Ethiopia is being hailed for its inclusive development model and for its fast economic growth. Its forthright Prime Minister, Meles Zenawi, speaks to New African about lessons drawn from the East Asian model, and the impact of the global economic crisis.
Q:Ethiopia has a unique historical, cultural, and federal lineage in Africa. With this in mind, what has characterised your own development philosophy in Africa?
A: Our approach has been based upon the concept of democratic development. Essentially, the concept hangs on the prudent combination of market forces and state intervention, where the state plays a leading role not only in providing infrastructure and basic services, but also in providing the right conducive environment for the development of productive and manufacturing capacities. For sure, the experience of a number of East Asian countries supports the validity of our approach.
Q:Do you believe the growth of democracy and development in Ethiopia should run in tandem, or do you think these two facets should be sequential, and separate?
A: I think both are processes, and like all processes they don’t mature unless you start early. I see no inherent conflict between the two, indeed, one can reinforce the other, such as, a democratic system enabling the population to play a more active role in terms of releasing their productive energies, and in terms of ensuring social equity.
Likewise, you have to have equitable development in order to have sustained development. And while it is possible to have equitable economic growth under non-democratic systems, as seen in some East Asian countries, we believe that development can only be firmly entrenched and sustainable if the people are empowered to have a say on the matter. So I see no conflict between the two, and consider them as processes that mature over time: in fact, the faster the better.
Q:Let us discuss the land issue and the policies on agriculture and land. How are you going to meet the objective of boosting agricultural productivity while ensuring locals are still able to secure the benefits accrued by large-scale foreign agricultural investors?
A: One of the unique things in Ethiopia is that prior to 1975, we had perhaps the only properly feudal land ownership system on the continent. The system was replaced by a very radical land reform programme involving the nationalisation of all rural land and its distribution to small-scale farmers. We decided to build upon this system.
It is an essential part of our constitution that land is state property. That means that in the highland areas where most of the people live and work, where there is a shortage of land, farmers have the right to use the land indefinitely and can pass it on to their children; but they cannot sell it because they don’t own it. That has extremely limited the concept of landlessness in Ethiopia. Only the young people who were not allocated land in the original distribution round might fall into that category.
We have large tracts of land in the lowland areas that are unutilised and very sparsely populated. Our agricultural development is based upon three key pillars; the overarching idea is that agriculture should lead economic development in Ethiopia, and this will subsequently lead to industrialisation. Initially this policy was not universally popular amongst our development partners. But I think it is now the agreed and accepted method of lifting the rural masses out of poverty.
We have discovered the key to this strategy is small-scale farmers, and improved productivity in the small-scale farming sectors. In the highland areas where we have a shortage of land, we also promote intensive commercial farming, meaning the flower and horticulture industry, which is more land-intensive than small-scale farming. In fact, you can have more than 20 people employed on a hectare of land. This constitutes the second pillar of our development programme.
The third pillar is large-scale commercial farming, which involves providing a long-term lease, between, say, 30-40 years to commercial farmers, both domestic and foreign.
However, the centre of our agricultural development is not large-scale commercial farming, it is small-scale farming.
Q:It sounds very much like an ongoing process of transition – not just in the agricultural sector but also in terms of the relationship with large and small-scale enterprises from all industries. What is the strategy to grow the SMEs in Ethiopia, in order to aid and speed up this transition?
A: We recognise that while the state must lead, it is the private sector that is the motor of growth in our economy and we continue to believe that the state should work to empower the private sector, to beef up its capacity. Most of our economic programmes are specifically designed for that. Without power, roads, water, and communication, you can’t have a vibrant private sector. I believe we have one of the most ambitious infrastructure development programmes on the continent.
We also have to provide trained manpower for the private sector, for it is from this that entrepreneurs will emerge. So education is a key component of our development agenda. And actually, we have significantly increased resources to higher education, not just primary education, which is crucial, but will not on its own be sufficient to unleash the potential of this country.
At the same time we expect the private sector to play by the rules, and one crucial aspect here is paying their taxes. That is something that is not yet, culturally speaking, fully accepted within our private sector. Paying taxes is not seen as a duty as it is in most western countries.
