My Take on privatization

Source: https://www.satenaw.com/my-take-on-privatization/

By Yoseph

 First and foremost, it is in my wildest dream to see such reform to happen in Ethiopia in a very short period of time and my fear was due to the complexity of the problem and dependency resisting the system will create chaos and disintegration and always recommend to move to a better administration gradually. Thanks for the wise new leadership team Lemma and the kudos to Kerro, Fanno, Zarma etc. who are driving their own destiny. Who knew!! We are grateful to our new Prime Minister Dr Abiy Ahmed as many says it is a God send. Please all of us let us help to support and use this opportunity and time to improve the lively hood of Ethiopians.

I want to put down my take on the upcoming privatization, the objective to relive the government owning and running business is correct in principle. However, the time and steps taken are important to maximize the benefit for the nation and not to be blinded to solve the short-term cash shortage which is also driving this initiative.

However, taking the current economic development of the country extreme care and selectivity is required during privatization and transferring of the public property to private and foreign ownership.

I want to be specific to each sector and business of public property transfer. First and foremost, the interest of the country and the public must be guaranteed during this transfer of privatization.

 

Ethiopian Airlines and Aviation in Large

Some of the motivation to privatize a company is, because such companies are mostly professionally managed organizations, strive to be profitable, able to raise capital to grow and can have a knowledge transfer from the acquiring company etc.

Let us ask ourselves, is not Ethiopian airlines managed by professionals? Is not ET making profit? Is not ET able to raise capital to grow and expand? Is not ET introducing new technology and compete with the industry leaders? What additional benefit will the airline get if privatized?

Airline business is capital intensive and the aircraft assets depreciation is dramatic once delivered from manufacturer efficient utilization of the aircraft for return on investment is paramount. Think of 360 million USD a pop for a wide body aircraft like Airbus 350

and it is heartwarming ET is one of the world airline to own and operate such aircraft and by itself is a feat kudos.

However, it is not the aircraft for a nation important it is the traffic right to land from its cities to a foreign city and vice versa which is the most precious asset. There is no foreign owned US based airline carrier in USA the same for Canada or for that matter in Europe. After the airline (ET) survived and strived all this tumultuous year selling the company and handing the landing right for a foreign company will be an excusable crime or injustice. In fact, it is the government responsibility to allow and flourish local private owned carriers and share and distribute equitably the landing and departing traffic right among ET and these private companies with various foreign governments signed bilateral air agreements to fly to different cities abroad. If the government want to go out from owning an airline gradually ET can float share that can be bought by Ethiopians and Ethiopian born and allow it to be owned by its citizen.

Definitely there are areas the airline can partner with other companies to grow for instance the joint venture with DHL still here also carefulness is required not to give everything for short term benefit during negotiation of the partnership.

The other area the airline can partner with a strategic foreign investor is in aircraft maintenance service specially partnering with aircraft manufactures as a separate business is a good strategy. Middle East aircraft maintenance service like GAMCO are profiting by ET and the likes carries trained professionals. ET trained aircraft technicians are an asset to attract a strategic partner to build a state-of-the-art maintenance center and cater for Africa and middle east carriers beyond ET’s aircraft maintenance. In this age of aircraft technology where the fuselage of the aircraft is made of composite material instead of aluminum there are not many centers that maintain the new composite materials. ET can partner to build a center to maintain these modern composite materials and the same can be done building a jet engine maintenance center. Point to mention is as we all know how ET B787 nose gear collapsed aircraft is maintained and the debacle of the grounding of the dream liners due to the Rolls-Royce Trent 1000 engine issues urge to be one step ahead of the game.

Also, the current activity of the airline partnering with other industry leaders manufacturing aircraft parts and components is a good start and commendable and should be encouraged to intensify on this endeavor. A couple of decades ago the airline started to assemble small aircraft specially for agro dusting that was not a bad plan maybe it is good to reconsider similar plan and manufacture parts as well.

Definitely the Hotel building and owning venture of the airline can be partnered with a foreign operator and is fitting for its business. The various airline groups such as catering, aviation academy, airport handling can benefit from strategic foreign partners.

ET has a bright future ahead of its trailblazing African aviation partnering with African nations building their aviation by partnering African sovereign governments and private investors. Such south to south cooperation should be encouraged and beneficial for Africa in general and formidable venture and wish you well on your endeavor.

 

Electric Power Generation Distribution

Ethiopia is one of the most endowed African nation specially on hydroelectric power generation potential. In my opinion care should also be taken in privatization of this industry.

