For three years now "Privatisation" has been the favourite word of almost everybody in town. The press, especially, the private free press accuse the Ethiopian Privatisation Agency (EPA) for being secretive. The unions accuse it for being shoddy and even corrupt. The rumour duct (mostly fanned by government agents) had been singling out names and connections in relation to certain deals. This all was no surprise to me, because, I knew how the Agency operated and how decisions were made, especially in the earlier years of the program. I was somehow involved in the task during those years.
What really surprised me most was the way the Agency and the government chose to "react" to all these allegations and accusations. "Silence" was the rule, and anything else the exception. Ato Beshah, the then GM of the Agency did try to respond to some of the allegations, he also defended the EPA at the parliament. Ato Assefa, the then chairman of the EPA board, also attempted to clear the dust at a couple of workshops and seminars organized for evaluating the progress of the programme. But nobody uttered a word on this issue, especially, from higher quarters of the government. The Prime Minister and his deputies in particular, who happen to be the prime movers of the reform program and the overall superiors of the EPA, were notably silent. The IMF and the Ministry of Finance, the supreme controllers of the whole programme, were also quiet. (Incidentally, the IMF people know exactly what happened--who did what, who knew what, who was responsible for what, etc.--and hopefully will come forward and say so someday.)
Aware of the time, money and efforts spent in implementing the Economic Reform programme in general, and the privatisation program in particular, I was amazed at this inexplicable attitude and behaviour of the people concerned. I really felt bad about the situation, and got worried about the future of the entire programme. Though, I am out of the government now, I always believed and still believe that reform is not a matter of choice in the Ethiopian situation. It is indeed a matter of necessity-more so for privatisation. As I see it, is one of the few windows of hope, not only for the survival and continuity of existing state owned businesses, but also for the attraction of foreign investments to the country.
Given the general attitude of the current government towards public enterprises, which is characterized by indifference, neglect or even apathy, and the imposition and controls made by the real Bosses (IMF/World Bank) there is no future for them in the hands of their current owner, i.e., government privatisation is all about finding a better owner for these businesses. Considering the worsening situations of the bureaucracy, privatisation creates easy/early access to business free from the entanglements related to land acquisition, infrastructure, licensing and construction, for all investors in general and more so for the foreign ones. Despite my concerns, there was not much that I could do. I was left amazed and sometimes puzzled. A few months ago, right after the crisis in the EPRDF leadership, the rumours and allegations of corruption within the EPA touched the ceiling and right away the GM and the chairman of the Agency were arrested and later charged with corruption.
Since then, I got keenly interested in the whole story and drama that unfolded gradually. Looking back to my days in government and my involvement in the EPA, I had and still have reservations on the way things were done. With the benefit of hindsight, I can see that there was a lot of room for improvement, mainly, in the areas of ensuring wider participation, transparency, planning and control. Rather than a national program designed to fit and augment the overall reform program, the privatisation program turned out to be a matter of fulfilling IMF's benchmarks and ensuring the release of funds on time. In the decision-making environment, urgency and expediency were permanent norms and not exceptions. A little bit of planning and national autonomy vis-à-vis the IMF would have saved a lot of trouble. Still, from the way things are unfolding now, I don't think anything would have saved the two gentlemen from going to jail. Plan or no plan, mistake or no mistake, I have no doubt that they still would have ended in jail. I say this, not because, I know of any crime committed by these gentlemen, rather, I am sure that their imprisonment has nothing to do with what they did but with who they are/are not.
Recently, few months after their imprisonment, I saw several names in the list of the prosecutor's witnesses that will testify against, Ato Beshah and Ato Assefa. I know most of these people and understand the terrible dilemma they find themselves in. People who don't know the ordeals of life in the bureaucracy of the Ethiopian civil service may wonder why. Well, let me enlighten them. On the one hand, the hand-to-mouth livelihood of the average civil servant essentially makes him/her dependent on the powerful government elite for day-to-day survival and thus any action contrary to the liking of these powerful persons of the time would surely result in the loss of that meagre livelihood. On the other hand, the implications of abetting the government's patently clear political case and testifying falsely to save one's skin/livelihood would weigh too much for most to bear. I thus find myself even more responsible and morally obliged to share what I know and set the record straight. I truly believe that these two gentlemen are not only honest and professional, but also clean from the crimes accused of. It, therefore, is a great weight off my conscience to say something in defence of these poor victims of the usual political drama played at innocent citizens cost. Due to my limitations in involvements, my reference will be limited to what happened until 1996/7. Beyond 1997, I can only speculate. Moreover, in order to be as objective as possible, I shall limit myself to the general domain and refrain from dwelling on specific issues or transactions.