Q:I’m glad you brought that up as in meetings I have had with local entrepreneurs and private sector organisations, they claimed that the level of taxation has become stifling. How do you respond to this?
A: Well, you can look at it from two directions. First, you can look at taxes from the government’s point of view. Tax receipts form only 11% of GDP, one of the lowest levels on the continent. You can also look at the marginal tax rates, which are in the range of 30%. So I think an objective assessment of where we stand suggests that we tax less than the average African country, which is not because we want it to be so, but rather, because first, in the past most of our taxes originated from state-owned enterprises and secondly, our tax collection capabilities were limited. So we have strengthened our tax-collection capability while at the same time inculcating a strong tax-paying culture amongst our people. So to answer your question, I don’t think that the private sector in Ethiopia is, by any stretch of the imagination, over-taxed.
Q:Major projects are unfolding throughout the country – the Grand Millennium dam and other large-scale hydro projects. Are you hoping that some of these mega-projects have a trickle-down effect into local communities and the economy?
A: I don’t think that the concept of trickle-down is the correct approach. If you expect wealth to be collected and redistributed, that may or may not happen adequately. However if you take a bottom-up approach, where the vast majority of the population is actively involved in creating a country’s wealth, then it automatically means that wealth is being widely distributed.
Hence why the focus of our overall development is centred on small-scale farming, in which 85% of our population live and work. Similarly, in urban areas we focus on small-scale and micro-enterprises, engaging the vast majority of our population in entrepreneurial activities. By supporting these initiatives, you are effectively redistributing wealth.
This has been our approach and the latest statistics I have show that Ethiopia has one of the most equitable economies. We are obviously not the richest, but we do not have the inequality and wealth disparities of other emerging and developed markets.
Q: What’s your view on the current competition to attain resources from Africa?
A: I think there are two aspects here; the emergence of China, India and the other BRIC countries has dramatically changed the dynamics. The demand for commodities has given us a window of opportunity to benefit from our natural resources.
Whether we make effective use of that opportunity is a separate issue, but the opportunity is there. The emergence of this new international force has increased the competition, and from Africa’s perspective, choice and competition are certainly better than monopolies. So, having various partners puts us in an advantageous position; we just need to use this to our advantage. In Ethiopia we are trying to do just that.
Q:In light of the current economic crisis and slowdown that is having global ramifications, what risks do you think the crisis poses to the developing world and indeed, Ethiopia?
A: Well, there are two potential risks, the first is, there is a risk that the demand for our commodities may go down and demand for products from our agricultural and manufacturing sector may also decline. The flipside is a fall in the price of oil from a global downturn may benefit many African countries, including Ethiopia. And the fact remains that in the 2008 crisis and slowdown, the negative impact was not as pronounced as initially feared, so even now it is possible that Africa could bounce back quickly, especially if demand from the BRIC countries remains strong.
Q:Another concurrent event has been the uprisings in several North African countries. What, if anything, do you think other leaders in sub-Saharan Africa can learn from these events and their consequences?
A: As you know, in the early 90s, we had a bit of a sub-Saharan African Spring. It was in the 1980s that the one-party state in Africa wilted and collapsed. With the support of the international financial institutions we embarked on a new liberal course, both economically and politically, across the continent. The results of that new liberal experiment on the continent have been mixed, but it’s an ongoing experiment that seems to me to have caught up with our brothers across the Sahara, and as latecomers to the game, they will add their own unique contribution to that experiment.
So I don’t think that this will be a completely new game for sub-Saharan Africa, because in essence, I think we have been going through it in our own way for almost three decades now.
Q: My final question relates to your legacy as prime minister. What would you like to envisage that “your” Ethiopia can achieve in 10 years and what do you hope will define your legacy as prime minister?
A: Well, we have a national vision of an Ethiopian renaissance, because we had a glorious past. We hope to replay that glorious past in the current environment and under present circumstances. My expectation is that 10 years from now, we will become a low-middle income country, with a flourishing agricultural sector, dynamic industry and well-developed infrastructure, and a very good educational system to match. That’s our plan and so far we are more or less on track.