The Depths of Corruption in Ethiopia – By Ed McKenna, IPS

ADDIS ABABA/LONDON (IPS) – Ethiopia may be one of the fastest-growing, non-oil producing economies in Africa in recent years, but corruption in this Horn of Africa nation is a deterrent to foreign investors looking for stable long-term partnerships in developing countries.

“Bankers, miners and developers presenting projects to investment committees in countries that fare badly in corruption rankings frequently struggle to get investment. Corruption raises red flags because it makes local markets uncompetitive, unpredictable and therefore largely hostile to these long-term players,” Ed Hobey, the East Africa analyst at the political risk firm Africa Risk Consulting, told IPS.

On May 11, in the biggest crackdown on corruption in Ethiopia in the last 10 years, authorities arrested more than 50 high profile people including government officials, businessmen and a minister.

Melaku Fanta, the director general of the Revenue and Customs Authority, which is the equivalent rank of a minister, his deputy, Gebrewahid Woldegiorgis, and other officials were apprehended on suspicion of tax evasion.

But the arrests have raised questions about the endemic corruption at the heart of the country’s political elite.

Berhanu Assefa of the Federal Ethics and Anti-corruption Commission of Ethiopia told IPS that these arrests highlighted how corruption has insinuated itself into the higher levels of officialdom.

“Corruption is a serious problem we are facing. We now see that corruption is occurring in higher places than we had previously expected. Areas vulnerable to corruption are land administration, tax and revenue, the justice system, telecommunications, land procurement, licensing areas and the finance sector,” he said.

Ethiopia ranks 113 out of 176 countries on the Corruption Perceptions Index of Transparency International, a global civil society coalition that encourages accountability. The country has also lost close to 12 billion dollars since 2000 to illicit financial outflows, according to Global Financial Integrity (GFI), whose statistics are based on official data provided by the Ethiopian government, the World Bank, and the International Monetary Fund (IMF).

Dr. Getachew Begashaw, a professor of economics at Harper College in the United States, told IPS that there was a fear that the recent high profile arrests were merely political theatre designed to placate major donors such as the World Bank and the IMF, and to give credibility to the new regime’s fight against corruption. Prime Minister Hailemariam Desalegn took over leadership of the country after Prime Minister Meles Zenawi died in August 2012.

“They are using this as a PR stunt to appease not only the donors, but to also dupe the Ethiopian people. Because many non-party affiliated Ethiopians in the business community are complaining, and this complaint is trickling down to the average people on the streets,” he told IPS.

According to the World Bank, companies held by business group the Endowment Fund for the Rehabilitation of Tigray (EFFORT) account for roughly half of the country’s modern economy. The group is closely allied with the ruling Ethiopian People’s Revolutionary Democratic Front (EPDRF), an alliance of four parties.

EFFORT is a conglomerate formed from assets collected in 1991 by the EPRDF to rehabilitate the Tigray region in northern Ethiopia after it had been decimated by poverty and conflict. The Tigray People’s Liberation Front (TPLF) is the lead party in the EPDRF coalition.

Tigrayans, however, only account for eight percent of the country’s 90 million people. According to Abebe Gellaw, an exiled Ethiopian journalist and founder of Addis Voice, a web platform that provides news that is otherwise censored by the Ethiopian government, EFFORT has become a business racket for the Tigrayan elite who are monopolising major sources of the country’s wealth.

“The TPLF controls key government institutions and a significant portion of the economy. For over 15 years, EFFORT has been used by the TPLF to channel public resources and funds to the coffers of the TPLF through illegal deals, contracts, tax evasion, kick-backs and all sorts of illegal operations,” he told IPS.

Azeb Mesfin, Zenawi’s widow, currently manages the multi-billion-dollar business empire.

She claims her husband paid himself a modest salary of 250 dollars a month, yet the online website “the Richest.org”, which publishes the net worth of the richest people in the world, recently divulged that Meles was in fact one of Africa’s wealthiest leaders having amassed a personal fortune of three billion dollars. This has led many to question the provenance of the erstwhile leader’s wealth – when he had no known business engagements.

Illicit financial flows as a result of corruption are a major hindrance to a country’s development, undermining institutions, economies and societies. According to the Africa Progress Panel’s Africa Progress Report 2013, the continent is losing more through illicit financial outflows than it receives in aid and foreign direct investment.

A commitment to greater accountability and transparency to curtail illicit financial flows should occur on both the national and international levels, according to E. J. Fagan, deputy communications director at GFI.

“Reforms and policies are needed to strengthen customs enforcement and make governing apparatuses more transparent. The international community can create a multilateral system of automatic exchange of tax information that African countries like Ethiopia can access, so as to make it difficult for illicit actors to hide money and transfer large amounts of illicit money without detection,” he told IPS.

Begashaw added that corruption in the social sphere also breeds social inequality, disenfranchisement and a breakdown in national unity and civil society.

“The very existence of parastatals and TPLF-affiliated endowed business conglomerates like EFFORT is a major source of corruption. The Birr (Ethiopian currency) will depreciate and inflation will skyrocket. The capacity of the state to provide public goods and services will decline. Free market competition will be eroded. Government revenue will be reduced and the budget deficit will rise.

“If they are really serious about combating corruption, they should start doing so from the top,” he said.

Share Button
Disclaimer: We are not responsible for any losses or damages that may have caused by using our services. EMF declines all responsibility for the contents of the materials stored by users. Each and every user is solely responsible for the posts.
Posted by on September 25, 2013. Filed under FEATURED. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

3 Responses to The Depths of Corruption in Ethiopia – By Ed McKenna, IPS

  1. ኦብጼርቬር Reply

    September 25, 2013 at 10:56 PM

    We have heard over and over again that EFFORT and its associated conglomerates are a covert mechanism for corruption in Ethiopia.I wonder why peaceful opposition parties do not confront this evil organization which is killing the country and fight it head long.It is high time that everyone raises his voice and struggle to dismantle this Trojan Horse,under the banner of equal economic opportunity for all citizens.

  2. Yineso Reply

    October 31, 2013 at 10:08 PM

    According to the new adminstration in Ethiopia Amhara’s are blamed for teaching corruption , bribery and so on to the Tigres.

    Basically what they are trying to say is when the Derg failed Amhara agents tricked the Tigray People Liberation Front leaders to live corrupt . they sincerly believe if it wasn’t for the Amharas the Tigres would not have known or started this corruption practices. Mind you they even argue that Azeb Mesfin is Amhara.

  3. Henok Reply

    June 18, 2016 at 1:31 AM

    I hardly believe the corruption rate in Ethiopia has been measured from the bottom up down. Almost every business functions on the routine path of ”eji mensha”and ”gursha”. moreover, the currency has gone down nose-dived as the foreign currency shortage goes up and up everyday due to high amount of money laundry and graft. I bet everyone that Addis Ababa’s major business route has been controlled by a few hundred individuals who are either a political elite or politically entitled peoples who have no mercy to robe their land at all. I also argue that the arrest of senior government officials in connection with corruption is obviously a politically motivated one.

Leave a Reply

Your email address will not be published. Required fields are marked *