2. Preamble
Right after its inauguration, the transitional Government wasted no time in looking for ways and means of mending the bankrupt state of the economy it inherited from its predecessor. Despite its ideological preferences/biases, the EPRDF had no other choice than applying for the support and guidance of the IMF and the World Bank, who by then have already established their international dominance and unchallenged arrogance. After the usual exchange of notes and visits with the IMF, a general framework was worked out and agreed upon, but both parties and finally signed in 1992/3. In documents that they call "Policy Framework Papers" (PFP) measures to be taken by different organs of government and in different sectors were listed along with due dates and benchmarks. Controlling parameters, reporting formats and time schedules were laid down. Controllers where assigned. Rewards and penalties were attached to good and bad performances, respectively.
The controller, from the Ethiopian side was called the PFP group. It was headed by the Minster of Finance and consisted of the Governor of the National Bank, the Minister of Economic Co-operation and the economic advisors of the Prime Minister (notably Ato Nway G/ab, Ato Fantaye Biftu, Dr. Mulu Kesela, etc.) This PFP Group was a member of a bigger group called the "Economic Reform Task Force" (ERTF). This ERTF, chaired by the Prime Minister himself, essentially consisted of the entire cabinet plus an army of experts and advisors. The Office of Economic Affairs Sector in the Prime Minster's Office (PMO) was the secretariat of the task force. Thus as the focal point for all reform related activities, the ERTF was the supreme decision maker. All debates of whatever type were ironed out here, with the cabinet finally formalising the occasions. Every executive on the implementing front, reported to this task force.
3. The IMF and the Privatisation
Privatisation came in to the picture of negotiations between the IMF and the PFP group, as a natural continuation of the "Public Enterprises Reform Program" (PERP). The whole public sector was reorganized and restructured, with the main purpose of creating new and viable businesses out of the different corporations and their controlling ministries. After proving their viability, the enterprises were bound to be privatised, sooner or later. Within this general framework and understanding, the bulk of restructuring and reorganizing the public sector was almost done by 1992/3. It was, therefore, agreed to launch the privatisation program by early 1994.
Hence, it was specifically agreed and benchmarked that the Agency be established by 1994 and at least 29 hotels and restaurants, 120 retail units, some more construction units and pharmacies be privatised by June 1994. This being the first phase of privatisation, other phases were to follow after it. Accordingly, the proclamation establishing the Ethiopian Privatisation Agency (EPA) was enacted on time (February 1994). The first Board chair, the then Head of Economic Affairs at the PMO and secretary of the ERTF, Ato Tekeste Berhan G/Michael, was designated and Ato Beshah Azmetie, appointed as the General Manager. Still, in June 1994, when the due date in the agreement elapsed, not much was done in terms of actually privatising the businesses. This meant default or disperformance and entailed penalties in terms of withholding badly needed disbursements. This created a lot of panic in government circles. A delegation went to Washington DC, and gave explanations and literally begged for an extension (mercy). The target unchanged, the due date was extended by a few months, until August 1994.
This time, stern warnings and instructions were given to the EPA to sell the said businesses by specific date. The then Minister of Finance is reported to have said (in the presence of the PM at the ERTF's meeting) that the value of these targeted enterprises is not worth 1/100th of what the IMF withhold due to our failure in selling these enterprises. Thereby, the EPA was instructed to issue tenders immediately without making valuations or other necessary preparations. This instruction to sell at any price without making valuations is captured in the 3rd Minutes (see adjacent Reference) of the meeting of the Board of EPA done on July 1994, (Hamle 27, 1986). By August 1994, not much has changed in terms of results. Another delegation went to Washington, and received another extension of a few months. The due date now moved to December 1994.
As usual, nothing changed by December 1994. This time, it is not the PFP group that went to Washington; rather the IMF group came to Addis. It was as if hell had fallen upon Arat Killo. This time, it was no more an issue for the small ministers to play with. It became the single most important issue in the government. The then President Meles Zenawi, his advisor, Dr. Kassu Yilala and the then Prime Minister, Tamrat Layne took charge. Ato Tekeste Berhan G/Michael got sacked. A new and young graduate from London took over the chairmanship of the EPA. From this point, it took all the top people involvement to persuade the IMF for anther extension.
The IMF agreed to extend the due date by 45 days, i.e., up to February 1995. But it also came with a longer list of enterprises to be privatised in a series of tranches, starting by February 1995 and running up to June 1996.
4. The First Phase of Privatisation
What I call the first phase is the operation specifically run to fulfil the repeatedly extended targets of the IMF. It covers the period between February 1995 to December 1995. Right after accruing the last extension from the IMF:
a) The lengthy and futile discussion with the trade unions was concluded with "a leave it or take it" ultimatum issued by the government.
b) Tenders were issued immediately without any reference to floor prices but with a mere list of assets involved, list of the employees and a sample contract attached.
c) Simultaneously, various experts were recruited from different sectors and tasked with valuation of the assets tendered for sale, and,
d) The effort to properly establish and strengthen the Agency gained momentum.