In my opinion all, hydroelectric dams built and owned by the government should continue to be owned by the government and can be run by efficient management without the government interfering the management and can service the debt like ET operates. For sake of transferring the ownership from the government to private, shares can be floated to the public and the citizen can buy, and gradual ownership can be transferred to the public. One good start will be kudos for all Ethiopians who bought bond for GERD construction instead of returning the bond money with interest if the bond holder chooses, to convert the bond to own GERD share that way the public will be the owner of the dam itself. Specially this reward early investors who bought the bond to build the dam the nation awaits for fruition.

New dams can be built by any capable private company and produce energy to sell and this has to have a time limit. The same as the case which has a time limit of the geothermal power generation signed by the government and the Icelandic company which expire after ROI.

Power distribution and management can be done in government private company partnership and the objective of this venture should be for knowledge transfer and capacity building and the long-term plan on this sector shall be to buy out the foreign company and replace it by local private investors in the long run. The partnership with the foreign company should have a time limit clause so that the it can be phased out after achieving the required knowledge transfer and return of investment (ROI).

 

Telecom and Communication and IT

When I saw news stating that the greatest prize of Ethiopian privatization is the telecom, Ya the “Ayer be Ayer Negade” cannot wait to win the prize ha ha!. First of all, first line bidders will be MTN owned by Vodafone, some from Middle East and it is mentioned in the news Vittel which is a Vietnam company is also interested. Wow time for the vultures to win their trophy!

The first thing is all these major capitalist nations like US western Europe push poor developing nations to privatize their infrastructure and put them in a vicious dependency. French groomed Cote D’Ivoire (Ivory Coast) door to door water distribution, electric power generation and distribution is owned and managed by French company and this is what privatization is for the capitalist. Poor Ivorian are paying in foreign currency for the water they drink, and energy generated in their own sovereign land. All west African Francophone nations to maintain their regional currency CFA (west African franc) they pay every year billions of dollars to the French Bank because the central bank is in France what a farce. No wonder the French government spend its time and energy to oust the President Gbagbo few years ago who stand against such hegemony.

The point here is all nations that recommend telecom privatization take USA like the airline no foreigner can establish a telecom company in USA. All US giant telecom companies are American owned companies. The same in Canada, UK British telecom, and Vodafone, Germany German Post and telegraph, T-Mobile, Sweden Ericsson, Italy Tele Italia, none of these countries have foreign operators. At one time a Canadian telecom company was installing a server in North West of US for its client in US and FBI was involved to stop the operation and this is how protective they are on their own turf. The only exception in US is T-Mobile that came in a back door buying a small company in USA and was able to expand its operation in US and have struggled to survive and even plan to sell and leave USA because of the fierce local competitors.

The whole point is if it is to sale the telecom company to these the likes of MTN or Vittel by the name of privatization imagine a county which has hard currency shortage to import insulin for its Diabetics patients, pay in hard currency for phone conversation and data usage. For voice at one point it was 0.75 ETB per minute I do not see difference between the Ivorian paying in hard currency for the water they drink and paying in hard currency for phone conversation in Ethiopia after selling the telecom to these vultures. If this is your vision in my opinion I would rather live with the problematic current network with on and off network connection and pay in birr only.

One example to this is say Uber is allowed to operate in Ethiopia as it is operating in Kenya and Egypt. In a globalized world business should be free to operate there is no qualm about it. Uber is an efficient system to transport people from A to B, but how can a country like Ethiopia with chronic foreign currency shortage can afford to pay for travel from A to B in foreign currency. There is no choice Ethiopians pay for the fuel burned to transport people from A to B in foreign currency and now we add more payment in foreign currency for the service rendered. Because Uber has to make a profit from the operation and demand to remit its profit in foreign currency. The solution for this is to build Uber like platform locally which does not ask payment in foreign currency. I have heard that there is a start in this idea which should be encouraged. I must like to add one time the executive of Pizza Hut which started to operate in Addis mentioned to say, “We will import all the ingredient and input for the Pizza until we get local sourcing”. Is this your opening up scheme for business what a farce? The best Pizza in the world is made in Italy next best tasting Pizza without exaggeration is the Pizza made in Addis Ababa. As a matter of fact a person who is used to eat an Italian Pizza in Italy will have a hard time to eat Pizza in US. The audacity of the Pizza Hut executive to import the input for the Pizza is mind boggling. More over the decision of the Ethiopian government to allow such franchise to operate is more mind boggling. In the current hard currency crunch importing Pizza by foreign currency and feed the metro in my opinion is not wise and timely.

