic stability. Climate change is not a distant threat; it is a present reality with the potential to erode Ethiopia’s GDP substantially, exacerbating poverty and undermining food security.

A recent “Country Climate & Development Report” from the World Bank paints a sobering picture of climate change’s impact, which could lead to an annual GDP loss of between one percent and 1.5pc, potentially soaring to five percent by the 2040s. If this is to happen, poverty across the country will deepen. With a growing population, the pressure on the agriculture sector to produce essential goods sustainably is mounting. Compounding this crisis are global events like the Russian war in -Ukraine, which disrupted grain seed transport and worsened food shortages.

Several irrigation schemes are struggling or falling short, often due to design flaws, implementation problems, or operational inefficiencies. These frequently arise from unreliable hydrological data, poorly designed infrastructure, rising construction costs, and delays in project completion. Inadequate community participation and exclusion from management decisions stymie small-scale irrigation efforts. Experts are calling for an encompassing development approach that weaves together technical, socio-economic, and environmental considerations.

Shockingly, only about five percent of Ethiopia’s potential irrigable land is in use, a tiny fraction of the five million hectares available.

In contrast, advanced economies are harnessing cutting-edge technologies like precision farming to improve record-keeping, and blockchain for food tracing and supply chain efficiency. The deployment of artificial intelligence (AI) is revolutionising agriculture by monitoring plant health, soil conditions, temperature, and humidity. The livestock sector is getting a tech upgrade too, with the “connected cow” concept, using wearable sensors to track daily activities and health, enabling swift decision-making.

Countries like the Netherlands are showcasing the future with high-tech greenhouses employing vertical farming, precision agriculture, and robotic harvesting—proof of how technology can transform farming.

Developing countries are not left behind. Initiatives like the CropWatch Innovative Cooperation Programme under the UN Commission on Science & Technology for Development are making strides in agricultural monitoring, working towards the Sustainable Development Goal (SDG) of zero hunger.

Fourteen African countries, including Kenya, are participating in this revolution, employing technology for drought monitoring even as far as Syria. Such projects are not only inspirational. They are essential for economies like Ethiopia’s, which heavily depend on agriculture and are most vulnerable to climate change. By integrating satellite technologies that are already in place, Ethiopia could boost agricultural productivity.

Agriculture, primarily reliant on rain, struggles with financing its commercialisation due to limits in mechanisation and irrigation. However, the innovation fund for agricultural mechanisation targeting smallholder farmers represents a hopeful leap forward, shifting from fragmented farming to commercially viable large-scale operations, with farmers organised into clusters. Recent studies reveal that cluster farming can lead to improved livelihoods for rain-fed farmers.

The Agricultural Transformation Institute (ATI) recommends that national irrigation schemes start collecting fees from end-users, paving the way toward self-financing models that replenish a national irrigation fund. Coordinating efforts across various ministries is crucial to achieving food self-sufficiency and elevating Ethiopia to middle-income status. The Disaster Risk Management Commission is stepping up, leveraging technology to monitor frequent droughts and weather conditions, offering early warnings and solutions to avert crises.

Expanding index insurance can empower farmers to bounce back from shocks, and collaborating with the Ministry of Innovation & Technologies to adopt diverse technologies is essential for emulating the best practices of leading agricultural economies.

Addis Abebas Light Rail Dream Turns into a Clunky Nightmare. It Shouldn’t.

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It may appear distasteful, unappealing and cumbersome to sight. But, the Addis Abeba Light Rail Transit (AA-LRT) stands as a concrete symbol of Ethiopia’s ambitious attempt to shake off its image as a poster child of poverty. Conceived in the 2000s during the reign of the EPRDFites, the project was a bold, if not audacious, attempt to leap into the future. With borrowed money, primarily from China, the ruling party sought to match the rapid urban sprawl it had unleashed with an equally rapid infrastructure expansion.

The AA-LRT, which cuts through the city’s heart along two routes — north-south and east-west — was intended to demonstrate modernity and propel Addis Abeba into the ranks of cities with advanced public transport systems.

