From war to talks – Ethiopia enters critical period of transition
The conclusion of the Ethiopian calendar year 2015 (or 2023/24) marks a significant turning point for the nation. As the year began, Ethiopia faced the challenges of a two-year-long conflict in the northern region, pushing the country to its limits. However, amidst these difficulties, a notable shift took place, reshaping the nation’s approach to the longstanding internal conflicts that had persisted since Prime Minister Abiy Ahmed (PhD) came into power.
The government, known for its strong belief in “might makes right,” took a surprising step by initiating dialogue with the members of the TPLF (Tigray People’s Liberation Front), signaling a willingness to seek reconciliation. This unexpected move prompted observers to take note, as it defied expectations and demonstrated a potential for progress.
Members of Parliament, who had previously been staunch supporters of the government’s military campaigns against the TPLF, calmly acknowledged the significance of the Pretoria agreement. The Parliament also took the step of removing the TPLF from the list of designated terrorist organizations, although it should be noted that 61 out of the 288 MPs expressed their objections during the voting session.
The government’s decision to engage in negotiations with armed groups in different regional states also had a positive impact on the nation. The Pretoria agreement served as a catalyst for both the government and the TPLF to reassess their perspectives and adopt a more cooperative approach.
The Pretoria peace accord, inked in November 2022, offered a much-needed respite for a country grappling with deteriorating security, diplomatic challenges, a turbulent political environment, and a struggling economy. This agreement, although its full impact is yet to be realized, served as a lifeline for a nation that had already endured immense hardships.
Tragically, the toll of the war amounted to the loss of countless lives, with the economy suffering a substantial 27 percent decline in GDP due to the crippling damages inflicted. Moreover, the year shed light on a multitude of human rights abuses that had been hidden beneath the veil of the northern conflict, prompting the international community to demand accountability from both the government and armed groups involved.
Amidst the war-ravaged economic landscape, the country experienced the strain of dwindling foreign exchange reserves and an alarming inflation rate of 37 percent. The challenges of stagflation, high unemployment, budget deficits, migratory pressures, stalled capital budgets, and suspended international financial support further compounded the nation’s difficulties.
While the Pretoria agreement brought a glimmer of hope for peace and stability, this newfound progress was disrupted by the eruption of fresh conflicts in Amhara, exacerbating the ongoing protracted conflict in the Oromia region.
As the nation stands at a critical juncture, contemplating its future and grappling with the choice between rejuvenating the nation-building process or facing potential disintegration, the government has implemented several measures in an attempt to address the challenges at hand.
One notable measure implemented by the government has been the dismantling of the regional special forces structure and introducing a survey report that sought to gauge the sentiments and opinions of the people regarding the ethnic provisions outlined in the constitution.
As the Ethiopian calendar year draws to a close, and the New Year approaches, The Reporter provides insights into the events and developments that have unfolded during this period, as a reminder of the challenges faced, the decisions made, and the potential turning points that have shaped the nation’s trajectory.
Bill surfaces to open-up banking sector for foreign competition
In a noteworthy development, Ethiopia embarked on a transformative journey in September 2022 by introducing a bill aimed at liberalizing the banking sector and inviting foreign competition. Prime Minister Abiy’s cabinet approved a new policy, charting a distinct path for the ruling Prosperity Party, which had previously upheld a protective stance under the Ethiopian People’s Revolutionary Democratic Front (EPRDF).
The groundbreaking policy was swiftly followed by the introduction of the Banking Open-up Proclamation, outlining four modalities for foreign banks to enter the Ethiopian market. These modalities encompassed the establishment of subsidiary firms locally, the opening of branches, the creation of commercial representative offices, and the acquisition of stakes in local banks.
However, the draft proclamation set a prudent limit, allowing foreign bankers to acquire a maximum of 30 percent ownership in local banks, ensuring a balance between external expertise and the preservation of domestic control.
The policy’s far-reaching objectives sought to enhance competitiveness and efficiency within the financial sector, ensuring a robust and diversified supply of financial resources while facilitating foreign currency availability.
While the potential benefits of their entry into the Ethiopian market, including improved access to finance, increased foreign exchange reserves, and the introduction of cutting-edge technology and corporate management practices, were widely acknowledged, the actual implementation by foreign banks remained a matter of observation and speculation.
