Reportedly, while speaking with Benjamin Netanyahu, President Trump suggested Egypt could bomb the Grand Ethiopian Renaissance Dam. The comment comes several months after President Trump ordered the State Department to cut around $100 million of US military aid to Ethiopia. Such attitudes will harm US interests in the region.
Over the last few months, Prime minister Abiy has faced several challenges that could have undermined his reputation and weakened Ethiopia. However, he has shown good acumen in navigating these issues, and in doing, so he has strengthened not only his position but that of Ethiopia. This does not mean that he has not been without criticism, as one can always do better.
Challenge One: The Tigray Regional Authority Elections
On 9 September 2020, the Tigray Regional Authority defying the federal government held regional elections. The election could have undermined the Abiy government, which showed great skill in managing the situation. Prime Minister Abiy merely referred to them as ‘shanty elections’ treating them as illegal. Abiy opted not to send in the military to quash the election, the standard practice of authoritarian leaders. Since then, the federal government has relied on the power of the purse, cutting direct dies with the newly elected government, and working directly with local institutions. Such a response ensured there were no casualties or international opprobrium, although arguably the federal government is merely postponing a potential conflict with the Tigray Regional Authority, as seen with Abiy’s decision to send the military into the province.
Addis Ababa’s relations with Beijing are at an all-time high.
In 2017, Ethiopia and China elevated their relations to a comprehensive strategic partnership of cooperation. The change is indicative of Beijing’s commitment to ensure Ethiopia remains friendly and open to them. The United Nations Conference on Trade and Development Report 2020 makes it clear that China is the largest foreign direct investment source in Ethiopia in 2019, accounting for about 60% of the newly approved foreign projects in Ethiopia. Chinese lenders supported the construction of the Dire Dawa Industrial Park in Somali State. It is believed that the Park could generate 20,000 jobs, in addition to the current 1000 jobs. Linked to the Industrial Park is a massive road construction initiative, aimed at connecting communities, and in doing so unite the country.
Beijing has provided Ethiopia with great support to address the Covid-19 pandemic and the locust infestation. Beijing and Jack Ma’s Alibaba Foundation supported the building of a Covid-19 testing factory, enabling Ethiopia to produce testing kits. Beijing has also provided much needed medical assistance and expertise in dealing with the pandemic. In response to the locust infestation, Beijing sent 72 tons of pesticides, 2,000 hand-held sprayers, and 20,000 personal protective gear. Such measures underlie China’s commitment to using soft power diplomacy to win allies in Ethiopia.
One suspects the Abiy government is confident it could secure lines of credit from China and Chinese lenders. Lines of credit and investment are crucial for Abiy if he is to continue with his commitment to ‘open’ up – privatize/de-nationalise – the economy, which is why the UNCTAD’s Investment Trends Monitor Report issued in October 2020 provided good news for Abiy, as it showed that whereas Foreign Direct Investment in sub-Saharan Africa was down 21 percent, Ethiopia drew in$1.1 billion in Foreign Direct Investment inflows during the first half of 2020, with China being a key lender, funding around a quarter of all newly approved projects.
The Grand Ethiopian Renaissance Dam (GERD)
Despite the kerfuffle with the US decision to reduce its military aid to Ethiopia in lieu of the deadlock over the GERD with Egypt, the federal government is secure. The decision not to make much of the reduction in military aid because it meant little in the grand scheme of things further empowered the Abiy government. Had it returned to the negotiation table because of the reduction in aid it would have been kowtowing to US pressure.
Things could still go wrong
In the immediate period, one major threat to stability is the locust infestation. The Food and Agriculture Organization has described the latest invasion as the worse in 25 years, with locust swarms destroying over 200,000 hectares (490,000 acres). Consequently, there are serious concerns about food production.
Concern over food security remains high because some models including one by IGAD Climate Prediction and Application Centre, suggest Ethiopia, Kenya, and Somalia are also heading towards dry conditions between October and December. The models supported by Earth Observations suggest there is a particularly good chance of another poor rainy season from March to May 2021.
The Tigray Regional Authority election did not spark ethnic conflict. Nevertheless, threats of ethnic divisions remain as seen with events in the Afar Province but also in Western Ethiopia, in Wollega. There are lots of small disputes, with little evidence that Abiy is taking an active measure to address them.
One of the biggest challenges for Abiy is the state of the economy. Abiy rode to power intending to massively reform the economy, opening it up to foreign and domestic investors. Ethiopia has a national debt of $28 billion, of which $12 billion is owed to China and Chinese companies and agencies. The debt has come in part because of attempts to reform the economy; in 2014 in the hope of raising a billion dollars to finance electricity, railway, and sugar industry projects, Ethiopia issued an international bond. The ten-year bond has than six percent interest rates.
Ethiopia’s economy is still operating under the rules of a planned economy, which is why Abiy is committed to reform it. Ethiopia’s telecommunication sector serves as a good example of a sector that needs drastic change. Abiy has sought to open up the sector, and it is expected that within the new few weeks, the Ethiopian Telecommunication Agency would announce which of the twelve official bidders would receive a license to operate elements of the sector.
The challenge is that EthioTelecom carries substantial debt much of which is owed to the Export-Import (EXIM) Bank of China and China Development Bank. The terms of the loan were harsh, as the government focused on the financing. Ultimately, ZTE and later Huawei were able to offer the support, which companies such as Ericsson and Alcatel Lucent SA, could not match because the Chinese could rely on state support. Putting the debt issue aside, it also means the telecommunication sector is dependent on Chinese equipment and expertise.
Prime Minister Abiy’s greatest challenge is the prospect of an economic slowdown. The Ethiopian economy is fragile, and so is food security, with the World Development Indicators notingthat Ethiopia’s poorest 20% subsist on around $250 a year. Nevertheless, there seems to be optimism within the government because
- There are no serious internal or external threats. Abiy’s decision to improve relations with Eritrea has paid enormous dividends.
- The public generally does not blame it for massive failure in dealing with the pandemic
- There is tremendous nationalist energy surrounding the GERD and hope it would help solve the currency and energy problem
- Abiy remains popular on the international scene, and more countries are turning their attention to Ethiopia.
Overall, there is momentum for change in Ethiopia, which is why the US should seek to work closely with Addis Ababa as the country would only become stronger over time.