When it was inaugurated in November 2015, by Hailemariam Desalegn, former prime minister, AA-LRT was hailed as a landmark achievement. The project consumed 475 million dollars and involved 41 trams capable of operating at speeds of up to 70Km an hour. Each tram was designed to carry 317 passengers, with the system projected to transport 60,000 commuters an hour across its 39 stations on 34Km of track. The project was expected to serve as a model for other African cities, manifesting a new era of urban mobility on the continent.

Yet, nearly a decade later, the AA-LRT is more often a source of frustration than pride.

Far from being the promised clean, comfortable, and affordable mass transit system, it has become a clunky addition to the city’s landscape. The rail now operates with only 17 of its original 41 trams, and daily ridership hovers around 56,000, far below the projected 105,000 to 110,000 commuters. The system’s inefficiencies are glaring, and its failure to live up to its initial promises has made it a topic of intense debate among Addis Abeba’s residents and policymakers alike.

Public opinion on the light rail is sharply divided. Some view the AA-LRT as a colossal failure that should be removed altogether. They argue that the project designers failed to consider the impact on the city’s social fabric. The rail has cut through vibrant neighbourhoods, creating artificial barriers that disrupt the flow of traffic and community life. Pedestrian crossings are scarce, leading to accidents and traffic snarls, while businesses along the rail’s path have suffered from reduced accessibility and foot traffic.

Critics see the rail as a blight on the urban terrain, an ill-conceived project that ignored the ecosystem of city life in favour of a misguided notion of progress.

On the other side of the debate are those who argue that the AA-LRT should remain despite its flaws. They point to the massive investment already sunk into the project and its potential to serve the city’s growing population.

Addis Abeba has seen a demographic surge in recent years, and the light rail has provided a vital transport option for many, particularly low-income residents and those living on the city’s outskirts. For these users, the tram is an affordable means of long-distance travel, even if it is overcrowded and often delayed. Proponents argue that the light rail could still fulfil its initial promise with improvements in operational efficiency and service delivery.

The AA-LRT’s struggles have not gone unnoticed by academics and researchers.

One study by Clelie Nallet, a French scholar with an interest in the evolution of the middle class in developing economies, chronicled the rail’s reception in Addis Abeba. Initially, the public was lukewarm, with empty carriages a common sight. However, by April 2017, usage had surged, and the once-deserted trams had become crowded during rush hours. Nallet’s work showed the troubles of introducing a new mode of transportation in a city with little precedent for such infrastructure. Her findings unveiled that while the light rail has found a niche, it still struggles to integrate fully into the city’s transport ecosystem.

A more critical assessment comes from a study published in the “American Journal of Traffic & Transportation” by Ashenafi Wondimu, Abraham Gebre, and Getu Segnie. They found that the AA-LRT accounts for a mere six percent of Addis Abeba’s transport infrastructure usage, far below what was expected. The researchers attributed this to operational inefficiencies, limited station amenities, and a rising number of trips cancelled. Their conclusion is damning: the light rail has not only failed to capture a meaningful share of the city’s transport market but is also suffering from diminishing returns.

Despite the bleak outlook, other researchers remain cautiously optimistic.

Sisay Guta’s postgraduate thesis at St. Mary’s University focused on the operational aspects of the AA-LRT. He acknowledged the rail’s shortcomings, particularly in maintenance and operational procedures, but argued that the system has, nonetheless, contributed positively to the city’s infrastructure and demographic size. Sisay emphasised the need for better maintenance procedures, more comprehensive operational manuals, and an upgrade in equipment. He also argued that despite these inadequacies, the company operating the rail has shown resilience, adapting to its difficult circumstances.

The light rail’s future, however, remains uncertain. The AA-LRT was supposed to recoup its construction costs within 10 years, but nine years into its operation, it has failed to pay off its debts and continues to operate at a loss. The Ethiopian Railway Corporation (ERC), which managed the system, has had to resort to domestic bank loans to keep the trams running. The absence of essential facilities, such as efficient ticketing systems and advanced transport technology, further undermines the system’s viability as a modern transit solution.

These issues are compounded by poor planning and governance, with insufficient arrangements for maintenance, spare parts, and local skills development.

As Addis Abeba grows, the city’s transport needs to become increasingly complex. The AA-LRT, despite its shortcomings, has at least provided an alternative to the city’s overloaded bus and minibus systems. The Anbessa City Bus Service, with its fleet of 700 buses, carries 600,000 passengers daily, while the city’s 10,500 minibus taxis make 840,000 daily journeys. These numbers dwarf the light rail’s ridership, exposing its limitations in meeting the city’s transportation demands.