The ideal partner in telecom sector are not telecom operators which are rent seekers, telecom technology companies like Huawei, Ericsson, Siemens etc., which can partner to build optical fiber network and telecom infrastructure operation and their operation should have time limit after return of investment(ROI). Also partner to manufacture telecom related accessories locally. Once such network is available it can unleash the potential for the IT community to flourish. One of the competitive advantages for Ethiopia having cheap electric energy source, will make attractive for Google, Facebook, and Amazon and the likes to build data center in Ethiopia and easy to find local manpower that can baby sit servers and maintain the data centers. Here the government concerted effort to make this happen is vital. The other low hanging fruit would be to compete, equipped with such infrastructure, is to host customer service and data   storage for credit card companies, airline reservation systems, hotel reservation including hosting the data center. This can be the next step and for that well-trained customer service crew training is essential. This will enable Ethiopians to compete worldwide for such business.

Yes foreign investment is required and knowledge transfer as well, however first of all there is no any private company that come to a country and transfer knowledge. That is against their profit strategy, it is called intellectual property and that is a valuable asset for a company. The knowledge transfer can only happen in universities and research institutes.

This time it is important to be aggressive like China, when any company establish operation in China the first thing the government ask the company is to have a local partner and allow the local partner to learn the operation detail of the company. In other words, to disclose its intellectual property. This require commitment and capable citizens to learn and execute.

 

One big difference between Ethiopia and China is most science and engineering Chinese universities started sending their graduate students to western countries  decades ago and the fruit of this investment is paying for their nation development handsomely. In all western universities science and engineering graduate schools and research centers Chinese are found from department head, professorship to graduate studentship. The only way for Ethiopians to have a knowledge transfer is to straighten the Ethiopian universities science and engineering departments and let the graduates to compete and win to get further education in western university and that is the only way to have knowledge transfer. The new prime minister Dr. Abiy Ahmed first step of acknowledging this year’s university honor graduates and help them to further their studies is commendable and should be institutionalized to open opportunity for the graduates to go abroad and seek knowledge. The diaspora can play a crucial role by teaching in Ethiopian Science and Engineering universities courses by block or virtual presence and help to raise the quality of the education. Having a software engineer prime minister can help to lead the nation to compete in information technology.

The recent achievement of AI (Artificial Intelligence) software development done on Sophia the robot is heartwarming for all Ethiopians and congratulate the team for their achievement, but this is the tip of the iceberg. The reason is Ethiopians have a competitive advantage if given the opportunity. AI (Artificial Intelligence), Machine learning, Block chain, Cryptocurrency, Cloud computing and Autonomous Driving etc. are the recent software developments which has a deep root with mathematical algorithms. Addis Ababa university Mathematics department is strong even now and these algorithms used in these platforms are a piece of cake for the Mathematician of Addis Ababa university if the proper integration and training is done with the software industry. Their contribution to the industry and unleashing the human capital is limitless. The mathematicians in Addis Ababa university spend enormous energy and time to prove a new theorem and solve multidimensional time and space universe problem and these algorithms needed in the software industry can be enhanced by  these mathematicians and can contribute to better the industry. To certain extent Addis

Ababa university physics department and Chemistry Department especially inorganic chemistry, Biology department Botany and Zoology used to have world class strength and quality, it it time to bring those quality and spreading such standard to the nation universities is paramount.

 

Sugar Estate

Ethiopian sugar estates are not only a sugar grinding factories the land, the irrigation system, the dam, the water asset, the workforce residential quarter by itself that equate to a town, are the many components that makes a sugar factory which makes it an estate by itself.

First and foremost, the land and the water asset are precious and important national treasure and it is hard to put dollar figure on these assets.

Since most of these estates are ready or close to production in an ideal case if the government set up an efficient management system to run such state and pay the accumulated debt from the revenue generated by these factories and transfer to pubic in a long term by floating share to Ethiopian public enlarge will be the most just privatization process in my opinion.

The other just privatization of these estates specially in today’s “Medemere” motto the government can do a bold move to benefit its citizen. Especially for the these sugar estates namely Kuraz, TanaBeles, Welkite if not Tendaho sugar estates the government can recruit unemployed youths from Kerro, Fanno, Zarmma etc., who struggled to make this reform a reality, organize them as a cooperative and give them a long-term lease of the irrigated land and produce sugar cane to supply for the sugar factories in these estates. The government can be a bridge to enable the factory to receive a constant supply of sugar cane at a fixed negotiated price. The efficiency of the youth producing the input can be assisted by the government for them to be productive. The composition of the youth who will be given these opportunities should be youth from the neighborhood as well as from all part of Ethiopia proportion to the ethnic representation of the nation. This way equitable benefit for all citizen can be justified.

After this the Sugar factories can be privatized for the highest bidder and the operation can be executed in a just and equitable long-term benefit.

These are my personal layman opinion of mine and there are a lot of experts professionals who can advise the government to do the right thing in this transition and

hope the transition is made without compromising the long-term interest of the nation and I can sleep without guilt.

 

Sincerely Yoseph

The post My Take on privatization appeared first on Satenaw: Ethiopian News & Breaking News: Your right to know!.

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