Privatization of Ethio-Telecom not in the interest of Ethiopia, “Why play with fire?” (Kebour Ghenna)

“… privatization of Ethio-Telecom goes against the interest of the nation.” Kebour Ghenna

Kebour Ghenna Desta _Ethiopia _ EthioTelecom _ Privatization
Kebour Ghenna Desta Source: Social Media

by Kebour Ghenna Desta
August 10, 2019

I don’t care if I sound an old fart for saying that privatization of Ethio-Telecom is not a necessary and indispensable for the broader economic liberalization reforms that’s taking place in Ethiopia today. Indeed, privatization of Ethio-Telecom goes against the interest of the nation.

Watch out, Dear Reader, unless you question, confront, and civilly resist this bad deal, we will all lose, and lose big!

In a recent press release of the Ministry of Finance of Ethiopia you will read the following simplistic statement to justify the privatization of Ethio-Telecom:

<<<“Partial privatization of Ethio-Telecom and private investment in the expanded telecommunications market will also contribute to attracting foreign direct investment, support the country’s effort to improve ease of doing business and its wider economic reform agenda. Furthermore, it will generate revenues through license fees, taxes and dividends that will contribute to overall economic restructuring.”>>>

I don’t know about you, but me I don’t see Mr. Market attracting foreign direct investment because of Ethio-Telecom partial privatization. I don’t see how this privatization will improve business or enhance reforms, or even bring more revenue than the state owned Ethio-Telecom. In any case if the above are the most compelling argument the Ministry can come up with for justifying the partial divestiture of Ethio-Telecom, then we’re in trouble. Really heartbreaking that this government failed to put together the official rationale for the privatization policy, and chose instead to favor privatization in a vacuum.

Anyway me, I stick with my initial advice. I say, don’t sell 20%, 30% or 49% of Ethio-Telecom. Don’t sell Ethio-Telecom, until the government builds its capacity to manage markets and move beyond the direct government monopoly of the past. In other words I argue for a government that invests in bringing speed, flexibility, and responsibility in its public enterprises but also in engaging citizens in the public service delivery process. This balance between markets and deliberation recognizes citizens are more than consumers, and government is more than a market player. Indeed, in the political space Ethiopia finds itself today, it’s critical for the government to create the space for collective deliberation to occur and through this process a sense of the social is built.

So for now, I repeat don’t sell Ethio-Telecom.

Because the privatization of Ethio-Telecom at this stage is a capital-killing move.

And yet today Ethiopia needs real capital – and Ethio-Telecom is that cash cow that can help the state with ready money. But the geniuses at the Ministry of Finance want to sell the cow and buy its milk, instead of making Ethio-Telecom efficient and get more money to work with, to build upon, or to create more output (this is hard work), they (the geniuses) choose to get rid of its major asset in return for crumbs (easy work). Sad!

Yes, the role of government is not simply to just make money, but also to serve citizens. Governments must have the capacity to help citizens come together to identify problems and to debate choices. Learning to solve collective problems, to engage the citizens and to practice deliberation – these are the foundations for a democratic society. This is what Ethiopia needs.

Remember the private sector would only be interested to acquire profitable or potentially profitable enterprises and activities, leaving loss-making SOEs in public hands, thus exacerbating the public sector’s fiscal burden. So I say to our leaders, don’t accept privatization as a condition for support from the World Bank. To the contrary, remain actively engaged as a market player directly providing services and contracting out certain activities, when necessary, to ensure competition, efficiency, service quality, ownership and broader public objectives.

I repeat again, selling Ethio-Telecom would be very bad for Ethiopia’s future.

So, okay, yes, Ethio-Telecom needs to do more to improve its services, so why not fix this problem now? Why is this government afraid to turn bold, and start rebuilding its internal service delivery capacity. Why is it too apprehensive to adopt a new approach that transforms state owned enterprises into efficiently run companies, as has been demonstrated by, say, our own Ethiopian Airlines. Why doesn’t it realize, privatized companies will not guarantee that the public interest will effectively be served? It would have been laudable if this government concentrated in streamlining business procedures, encouraged operational transparency, increased competition, and developed efficient tax and customs processes to attract investors. In fact, the key question here is whether the ostensible efficiency and welfare gains from partial privatization could have been achieved without such recourse. For example, could such gains have been achieved through other means of ensuring greater autonomy, flexibility or managerial reform, such as through corporatization and commercialization?

