by Yohannes Tesfaye
Ethiopia, a nation of vast resources and resilient people, has made headlines in recent years not only for its ambitious economic growth but also for the daunting crises threatening to reverse its progress. Once among the fastest-growing economies in Africa, with a decade of remarkable annual growth averaging 9.5%, Ethiopia’s progress has slowed in recent years due to ongoing internal conflicts, political instability, and economic hardship. This article examines the paradox of Ethiopia’s abundant resources locked in dead capital, while a volatile civil war and crippling inflation deepen the country’s challenges — and explores how a strategic focus on capital reform could serve as a foundation for both stability and long-term prosperity.
Ethiopia’s Economic Landscape: Growth Hindered by Conflict
At the heart of Ethiopia’s economic potential are its vast resources: 74.3 million hectares of agricultural land, Africa’s second-largest population, and an abundance of mineral wealth, including gold and precious stones. These resources, combined with a traditionally resilient and industrious population, positioned Ethiopia as a model of African economic success through much of the early 2000s. But this success has been undermined by recent crises:
Civil War: The conflict that began in the northern Tigray region has spread across the country, inflaming ethnic tensions, displacing millions, and diverting government resources from economic development to military expenditure.
Economic Instability: GDP growth has slowed to 6.4%, with inflation soaring to 28.3%, exacerbating poverty levels. Urban unemployment has climbed to 19.1%, while over 23% of Ethiopians live below the poverty line, creating a fragile socio-economic environment.
Food Insecurity and Inflation: Ethiopia’s once-promising agricultural sector is now facing severe disruptions due to both internal displacement and erratic weather patterns. Prices for basic goods are skyrocketing, impacting the most vulnerable and pushing a once-growing middle class into poverty.
This crisis of stability, driven by both economic and social turmoil, underscores Ethiopia’s need for structural reforms — particularly reforms that could help it unlock and mobilize its substantial “dead capital.”
The Capital Conundrum: Why Ethiopia’s Resources Remain Dormant
Ethiopia’s wealth is vast, but much of it remains “dead capital” — assets that cannot be leveraged within the formal economy. This includes untitled farmland, unregistered urban properties, and millions of informal small businesses. Such “dead” assets, estimated to be worth trillions of birr, represent an immense opportunity to transform Ethiopia’s economy. Yet, these resources remain out of reach due to systemic barriers:
Land Ownership Constraints
Despite its agricultural base, Ethiopia’s land ownership laws restrict most farmers to usufruct rights under Article 40 of the Constitution, meaning they can use but not own, sell, or mortgage their land. For the 12 million smallholder farmers who depend on these lands, this limitation is crippling. Without formal titles, farmers cannot use land as collateral to access credit, invest in modern equipment, or scale their operations. This “dead capital” costs Ethiopia roughly 300 billion birr annually in lost productivity, and with an estimated 1.5 trillion birr in unregistered farmland, the potential for economic growth remains stalled.
Urban Informality and Lost Revenue
Ethiopia’s cities, particularly Addis Ababa, face similar issues. Around 60% of properties in the capital lack formal registration, meaning billions of birr remain untapped within the informal real estate market. In addition to lost potential for credit and investment, the government loses approximately 50 billion birr each year in uncollected taxes. During times of fiscal strain, these missing revenues are a significant loss, preventing funds from reaching essential services, including those required to aid displaced communities and support war-torn regions.
Bureaucratic Barriers and Financial Exclusion
Entering the formal economy in Ethiopia can be a daunting process, with complex bureaucracy and prohibitive costs. The average business registration takes 32 days and costs more than 130% of the per capita income, pushing millions of small businesses into the informal sector. While informal operations help sustain livelihoods, they limit access to financing, with only 12% of small businesses having formal credit. In a country where the informal sector represents about 40% of GDP, a lack of formalization undermines revenue collection and stifles growth. Formalizing businesses and easing bureaucratic barriers could unlock billions in capital and facilitate the expansion of Ethiopia’s tax base — revenues that are now critical to economic stability amid conflict.
The Implications of Conflict on Economic Development
The ongoing conflict has intensified these capital constraints. Government resources have been diverted to military efforts, displacing funds meant for infrastructure, healthcare, and education. Internal displacement, estimated at over 2 million people, has devastated agricultural productivity, pushing food prices up by 30% and creating widespread food insecurity. Political instability has also damaged foreign investment, which was once a major driver of Ethiopia’s economic growth.