Yet, the AA-LRT still has the potential to be more than just a struggling transit system. With the right reforms, it could become a catalyst for urban transformation. This would require a holistic approach, integrating all aspects of public transport and investing in infrastructure improvements, such as station facilities, ticketing systems, and spare parts. A digital transformation, including the introduction of mobile and card-based ticketing systems and an Intelligent Transport System (ITS), could enhance the system’s efficiency and appeal.

Policymakers and city leaders need to be better informed about the principles of public transportation and transit-oriented development (TOD). By embracing innovative growth principles, they could create more livable neighbourhoods in Addis Abeba and boost public health. In the longer term, privatising the light rail operation while keeping public ownership of the infrastructure, as seen in more advanced economies, could help make the system financially sustainable.

As Addis Abeba hurtles towards an even denser future, whether the light rail can keep pace remains to be seen. For now, the city stands at a crossroads, caught between its past ambitions and the evolving demands of its future. Embracing the past and aspiring for a better future is left for the residents and the city’s leaders.

PHASE TWO BEGINS

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The Addis Abeba city administration has a mammoth task at hand with launching the second phase of its corridor development project, designed to breathe new life into the city. On the horizon is the transformation of three key districts. Responsible for the task, the Plan & Development Bureau, seeks a harmonious design across the city, creating an urban landscape that is both appealing and cohesive.

Communications Authority Kicks Off Data Registry Entities

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Federal institutions, schools, civil society organisations, and other entities that collect personal data are required to register with the Ethiopian Communications Authority (ECA). Parliament recently passed a law protecting personal data, mandating the federal government to safeguard citizens’ privacy rights in an increasingly digital world.

Ratified four months ago, the law imposes a broad range of obligations on data controllers who determine the purpose and means of processing personal data. These controllers are mandated to collect personal information only for “specified, explicit, and legitimate purposes.” They are required to ensure that the data is accurate, up-to-date, and processed securely to prevent unauthorised access or breaches.

The Communications Authority, directly accountable to the Prime Minister’s Office, oversees the law’s enforcement, regulating data processing, upholding individuals’ rights, monitoring compliance, and enforcing the law through administrative fines, penalties, and sanctions against violators.

“This is why the protection law is important,” said Million H. Tolessa, deputy director general of the Authority, stating the need to distinguish personal data from other types. “Personal data may contain sensitive information that could be misused to harm an individual if not properly protected.”

According to Million, the dual-edged nature of the data economy offers considerable benefits and also poses risks if not managed properly. He cited the example of residential electricity consumption data, which, if analysed, could lead to improved efficiency. However, he cautioned that the same data, if mishandled, could be used by cyber criminals to organise theft.

“The law is a comprehensive response to these issues, establishing a legal framework ensuring that individuals’ data is handled lawfully and transparently,” Million told Fortune.

An IBM report for 2024 unveiled that data threats and unexpected business disruptions due to data breaches recorded a 10pc spike worldwide. Conducted by the independent Ponemon Institute and analysed by IBM, the report draws from a year-long survey of 604 organisations that experienced data breaches between March 2023 and February 2024. The findings revealed that an organisation’s average data breach cost has skyrocketed to 4.88 million dollars.

Over half of the organisations surveyed suffer from a severe shortage of cybersecurity professionals.

According to Million, the law’s provisions are intended to prevent such losses and build trust between citizens and the entities that collect and process data, trust is crucial for the growth of the digital economy.

“Some people withhold from using digital platforms for lack of trust,” he told Fortune.

The law also grants individuals rights over their personal data. Citizens have the right to be informed about how their data is being used, access their data, request corrections to inaccurate information, and even demand data removal in certain circumstances. They have the right to transfer data and to object to its processing, mainly when it is being used for purposes beyond what was initially consented to.

Experts see the law as a legal instrument shifting the power dynamics between citizens and entities that rely heavily on personal data, such as event organisers, where collecting names, phone numbers, and email addresses at entry points is a common practice.

Nebeyu Lemma, managing director of Prana Events, noted that while attendees have always had the right to refuse personal information, the new law formalises these rights and places greater responsibility on organisers.