Finance Minister’s remark over M-Pesa license confuses central bank
In 2021, Safaricom made headlines when it secured a telecom license in Ethiopia. Following this achievement, Safaricom engaged in discussions with the Ethiopian government to explore the possibility of becoming the country’s first foreign fintech operator. However, the progress of the licensing process faced uncertainties, as the statements of Ethiopian government officials seemed contradictory.
On October 7, a significant announcement was made by Ahmed Shide, the Ethiopian Minister of Finance. During the launch ceremony of Safaricom Ethiopia at Friendship Square in Addis Ababa, the Minister declared that the Ethiopian government and Safaricom had reached a mutual agreement to grant Safaricom a license for mobile money services.
The announcement took place in the presence of esteemed guests, including Prime Minister Abiy Ahmed, the recently elected Kenyan President William Rutto, Safaricom CEO Peter Ndegwa, and other prominent officials.
The impact of this news reverberated beyond the ceremonial stage. Safaricom’s shares experienced a surge of over nine percent in Kenya’s stock market, reflecting the market’s positive response to the company’s expansion into Ethiopia. Analysts also projected that the acquisition of the M-Pesa license would significantly expedite Safaricom Ethiopia’s path to profitability, reducing the break-even period from the previously estimated five years to a more favorable two-year timeframe.
However, the Minister’s announcement appeared to be slightly disconnected from the progress made by the National Bank of Ethiopia (NBE), the regulatory authority responsible for licensing mobile money operators.
The NBE needed to amend the existing National Payment System Proclamation, which had been in effect since 2011. Although the draft proclamation had been finalized by the central bank, it still awaited ratification by Parliament, despite receiving approval from the Council of Ministers.
Finally, in May 2023, the NBE granted the coveted Payment Instrument Issuer License to Safaricom M-PESA Mobile Financial Services Plc, two years after Safaricom initially obtained its telecom license, signaling a new era for mobile financial services in Ethiopia.
Federal gov’t, Tigrayan forces reach peace accord
The last New Year holiday (Enkutatash) in Ethiopia, celebrated on September 11, 2022, was tinged with a mix of emotions as the country grappled with a devastating conflict in northern Ethiopia. Millions of people remained displaced, and the atmosphere was somber. However, a glimmer of hope emerged as the warring parties finally agreed to engage in peace talks facilitated by the African Union (AU).
After ten days of intense negotiations held behind closed doors in South Africa, a significant breakthrough was made with the signing of the Pretoria agreement, exactly two years after the outbreak of the war in Tigray, which later spread to other regional states,.
The Cessation of Hostility Agreement (CoHA) amounted to the gradual cessation of active military engagements in Tigray. The devastation caused by the two-year conflict resulted in the loss of countless lives, millions of internally displaced persons (IDPs), and a dire need for humanitarian assistance.
While some expressed criticism towards the international community for what they perceived as a delayed response, the signing of the CoHA brought a palpable sense of relief to the warring parties. It offered a respite from the horrors of the deadliest internal conflict in over a century.
Ethiopia loses second attempt to defund resources for UN rights experts
Ethiopia’s draft resolution requesting the UN General Assembly’s Fifth Committee to withhold resources for the International Commission of Human Rights Experts on Ethiopia (ICHREE) was defeated by a vote of 71 against and 32 in favor, with 50 member states abstaining. This marked the second unsuccessful attempt by Ethiopia to defund the UN rights experts appointed to investigate human rights abuses related to the conflict in Ethiopia.
The Ethiopian government had opposed the establishment of ICHREE and voted against UN funding for the commission, but were unsuccessful. The Commission proceeded to present its first report to the UN Human Rights Council in September 2022, outlining initial findings on the conflict in Tigray and Amhara regions.
According to the report, there were reasonable grounds to believe that a range of violations, including extrajudicial killings, rape, sexual violence, and the use of starvation as a method of warfare, had taken place in Ethiopia since November 3, 2020. The report also suggested that these violations potentially amounted to war crimes and crimes against humanity.
The report attributed grave human rights violations to various actors, including the Ethiopian National Defense Forces, Eritrean Defense Forces, Amhara region forces (including militias and the irregular armed group Fano), as well as the Tigrayan forces involved in the conflict.
