In its latest report on “Selected Issues“, the IMF points out that Ethiopia’s Gini coefficient is successfully masking inequality. Nonetheless, in an environment lacking structural transformation, the research paper warns that significant inequality is at the corner.
Unfortunately, the IMF is approaching this serious problem for Ethiopia from the trickle down economics perspective, i.e., an economic outlook or policy favoring the wealthy. For instance, the IMF is recommending increases in electricity service costs, as follows:
“Tax brackets should be revised upwards to ensure that they keep up with changing income levels. Indirect subsidies (in particular on electricity) should be replaced with direct transfers, which are more efficient in addressing the needs of the most vulnerable households.”
Of course, Ethiopians have been aware that the tariffs would go up by 50 percent in no time. The TPLF says it would not be able to attract foreign investors otherwise.
On the other hand, in its much clearer and data supported conclusion, UNDP’s Accelerating Inclusive Growth for Sustainable Human Development in Ethiopia highlights its concerns right starting from gender inequality in Ethiopia to bringing out broader issues of human development.
Accordingly, it states that, while Ethiopia’s inequality-adjusted Human Development index (IHDI) between 2005 and 2013 had increased from 0.349 to 0.459, the UNDP estimates that in reality this only shows that Ethiopia on average was losing from its human development 0.5 per cent annually “due to inequalities in health, access to education and income” (page 26). In amplifying this further, the UNDP observes:
“Ethiopia’s IHDI for 2013 was 0.307 in contrast to HDI of 0.435 indicating an overall human development loss of 29.4 per cent…In fact, Ethiopia is situated at the lower end of the spectrum for many development indicators when compared with the rest of Sub-Saharan Africa, and is among the bottom 15 countries in the UNDP Human Development Index for 2013.
In a 2011 analysis, Ethiopia ranked fourth in the global ranking for HDI advances and eighth in the global ranking for non-income HDI advances since 2000. Thus, even though Ethiopia‘s 28 National Human Development Report 2014 – Ethiopia relative HDI standing continues to be low, the county has made considerable progress given its original baseline and the fact that almost all countries are showing improvements in their human development indicators (albeit some are improving faster than others). Table 3.2 shows Ethiopia’s (and several African countries) standing in UNDP’s global ranking of advances in country HDI values….
The official poverty results indicate that poverty incidence is highest in Afar, Somali, and Gambella (relatively less developed, pastoral areas) and lowest in Harari, Addis Ababa and Dire Dawa (urban centres). In all regions, consumption is higher in urban areas. However, the Gini coefficient for urban areas is 0.37 compared with 0.27 for rural areas. Hence, there is much higher inequality in urban areas than in rural areas. Overall, absolute poverty in 2010/11 (compared with 2004/05) has declined in all regions except Dire Dawa, a largely urban area (where the absolute poverty incidence increased by 6.1 per cent). Moreover, compared with the previous years, the difference in poverty incidence among the regional states narrowed substantially between 2004/05 and 2010/11, indicating balanced growth among regional states (MoFED, 2013b). Even though the difference in real consumption among regions is very small, real consumption levels are highest in Harari, when measured in per adult equivalent, and in Addis Ababa when measured in per capita terms. For per capita measurements Addis Ababa is followed by Harari, Tigray, Benishangul-Gumuz and Dire Dawa regions, while Amhara, Afar, Oromiya, and Somali recorded lower consumption levels. In all regions, consumption is higher in urban areas “
Of this trend, the UNDP matter of factly states:
“Despite the major economic and social improvements over the last decade, some 25 million Ethiopians currently remain trapped in poverty and vulnerability. With a Human Development Index (HDI) of 0.435 in 2013, the country is still classified as a “low human development” country, based on UNDP’s Human Development Index. One of the key challenges for Ethiopia in its quest to become a middle-income country is therefore to ensure that all Ethiopians fully benefit from the phenomenal progress that the country has registered and that all have the opportunities to realize their human development potential.”
What Ethiopia needs is lifting all its population into the stratosphere of their possibilities, not limiting them into the confines of poverty and TPLF’s gated ethnic communities the Front has been building in the past quarter century, whose story is now embarrassingly horning our eyes from fronts of international magazines, in this case such as on Times Live.
