Ethiopia Investors Warily Eye Crackdown

Ethiopia Investors Warily Eye Crackdown

October 10, 2016 - Foreign investors on Monday warily eyed the Ethiopian government’s latest attempt to quell violent protests that have targeted foreign-owned businesses in Africa’s second most-populous nation.

Prime Minister Hailemariam Desalegn declared a six-month state of emergency on Sunday, saying it was necessary to protect citizens and property following widespread antigovernment unrest in Oromia, one of the country’s nine ethnically based regional states.

Long-running protests over the government’s monopoly on power and human-rights abuses have swelled recently in Oromia and Amhara, another regional state. More than 130 private concerns were attacked by protesters last week, including a Dutch-owned flower farm and a cement factory owned by Nigerian Aliko Dangote, Africa’s richest man.

As security forces multiplied in the streets of the capital Addis Ababa on Monday, KKR, major private-equity fund, said it was stepping security at a large Ethiopian flower farm it invested in two years ago

Under the state of emergency announced by Mr. Desalegn, demonstrations, writing and distributing pro-protest material and mimicking the protesters’ symbol—crossed arms raised aloft—are prohibited. Curfews and other restrictions were expected.

Financial analysts voiced skepticism Monday that the steps would help Ethiopia’s souring investment climate.

“The declaration of a six-month state of emergency is unlikely to improve dwindling investor confidence in Ethiopia,” said Emma Gordon, a senior analyst with Verisk Maplecroft, a research firm.

“Protests in Oromia and Amhara have proved resistant to increased security measures, although tougher controls will probably lead to a temporary reduction in violence,” she said. They won’t, however, resolve the underlying grievances that have given rise to the unrest, she added.

More than 50 people were killed Oct. 2 in the town of Bishoftu in a stampede after police tried to disperse antigovernment protesters with tear gas and by firing rubber bullets into the air.

Last Tuesday, a 31-year-old researcher from the University of California, Davis was killed on the outskirts of the capital Addis Ababa when the vehicle in which she was riding was struck by rocks thrown by protesters.

Despite the state of emergency, a planned visit to Addis Ababa by German Chancellor Angela Merkel was set to go forward as planned, her office in Berlin said Monday.

Ms. Merkel was scheduled to arrive in the Ethiopian capital late Monday, the third and last stop of a tour of Africa that includes stops in Mali and Niger. The German leader is seeking deeper economic cooperation with the three nations, and ways to fight extremism and stem migration to Europe.

Ethiopia receives hundreds of millions of euros annually from the European Union as part of an effort to discourage migration.

During her visit, Ms. Merkel is to meet President Mulatu Thshome and civil society representatives in separate talks.

“The chancellor will talk with the president about the current political situation, but will of course also address human-rights issues. She will of course voice her belief that policies that take into account the interests of all groups of people and a democratic state of law offer the best chances for a country,” the chancellor’s deputy spokeswoman, Ulrike Demmer, said Monday.

Experts warned that deploying the country’s army to stifle antigovernment protests by two large ethnic groups, the Amhara and Oromo, could incite more violence. The move also risks the government’s efforts to portray itself as a guarantor of stability.

“The unique selling point for Ethiopia is, ‘Don’t worry our government is competent, and we know what we’re doing.’ That led many observers to forgive the fact that it was always quite a heavy-handed government,” said John Ashbourne, an emerging markets analyst with Capital Economics research group.

“The worst outcome for investors is a sustained, long-term disruption in Ethiopia,” which depends on foreign investment and Western aid to finance its $7 billion current-account deficit, Mr. Ashbourne said.

Source: Wall Street Journal