The mandate of ICHREE is set to expire in December 2023. Human rights organizations continue to advocate for an extension of ICHREE’s mandate. However, the Ethiopian government maintains that it has already initiated a domestic Transitional Justice initiative and considers ICHREE redundant. The government has also accused the ICHREE of being influenced by foreign powers and politicized.
Meanwhile, the US, EU, and international financial institutions remain steadfast in their position to withhold financing until the Ethiopian government allows the ICHREE to operate and ensures accountability for the two-year conflict in the northern part of the country, as well as addressing the ongoing human rights violations in parts of Oromia.
Budget squeeze lax expenditure and tax rush strain economy
In response to the financial strains caused by the northern Ethiopia war and the need to meet the growing budget demands, the Ethiopian government has initiated efforts to increase tax revenue. The government, determined to refill the state’s coffers, introduced new legislation aimed at tapping into every sector of the economy.
Recently, the government revealed that a substantial USD 28 billion is required for the reconstruction of the war-torn economy. While seeking USD 12 billion in support from international financial institutions, a significant portion of the funds is expected to be generated through domestic mobilization. Simultaneously, the government hopes to negotiate debt restructuring with foreign creditors.
To bridge the widening gap between a growing government spending and diminishing external sources of finance, comprehensive revisions are being made to various tax laws, including income tax, excise tax, and Value Added Tax (VAT). Behind closed doors, officials are diligently working to finalize these changes, aiming to broaden the tax base and bolster the federal government’s revenue stream.
However, these measures have placed a heavy burden on citizens already grappling with soaring inflation, unemployment, and a challenging business environment.
In addition to the tax reforms, the government introduced a property tax, adding financial pressure on citizens.
Despite implementing measures to contain budget expansion for the upcoming fiscal year 2023/2024 to a modest two percent and deciding against commencing new capital projects, these efforts alone are insufficient to address the prevailing financial challenges.
Historic referendum results: New region established
The National Election Board of Ethiopia (NEBE) announced the results of a momentous referendum held in the Southern Nations Nationalities and Peoples Region (SNNPR). On February 6, the people residing in six zones and five special districts exercised their democratic rights to decide on the establishment of a new region in southern Ethiopia.
After careful scrutiny and verification, NEBE declared that the majority of voters in Gamo, Gofa, South Omo, Gedeo, and Konso Zones, along with Burji, Basketo, Ale, Amaro, and Derashe special districts, voted in favor of coming together to form the newest state in Ethiopia—Southern Ethiopia Region.
However, it is important to note that the outcome in the Gedeo zone differed, with a notable number of voters expressing their opposition to the establishment of the new region. It is worth noting that the Gedeo zone demonstrated significant opposition to the establishment of the new regional state, with 46,749 people voting against it out of 241,695 valid votes.
Nevertheless, the majority of participants across the other zones and districts overwhelmingly supported the formation of the Southern Ethiopia Region.
While the referendum process proceeded smoothly in most areas, NEBE acknowledged that certain polling stations in the Wolaita Zone experienced operational irregularities.
Sheger City demolitions displace thousands, prompts public outcry
Nearly 100,000 individuals residing in and around Addis Ababa have been forcibly displaced, rendering citizens homeless, as the newly formed administration of Sheger city embarked on a widespread demolition campaign. Thousands of residents have been displaced due to a series of targeted demolitions. The towns encompassed by the Sheger City administration, include Sebeta, Burayu, Legatafo, Lededadi, Sululta, Gelan, and others on the outskirts of the city.
Officials claim that the majority of structures within Sheger City, comprising approximately 80 percent, were built without proper adherence to master plans, necessitating their removal.
However, the approach taken by the officials has raised significant public outcry, as it has resulted in the forced displacement of vulnerable communities and potential breaches of human rights, drawing scrutiny from the Ethiopian Human Rights Commission. In a report dated March 31, 2023, the Commission emphasized that the demolitions and forced evictions contravene enacted laws at both the federal and regional levels.
Gov’t moves to disband regional special forces
In a significant development, PM Abiy announced plans to dismantle the special paramilitary forces established by regional states. Citing concerns over their constitutionality and their potential to exacerbate problems within the country, Abiy justified the move as a necessary step toward promoting peace and unity.
To address these concerns, personnel were offered the choice to join the ENDF, federal police, regional police, or transition to civilian roles.
However, the decision sparked tensions between the federal government and regional administrations. While some regions accepted and began implementing the policy, the Special Forces of the Amhara region vehemently opposed the restructuring decision.
