BY MENGESHA AMARE
Being home to close to 120 million population, Ethiopia is the second most populous nation in Africa next to Nigeria, and still the fastest growing economy in the region. Though the country is still regarded as one of the poorest nations in the continent, it is relentlessly working to enlist itself in the category of middle income countries in the years to come.
Yes, Ethiopia’s economic growth would help the nation pull social stability, financial progression and even political harmonization to think of, at the end of the day, a well-developed and equally benefiting country. The right avenue on which the country is now journeying has exhibited the smartest trajectory towards an irreversible progress and lasting development.
Without a shadow of doubt, inclusive and sustainable growth can help heal grievances stemmed from economic exclusion, and the role the private sector can potentially play along this line is an invaluable step to bring about a real difference.
Taking this solid fact into consideration, this writer talked to Amanuel Lorenso, who is an economist and working for a private consultancy to substantiate the topic of discussion“ the role of private sector in bolstering economic development in Ethiopia.”
He said, “The profitability of very private sector has highly depended on their country’s development and comprehensive growth. Hence, actively participating in Ethiopia’s development scheme for the private sector is serving themselves at their own home. Yes, the private sector investment can also bring an infusion of capital without increasing the debt burden. However, these volatile environments struggle greatly to attract and sustain the long-term private sector investment that is needed to help the country break the sluggish economic growth pace.”
As effectively dealing with the complex economic challenges requires creative solutions, the private sector and the government are expected to work together to find innovative ways to firmly consolidate investments in a range of lucrative contexts.
As to Amanuel, the combined effort of the government, local private sector, the international investor, public enterprises and other development partners has prettily paved the way for the country to seize the next level of success as active economic engagements and supplementary businesses are important for continuing economic opportunity.
“In present day Ethiopia’s opportunities for private sector engagement are made much more widened though a lot remains to be done. For instance, if we take the recent situation of the country, where conflicts are contained in certain regions, extensive investment and advisory support in stable areas has been possible – for example, in places such as the Tigray state and those of Amhara and Afar where investments in agribusiness, power, financial services, and renewable energy were severely damaged,” the economist said.
True, supporting the private sector in daunting contexts is complex and requires active market creation through project development, regulatory reform, and capacity building, he opined. According to Amanuel, the link among economic development, job creation and stability has repeatedly been emphasized, as well as the need for more robust underwriting of risk to encourage the private sector.
He further stated that the road ahead in the era of competition and the existence of myriads of systems of doing business is challenging, and the country has to make adjustments along the way. “We shall continue learning, understanding, and incorporating approaches and instruments that could be effective in engaging the private sectorknowing that the sole effort of the government and some finger coned partners of it would lead nowhere.”
As Ethiopia moves towards adoption of the institutional strategy on private sector, it is committed to remaining nimble and flexible thereby meeting the ambitious target it has set for itself. As far as the active involvement of the private sector is concerned, a number of aspects have to be taken into account. To mention but a few, business-led initiatives, such as research and development partnerships, knowledge-sharing platforms, technology and skill transfer, and infrastructure investment have the potential to kick-start development thereby reinvigorating productivity gains, generating better quality jobs, strengthening skills and promoting technological advancements.
It is inevitable that challenges exist in due course of maximizing the private sector’s role in economic development. Besides, businesses often work in difficult environments where corruption is rampant, the rule of law is not enforced, and infrastructure and services are poor. As to him, still, the private sector is often an agent of change and a potential partner for implementing the farsighted goals of the nation. This move is worth appreciating, indeed!
Small and medium-sized enterprises (SMEs) often lack the resources to invest in innovation to fuel productivity and development, he said adding that strengthening SMEs may help drive these processes and foster local entrepreneurship, create skilled employment, and promotes knowledge- and technology-transfers.
Needles to state, the active involvement of the private sector is key for increasing productivity, attracting investment and creating better job opportunities. Ethiopia has shown that it is possible to narrow that gap, with the private sector contributing greatly to strengthen skills, improve education opportunities and rehabilitating as well as reconstructing institutions in war affected areas. Thus private companies in the country have partnered with national universities to make a difference in all aspects, he underlined.
Doing business and doing well are not mutually exclusive. Profit-seeking and sustainability objectives can align. To better mitigate risks and realize the benefits of private sector action, informed dialogue among policy makers, the private sector and all concerned businesses entities is quite crucial to make a difference.
Through this frank exchange of knowledge and best practices on doing business in emerging economies, both public and private sectors can better define their contributions to mutual interests. While the private sector can be the engine of growth, innovation and job creation, government’s effort to establish stable and supportive environments needs to be well focused, he underlined.
The consistently high economic growth over few recent years has resulted in positive trends in poverty reduction in both urban and rural areas. Furthermore, conflicts in various parts of Ethiopia risk undermining the economic and social development progress the country has achieved.
Ethiopia’s main economic development journey on a sustainable basis is of instrumental in accelerating poverty reduction which both require significant progress in job creation, as well as improved governance, to ensure that growth is equitable across society.
As food insecurity is growing due to adverse weather events, locust invasion, conflict, and global conditions leading to high inflation of food prices, the commitment of the private sector more than ever before is seriously needed.
True, he said Ethiopia has a fledgling private sector, whose growth and job-creation abilities have been hindered by constraints in the business climate and competitiveness. No doubt, as Ethiopia’s growing workforce puts pressure on absorption capacity of the labor market, necessitates improving current jobs, while creating sufficient new jobs, promoting private sector involvement it timely and decisive.
The private sector helps reduce poverty in Ethiopia by creating employment and generating income, providing essential consumer goods and services, and investing in infrastructure. Although Ethiopia has grown over the past three to four years at impressive rates, the challenge going forward is to promote the growth that is inclusive and sustainable.
According to Amanuel, to achieve economic outcomes that lift greater numbers of people out of poverty requires a vibrant private sector in which micro, small, and medium size enterprises thrive alongside large firms and labor intensive activities can also flourish.
The private sector can also support the development of regional value chains, where manufactures that heavily rely on embedded and embodied service inputs source such inputs locally in the continental market, creating jobs and adding value.
As the banking sector, non-bank financial institutions and fin-techs have important roles in private sector financing, they have to run in a very organized and properly managed manner. The private sector thus presents an opportunity for firms to access finance and increase firm competitiveness and productivity which in turn help the nation record remarkable economic achievement for real growth and lasting change.
The Ethiopian Herald December 21/2022
