BreakingNews 15/3/17 - Ethiopia`s Oromia State scares away investors, forcefully nationalizes mines
[ Masterweb Reports: Abebech Terefe reports ] - In the last decade, Ethiopia has been the poster boy for the Africa-Rising story. The country seem to have got almost everything right: fastest growing airline, high investment inflow, Africa’s aviation hub, security on its borders, one of Africa’s fastest-growing economy, rising middle class, great infrastructural revolution from the Great Renaissance Dam to the Addis Ababa Light Rail project and Addis-Djibouti international rail line. Most African countries were urged to emulate the Ethiopian development strategy for economic growth. But news coming out of Ethiopia in recent times is not that palatable, in fact most investors are worried, even those not directly affected. Nobody thought the country will descend to a level where existing investment agreements will be cancelled at the shortest possible notice without a care on the likely effects such action will on both the investors and the economy in general.
That is why the recent approval by the Oromia Regional Government of a mining proclamation which gives the it unquestionable right to take back the mining leases and licenses from any investor and hand them over to the youth of the area has set tongues wagging. The Oromia Regional State, unarguably one of Ethiopia’s biggest autonomous regions came up with what analysts see as a populist measure pandering to public sentiment. The sectors affected are all extraction of Red Sand, Sand, Stone, Pumice and Tantalum.
The Regional State started this process of dispossessing genuine investors of mines and extractive sites that were legally and rightly acquired from the government after due process and diligence were followed. This ill advised moved according to the Regional State is part of its economic redistribution strategy where the said mines will be reallocated to unemployed youth as part of a wider job creation programme to fight unemployment. A move critic say is a masked effort by those in positions of authority to lay their hands on the public pie using the youth as fronts. The companies that will lose their mines to this policy are Derba Midrock Group, Muger Cement Factory and Dangote Cement.
Experts are of the view that Ethiopia’s Oromia Regional State may end up causing investor fright and flight thereby crippling the country’s economy if nothing is done fast to mitigate the situation. These decisions they say will not only have an overall negative impact on the Ethiopian economy but will out-right create a very bad impression for the country and Africa in general as incapable of abiding by investment laws, according to international norms. Sources say the country’s investor confidence have already taken a dip, hitting an all time low for the first time in two decades.
An official of the Oromia State was quoted as saying that the process has started in East Showa area of the region. The plan according to him is to force the investors who initially acquired rights to these mines to now buy products extracted from the youths who will be running the mines. Mr. Abiy Ahmed, Vice President of Oromia Region who also double as head of urban development and job creation who said the intention of the programme was not to disrupt the operations of the investors but to find a solution to the region’s bulging unemployed youth population. He also threatened investors that the decision of the regional government cannot be influenced by the federal government over this issue. Warning that those who fail to abide by it will have themselves to blame as the State will not guarantee the safety of their investment going forward, a veiled threat that their premises will be attacked, says close watchers of the development.
The Oromia State did not stop at that. They even told the companies at the receiving end of their obnoxious law to train the youth on how to operate the mines and also release their equipment to the youth to use in operating in the mines they confiscated from them. They also threatened to review compliance from time to time to ensure all the companies adhere to this arrangement. A development discerning voices within and outside Ethiopia have decried as draconian, obnoxious, and archaic with no connection to the 21st Century.
Reacting to the development, an Ethiopian national with the United Nations Economic Commission for Africa (UNECA) lamented that “I have never seen such brazen disregard to international investment laws and norms of engaging with investors,” he said. The UNECA official who pleaded anonymity because he does not want to be dragged into the issue noted that this decision will not only send the wrong signal to investors all over the world about Ethiopia, it will also lead to price increment of cement because the companies are being forced to go through another layer of middlemen which will add to cost of production, and may eventually lead to chaos because the so called youth lack organization and requisite skills to run and exploit the natural resource being handed to them on a platter. This, he said, is the most archaic way of empowering youth. He noted that instead of finding ways to make the youth employable because most of them are not, the State government is adopting this strategy, sacrificing investment and efficiency on the altar of political expediency.
In a similar vein, Dr. Ahmed Mawiya of the African Union Commission said that the new policy goes against the grain of efforts by the African Union to create a friendly environment across Africa. Commenting on the development, he warned that such policies though appear popular is unsustainable, and by the time the government realizes it, much damage would have been done. He warned that it will work against the Commission’s efforts to boost intra-African trade relations and make Africa even less competitive within the global economy. He opined that the regional state should have explored other avenues of getting jobless youths productively engaged instead of outright economic empowerment for a large number of unskilled, uneducated young people.
These young people first need skills acquisition while those with skills can be absorbed by the investors”, he added. He lamented that the Regional government is not considering the overall effect, the huge cost implications of their actions will have on investors, and the wrong signal it will send out there not only about Oromia region or Ethiopia, but Africa as a whole. World over, governments are working hard to create enabling environments to attract investors not bottlenecks that chase investors away, he added.
Another challenge being faced by the companies in Oromia region is that this measure will create an unfair market where only companies operating in the region will suffer while those in other regions of Ethiopia will have an unfair advantage because they are not being made to go through such conditionalities. This create imbalance in the market and prices of products. This much has been highlighted by the CEO of Derba Midrock Group Mr. Haile Asegde who warned that problems will arise in competitiveness unless the same strategy is adopted country wide. If not, companies in Oromia Region will suffer the effect adversely.
Analysts are calling on the Oromia State to have a rethink and resend this action while exploring more sustainable avenues of engaging the youth productively and making a dent on rising unemployment which is not only a national problem but a continental one. Africa they say needs to work out better ways of turning its demographic dividend into an advantage.
Kelechi Deca ( Email: email@example.com ) reports.
*Photo Caption - Map of Ethiopia showing Oromia State. Oromia is one of the nine ethnically based regional states of Ethiopia, covering 284,538 square kilometers.