Ethiopia: When an Economy Goes Wrong – Addis Fortune

ANALYSIS

BY GIRMA FEYISSA, 27 OCTOBER 2013 – The change in the rate of economic growth from one year to the next is approximated by the aggregate values of goods and services adjusted in their current prices. These figures are often understood to be figures representing the annual economic growth of a country.

But this expression of growth is a misnomer to many people who may be taking growth to mean the reduction in the cost of living. One can not blame such folks because they are not aware of what this economic growth concept really means when it translate into what or how much of goods and services they could buy with the money in their pockets.

Official who give press conferences on this subject added that about one million jobless people were employed in the past year. This is a good news, even many world leaders, including president Barack Obama of United States, would envy even if the Ethiopian officials do not mention the number of the unemployed.

Employing one million people annually, in an agriculture-based economy like Ethiopia, is no less than a miracle because it would mean that many people are now able to cover their costs of living. The question is we should answer will, then, be how much does it cost to live fulfilling one’s basic needs?

Ashenafi Sime, 65, is an engineer by trade and a businessman by profession who reads this newspaper as often as possible to know about what is going on in the economic sector of Ethiopia. He finds it hard to understand why it becomes impossible to figure out specific prices of goods and services in the market except for a few items.

He asks why the commercials that are being transmitted through the state media are not obliged to announce their selling prices as per the rules and regulations set by the Ministry of Trade (MoT) or whatever the government body responsible for such executions. Basic economic laws state that prices are determined by the interactions of demand and supply. If there is more supply of goods and services in the market more than the demand in the market then suppliers or the providers of the services will have to make some discount on the prices if they have to sell what they brought to the market.

But facts on the ground do not substantiate this assumption. Prices are quoted under the mercy of merchants out of nowhere. The next merchant on line gives another quotation either unbelievably reduced by a big amount or raised high up leaving little to be desired.

This trend gives the benefit of the doubt to the potential buyer who uses the option of roaming about in search of better bargain. This fluid type of pricing will only lead to the unnecessary repletion of opening shops and stores side by side thus forming stands engaged in the same business.

This practice has impacts on the optimisation of available space in the City. Instead of going directly to a specific place, consumers would be obliged to spend time, needless by visiting many of the shops looking for a lesser price. Price tagging on the shelves or on the merchandise is a common practice all over the world except in Ethiopia.

One may tune to a radio station and listen to commercials. About 99pc of these ads may announce that such and such goods or furniture are imports and beautiful. But these ads fail to announce prices for obscure reasons.

In times when emerging economies like Ethiopia ought to advertise home made manufactured goods and instil in the minds of citizens the importance of consuming local products for all intent and purposes, it is ironic that imports are highly advertised on the local media. This notion contravenes the idea of encouraging small scale industries.

Certain prices are opportunistic. Take the case of the Ethiopian tricolour jerseys for example. These T-Shirts and other items related to the football match were selling like hot cakes.

The price tags started with 100 Br apiece. At the time of writing this column, on the day of the first match, the price soared up to 200 Br each and the first class seats were worth 1,000 Br. Who know we might come across a t-shirt or an article with a mark “Brazil” on sale, one of these days, like a logo reflecting our wishes and hopes.

There is no doubt that prices fluctuate from place to place and from time to time. But one thing is certain. They keep on increasing over the years.

A quintal of grain that used to cost a little over 1,000 Br has now shot up to reach 1,700 Br. Gasoline was only 4.5 Br per litre or there about a couple of years ago but now it has soared up to 20 Br plus.

Any increase in the price of fuel has negative implications on almost all goods and services in the market, an important factor in the determination of the cost of living. Such unstable prices in the market make the valuations of prices of goods and services that would be used to assess the annual growth of gross domestic product (GDP).

Another important point that should be raised here is the impact that prices could have on costs of capital projects. This also gives a leeway to involve in corruption and unfair pricing. Lack of price stability would undoubtedly result in mistrust in the process of business transaction which will discourage people to do business.

Another point which is perhaps unique to Ethiopians is the practice of wrongly associating prices with quality. The higher the price the more durable or quality a product is believed to be. By the same token, cheaper prices are taken as indicators of poor quality purchasing costly goods are sometimes taken to be prestigious and showing social status.

That could probably be one of the reasons why prices are not explicit as indiscretion will help to conceal the actual prices from public knowledge. Even if prices of goods are not made public, they are advertised intensively through the mass media, day in and day out.

The language used and the substance referred to do not leave much to be desired. In some cases the timing of the transmission of some ads seems to be absurd.

A case in point could be the long narration used as an introduction to a suspense story of what one does in a kitchen before cooking to advertise just a spice whose brand is hard to pronounce. In many cases the advertisements are exclusive. Their messages focus on advertising entertainment venues and fast food and juices to attract the affluent society polarised around the Bole Medhanialem area. Others advertise vehicles imported from the Far East countries.

Although the government has committed itself to reduce poverty, the ever rising cost of living keeps on intensifying the level and coverage of poverty with the passing of time. Food insecurity prevails not only because the shortage of production but more so due to the inability to pay for it because of the price hike.

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Posted by on October 29, 2013. Filed under NEWS. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

One Response to Ethiopia: When an Economy Goes Wrong – Addis Fortune

  1. tn. Reply

    October 31, 2013 at 4:44 PM

    growth numbers are fine even when fudged. economics/finance has thrown objectivity out of its way for at least the last 30 years. jew york is now into financial movies. valuation is half perception. so i see nothing wrong with the peddling of 14% growth! Good Story brings Good Story, so long as one who is telling the story remains knowing that it is just a story told to squeeze VALUE that bleed out of a Good story.

    the problem with ethiopia is the baseline of the value creation has been colonial expropriation, while abysinia & tigre in this case, is attempting to pride brand itself while holding the entire country hostage through the learning steps of a savage to man through an oligarchy called EFFORT.

    everything is subordinated to the pace of the savage and when the pace is not fast enough to justify growth then money has to be printed.

    PS…it looks like now, the news should be on how EFFORT is in a bid to sell Nile to Egypt.

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