Reportedly, a significant percentage of Amhara Special Forces personnel left their camps and joined informal armed groups across the country. This development has been identified as a major contributing factor to the ongoing conflict within the Amhara regional state.
In April, Birhanu Jula (Field Marshal), the Chief of Staff of the ENDF, declared that the regional special forces no longer existed as an organization or structure.
Fed, OLA enter peace talks
The week-long talks between the government and the Oromo Liberation Army (OLA) concluded in Zanzibar, Tanzania, without reaching a final agreement. Representatives from both sides engaged in discussions, but some key political matters remained unresolved at the end of the talks.
Redwan Hussein, the national security advisor to the Prime Minister, described the talks as largely constructive, although certain issues could not be resolved during this particular round. The OLA also issued a statement acknowledging understandings were reached on some outstanding issues but noted disagreements in key political areas.
However, both parties expressed their commitment to continued dialogue in order to achieve a peaceful and lasting resolution to the conflict.
Although the talks did not result in an immediate breakthrough, it marked a significant development as it represented the first official recognition of the OLA as an organized entity by the government. Previously, the government had dismissed the group as a collection of bandits lacking a cohesive structure.
Aid diversion comes to light
The US Agency for International Development (USAID) announced the decision to temporarily suspend its food aid to Ethiopia due to concerns over widespread food aid diversion. This raised significant challenges for the relief efforts aimed at assisting millions of people affected by war and drought in the country.
Following suit, the World Food Programme (WFP) also suspended its aid supply to Ethiopia after discovering instances of theft.
Both agencies clarified that the suspensions will remain in effect until investigations into the food diversions are concluded. According to a memo prepared by the Humanitarian and Resilience Donor Group (HRDG), which includes USAID, there “appears to be orchestrated” by federal and regional governments entities, “with military units across the country benefiting from humanitarian assistance”. The memo suggests that various military units across the country have been benefiting from the diversion of humanitarian assistance, with the involvement of private grain and flour traders and operators as well.
The HRDG memo highlights the potential scale of the food theft, potentially reaching seven out of Ethiopia’s nine regions. Monitoring visits to 63 flour mills revealed significant instances of diversion of USAID-funded humanitarian food commodities across these regions.
Conflict erupts in Amhara region
Violent clashes between federal security forces and the Fano militia erupted in Ethiopia’s Amhara region, raising concerns about regional stability. In response, the government disconnected internet services in the region. Ethiopian Airlines also suspended flights from Addis Ababa to the affected cities of Gondar and Lalibela due to the ongoing fighting.
The Fano militia, which had previously fought alongside the ENDF during the northern Ethiopia war, clashed with the government over plans to disband regional special forces and demobilize armed groups, among other issues. This disagreement strained their relationship.
The UN Office of the High Commissioner for Human Rights expressed concern about the human rights situation in Ethiopia since the state of emergency was declared in August. The Amhara region, in particular, witnessed an escalation of violence, resulting in numerous casualties. At least 183 people killed in clashes since July, according to the OHCHR spokeswoman.
In response to the escalating situation, the president of the Amhara region, Yilkal Kefale, resigned during an emergency meeting of the regional council. He was replaced by Arega Kebede becoming the sixth president since PM Abiy came to power in 2018. This change aimed to address the crisis and restore stability.
Ethiopia joins BRICS
Leaders of the BRICS nations came to a consensus regarding the expansion of the block. Effective January, 01, 2024, six countries will formally become full members of the BRICS, further strengthening its global presence.
These countries include Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE.
This decision marks a momentous occasion as two of the newly admitted members hail from the African continent. Prime Minister Abiy emphasized Ethiopia’s commitment to collaborate with all stakeholders in building an inclusive and prosperous global order.
An expert closely monitoring the Ethiopian economy hailed Ethiopia’s membership as a significant diplomatic triumph, possibly the most substantial accomplishment during Prime Minister Abiy’s five-year reign.
Around 40 countries have expressed their interest in joining BRICS, with 23 of them formally submitting written requests. While Prime Minister Abiy emphasizes that Ethiopia was chosen based on its own merits and the potential it offers for south-south cooperation, political observers and analysts argue that Ethiopia’s selection serves tactical purposes. According to these analysts, Ethiopia’s inclusion in the BRICS camp will primarily provide economic benefits rather than political ones.