The first four meetings of The EPA Board, under its new chairman, Ato Assefa Abraha, (Minutes # 7, 8, 9 & 10) (see adjacent Reference) primarily dealt with the:
This was how the first sales contract or decision was made. This process of issuing tenders while simultaneously conducting valuation of assets, and then evaluating offers against valuation reports, before submitting the decision was the standard modus operandi for almost a year since February 1995. Although the operating vehicle was stationed at the EPA, (i.e. most of the paper work, technical discussions, contract signing etc.) actual decisions were made at the PMO. Since the Agency was not properly organized and staffed by February 1995, (there were only the GM of EPA, a few secretaries and one or two assistants), the first tender documents were actually prepared and duplicated at the PMO.
The Prime Minister, the President and his advisor (i.e., Ato Tamrat, Ato Meles and Dr. Kassu) were activity involved in the decisions and operations of the Agency. They regularly received current minutes of the Board, oral and written reports and routine briefings from the Board and/or its Chairman. Feed back from the Bosses was reported back to the Board, usually through its Chairman. Most of these were minuted on the reporting day. This up and down flow of reports, decisions and feedback insured harmony and understanding between the two bodies. It also inculcated a lot of confidence and trust into the process. Accordingly, improvements and modifications were made on the modus operandi itself. Notable is the decision to declare floor or indicative prices on the tender documents and request bidders to quote their prices accordingly. If prices are named as floor then only offers above this figure were to be accepted if, however, prices were named "Indicative" any offer will be considered . This improvement was made, primarily, to assist buyers make a fair decision, for most of them were unable to make their own independent valuation. The Board allowed this improvement on its meeting held on July 3, 1995 (Sene 26/87, Minutes #21) (see adjacent Reference).
5. Privatisation and Restitution
Exactly a year after the enactment of the proclamation establishing the EPA, Parliament enacted another proclamation on the restitution of "illegally confiscated" properties. It is a proclamation that obliges the government to return all properties illegally confiscated by the previous regime and that are in the hands of the government, to their previous owners. This includes residential and office buildings, cash at bank, vehicles, farms, industries, business establishments, etc.
The responsibility of implementing this proclamation was vested on the EPA. Restitution being a long overdue issue for most ex-owners of many properties, this proclamation opened the Pandora box and the Agency was flooded by tens of thousands of applicants. Almost immediately, claims were filed on most of the businesses earmarked for privatisation and even on some of the ones already floated for bids. Although the Agency was not yet ready and capable of reviewing and deciding on these claims, it became evident that this proclamation demanded a complete halt on the privatisation programme. A requirement, totally inconceivable, under the then prevailing sense of urgency and pressure by the IMF. After consultation with the Bosses at the PMO, the Board adopted that:
By Sept.1995, almost everybody was relieved that we made it through. Hence, a meeting was called by the newly appointed Prime Minister, Meles Zenawi (the ex-President) and his two deputies, Ato Tamerat Layne (the ex-Prime Minister) and Dr. Kassu Yilala (the ex-advisor to the President). After reviewing the operations of the previous six months (Feb-Sept., 1995):
The Board began by reviewing the progress thus far and immediately initiated the preparation of guidelines for handling restitution applicants, privatisation and compensation manuals, as well as a revision on the valuation guidelines. The valuation guidelines were specifically reviewed with the intention of lowering the valuation results (floor price) because the Agency was always criticised for over-valuing the assets. In tandem with the preparation of manuals and operating guidelines, the sale of assets or privatisation gained pace.
7. Concluding Remarks
As I have stated at the outset, my intention is not to write a report on the whole program of privatisation in Ethiopia. I am just trying to discharge my obligations by helping bring out the truth of the circumstances being described about the privatization process. By so doing, I hope to have given some support and encouragement to my former colleagues who have been called by the "Anti-Corruption" Commission to testify against Ato Assefa and Ato Beshah. Vague as they are, I have found it difficult to comprehend the charges leveled against these individuals. Besides my problem in comprehending the charges, another bigger problem lies in understanding the whole drama.
In this operation of many years and involving many people, both on the selling as well as buying end, why were these gentlemen selected? Of the tens more similar privatization transactions, why were five transactions and only two businessmen, (those presently imprisoned), chosen? When it is evidently clear and well known to the Bosses that nothing has been done that they didn't know and approve of, why did they initiate such ridiculous charges? If indeed crimes have been committed, who really is responsible? Why are they letting it continue? Is the government trying to kill the privatisation programme, while claiming to be more "pro-reform" than ever? Or may be Ato Assefa has fallen victim to the political wrestling match targeted at his brother, Ato Seye, one of the dissidents of the ruling party? I cannot provide clear answers to most of these questions, but I shall clearly state that I have no doubt about the honesty of the defendants. Mistakes? Yes, may be some. But deliberate corruption and abuse of power are just out of the question.