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Ethiopian PM's Death Brings Uncertainty and Opportunity

By Jen Alic | Wed, 22 August 2012 17:48 | 0

The death of Ethiopian Prime Minister Meles Zenawi after a lengthy illness on 20 August could have the effect of temporarily stalling the country’s grand five-year plan and slowing the momentum of Kenya’s ambitious regional infrastructure project, but Western investment in the massive Ethiopian market could see a boost.

Whatever everyone might think of Zenawi’s hard-handed methods for dealing with dissent, he can also be credited with vastly transforming Ethiopia’s economy and masterminding an impressive five-year plan to boost development the aim of which is move Ethiopian from an aid-dependent country to the middle income bracket. 

The five-year plan (2011-2015), which largely focuses on infrastructure development, was proceeding apace, with concrete gains made towards increasing the country’s electricity generation capacity and even transforming Ethiopia into an electricity exporter. Massive hydro schemes are being developed and plans for major railway extensions look set to be realized in due time.

These plans were very much tied to Zenawi, whose development acumen is hard to rival among Ethiopian officialdom, and there is some cause for concern in his absence. For now, Zenawi—only 57 at the time of his death--will be replaced by Foreign Minister and Deputy PM Hailemariam Desalegn. Desalegn will not have the power base that Zenawi enjoyed, nor is he likely to have the unusual intellect.   

This may be good news for those Ethiopians who have unfortunately found themselves living on the wrong end particularly of Zenawi’s controversial hydro schemes, which are said to have violently displaced local communities in the quest to become an electricity exporter. 

Zenawi’s death could also dampen the momentum of the Lamu Port-South Sudan-Ethiopia Transit Corridor (LAPSSET), which is a massive regional infrastructure effort initiated and led by Kenya. Zenawi played an important role in this effort, as he played an important role in brokering peace between Sudan and South Sudan.

The golden egg here for Ethiopia is that the LAPSSET corridor will include a pipeline running from Kenya to South Sudan, with a branch to Ethiopia, which cut a deal to refine South Sudan’s oil. In turn, profits from this would help further Ethiopia’s own domestic infrastructure plans.

With Zenawi’s death, there is a great deal of uncertainty on a number of stages, from the situation in Somalia, to regional infrastructure development, to Sudan-South Sudan relations.

But there is another possibility here, too. While the five-year plan may suffer some setbacks from Zenawi’s death, these are likely to be only temporary, and Western foreign direct investment could see a major boost. Zenawi’s Eastward strategy was frustrating to Western investors and left the massive Ethiopian market open largely only to China and India.

According to East Africa analyst and award-winning investigative journalist Wanjohi Kabukuru, Zenawi was somewhat of a “stumbling block” to opening up the region and its 80-million-strong market to Western multinationals, particularly in the area of oil and gas concessions.

In an interview with Oilprice.com, Kabukuru said that while it’s true that “Addis has had a double-digit economic growth under Zenawi, this has not benefited most Western or even neighboring multinationals.”

Western foreign investors have been frustrated with Zenawi’s politics, according to Kabukuru, and his death “may open up the pie that is Addis Ababa.”

While it is still too early to attempt to predict how Zenawi’s replacement will pick up the pieces after his death, the generally consensus—at least among African analysts—is that we will now see a scramble for Western investment in Ethiopia, to the detriment of the Chinese and Indian stronghold.

By. Jen Alic of Oilprice.com

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Jen Alic
Company: ISA Intel

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