High-Flying Ethiopia Has Lessons for South Africa
Updated: Mar 23, 2019
Thanks to a wonderful initiative by Bloomberg, I got to rub shoulders with some of the continent’s leading media owners and operators as we tried to predict the biggest
trends facing the industry in years to come.
In addition to changes in consumption habits, the rise of social media and electronic platforms, and the threats and opportunities presented by technological advancement and mobile internet connectivity, there was another development that caught the attention of
many delegates: Ethiopia.
African Business Media Innovators is a featured component of the Bloomberg Media Initiative Africa, which launched in Johannesburg in 2014 to support a flourishing media sector in Africa and contribute to the continent’s sustainable development.
This intimate, invitation-only gathering provides an opportunity to examine the issues and challenges that most affect the future of media in Africa and explore how business and financial media can better contribute to investment and economic growth on the continent.
According to Bloomberg, Africa’s economy is projected to grow at 3.8% by 2020, beating the estimated world growth of 3.2%. This will be the first time Africa has outperformed the world in growth since 2014.
Presenting the data, Matthew Winkler, co-founder and editor-in-chief emeritus of Bloomberg News, said Ethiopia is the leading force behind the growth, with its 10.9% GDP growth for 2017 beating every member of the emerging markets — and it will exceed that over the next three years.
Thanks to the 42-year-old recently elected prime minister of Ethiopia, Abiy Ahmed, launching a wide programme of political and economic reform, the country is now firmly on the radar for large foreign direct investment by some of the world ’s largest multinationals, and the proof points are there for everyone to see.
Historically, the East African nation of 100-million people has been one of the most closed and state-controlled economies in Africa.
But, in June this year the new coalition government led by Abiy announced fresh plans to liberate the economy, starting with private-sector involvement in key industries previously monopolised by state-owned entities .
According to a statement from the government, “majority stakes will be held by the state, [but] shares in Ethio Telecom, Ethiopian Airlines, Ethiopian Power, and the Maritime Transport and Logistics Corporation will be sold to both domestic and foreign investors”.
South Africans have been debating the part-privatisation of state-owned entities such as Eskom and SAA for years now.
In terms of our national airline, the case is mostly driven by the need to share the constant calls for capital injection by a thirsty, uncompetitive operation in an industry notorious for large capital expenditure and thin operating margins.
Ethiopian Airlines is the most profitable airline in Africa and yet the government is still keen to part-privatise it. Here we are, pouring money we don’t have into an SAA we don’t need, and insisting that any private participation is a cardinal sin.
According to Business Insider, “in the past five years, Ethiopian Airlines has
doubled the number of its passengers, surpassed a target it set for 2025, and increased its profit fivefold. SAA, by comparison, lost nearly 300,000 passengers and posted six consecutive years of operating losses, amounting to more than R12bn.”
Granted, Ethiopia has different problems to SA, and also a different reason to sell such a crown jewel.
Other than an ideological shift from state control to free markets, privatisation is a pragmatic measure aimed at improving the country ’s dwindling foreign-exchange reserves, which, by the end of the 2017 fiscal year, were said to be equal to less than two months ’worth of imports.
Add to that a growing sovereign debt load and it is easy to appreciate Ethiopia’s strategic call.
For many reasons, SA should stop bastardising the p-word. Privatisation does not always represent the total disposal of state resources and succumbing to neoliberal capitalism. It can also be a compelling option to retain state control of key assets while benefiting from the operational efficiencies and balance sheets of private operators and shareholders.
The Ethiopian case, unfolding before us all, will be an interesting one to watch closely.
It could be a lesson on how to get the private sector to literally put its shoulder to the wheel of economic reform that we so dearly need.
This article first appeared in The Business Times, Sunday Times on Sunday, 25 November 2018.