“It’s a choice,” Nebeyu said, stating that individuals can choose not to provide their information, but organisers also have the right to deny entry if they deem it necessary.

According to Nebeyu, terms and conditions on data use are stated, and individuals have the option to unsubscribe at any time. However, he acknowledged that the new law would likely increase costs and workload for data collectors.

“The price of getting data will increase,” he stressed.

The proclamation imposes strict obligations on data controllers and processors accountable for compiling with data protection principles. Data processors, who handle data on behalf of controllers, are required to act strictly according to the latters’ instructions to ensure that data is processed securely. This is expected to compel organisations to invest in new infrastructure and spend on training.

With over 78 million subscribers, Ethio Telecom is one of the largest data processors in the country. It was actively involved in the preparation of the law and has taken three major steps on policy updates, technological controls and training to align with the proclamation.

According to Tsegaye Emmanuel, chief information security officer, existing processes and procedures were updated while comprehensive data protection and personally identifiable information (PII) policies were developed. To safeguard data from unauthorised access, Tsegaye said robust technological controls were placed, providing clear guidelines for employees and contractors on how to handle sensitive data.

Tsegaye stressed that Ethio Telecom mainly get customers’ consent during subscription for the specific service and during interactions with websites or mobile applications as they request to read and give informed consent on the handling and usage of their data in the system.

“We took customer data protection seriously regardless of the proclamation,” he told Fortune. “The law makes our job easier.”

Those in the middle are set for a ride as the new law will likely require additional measures to ensure compliance, particularly to secure data processing and prevent unauthorised access.

Eshetu Abebe, shareholder and general manager of AfroReach Technology Plc, a two-year SMS-based campaigning platform and API provider, anticipates the challenges faced by companies like his. AfroReach has grown to serve about 200 companies that use its platform to send bulk messages. According to Eshetu, these companies come with their own data sets used exclusively for their campaigns.

“We don’t use one company’s data for another,” he told Fortune.

However, the law is not free from controversies. Its authors desire to see cross-border data flow regulation ensure personal data is transferred only to countries with adequate protection standards, a measure “to prevent the exploitation of citizens’ data by entities in jurisdictions with weaker privacy protections.” This provision mirrors similar regulations found in the European Union’s General Data Protection Regulation (GDPR), but has raised concerns among businesses operating on a global scale. Critics argue that these restrictions could impose costs and reduce efficiency on international companies.

Despite these concerns, the law’s proponents argue it is necessary in Ethiopia’s digital evolution.

According to Million Kibret, a partner at BDO Consult, personal data protection plays a vital role in the country’s rapidly changing digital ecosystem. He advocated for a more institutionalised approach, including establishing systems and procedures that comply with the proclamation.

“Companies should invest in training their employees on the requirements,” Million told Fortune, warning that failure could result in substantial financial and legal consequences. “They should ensure their systems are designed for compliance.”

Appointing data protection compliance officers may become essential for businesses heavily reliant on personal data. The law mandates these officers to oversee data protection activities and ensure compliance with the law, potentially saving companies from costly legal battles. Companies may need to invest in infrastructure, such as local data storage facilities.

However, the Deputy Director General anticipates the law will boost customer confidence in using digital platforms rather than diminish the data economy. With mandatory digital infrastructures such as the National Digital ID in place, he believes citizens need to feel safe using supportive platforms.

“They’ve the right to be protected,” he told Fortune.

Outsourcing Aspirations

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The emerging outsourcing sector, still in its infancy, is rapidly recognised as a critical component of the country’s economic growth strategy. Federal authorities see potential in this sector for job creation, foreign exchange generation, and integration into the global market, positioning Ethiopia alongside African outsourcing powerhouses such as South Africa and Kenya.

According to Solomon Soka, a state minister for the Ministry of Labour & Skills, Ethiopia’s prospects of becoming a globally competitive outsourcing destination can be within reach. He attributed educational reforms the federal government initiated a few years ago to a substantial pool of human resources.

But, Ethiopia faces a paradox. While a large number of STEM graduates — around 300,000 each year — enter the labour market, the number of high school dropouts and unemployed graduates is on the rise. The State Minister pins his hope on the ongoing initiatives to build an ecosystem focused on digital entrepreneurship and skills training, in partnership with organisations like the United Nations Development Program (UNDP) and domestic institutions.

