Debate over Public Enterprises Privatization Continues

ADDIS ABEBA – The debate over decision to privatize public enterprises continues in Ethiopia as the government pushes to sell its stake in major public enterprises.

Privatization is one of the key reforms promised by Prime Minister Abiy Ahmed as he aims to encourage competition and foreign investment after decades of state-driven economic growth.

His administration plans to give away government’s entire stake in state-owned sugar plants, railways, and industrial parks starting from this fiscal year.

It also plots to partially privatize the four crown jewels of the economy: Ethiopian Airlines, Ethio Telecom, Ethiopian Electric Power Corporation, and Ethiopian Shipping & Logistics Services Enterprises within few years.

Pace sparks Debate 

While the government’s push to sell its stake in the enterprises gather momentum, experts are unhappy with the pace and lack of detailed studies behind the decision.

Some of them make their frustration felt during a dialogue organized by Forum for Social Studies on Thursday.

Pro-free market government officials aggressively advocate privatization of State enterprises saying it will be key to repaying foreign debt and they are inefficient and do not make profits.

Initiative Africa Director, Kibur Gena, said privatizing the telecom sector would not be a genuine solution to assuage foreign currency shortage as government claims.

The decision to do so should not have been made in a hurry, he said. Not at least without looking into other alternatives that could generate foreign exchange exhaustively, according to Kibur.

Kibur said profit-making Ethiopian airlines, on the other hand, could be used as a model for other entities on how to be more competitive and built them digitally. He urged for the government to take note of the experience Kenya Airways, privatized 23 years ago but sank into debt and losses in 2014.

Terefe Raswork, a telecommunication expert, questions the pace of the privatization process, especially Ethio- Telecom. “We should study cautiously the merits and demerits privatizing, before putting the company for sale,” he said, adding that Ethio-telecom could be more competitive like Ethiopian airlines with no state interference.

Contrary to the economist and the expert, advisory to the Minister of Finance Biruk Taye (Ph.D.) said the government believes that building a digital economy with efficient system will lift the economy.

The high inflation, inefficiency of the companies and debt burden of the country, were mentioned as among the reasons that forced the government to embark on liberalization.

For the past decades, public enterprises have been engulfed by crisis due to debt burden and structural problems.

“In some cases, the government has been forced to bail them out with no avail,” he said. “Privatizing the enterprises will have paramount importance in order to make them more competitive and deliver better services”.

Experts, however, cautions government that the move could increase challenges related to the affordability of services and products.

“While it is important and desired for State enterprises whose primary objective is not profit-driven to be efficient and effective, it is neither right nor fair to expect State enterprises to be as efficient and effective as Profit only driven companies whose main objective is to maximize profit for their shareholders,” said Fisseha-Tsion Mengistu (Prof.).


By Sisay Sahlu