Social cohesion, vital for building a robust economy, has fractured under ethnic tensions. As trust erodes, the social contract — a key element in driving formalization and growth — becomes harder to restore. In this context, many Ethiopians rely on community-based networks rather than formal institutions, reinforcing informal structures and further trapping capital.
Success Stories and Emerging Solutions: Signs of Progress Amid Crisis
Despite these challenges, some recent initiatives show Ethiopia’s potential for transformation, offering glimmers of hope even amid conflict.
Land Certification Programs: The Land Investment for Transformation (LIFT) program has brought real change to rural land management. By issuing certificates to over 7 million farmers, the program has not only reduced land disputes but also encouraged farmers to invest more in their land, increasing productivity and food security. Programs like these could be expanded, even amid conflict, to stabilize rural economies and enhance food production.
Mobile Banking Revolution: Digital financial services have proven invaluable in reaching underserved populations, particularly during times of displacement and disruption. The Commercial Bank of Ethiopia’s CBEBirr platform, with its 12 million users and rural penetration rate of 70%, demonstrates the potential of digital banking to offer critical financial services. CBEBirr allows displaced citizens and rural communities to securely access savings, receive remittances, and obtain small loans, all of which are crucial in maintaining livelihoods amid instability.
Localized Business Formalization Efforts: In the Oromia region, a targeted effort to formalize businesses registered 50,000 enterprises in 2022-2023, raising tax revenue by 35% and employment by 40%. By stabilizing localized economies and fostering formal employment, such programs offer a blueprint for building resilience and restoring confidence in the formal economy.
Charting a Path Forward: Unlocking Capital for Stability and Growth
Unlocking Ethiopia’s dead capital requires addressing both economic and social issues, especially in the context of conflict. The following strategies represent a comprehensive plan to mobilize resources, rebuild trust, and drive stability:
Land Rights Reform
Ethiopia must transition from a system of usufruct rights to transferable land certificates, allowing farmers to own, mortgage, and invest in their land. Expanding digital land registries and establishing automated systems for title transfers could empower millions of farmers to access credit, stabilize food production, and invest in long-term agricultural growth. A robust land certification system would be especially valuable for communities affected by displacement, as formal ownership could provide them with security and support resettlement efforts.
Simplifying Bureaucracy and Encouraging Formalization
Simplifying business registration and licensing processes can reduce the reliance on informal economies. Introducing mobile-first platforms and one-stop service centers, especially in conflict-prone areas, would make formalization accessible, even in unstable conditions. Streamlining these processes could quickly formalize enterprises, particularly those established by displaced populations, creating a pathway to resilience for local economies.
Expanding Financial Inclusion
In conflict-affected regions, mobile banking and microfinance offer critical solutions for financial access. Digital credit systems and alternative financing can enable small businesses to survive disruptions, access credit, and rebuild. Furthermore, strengthening microfinance and rural banking infrastructure could expand Ethiopia’s financial inclusion, making resources accessible for those most affected by the economic impact of conflict.
Strengthening Social Trust and the Rule of Law
In times of instability, trust between citizens and the government is essential for economic recovery. Transparent land registration, consistent enforcement of laws, and accessible conflict resolution mechanisms can help rebuild this trust. A reinvigorated social contract, including reliable property rights and fair, consistent enforcement, would incentivize citizens to engage more fully in the formal economy, strengthening national unity and economic participation.
Projected Impacts of Reform in a Conflict Context
While the timeline for realizing the benefits of reform may be extended due to the ongoing conflict, the potential impacts remain significant.
Short-term (1-2 years): Reforms could lead to a 15% increase in formal business registration, a 20% boost in credit access, and a 30% improvement in tax compliance, enhancing government revenues essential for managing conflict.
Medium-term (3-5 years): Increased financial inclusion, expanded foreign investment, and a 35% rise in formal employment could create stability, especially in regions that have been disproportionately affected by the conflict.
Long-term (5-10 years): A projected reduction in poverty rates by 60% and financial inclusion reaching 70% would lay a foundation for resilience, creating a pathway to peace and economic stability.
Ethiopia’s Path to Stability Through Economic Transformation
In the face of deepening crises, Ethiopia stands at a critical juncture.Unlocking its “dead capital” and implementing comprehensive reforms could be the key to both economic revitalization and social stabilization. Land rights reform, streamlined business formalization, expanded financial inclusion, and rebuilding the social contract offer a strategic foundation upon which Ethiopia can build a more stable and prosperous future. By formalizing property rights, simplifying business registration, and creating accessible financial services, Ethiopia can mobilize its vast but dormant assets, driving growth in both urban and rural economies.