According to the Ministry of Labour & Skills, more than 345,000 employees were sent abroad, and 3.7 million jobs were created in the last fiscal year. The Ministry aspires to increase these numbers to 4.2 million jobs and 700,000 outsourced employees.

“We’re working with multiple partners to realise this,” Solomon told Fortune.

By transferring non-core business operations to external organisations, companies can focus on their primary activities, a model that is gaining traction with services ranging from software development and customer support to cloud platform management, human resources, and back-office operations. Approximately 15,000 professionals are engaged in the outsourcing sector, including remote workers on platforms such as Upwork, generating about 50 million dollars annually, a little over 3,300 dollars on average. However, projections suggest that with conducive policies, this figure could soar to over 12 billion dollars a year by 2030.

Mulay Woldu, head of the tax policy department at the Ministry of Finance, noted that ongoing policy reforms are creating a favourable environment for companies. These include revised tax policies and incentives for sector-based exports, such as duty-free imports of capital goods and a five-year tax relief for start-ups.

“I would ask what has been done since then,” he said.

Despite these optimistic projections, the outsourcing sector faces several limitations in reaching its full potential. For many years, the outsourcing firms have been working on their own. Recently, the Ethiopian Outsourcing Association (EOA), formed two years ago, has been working with a dozen members to position the country as a major outsourcing destination. The Association has teamed up with the ministries of Labour & Skills and Innovation & Technology to explore growth drivers and address problems, illustrating the urgency with which these issues must be addressed.

“The time is now,” said Wondwossen Zewdie, president of the Association.

Last week, state ministers, digital directors, and private sector representatives gathered at the Inter Luxury Hotel on Marshal Tito Road (in the Casanchis neighbourhood) to explore growth drivers and address challenges.

A major concern raised was the development, or lack thereof, of a skilled workforce. While Ethiopia produces a large number of STEM graduates, many lack the essential soft skills required by the global industry, such as communications, teamwork, and problem-solving. Proficiency in the English language, a critical skill for engaging with international clients, remains a severe drawback. Much of the sector’s success depends on recently launched initiatives to train five million coders.

Melaku Beshah, vice president of the Association, hopes that even if only a fifth of these trainees enter the outsourcing sector, it could create one million jobs and echoed the official but highly optimistic projection of generating an estimated 12 billion in annual earnings.

“It is doable,” he told Fortune.

However, several infrastructural constraints remain. Issues such as unreliable power supply, inadequate internet connectivity, and the high cost of access to devices and cloud infrastructure continue to be barriers to growth. The lack of suitable infrastructure, facilities, and amenities further complicates the sector’s expansion.

MMCY Tech, an outsourcing company with 16 years of experience, has grown its workforce from 100 to 1,500 employees in the past four years, capitalising on new opportunities. According to its Chief Technical Officer (CTO), Tadios Tefera, telecom liberalisation has benefited the sector, noting the entry of Safaricom Ethiopia as a noteworthy factor. Competition from Safaricom’s entry has pushed the state-owned Ethio telecom’s performance, transforming it from one of the most expensive providers to an affordable service. Nevertheless, service quality continues to lag.

“Access is not an issue now,” he said. “It’s the quality.”

Tadios observed delay issues, noting that messages sent in Ethiopia are received within five seconds, while in most other countries, the delay is negligible.

Another concern is the absence of a 24-hour work culture, essential for handling time zone differences requiring late-night shifts.

“There is no one to fix issues at midnight,” Tadios said, pointing to the lack of infrastructure and human resources required to support continuous operations.

Business process outsourcing (BPO), which companies use to reduce in-house costs, is still in its early stages in Ethiopia. Outsourcing firms have emphasised adopting special economic zones (SEZs) as a critical strategy for the sector’s success. Such zones are hoped to offer more favourable business environment compared to the rest of the country, providing tax incentives, streamlined regulations, and world-class infrastructure. They have driven rapid economic growth in countries like China and India; many industry insiders believe they could do the same for Ethiopia.

