Ethio Telecom: Its Privatization Buzz
(Dinagddee) –The privatization of Ethio Telecom seems to have begun in earnest. We may not hear any more such silly recorded messages as “the network is busy now, please try later!”
My personal favorite is the excuse I have often received for my calls from abroad: “your balance is running low, please top up and call later!” I would still be mystified if I were not a post-paid customer to my service provider in the country of my residence.
As things stand, any optimistic statement regarding the outcome of Ethio Telecom’s privatization would be more in hope than expectation. After all, privatization alone would not do the trick to fix that company’s troubles. For instance, the people of Ethiopia will pay the price for a mistake of replacing the current public monopoly by a private monopoly.
There are already some tell-tale signs of some ominous troubles ahead. The Reporter (Amharic) provided some details on the manner in which the public asset is scheduled to be privatized.
To begin with, I am astonished by the number of foreign firms involved in managing different stages of the process of privatization.
According to the Reporter the following consulting firms have been hired to advise the Ethiopian government:
- PricewaterhouseCoopers (PwC), a professional services network, headquarter in London, United Kingdom. Responsibilities: Valuation of existing assets.
- Deloitte (Deloitte Touche Tohmatsu Limited), multinational professional services network, headquarter New York, USA. Responsibility: Stock valuation and share marketing or sales.
- Ernst & Young, multinational professional services firm headquartered in London, United Kingdom. Responsibility: Stock valuation and share marketing or sales. Same responsibility as Deloitte but it is unclear how the two firms will share this responsibility.
- The Mackenzie Consulting Group, headquarter New York, USA. Responsibility: Consultancy services regarding regulation and structure of the regulatory authority.
If you are familiar with the world of management consultancy, then you would already notice that three of the “Big Fours” are in the above list, the first three! I don’t know why only KPMG is missing from among the largest four multi-national consultancy firms in the world.
Here is the icing on the cake for the big firms: the World Bank and bilateral donors (countries whose names was not revealed) have volunteered to pay their expensive consultancy fees.
At this juncture it is appropriate to ask a few relevant questions: why has privatization of Ethiopia’s public assets become such a magnet? Why so much generosity by multilateral and bilateral donors to pay for the expensive consultancy fees?
In order to answer these questions, we need to understand the global setting. There is so much idle capital in the hands of potential big investors for long period of time. Ever since the financial crises of 2008, depositing funds with banks attracted near zero interest rates. The stock markets have kept crashing now and then, and the capitalist world has encountered a protracted delay to recover to its former glory. For that reason, investors have been scanning the horizon to seek opportunities for better yields for their funds anywhere in the world. Wherever and whenever any opportunity presented itself, big investors have quickly landed pretty much like a vulture on the scene of a dead animal.
For nearly three decades, the EPRDF regime closed its doors primarily to serve the interest of its cronies, party affiliated businesses! Public assets were needed as cash cows for the politicians as well as provisions of services to the enclave economy, politically favored businesses. This was a “negative good”. Negative, because of the economic injustices and the multi-layered inequalities between individuals, places, ethnic groups, etc. Good, because the economy remained “indigenised”, kept in the hands of Ethiopians, not foreign dominated.
In fact, indigenization has historically been the hallmark of the Ethiopian economy. There isn’t much there in the economy, but whatever was there belonged to Ethiopians. Unfortunately, this began to get eroded over the last decade and a half, through shallow decisions in the manner in which foreign direct investment (FDI) was attracted.
At this stage, public assets were still kept in the hand of the government, which was the right thing, but as we know that decision was made for the wrong reasons; public enterprises were meant to support private crony interest groups, for instance, the role of commercial bank of Ethiopia, development Bank of Ethiopia, etc.)
Potential investors have never given up though, they have always tried in the past to arm twist EPRDF to yield to their demand and sell public enterprises. For instance, the World Bank and IMF have kept pestering EPRDF to privatize the banks and also allow foreign banks to enter Ethiopia. Steadfast commitment by EPRDF to keep public assets in the hand of government meant they had to give up and wait for opportune moments.
When a crack occurred in Ethiopia’s political governance, global capitalists saw that the moment they were waiting for had arrived. That is why known lobbyists started shuttle diplomacy within weeks when the process of political and economic reform started in the second quarter of 2018. Now those investments in frantic shuttle diplomacy seem to have approached a stage of yielding some fruits.
The jostling among the consultancy firms and lobbyists means it is highly likely that the bulk of Ethiopia’s existing public assets will be sold to foreign actors. If that is the case, then at the very least, it would have been wise if those public assets, those of Ethio Telecom and the rest alike, were valued by capable Ethiopian experts. I have no doubt Ethiopia has more than enough expertise to value those assets.
I grew up in rural Ethiopia and I often accompanied my father to take cattle to the local markets. When traders asked the price of his oxen, I have never heard my father seeking advice from the trader himself regarding the right and fair price. He either tells a price he thought was right, or else he would consult with friends nearby.
More or less the same logic applies here. The Ethiopian government has no way of finding out the interconnections between the big businesses, their governments, as well as other major global players. As things stand, the Ethiopian government has left the entire process of privatization to big global players, starting from asset valuation all the way to the establishment of a regulatory authority.
It is an open secret as to whose interest this kind of arrangement would ultimately serve.