However, the success of these reforms depends heavily on Ethiopia’s ability to foster a stable, inclusive, and resilient national environment. Government efforts must be aligned with local leaders, community organizations, and international partners to create systems that ensure citizens — from urban entrepreneurs to displaced rural farmers — have opportunities to thrive within a formal economy. Transparent governance and consistent rule of law are essential to rebuilding trust in formal institutions, while robust financial systems can provide the stability needed for economic participation even in times of conflict.
A Vision for Ethiopia’s Economic Renaissance
If Ethiopia can mobilize its resources effectively, it holds the potential to not only stabilize its economy but also create a new era of prosperity that benefits all its citizens. By addressing its structural economic challenges head-on, Ethiopia can transition from a system dominated by informal, locked assets to one that fully utilizes its human and natural resources.
While the journey will be arduous, particularly amid civil unrest and economic strain, Ethiopia’s potential remains immense. Through sustained reform and resilient governance, Ethiopia can lay the groundwork for a diversified, inclusive economy capable of weathering both current and future challenges. Such transformation could set a precedent for economic resilience across Africa, showcasing how nations can harness their resources, rebuild social trust, and secure a future of peace and shared prosperity.
The path to this future will require commitment, collaboration, and courage — but by converting dead capital into dynamic assets and fostering an inclusive economy, Ethiopia has the opportunity to not only recover from its current crises but to emerge as a beacon of growth and stability in East Africa.
Editor’s note : Views in the article do not necessarily reflect the views of borkena.com
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“Land Ownership Constraints”
“Despite its agricultural base, Ethiopia’s land ownership laws restrict most farmers to usufruct rights under Article 40 of the Constitution, meaning they can use but not own, sell, or mortgage their land. ”
One can be productive by farming or utilizing the land as a business operational base for many kinds of businesses , but how can one be ‘productive’ by ‘selling” land?
Yes, one can ‘mortgage’ the property they (one) built on the land crop, machinery, home, business operations of various kinds, but selling the land they did not ‘make/build’ is and should remain unconstitutional.
The very reason that brought about the ‘Land Act” of 1974/75/76 is because a vast amount of land was owned by very few.
There is an old tell, during Emperor Menelik II rule, a French explorer asked the Emperor to ‘sell’ him land so that he can build an agricultural homestead, the Emperor replied, “Land is god made therefore is not for sale. It is to be used by the citizens to grow all kinds of crops, but not for selling, but selling what they produce is their right, you as a foreigner cannot buy or own land on this land or this nation.”, paraphrasing .
I agree the “The Land Investment for Transformation (LIFT) program” mentioned in the article, sounds very useful as long as every citizen is entitled to participate in it, not only those who have ‘capital’.
I argue, land or our traditional way of living on the land is not “dead capital”, it is very alive, and so are the societies that have been active in it for millennia.
On the other hand ‘capital’ , the financial kind as understood widely, can be called ‘Dead capital’ if it is stashed under one’s pillow, and as long as it is not used to produce something that can be used or sold.
Economic growth measured by ‘GDP’ is very misleading, for example the US GDP since 2020 has been the result government spending due to covid-19 stimulus-checks, followed by “The chip Act” spending… that is why the US debt is going higher and higher, and now the ‘interest payment’ passing all other social-spending’s.
Economic growth must be measured by the wellbeing of the society that live in it, having a healthy and fairly comfortable living standards, clean environment to lead a healthy life, access to basic necessities such as clean running water, electricity no mater where they live, and having stable and functional fair institutions.
The term “inclusive’ is used repeatedly, and as US president Biden used it in his US African summit, as well as in his UN address, usually focused on resource-rich nations of the “global majority”. What is implied by this term is to impose US multinationals participation in the global-majority economic activities, perhaps to get them into the action and later to totally control what is made, how & where to whose benefit from them.
US Wars, regime change, & sanctions are the tools used to open that possibility, as explained by a former US State department official…
I am not suggesting your use of the term is linked to the US gov, but it suggests the need for outside ‘capital’ participation, perhaps from individuals such as the diaspora community.
Link = youtube.com/watch?v=sTrZLHQOJkg
Be well.
“Capital reform” ???
