Ethiopia: Investors rattled by unrest, considering options

Foreign investor confidence in Ethiopia has been shaken following nearly a year of unrest, with the country’s government now admitting that as many as 500 people have died as a result of police crackdowns and a deadly stampede at a recent rally in the country’s Oromia region.

Prime minister Hailemariam Desalegn declared a six-month state of emergency Sunday in an attempt to quell the protests by ethnic Oromo and Amhara communities over a land dispute and political marginalisation. The unrest has caused millions of dollars worth of damage to foreign-owned businesses, including flower farms and other agribusinesses. The anti-government protests have dented the view that Ethiopia is a stable partner for investment, according to Emma Gordon, a senior analyst with research firm Verisk Maplecroft.

“[Foreign] investors are very concerned with the situation in the country, with some already pulling out,” she said. “They were willing to look past the human rights [abuses] perpetrated by the security services, but it’s difficult to ignore them now.”

Some foreign-owned businesses have been forced to cease production, including a cement factory owned by the Nigerian billionaire Aliko Dangote and the US-based flower growing and exporting company Esmeralda Farms, which has pulled out of the country altogether. Meanwhile, the US-based private-equity firm KKR has stepped up security at its Afriflora farm, south of the capital Addis Ababa.  

Despite the shock, some investors believe that Ethiopia’s economy remains solid due to the country’s strong institutions and infrastructure, according to Ibi Idoniboye, Africa analyst at market research company Integer Research. “It’s true that we are experiencing a short-term dip in investor confidence, but the long-term view of the economies in East Africa, especially Kenya and Ethiopia, is still positive and we expect to see solid growth this year,” he said.

But in the short-term, the anti-government protests will markedly slow down foreign investment, especially in the agribusiness sector, which has bore the brunt of the violence, said Gordon. “The instability will continue until there is political reform in the country and the concerns of the protestors are addressed,” she added.

Despite the implementation of the state of emergency, German Chancellor Angela Merkel went through with her planned visit to Addis Ababa on Tuesday. Merkel called on the Ethiopian government to be more inclusive and warned against using heavy-handed tactics against protesters. The government has denied accusations that the police have used excessive force but has acknowledged the need for political reform.

The current protests were triggered last November by the government’s plans to expand Addis Ababa into Oromo lands. The proposal was scrapped following a series of protests, but the police’s heavy-handed response led to demonstrations spreading to the northern regions, which are dominated by the Amhara ethnic groups. Both the Amhara and Oromo communities – which make up around 60% of the population in Ethiopia – are frustrated by the political dominance of the Tigray minority, who account for just 6% of the 100m population.

Taku Dzimwasha