Ethiopia says reforms "to unleash private sector"
* Private sector, not Ethiopian state, to drive growth
* Foreign investment needed to ease dollar crunch
* Govt to retain overall control of Ethio Telecom
* No decision yet on fate of financial sector
* Ethiopian Eurobond surges after Eritrea deal
(Adds M-Pesa, Eurobond, analyst quote)
By Maggie Fick
ADDIS ABABA, July 18 (Reuters) - Ethiopia is open to selling
off a host of state-owned firms, either partially or entirely,
as part of major economic reforms designed to "unleash the
potential of the private sector", its information minister said
In an interview with Reuters, Ahmed Shide said the
government of Prime Minister Abiy Ahmed - which has announced a
slew of shake-ups since coming into office in April - would
retain majority holdings in the state-run airline, logistics,
telecoms and energy companies.
However, everything else, from hotels to sugar farming to
cement production, could be up for sale, with the sole exception
of the tightly controlled financial services sector whose fate
was yet to be decided, he said.
"The main objective of this is to encourage private sector
development in the country," Ahmed said, making clear that the
nation of 100 million was turning the page on decades of
reliance on the state to drive economic growth.
"The role of the private sector is very fundamental. We did
a lot of state development projects. Now we need to unleash the
potential of the private sector," he said.
Ahmed did not give a time-frame for the privatisations but
said the government was tendering for advice from global
business consultancies including McKinsey and PwC.
"The detailed planning is not complete but precautions will
be made not to have mistakes," he said. "So we will do it with
Having come to power less than four months ago, 41-year-old
Abiy has turned the Horn of Africa nation - the most populous in
Africa after Nigeria - on its head with his bold plans to
reshape politics and the economy.
Besides his stated desire to attract foreign capital into
one of the continent's most closed states, Abiy has brokered
peace with arch-enemy Eritrea, with whom Ethiopia fought a
brutal border war two decades ago.
In a sign of the speed of the rapprochement, the first
commercial flights from Ethiopia to Eritrea in 20 years took off
early on Wednesday, just one week after Asmara and Addis Ababa
buried the hatchet.
Although it has been one of Africa's fastest-growing
economies, Ethiopia's export sector - mainly garment
manufacturing and farming - has struggled to take off, meaning
the economy is not generating enough dollars to pay for imports.
The foreign exchange shortages have been exacerbated by the
government's massive investment in infrastructure over the last
With some notable exceptions, such as Ethiopian Airlines,
the state firms that lie at the heart of the economy are poorly
run by inexperienced political appointees with links to the
security services or top echelons of the ruling EPRDF coalition.
The banking sector is dominated by the state-run Commercial
Bank of Ethiopia, which controls more than half of the sector's
assets, and remains stuck in a time-warp even by African
standards, with no way to transfer funds between banks, putting
a massive dampener on basic economic activity.
However, Kenya's Safaricom is poised to roll-out its popular
M-Pesa mobile phone money service, according to sources, raising
hopes the payments technology that has changed the face of
Kenya's economy since 2007 will do the same in Ethiopia.
"It's really going to alleviate their liquidity
constraints," said Jacques Nel of Cape Town-based consultancy
NKC African Economics. "People will be able to start using this
electronic currency and won't have to waste time looking for
birr or foreign currency."
Abiy's reforms, especially his peace deal with Eritrea, have
gone down well with external investors, driving the yield on
Ethiopia's debut 2014 Eurobond - the only easily tradeable
Ethiopian asset - down from 7.6 percent a month ago to 6.6
percent this week.
(Reporting by Maggie Fick; Writing by Ed Cropley; Editing by
First Published: 2018-07-18 10:43:27
Updated 2018-07-18 12:31:27
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