The many secretive & hidden ‘manipulative’ hands of :
Bank for International Settlements (BIS)
“World’s Most Powerful & Secretive Financial Institution: What It’s Done & Planning Next – Adam LeBor”
link = youtube.com/watch?v=bfivIBK9cm4
The dark-forces (little men) “behind the curtain” being exposed as the “Golden Age” shines its golden-light on these rats…
This is the ‘the time’, that is mentioned in the Bible as ‘the eye of the needle’, meaning everyone can see who goes through it , and those (the Dark ones) who cannot go near it… & shiver just looking at it in the distance.
Bob Dylan
“The Times They Are a-Changin’
Link = youtube.com/watch?v=Q9_nWlSX6Us
Be well
What ‘capital’ has done to “the America the beautiful’, after WWII with the new immigrant-group evicted from Europe were allowed to invade it…
Here is a lecture (report):
By Ben Norton
” Billionaire BlackRock CEO: ‘Doesn’t matter’ who wins US election; Trump & Kamala benefit Wall Street”
Link = youtube.com/watch?v=chPfp01rsD0
We do not want Ethiopia to fall into such degradation of its native populations taken over by outside ‘capital’ and ending up becoming ‘tenants’ on their own land, in the name of ‘development’. Our diaspora should inspire to help the motherland develop to make sure the future generation lives better than the last, but not motivated to ransack the nation’s wealth to increase their own wealth building interest regardless of what happens to the native population they came out from.
.
Yesterday it was a “National Unity Day” in Russia
Here is a congratulation to the nation broadcasted by the Former President Russia:
Dmitry Medvedev, Дмитрий Медведев,
Born 1965,
(age 59)
“Sincere love for the Motherland, respect for our ancestors, the desire to be worthy of their glorious feats will help us win. Win in the name of the Fatherland! Happy National Unity Day! “.
Be well.
Well articulated and conversation starter article by the dear countryman. The current law on land ownership is the product left behind by commies in their dream of creating a socialist state. It did not create equality nor eradicate homelessness and stinking slums. Under such law whether you like it or not the house you own and have lived in it for decades is an eminent domain. Which means it can be taken when the state feels like it.
We read horrible stories when fascists came to the country and murdered millions using poison gas in the 1930’s. We also read about calamities in which millions lost their lives in the country due to senseless religious strifes many centuries ago. But the worst of all happened after commies and their offshoots dominated the political scene since 1974. When one of those commies was asked why not allowing private land ownership and his answer was the law was intended to forbid former owners from reclaiming their confiscated property. So the law was not primarily intended to benefit the citizens and eradicate homelessness but it was because the commies have this runaway hatred to the middle and upper class. But they save the best for themselves. Commies, commies, commies! Do I have utter contempt for you or what!! I hate to say this but I wish you were not even born!!!
Keep writing brother!!!
“Capitalism’ is in its deathbed, just like feudalism before it, to see that reality one doesn’t have to go far but take a glance at what is going on in its birthplace Europe.
The China economic rise that started in the 80’s and the retooling of Russia since the 90’s (collapse of USSR) & the NATO’s (US) war spree of the 90’s forward, all economic matters weren’t favorable to the collective ‘West’ in general and since Feb 24 2022 Russian SMO in Ukraine (NATO wannabe) Western Self-sanction & the Sept 26, 2022 Nordstrom 1 & 2 blast by the US to decouple Germany from Russia cheep oil & gas, that lead to the Energy shortage in Europe, and the beginning of its deindustrialization is visible to all who wish to acknowledge .
“Deindustrialization in Europe?”
Link = youtube.com/watch?v=Ev4soChNHtE
There is only one way for ‘capital’ to survive, abandon its very few over the many profiteering schemes and adopt supporting social-causes and needs, and grow along with the wider society, and its rebirth is guaranteed and would be prosperous time for all.
‘Centralized’ anything ( banking, gov. etc.) that was the way of life for the longest time has come to an end, from here on decentralized community-based developmental strategies and structure only will succeed, going forward. Yes, many are unaware and unsuspecting (with their horse blinder on) as we have observed them all during the ‘Covide-19’ lockdown, many were bewildered how unexpectedly things could happen so fast, where no one can stop such changes. And many still are in the wilderness when it comes to the future of their beloved ‘capitalism’, well all we can say to them is, ‘stay tuned’.
As stated in the article “The Land Investment for Transformation (LIFT) program” could be arranged/tweaked by the government to create a land assignment/distribution program for all citizens ( have money or not) and partner them with the ‘capitalist’ (investor group) so that land-holder (not for sell) and capitalist investors partnership flourishes where both share the produced crop equally, even share a percentage of the profit with their farm /factory laborer’s after they recoup the initial capital invested in the project. In such a way everyone has some ownership of the enterprise they are involved in and its success becomes everyone’s success or lose, and boosts motivation and brings about the desired ‘transformations’, ( Partnership of land & capital for transformation).