Posted by The Ethiopia Observatory (TEO)
White fences and manicured lawns surround the villas of an elegant housing estate in Ethiopia, a potent symbol of the emerging elite in a country better known for drought and famine.
A comfortable commuting distance of 20 kilometres (12 miles) from the capital Addis Ababa, the 600-hectare (1,500-acre) estate has tapped into a growing taste for high-end luxury among wealthy Ethiopians, who are looking for a home which reflects their success in business.
Over the past decade, this Horn of Africa nation has seen an annual growth rate of nearly 10 percent, World Bank figures show, due to a boom in construction, manufacturing, trade and agriculture.
For those in Africa’s second most populous country who are enjoying that growth, the estate symbolises much more than a home.
“We are selling a lifestyle more than just housing,” says Haile Mesele, a civil engineer who heads Country Club Developers, the property firm behind the development.
“We don’t do any advertising. We prefer that the residents themselves spread the news, and in a way, chose their own neighbours,” he said.
According to a recent study by New World Wealth (NWW), a South Africa-based market research consultancy, there are now 2,700 millionaires in Ethiopia, reflecting an increase of 108 percent between 2007 and 2013 — the fastest growth rate in Africa.
“There is a demand for luxury real estate,” said Wunmi Osholake, who runs the Ethiopian branch of online real estate platform Lamudi, which focuses on emerging markets, with customers eyeing property costing over $330,000.
The price, she adds, has no upper limit.
And the luxury boom is not just in the suburbs.
In the centre of Addis Ababa, the bustling Kazanchis business district is also undergoing major renovations.
Eighteen months ago, May Real Estate Development began a new residential development called the Addis Gojo project, which incorporates 113 apartments in three 10-storey towers located near several embassies.
“For those working for the UN or diplomats, it is very central. The district is a new sort of Manhattan,” says project manager Bitania Ephfrem.
“The lifts work, which is not the case elsewhere,” says Bitania, adding they are planning rooftop swimming pools, a gym and a restaurant “so that residents don’t need to leave the premises.”
A standard apartment between 140-170 square metres (1,500-1,800 square feet) rents for about $1800 per month (1700 euros).
Such luxury housing has been designed to meet the needs of Ethiopia’s emerging new middle class. At the estate in Yerrer View, hundreds of the homes from stand-alone villas to modern apartments are already occupied with plans for a total of 5,400 houses for some 20,000 people.
When completed, the estate will also include a golf course, a five-star spa hotel, a shopping centre, school and clinic and an organic farm covering about 200 hectares.
“When we began, economic growth wasn’t very strong,” recalls Haile. “Half of our clients came from the diaspora. But since then, the economy has become a lot stronger and nearly 85 percent of our residents are local.”
The customers have high expectations. Pushing open the door, Mesele shows off a 500 square metre (5380 square foot) property built on a plot measuring 1,000 square metres.
A large open plan kitchen and a curved imitation-marble staircase leads up to the first floor where there are three bedrooms, all en-suite.
The master bedroom has a fireplace and a dressing room, while the bathroom has “an open space in case the owners want to install a sauna,” he explains.
All that remains is to install surveillance cameras able to read a licence plate before opening the gate, smoke detectors and a security system.
And the price tag? $400,000 (377,000 euros) — a fortune in a country where the gross domestic product per capita is $565.
“No matter what we build, it will always be too little to meet demand,” he says.
But others have spotted the growing demand, with several other sites popping up nearby.
Since the overthrow of a Marxist junta in 1991, Ethiopia’s political and economic situation has stabilised, although rights groups have criticised the government for suppressing opposition.
The economy is still heavily dependent on agriculture, especially coffee, with the vast majority of the country’s workers involved in that sector.
Meeting the demand for new housing has called for bringing in foreign workers as Ethiopia lacks a skilled work force.
Haile said his firm recruited around a thousand specialist workers from China.
Yoseph Mebratu, the major shareholder in May Real Estate Development, also complains that he had to import 70 percent of raw materials.
“Windows, doors, wood panelling… everything comes from China,” he told AFP, adding that taxes are “very heavy.”
Inflation, which hit a record 64.2 percent in July 2008 but has since stabilised at around 13 percent, has also caused delays.
“We had to slow down our business and missed deadlines… but since last year, we have become profitable again,” Mesele added.