While industrial park development has been ongoing for decades, targeted policies focusing on the service industry have only recently been introduced. Unlike industrial parks, economic zones of particular purpose offer a range of incentives, from customs exemptions, zero-rate VAT for goods and services transported into SEZs, full exemption from domestic indirect taxes to duty-free imports for construction materials, and tax exemptions on dividend income and salaries of foreign nationals employed by export-oriented enterprises for five years.

Four months ago, federal lawmakers ratified a law to oversee SEZ development and administration. The law, drafted by experts at the Ethiopian Investment Commission, includes investor protections and dispute resolution mechanisms, with a minimum capital requirement set at five billion Birr. Oversight of SEZs will be handled by the Ethiopian Investment Board, chaired by the Prime Minister, and includes Hana Arayaselassie, commissioner of the Investment Commission; Mamo Mihretu, governor of the central bank; Ahmed Shide, minister of Finance; Fitsum Asfaw, minister of Planning & Development; and Girma Birru, senior economic policy advisor to the Prime Minister.

The private sector sees immense opportunities in outsourcing, particularly through economic zones, as a springboard. However, concerns over delayed customs processes remain, and companies that have operated in the sector longer than the recent reforms have questioned how they can benefit from the new incentives to become globally competitive at a lower cost.

According to Mulay, tax relief instruments are intended to support start-ups, not as an entitlement for established firms.

“It’s not a right,” he said.

As Ethiopia seeks to follow in the footsteps of countries like China and India, which have evolved from business process outsourcing (BPO) to knowledge process outsourcing (KPO), the need for targeted investments in training programs, improved infrastructure, and a business-friendly regulatory environment remains critical. The IT Park, emerging as a hub for innovation and job creation within the rapidly growing sector, seeks to meet the criteria to transform into a Special Economic Zone.

Henok Ahmed, CEO of ICT Park Corporation, noted that a building designated for BPO service providers is already fully occupied, signalling the need for further development.

“We need to build more,” he said.

A reliable power supply is crucial for outsourcing operations. According to Henok, a strong power backup has been installed at the Park, yet power availability remains an issue that needs to be addressed.

“Power outage shouldn’t last more than five hours a year,” he said.

Massive investments in upgrading infrastructure are essential for the sector’s growth. Although there are a few cloud service providers, Henok believes their number needs to be multiplied to match the planned scale of growth. Streamlining regulations, reducing bureaucracy, and offering attractive incentives could make Ethiopia an appealing destination for domestic and international outsourcing companies.

“An environment that entertains incentives is crucial,” said Henok.

University Lecturers Grieve for Reform Amid Pay Disparities, Professional Struggles Chronicles

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For Nega Gudetaa, a hydraulics lecturer at Mizan Tepi University in South West Regional State, becoming a researcher was a lifelong dream. He graduated with honours, yet the reality of his career has not matched his expectations. Nega echoes a growing concern within the academic community—struggling to survive on a lecturer’s salary. His gross monthly salary of 12,000 Br barely covers his expenses after sending a portion to his family and paying rent.

“How can I talk about the quality of education in this state?” he asks.

Some of Nega’s colleagues have resorted to driving three-wheelers incognito to make ends meet. This issue has only intensified following the recent foreign exchange regime liberalisation with the anticipated inflated cost of living, leaving civil servants like Nega feeling the sting of their diminishing paychecks. Although a monthly rent allowance was introduced for lecturers in February 2023, Nega, with eight years of experience, finds this stipend insufficient. He notes that only 350 Br of housing allowance remains after tax, with his net earnings falling below 10,000 Br.

“We need answers,” he told Fortune.

University lecturers and academic staff across the country have been engaged in a prolonged struggle to improve their working conditions and secure adequate salaries. They argue that their current pay is insufficient to meet the rising cost of living and does not reflect their qualifications and contributions to higher education. With the new academic year looming, they are allying to get their demands heard including better pay, housing, and working conditions.

Ethiopian Teachers Association, the principal lobbying group for educators, has raised concerns about the 2019 salary increment for the highest-ranking academic staff—a mere 223 Br. Three years later, a letter signed by Yohannes Benti (PhD), president of the Association, was sent to several institutions, including Parliament and the Prime Minister’s Office, outlining these grievances.

“It doesn’t even cover a lunch meal,” reads the letter.