Today governments across the world are moving beyond the dichotomy of markets or planning, and instead embrace a mixed position which complements the advantages of markets with the benefits of public engagement. We are increasingly seeing such shifts away from competitive tendering among the early privatizers: the UK, Australia, New Zealand, and the US.

Let’s be perfectly clear, the World Bank and IMF’s ‘neo-liberal’ policy prescriptions involving liberalization, deregulation and privatization have not, and will not bring prosperity to Ethiopia. And privatizing Ethio-Telecom will neither contribute to the development of the telecom and related sectors nor reduce the government’s debt obligations. I don’t know the amount of money the government expects from the partial sale of Ethio-Telecom, but whatever that figure (which will hover around USD 300-400 million), this privatization may only postpone a fiscal crisis by temporarily reducing the government’s fiscal deficits, but it would certainly not resolve the underlying problem because the government would in the end lose income, and would be stuck with financing requirements.

By the way, once the government signs over part or all of Ethio-Telecom to a private company, withdrawing from the agreement borders on the impossible.

So why play with fire?
____

Editor’s note : This article was first published on the facebook page of Kebuor Ghenna on August 8, 2019



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10 Responses to "Privatization of Ethio-Telecom not in the interest of Ethiopia, “Why play with fire?” (Kebour Ghenna)"

  1. habtu   August 10, 2019 at 8:05 pm

    I respect your opinion but this article is just an opinon piece devoid of facts and historical examples. It aslo only incorporates a simple analysis that assumes the government will lose all of its revenue! FYI it also doesn’t incorporate recent news on the subject matter!

    Reply
  2. Mohamed sheikh   August 11, 2019 at 12:47 am

    Selling the cow and buy its milk is a short and well said that can any lay man on the street can understand. Selling whole or part of ethio telcom is not a good ecnomic move.

    If the pressure is from World Bank and IMF why the ethio market is been close for the lucrative business. Solution is not laying in selling your cash cow. The solution is make another cash cowi with government and the publich shares with second license whith local and ethio daispora can buy shares.
    In this you can solve two things create competetion in the sector for endusers to get options and the second tpressure of donors will have no case.

    Reply
  3. Teweldemedhin Aberra   August 11, 2019 at 1:02 am

    The guys sounds like an old communist fart for saying privatizing Ethio-Telecom is not necessary!

    He is wrong on so many levels, I can name tree:

    1. The government is simply not capable of running services as complex as a modern telecom. It can’t have the institutional capacity, it can’t retain the talent and their managers are almost always necessarily corrupt. If the country deserves modern telecommunication service, entities with the technical and financial capacity should do it. Ethiopian government, which is reconstructed every couple of decades surely don’t and will never have such capacity.

    2. Ethio-Telecom and EPCO are two of the most important reasons why it is hard to run modern business in Ethiopia. No reliable electric power and communication just means no modern business.

    I am okay if the government keeps Ethiopian airlines for now, as it is doing its job.

    3. The story that ‘EthioTelecom is a cash cow’ which I think Meles Zenawi popularized, is a complete bulishit. EthioTelecom is a cash drain. EthioTelecom wastefully spends billions in hard currency for the expensive equipment and service it imports, exarberting the currency shortage. And it generates almost no revenue in dollars. All the profit it posts is pile of increasing worthless Birrs, which is not really the cash problem of the country at this moment. EthioTelecom is draining the hard currency. The Government should get ride of it as soon as possible and cut its losses.

    The Abiy government will do a great favor for us living and trying to actually do business in Ethiopia if it sells EPCO and EthioTelcom for companies that are real the specialists in power generation/distribution and telecom.

    Reply
  4. Tedla   August 11, 2019 at 3:21 am

    Well, Ethio Telecom may generate revenue for the country but it’s the worst telecom company in the world. Privatization is the only way to modernize it.

