Foreign direct investment in Ethiopia dropped by a fifth in the first half of the country’s fiscal year after violent anti-government protests in which foreign-owned businesses were targeted.
The country attracted $1.2 billion in the six months through the end of December, compared with $1.5 billion in the same period a year earlier, Fitsum Arega, commissioner of the Ethiopian Investment Commission, said in a phone interview Monday from the capital, Addis Ababa. He said the government may miss its annual target of $3.5 billion, with $3.2 billion more likely to be attainable.
The government of Ethiopia declared a state of emergency in October to deal with unrest accompanying protests by ethnic Oromo and Amhara communities that began in late 2015 over the alleged dispossession of their land, political marginalization and state repression. Businesses including those owned by Nigerian billionaire Aliko Dangote and Dutch fruit processors were attacked during the unrest. The security forces killed at least 600 demonstrators, according to the Association for Human Rights in Ethiopia.
Ethiopia, one of Africa’s fastest-growing economies, is expected to expand 7.5 percent this year, compared with an average of 9.1 percent over the past five years, according to the International Monetary Fund. Opponents of the government argue that Ethiopia’s economic gains haven’t been matched by increased political freedoms since the ruling party cracked down on the opposition in 2005, after losses in that year’s elections.
The government is paying out damages to foreign and domestic companies deemed affected by the unrest, with 100 million birr ($4.4 million) already disbursed and “more in progress,” Fitsum said. Claims were received from at least 20 domestic companies. At least two foreign businesses were successful in making claims from insurance companies, while the government is also providing tax relief to operations that sustained damages during the violence, he said.
While no foreign investors canceled planned projects, they have taken a “wait-and-see attitude” to the country, Fitsum said.
“We already have big investors in the pipeline,” Fitsum said. “There are also big textile-manufacturing companies we can expect to have in the coming six months,” he said, referring to Ethiopia’s Hawasa Industrial Park that opened in July and which the government says is the largest in Africa.
Companies investing in Hawasa Industrial Park are from countries including China, India, Belgium, Spain, France, Hong Kong, Sri Lanka and Indonesia, Fitsum said.
Total foreign direct investment in Ethiopia in the 2015-16 fiscal year was $2.2 billion, according to an EIC statement published on the website of FANA, the ruling-party affiliated broadcaster.
Yields on Ethiopia’s $1 billion of Eurobonds due 2024 hit a record 9.66 percent at the peak of the unrest in January last year, and have since recovered to 7.35 percent, according to data compiled by Bloomberg. The notes have returned 5 percent this year, compared with an average 2.5 percent for the Bloomberg USD Emerging Market Sovereign Bond Index.
A president who’s flown abroad to seek medical treatment and given no firm date for his return: Nigeria has been here before.
Muhammadu Buhari, 74, traveled to the U.K. on Jan. 19 for medical tests and was due back on Feb. 5. He’s yet to return and hasn’t appeared or spoken in public for more than three weeks after asking lawmakers for medical leave. On Monday, he talked by phone with U.S. President Donald Trump, giving cheer to his supporters that he’s not as ill as widely speculated. Yet his absence is heightening concern about government paralysis at a time when the economy is in recession and the stock market is sliding.
For many Nigerians the situation recalls former President Umaru Musa Yar’Adua’s time in office. Like Buhari, Yar’Adua was a northern Muslim with a southern Christian vice president in a country with often sharp sectarian divisions.
Yar’Adua was flown in November 2009 to Saudi Arabia for treatment of a heart condition. It took about three months for the legislature to appoint then-Vice President Goodluck Jonathan acting president, as Yar’Adua associates sought to cover up the severity of his condition. Yar’Adua eventually died in office on May 5, 2010. Unlike Yar’Adua, Buhari formally transferred power to his vice president, Yemi Osinbajo, before departing.
“The experience of 2010 still hangs over Nigeria,” Antony Goldman, head of London-based PM Consulting, said by phone from London. “Partly as a result of that the government has undertaken all the efforts to do what wasn’t done in 2010.”
Under the constitution, if Buhari can’t continue in office, Osinbajo would become president and he would choose a new deputy.
Political Jockeying
That’s not stemmed rumors of politicians jockeying for position to succeed Buhari, a former military ruler. The presidency has only said that Buhari is undergoing medical checks and has declined to disclose further information about his condition.
On Monday, Buhari spoke to Trump about the need for more equipment to deal with one of the worst crises the nation is facing -- the fight against the Islamist militant group Boko Haram in the northeast where thousands of people have been killed, more than 2 million have fled their homes and the United Nations is warning of a widespread humanitarian crisis.
Buhari is facing a raft of additional challenges. Even as the central bank holds the naira around 315 per dollar on the official market, it’s tumbled to a record low of 507 on the black market amid a dearth of foreign investment and as shortages of foreign-exchange mount. Gasoline prices that were to be slashed by two-thirds have risen about 67 percent since he took office. Africa’s second-biggest economy likely had its first full-year contraction in a quarter-century in 2016, while inflation is at an 11-year high.
Stocks Fall
Since his departure, Nigerian stocks have fallen 4.6 percent to a nine-month low. They’ve dropped 7 percent this year, the world’s worst performance among 96 primary indexes tracked by Bloomberg.
“The concern may be the effectiveness of government,” said Olusegun Sotola, senior researcher at the Initiative of Public Policy Analysis in Lagos. “Constitutionally, Osinbajo can do almost anything, but it may be another thing in practice.”
To allay public concern for Buhari’s health, the Nigerian government has shared photos of the president and cabinet members have relayed conversations they’ve had with him.
“The issue is not the president being outside of the country -- he’s followed all the constitutional steps to allow that,” Goldman said. “The challenge is when the president returns to the country to show that he is fit and able to continue in office.” Read more here
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