IGC’s Africa Growth Forum

Am in Addis at the IGC’s Africa Growth Forum. Had the chance to listen/learn from one of the architects of the country’s economic transformation underway.
Some tough choices had to be made, corresponding to the clear long term vision of a determined leadership. Party politics do not interfere with that vision. 11% growth rate over 11 years is evident in the impressive reduction of poverty over the same period, expanded access to quality education, an industrialisation strategy that is home grown and not victim of the latest development fad, and so on. Despite grumblings of my friends from the Ethiopian Diaspora, their presence is visible in the dramatic expansion of the private businesses in the services sector.
Ethiopia is not a mineral rich country but has good arable land and people to add to the above. A huge population approaching 100 million with a capital city of 3.5 million is mouth watering for setting up any service enterprise with low unit costs.
This brings me to my latest conundrum from our small economy in Salone. How can we promote businesses that must be competitive, if we keep raising wages in both the public and private sectors? Before my economists friends retort that the answer is raising productivity, could someone please calculate the discrepancy between labour productivity in a few sectors and wage rates? How can we promote private sector when we do not allow market forces to set the price of labour?
To illustrate, very soon firms providing security services in Freetown will be forced to retrench workers as the cost of their services has now doubled since the start of the year. There has been no change in the quality or quantity of service, but by edict the price doubled overnight. The same is true for most small businesses and Labour officers now intensify the pressure (parliament too!) that minimum wages be applied. Combine all of the above with Ebola and you undestand why some businesses are thinking of, or moving to Liberia.
Conclusion, we must keep our long term vision constantly in mind as we adopt short term policies. Ethiopia has mastered the art. But there are so many more lessons to be learnt from the Ethiopian experience.