Why the Rush to Sell National Assets of Ethiopia?

Addisu Tesfa

September 10, 2020 

I am writing this article in desperation. Desperate because I feel that the Ethiopian government is rushing to privatize the telecom sector without first thinking through the long-term impact; lest building the necessary infrastructure and capacity to manage and regulate it.

The absence of any dialogue about why, when, how, who, what; is not only a recipe for disaster but is frightening. As an insider and as a person who spent half of their life in Telecom; I am appalled by the huge gaps I am witnessing in the current process and except a few, most of the people that are at the helm leading the charge.

I am in-fact seriously questioning the readiness and capability of the Ethiopian government in its rush to privatize the Telecom.

Before we even get into the how, I also want to discuss the why question; in the hope of initiating a true dialogue as to this wholesale thinking of privatization or nothing mentality.

First, my disclosure. I am not a politician nor am I a socialist demagogue. I am not a bought and sold government or corporate agent hence just an average concerned citizen.

Why should Ethiopia privatize the telecom?

Privatization, and Opening up for competition are two related but different concepts while discussing this topic.

Our government is selling part of the incumbent Telecom by seeking a 40% foreign partner to come in and help the telecom modernize. In this assumption, the partner will bring among other things a robust Capital, technology and Management Knowhow.

Our government also is Opening up the telecom sector for foreign competition so that two additional FOREIGN OWNED operators can come in and provide telecom services in the country bringing Capital, technology and management knowhow.

In both cases the government calls privatization is nothing but selling part of the country’s existing telecom business (40%) and also inviting FOREIGN operators to come and setup shop for an initial sum.

Let us look deeper be very optimistic. AS the argument for doing so is based on the assumption that the new foreign partners and operators will bring in a huge improvement in capacity, delivery, customer service and overall performance.

For the sake of being realistic let us mention names and see if all the assumptions are true.

Let us assume that Ethio-Telecom sells 40% to ORANGE AKA France Telecom  Since there is an abundance of foreign and semi foreign consultants in and around Arat Kilo now a days, (I call it foreign insurgency via UNDP), it somehow makes sense to also assume that they are indeed the front runners.

Orange of-course will bring management knowhow to the telecom and also pay a certain amount (for the 40% equity) and will now be guaranteed to own 40% of the nation’s de-facto telecom monopoly.

Orange will also get at-least $250 million Dollars a Year as a reward for its capital and efforts (based on 40% of the telecom’s annual earnings) in perpetuity.

In return, Ethiopia gets a few dollars initially; let’s speculate One Billion dollars (for the 40% stake) that will be immediately spent by the government on other “Important” goodies from the FOREIGNERS (Shopping list already prepared and handy). 

The telecom will also get Foreign expats and Foreign management that will dramatically transform the company and improve it and make it a world class operator. (or – an African class operator.)

The partner (Orange) is also assumed to bring new technology and build out the Infrastructure to a level unseen in sub-saharan Africa.

The Competition:

Let us also assume that MTN is the other player who would come in and setup shop in Addis Ababa. 

MTN will buy an operator’s license for a certain sum (Let us assume 300 Million USD) and will start business in a very short time by piggy backing on ETC’s infrastructure. The company is assumed to bring in superior technology and Management experience it has into the Ethiopian market.

MTN may probably get a good share of the market and earn about 100 – 150 million USD / Year once established and operational.

Technology:

None of the players that are vying for the business own the technology they use. The back-end infrastructure is supplied by the Ericssons, Nokia and Huwawei’s of the world.

None of the players will not invest in the latest and greatest technology on par with the rest of the world as the “Market may not support it”. hence most probably 4G and 4G LTE and maybe after 5-10 years 5G is what they will deploy.

Investment:

All of the players are assumed to bring investment into the sector and spend significant amount of FOREX to import the necessary equipment to the country.

If we further take Capital and breakdown the numbers, the amount of capital infusion compared to the amount that is projected to leave the country in 10 years will be approximately as follows:

Over the next 10 years, the cumulative net capital outflow will be close to a Billion dollars. ($875,000,000.00)

Management Knowhow:

All of the players are assumed to bring management and operational skills to the country. To simplify the whole scenario and get to my point without writing a book or two, all the rest is almost non-consequential as the telecom can also acquire the necessary equipment from the vendors as well.

what Ethiopia is assumed not to have and more specifically ETC does not have and what these Foreign companies bring to us are:

Management knowhow and operational Skills

Hence For a handful of expats with a couple of billion dollars to come in and plant a syringe for sucking money out over the coming decades, we are willing to pay 1 Billion or more over a Ten-year period. If we extrapolate over 25 years, it is a monumental capital outflow. Since they are out of this earth and superior to our Ethiopian minds, and since we Ethiopians do not trust ourselves or any other Ethiopian to do what they can do, we would rather bring the foreigners.

So far this is what it comes to, as the rest of the argument about better management, customer service, knowhow, technology, capital and mere foolishness are all mixed up into a generic name called privatization.

Do not get me wrong, what I am proposing is not whether the government still should manage and own the telecom and whether the telecom should or should not be privatized. What I am asking all of us to do is just think it through. Take the time and dialogue. What is best for the country in the long term? What else can we do?  Do we even have the right knowledge and infrastructure to administer it? 

What is the expected net inflow and outflow of capital? How about our national interest? Have we considered all that need to be considered?

All these questions should at-least be discussed, reviewed and rehashed before decisions are made instead of asking for comments after the fact. I am sure there are a few consultants and so-called advisors hired by our benefactors’ money helping us formulate the rules and facilitate the process. I am also sure that they will call a bunch of us for window dressing and a bit of a media exercise. Since the benefactors’ interest is not Ethiopian interest, they of course will do whatever it takes to get this going the way our “benefactors” and “Development partners” want it to go.

Have we all considered Corporatization? Giving a chance for Ethiopians to own and operate it instead of foreigners? Is it not supposed to be owned by the people anyways?

If we truly believe that we can achieve anything as Ethiopians, why not first open the telecom business up for Ethiopians and let the market nurture and grow Ethiopian operators and then open it up? 

Think of it. wouldn’t we all be better off to have Ethiopian owned businesses in the long run? 

Almighty god willing, I will follow up with part two of why I am questioning the motive, readiness and capability of the Ethiopian government in its rush to privatize the Telecom.