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Addis Ababa 1995

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The Economic Scene in Addis Ababa

(Addis Tribune July 11, 1998)

Seven years of economic reform has hardly changed Ethiopia's capital city. Streets literally turn into rivers and ponds after downpours because of clogged drains. When the rain lets up, potholes turn into waterholes, sometimes masking dangerous excavations capable of breaking car axles. Mud and litter is everywhere. Most roads don't have sidewalks; so pedestrians share them with motor-vehicles, a surefire recipe for traffic accidents. Nostrils are constantly buffeted by the stench wafting up from roadsides. Rubbish can be seen being tipped practically everywhere. Putrid refuse receptacles sparsely dotted about the city are typically full to overflowing. Notwithstanding official statistics indicating a rise in the incidence of rabies, stray dogs roam the streets without any visible municipal control.

Government-owned buildings, inherited by the new government from the Derg, have long turned gray and most are in a crumbling state for lack of repair and maintenance.

The human condition in Addis is equally squalid. Beggars of all types are to be seen in every part of the city. In some sections of Addis, beggars literally line roadsides. Main roads and streets are filled with people, most of them simply loitering without any discernible sense of purpose. Even on working days, bars, cafés and tea-houses teem with people, most occupying chairs and tables for hours on end for no more than a cup of tea. The common person in the street in Addis is undernourished, shabbily dressed and with little to show by way of personal hygiene. But for contraband imports of second-hand clothes, the question of apparel would have been even worse. Street-dwelling has become so commonplace that people hardly notice it any more. Open prostitution as practiced by street-girls and bar-women as well as covert prostitution as practised by school-girls, low-income government and private-sector workers and employees and exclusive night clubs is burgeoning. Lunatics, pickpockets and hard-core criminals are becoming an increasingly visible part of the scene in Addis.

With regard to the living standards of people in Addis who are employed, those working in the private sector are appreciably better off than those in the civil service. Private business-persons owning and running relatively big and medium-scale activities form pockets of affluence, but members of this class are very few in number, as would be expected. Business persons owning and managing medium-scale enterprises come next in the wealth league table. Small-scale business enterprise owners follow. Among the professions, civil engineers, medical specialists, and chartered and certified accountants and lawyers practising as sole proprietorships or partnerships rank among the relatively well-to-do. However, all of these people put together form no more than a tiny fraction of the city's total population. They are however the social elite who are struggling against the odds to spearhead a fundamental and self-sustaining economic transformation of Ethiopian society.

The rest of the people in Addis, including the emerging middle class, are striving to make ends meet. As indicated above, most of them form the army of the unemployed, beggars, street-dwellers, etc., of the city. Many of the rest live in one-room rented hovels, often 4-5 people sharing a single room. They eat out at seedy eateries obviously because they lack cooking facilities at home. The few imposing apartment buildings built and being built along some of the main streets in the city were never meant to address their problems. Rather, these impressive, marble buildings partly serve to mislead the uninitiated about the economic status of the city. Politicians and bureaucrats, themselves officially not well-paid, routinely use government-owned mass media to make yet more promises that things will soon get better or, not infrequently, to announce confidently that things have already got better, if only the opposition would shut up!

Hence, seven years on, life in the nation's capital for the vast majority of the people is still miserable. Even the most highly paid civil servants, who are conscientious enough to refrain from taking bribes, cannot afford to build or buy small houses, buy second-hand cars, new sets of furniture and other new household items such as fridges, TV sets, VCR's etc. They need to join the "Ekub", the traditional savings association, to buy a decent suit. On the other hand words fail to describe the misery of those not fortunate enough to have some form of employment.

The overall business scene is none too bright, either. There is no stock exchange; no construction boom as would have been expected in the wake of genuine economic reform; compared to many other African cities, the number of banks operating in Addis and elsewhere in the country is almost negligible, and foreign banks are banned by law; other financial services, including insurance, are rudimentary; there is no market for venture capital outside the banking system; money markets are virtually non-existent; Financial institutions such mutual funds, building societies, discount houses, etc., are pretty much unheard of. Private ownership and the buying and selling of land are prohibited by law; a so-called capital-gains tax of 30 percent has brought the buying and selling of houses almost to a standstill; Similarly, a rental-income tax of up to 45 percent has discouraged commercial housing construction. Bureaucratic red tape is killing the urge to create wealth, own property and do business in general. In short, Addis is far from being economically, financially and commercially vibrant.

What to do? The basic principle is simple. Stimulate and encourage the urge to create wealth, own property and do business in general. As elementary economics tells us, wealth can be created only by combining land, labour, capital and enterprise. In Addis Ababa, there is a pool of labour and entrepreneurship of varying quality; there is also a certain amount of capital and modest channels to make it available where it is needed. At any rate, paradoxically, there is a lot more labour, entrepreneurship and capital ready to be utilized in the wealth creation process than there is land. For some obscure reasons, the availability of land for wealth creation is severely curtailed by government policy. Hence, if there is one major issue on which a breakthrough should be made in general economic policy, it is, without a doubt, the question of land ownership and use. The land policy issue is a truly national question, not just a problem for Addis. For maximum economic financial and commercial buoyancy in Addis or elsewhere in the country, an expeditious revision of the land policy should be combined with other major policy steps including those related to the following:
•nationalized houses and other nationalized private properties;
•further incentives to attract foreign investment
•anti-monopoly legislation and enforcement
•reduction of certain taxes, including capital-gains and rental-income taxes;
•reduction of exorbitant house rents imposed by the Addis Ababa Administration
•Streamlining bureaucratic procedures, particularly those applicable to business operations.

Pictures

Our first days...
Esther, daughter Sasha, husband Anatoly and her uncle Zewde in Ethiopia. Photo by Alexey Tafari Sellassie Antohin, July of 1995. This is a dinner in Jordanas Hotel. The basket you see is a traditional Ethiopian table. If you haven't visit the Ethiopian FOOD page, go to Cooking with Esther for recipes and list of Ethiopian restaurants near you.

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