    Reply
  5. SATENAW   August 11, 2019 at 4:11 am

    I do agree with you Kebour Ghenna, Ethio telecom shouldn’t be privatized at the moment! If they do it ; it will be the biggest crime against the will of Ethiopians! All african countries have privatized their companies in the 1960s and 1970s but nowadays they are under colony indirectly. They are losing their wealth. Even most of them; they couldn’t build a one kilometer asphalt road since they have sold the cash cow.

    Reply
  6. Balew Demissie   August 11, 2019 at 4:25 am

    Dear Editor

    Thank you so much for sharing us this piece. I often read Kibour’ articles. He is one of the most brilliant men of our country. Why doesn’t the Government listen to him? It is a sorrowing heart.
    Best Regards

    Reply
  7. Concerned   August 11, 2019 at 4:44 am

    Habtu, the literature on failed privatizations when they lack a plan is deep, and respectfully, if you are not aware of this you’re in way over your head in this discussion. You need look no further than the Kenya. Better yet, look at the entirety of Eastern Europe or South America.

    When rushed like this, it is usually because the real reasons for the privatizations will not be accepted by the public. If history has taught us a lesson, when they rush such ill thought out transfers of public assets to the private sector, there are some people that will make ungodly money from their involvement in selling there country’s assets.

    So, Habtu, your question should be why is the privatization happening? Have they looked at why others failed before the decision, or are they coming up with justifications now? What has been role of World Bank /IFC? What conflicts exist and who are any private sector actors who stand to gain in the deals.

    Reply
  8. Dula   August 11, 2019 at 7:52 am

    I agree with Habtu. This is just an opinion not based on facts. Ethiopia has one of the lowest internet penetrations and access to technology primarily because of a government monopoly that kept prices high, limited access to tech and entreprenorship.

    Reply
  9. SLW   August 11, 2019 at 12:40 pm

    I am also inclined to think the analysis is far from complete in the author side rebuking the government privatization plan. First what is the best timing for privatization? As the author already mentioned the only profitable state company is EthioTelecom then if the government does try to privatize non profitable companies does it will get best value for them? There are two main reason for privatization for good intended government administrations. First is sacrificing profitable assets to avoid state bankruptcy or get the best value out of them because of changing market conditions in near future. The second is inoperability of the asset or company by market rules without the assistance of state subvention and therefore an intent to hand over to private investors to improve productivity. For both first and second scenarios if the Ethiopian Telecom sector is on the brink of opening to multiple carriers then one can assume a first stage of privatization is not only the best value but also it would prepare EthioTelecom for the fierce competition it will face once other players also are allowed in the market. With the low wage of Ethiopian labor market and with the improvement done on roads and infrastructures including supply chain management with the number of industrial parka being established it would not be difficult for new big external Telecom companies to displace the incumbent EthioTelecom in very shot time. This a very true statement as we have seen it in the west again and again. The third scenario in the case we have non trustful government that would just sale left and right state assets to keep paying it’s burocracy to stay in control and power then the selling government and the buying private capital at playing with fire as for the government it will not be any longer business as usual to politically control EthioTelecom in which private company may not want to associate their brand with unpopular measures that can back fire and cost them their branding.

    Reply
  10. ሃረርጌ   August 15, 2019 at 12:02 pm

    ለገንዘብ ስንል ሃገሪትዋን ተከፍሎ በማያልቅ እዳ ዘፍቀን

    ልጆቻችንን ደግሞ ለአረብ ለፈረንጅ ለሶዶማውያን አሳልፈን አስረከብን ::

    ለራሳቸው ሃገር ልጆች ያልራሩ የክሊንተን የትራምፕ እና የሚስተር ጄፌሪ ኢፕስተይን ( Jeffrey Epstein ) ግሩፕ ለአፍሪካ ልጆች ይራራሉ ብሎ ማሰብ ስህተት ነው::

    ልጆቻችሁ ባገርም ወይም በዳይስፖራ ባሉበት እየተደፈሩ ነው::

    አብይ አህመድ የራሱን የግሉን ልጆቹን ወደ ሃገር አስገብቶ የሌላውን የአማራ ልጅ ያሳድዳል ወደ ስደት
    እና ወደ ሞት::

    Reply

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