Be well.
One thing I did not put in detail is this (for those with a lot credentials from Western (dumb down) education and lost commonsense in the process.)
Re: “Land Ownership Constraints”
Unlike Dollars (dead capital) where trillions of $$$ are printed in the USA daily for a minimal cost of say $100 ink & paper to print $100 bill worth trillions…
(1) “land” cannot be printed ( unless some popup in the middle of the oceans as islands, even then those with big guns will claim it as their own.
(2) ‘Dead capital’ ($$$) does not hold its value in time, in fact there are old coins of yester dynasties that worth more then but are useless now. But ‘Land’ value and use appreciates in time and besides all that can be grown on its surface, it holds under it all kinds of minerals, and gemstones that are more valuable than the price paid for the land /acreage.
(3) Being Moneyless is temporary, where as being ‘landless” ( Nation less) is permanent, except for the migrants…
It is funny to hear the PM’s argument about the ” ‘free’ $3.5 billion IMF ‘gift” where the only requirement was to cut the value of the Ethiopia Birr by half or more… ” (paraphrasing).
Now simple math says, at the current reduced rate to pay back the $3.5 billion to IMF he needs twice as much or more Birr, or the value of IMF gift is now $7 billion USD or more…
Mind you, during the GERD initiative in 2011 & later both IMF & WB refused to lend Ethiopia a single $, now ( even mystifying for the PM) they are egger to throw away $3.5 billion for no reason, but just devaluing the Birr… ( is called ayaconda strangulation, where no animal in such predicament wont exit alive)… aka ‘fools errand’.
Looking at the IMF $3.5 billion ‘gift’, with “the land for sell” argument entertained in this article , ( perhaps sponsored by the PM’s “foreigners property ownership proposal”) , who knows, but it leads many to think, this ‘publics property privatization’ moves are perhaps designed to fend off “regime changers” from the predatorial-pirate-states of the North Atlantic, but in the process might end up making the country a vassal in perpetuity…
That is a sad tell, for nation that has stood strong during the crude-colonial-armageddon (the last few centuries) and won the battel, is easily getting flattened by mire propaganda-of-fear mongers of the same predatory-forces of today.
So, if these people were in power back then in the 1700-1900 we would all have been speaking Italian or something else, not knowing we had our own that is older and mush more structured & suffocated than any of theirs.
Emperor Haile Selassie’s time kids’ went to school and back home safely on their own, citizens lived in peace wherever they may be, no ethnic killings, kidnappings for ransoms, no sexual violence on adults and children’s alike, rule of law was protected across the land, and many many more.
The Emperor even from his grave is helping his beloved nation, with the so called ‘Gold find’ in his palace by the current ‘glorious PM’ (taking credit for it) was left in its place in the country, when even those that came after 1974 have stashed their loot else where in the West capitals where their families stay.
This Gold in whatever form it exist, its monetary value has sky rocketed since its 1974 value, more importantly it is a priceless-collection & a ‘national treasure’ and should be kept in the form it exist, in the palace turned into a museum, and all the Emperors holdings: his Train, car collections all the other artifacts must be preserved & displayed for the nation and its history to be visited & treasured by all.
I know many wouldn’t appreciate out ancestors and what they have done to keep this nation of ours to be passed on to us and to the next generations, that is simply because we have become out of touch with who we are, divided in secluded ethnic virtual-walls we have created lost the Nation-hood that existed, we are sliding backward further day by day we appear to lack the depth of our collective glorious past as a people.
I believe it is temporary-hungover!
‘Land’ is alive & timeless, a drop of water & sun light boom it blossoms with life forms of all kinds ; nothing in ‘creation’ is ‘dead’, except those made by man, that wont last.
Don’t be subdued by a FIAT $ (“dead capital”),
Be well
If you have an hour to spare this video is highly educational and is worth every minute it… enjoy!
“US POLITICS & POLICY, post Trump win w/ Mel K (Live)”
(I would have added “The hijacked ” in front of the title above)
Link = youtube.com/watch?v=LMwVhgDbpZo
Bonus videos!
==========
1) “Richard D. Wolff & Michael Hudson: Trump Returns! Empire in Decline!”
link = youtube.com/watch?v=i7iGPm0vloA
2) “Max Blumenthal : Neocons and the Security State.”
Link = youtube.com/watch?v=-qD6Ea1fID8
Be well.