The great test of the new administration will be its preparedness to improve the state’s relationship with the business community. Abiy Ahmed’s meeting with leaders and members of the private sector earlier last week showed where his priorities lay. The fourth public appearance since parliament confirmed him as a Prime Minister, his dinner at the Sheraton with no less than 300 businesswomen and men demonstrated his commitment to fixing what ails the national economy. It was a commendable move on his part, setting the agenda that addressing unemployment and generating forex to the economy are areas where the private and public sectors can see each other eye to eye. Yet, so much can be deducted from both his scripted and unscripted talks, but hard to discern where his core conviction lays. Not many businesspeople attending the dinner were as impressed by his eloquence as the nation was captivated by his inaugural speech three weeks ago.
No less were members of the private sector unimpressive in their issues raised before the newly elected Prime Minister. They were bogged down on micro and company-specific matters. Such debut with members of the private sector could have been used to steer clear of whether he will be a leader to take the path of continuity or stand up to be counted as a reformer. One crucial area that has been hammered by businesses at the dinner was the painful and disabling crunch in forex. The Prime Minister was seen navigating high in acknowledging the structural nature and the near permanence of the problem.
Nonetheless, the thoughts he reflected in some of his responses were transactional. Not that many businesspeople were made to feel that he may, after all, have a regulatory mindset that is detrimental for businesses to thrive. Abiy appears to believe the thriving of the parallel currency market would be one source of the problem, if not the many businesspeople who have allegedly stashed their cash with banks in Dubai. He implored on them to repatriate their money without ever giving adequate credence to why indeed they prefer to keep their money overseas. He even threatened to crack down on the parallel market robust on Yohannis Street, in the neighborhood behind the Ethiopia Hotel, in Addis Abeba, as a series of measure to address the currency crunch. While fixated on policing the behaviour of businesses, Abiy seems to have overlooked the issue of why such a market would exist, to begin with. 1,650 importers, with a total value of 300 million dollars.
Importers though remained unsatisfied, complaining that it is too late, not to mention far less, to what they had expected. 3 billion dollars, although there are those who claim that the reserve has been dwindled alarmingly since then. This is for an economy that supports an estimated over 100 million people, covering only 1. Abiy too has figures that stress the severity of the issue.
It is unavoidable for officials giving the issue the weight it deserves. For an import-dependent nation, where the stock of foreign currency ensures the availability of critical goods such as fuel, wheat and medicine, the last of which is already scarce, there is not an economic challenge that can divert away from the administration’s attention. Regrettably, the dinner has produced no meaningful output the attendees had expected. It was yet another indication that the administration is unwilling to budge from the policies that have led the country down this path.
The focus remains too concentrated on what the authorities see as a failing of the private sector and their temptations in resorting to the parallel market. This is despite the fact it should. The dollar was selling for over 34 Br on the black market last week, compared to the lower value of the national currency on the legal exchange rate that is close to a quarter lower. The authorities should not turn a blind eye to such offences, as a means of giving breathing room to the private sector.
What they ought to do is stop strangling private players and allow them to be able to breathe without the assistance of the black market. There exists the impractical mindset that businesses are bound to public service even at the expense of their bottom line. While corporations should feel responsible for the well-being of communities where they do business, it is unfair to ask business leaders to stick to Ethiopia even in the instance where it would be unprofitable to do as such. Equally, the ultimate responsibility to ensure the welfare of the public lies with the state. Individuals and owners of businesses should be required to abide only by the laws of the land. This is especially true for a country with a state-centric economy. Few businesses would find sense in repatriating currency to Ethiopia, a country which does have a current account that is not open to let the free movement of capital in and out.
The forex regime is inflexible, creating multiple headaches and inconveniences for those nationals with the buck kept overseas. This is not to mention the political instability and high inflationary pressure the economy grapples with. The Prime Minister believes that it is alright to condone the black market on the streets of Addis Abeba and use it as leverage against the business community. It is a reductionist approach devoid of a rulebook to address the issue at a structural level and from the source. The right to property enshrined in the constitution should apply for the right to keep property wherever in the world it is deemed appropriate and is allowed to do as such. The state’s sole purpose here should be to make the doing business environment as conducive as possible for capital to be repatriated on its terms. Letting foreign banks operate in the country for businesses to access hard currency through loans would be an excellent place to start attracting fleeing forex.