Founded in February 1949 by 32 teachers from Minilik Senior Secondary School, the Association also advocates for the rights of higher education academic staff. It is recognised by the government as a lobbying entity, although other groups, such as the Ethiopian Universities’ Lecturers Association, the Confederation of Lecturers’ Association, and various regional associations, also exist.

The pay scale for over 40,000 academic staff in government-owned higher education institutions is structured across several ranks based on the Job Evaluation & Grading (JEG) system. This system standardises public service jobs by evaluating and grading them based on specific criteria to ensure equitable salaries and benefits proportional to job responsibilities, reducing disparities in pay for similar positions across different institutions.

The structure includes 22 classifications, with professors at the top. A point of contention within the JEG system is its prioritization of academic credentials over experience. Critics argue that the Commission’s job rating and grading process—considering factors such as innovation, effort, and risks involved—often overlooks the intangible skills, competencies, and attitudes crucial to teaching and research.

Although the Civil Service Commission ordered that those working in teaching colleges be classified as higher education staff, with their salaries and benefits determined accordingly under the JEG system, Yohannes stressed that this has yet to be implemented. According to him, while salary scales have been standardized, disparities in benefits—particularly housing allowances—persist, except in the Amhara Regional State.

“It was approved by the regional cabinet,” he told Fortune.

While the federal government has acknowledged these concerns, it has fallen short in providing solutions. Despite repeated promises of salary increases and improvements in working conditions, lecturers have expressed frustration with the slow progress and the government’s failure to deliver on its commitments.

The economic crisis within the sector underscores a broader issue of compensation and recognition within civil service professions. Federal Civil Service Commission, tasked with overseeing the administration and capacity building of civil servants, has not responded officially.

The Association letter also points to the elimination of the biennial salary increase, which previously rewarded experience and tenure. However, Yigezu Jemaneh, head of work evaluation and payment research at the Commission, confirms that this practice was discontinued in 2003 for all government employees. He said that the salary increment is expected to be addressed by the federal government along with Prime Minister Abiy Ahmed’s (PhD) recent address.

“We’re hopeful,” he said.

There are over 400,000 civil servants at the federal level and more than 1.4 million across all levels of government. The public sector is set to see a salary adjustment of up to 300pc for its employees in hopes of addressing the cost of living amid new macroeconomic reforms.

Prime Minister Abiy disclosed that 90 billion Br has been allocated for this wage increment in the supplementary budget bill, which will be presented to Parliament. He emphasized that the salary adjustment is intended to support economic classes who will bear the weight of short-term economic shocks. Civil servants, particularly those in lower positions within federal agencies, are the first to feel the impact of inflation.

According to Solomon Abreha (PhD), CEO of Governance & Infrastructure at the Ministry of Education, even a university dean is paid based on their credentials. He said that additional compensation, known as a “chair allowance,” is given to those who assume the role of department chair or program director, which involves marked administrative responsibilities.

Solomon notes that some universities have successfully provided housing for their academic staff, such as the Ethiopian Civil Service University, which has made residences or access to housing available to 75pc of its lecturers.

“Universities must negotiate with their respective regions to secure housing for their staff,” he told Fortune.

Solomon remains hopeful that some of the concerns will be addressed in the comprehensive civil service reform slated for next year. He revealed that experts from the Ministry, Addis Abeba University and Kotebe University of Education, are researching education sector reform, expected to conclude in December.

“It’ll dissect administration, incentives, and professional catagorisation,” he told Fortune.

The declining interest in teaching among graduate students poses a long-term threat, potentially leading to a shortage of qualified educators and diminishing the quality of education and intellectual development for future generations.

For Tessema Ayalew, a former lecturer at Dilla University for nearly three decades, the societal perception of teaching, once considered prestigious, has shifted dramatically. He believes there is a decline in morale and motivation among teaching professionals, indicating that low salaries, coupled with limited opportunities for professional growth, have led many to seek additional income through tutoring or other part-time jobs.

“This has impacted the overall quality of education,” he said.

To attract talented students to the teaching profession, Tessema believes it is essential to offer competitive salaries, incentives, and opportunities for professional growth. He warns that a decline in the quality of education will inevitably lead to a decline in other professions, stressing that demotivated and poorly compensated workers are more susceptible to bribes.