Ethiopia has been credited as being one of the fastest growing economies in Africa. Defining poverty as the biggest threat to the regime’s survival since its inception has led the EPRDF to establish a top-down developmental state model in order to drive continuous economic growth and thus legitimate its continued existence. While this model has succeeded in sustaining high GDP growth rates, Ethiopia faces a challenge translating such growth into improved livelihoods across different segments of its population. Growth has been largely state led, through accumulation of capital and public investments in infrastructure. The private sector, in contrast, has remained weakly developed, hamstringed by a weak exchange rate and constrained access to foreign exchange, and outcompeted by politically backed parastatal companies. As a consequence, job creation in Ethiopia’s urban centres has not kept pace with GDP growth, nor with population growth or the significant rural-urban migration. This has pushed large segments of Ethiopia’s youth population into the urban informal economy where they struggle to make ends meet. While employment in the informal economy has been key to increasing the number of individuals’ livelihood options, the persistent poverty, inequality and marginalisation many face is also deepening grievances. What thus may appear to be a strong state at first sight may in fact harbour considerable tensions and fault lines under the surface.

The ethnic nationalist cleavages rising to political salience today are by no means novel, and are a product of and an impetus to the changing form of political contestation and mobilisation over the past years. The ethnically defined federalist system has created potentially powerful ethnic nationalist constituencies and aligned other previously cross-cutting political cleavages with existing ethnic divides, which could result in strong centrifugal forces. While the new administration’s liberal reforms may very well be a constructive attempt to deal with the tensions that led Previous Prime Minister Hailemariam Desaleign to resign, it should be noted that the declining cohesion of the governing party has made a strongly repressive response less feasible. Additionally, many of the EPRDF’s established clientelistic approaches to political mobilisation and its claim to legitimacy based on economic growth have equally lost purchase in the face of persistent poverty and marginalisation. Growing ethnically based mobilisation appealing to widespread economic grievances has facilitated the spread of ethnic tensions outside traditional spaces of political contestation and into various forms of non-EPRDF controlled mobilisation, requiring the governing party to reinvent its electoral appeal.

With political debate extending beyond previously formalised channels, ethnically based networks are gaining significance on a new dimension. While career perspectives in the formal sector have long been intertwined with the ethnically based political (EPRDF) system, such dynamics are becoming increasingly pronounced in the informal sector. As political actors increasingly seek to use ethnicity to mobilise their constituencies, clientelist and identity-based appeals to urban informal workers are on the rise. The demarcation of boundaries between ethnic groups is growing in importance in the informal sector. While this may help ethnic groupings secure their livelihoods by securing control over various economic sectors and locations, it has reduced inter-group cooperation by eroding cross-cutting social capital and has connected economic grievances with ethnic fault lines. As a result, political tensions between ethnic nationalist groupings increasingly engage substantial urban constituencies, allowing tensions to spill over, at times leading to protests and violent conflicts in urban spaces.

While the assumption underpinning Ethiopian public policy and many donor interventions that (un)employment is a key driver of instability thus holds, the ethnicization of economic sectors and job creation is also a major factor driving tensions. The present dynamics cannot be adequately addressed by focusing merely on increasing job creation. While employment-related issues such as poverty, inequality and marginalisation are important factors in the economic grievances felt by many in the informal sector, the expression and political mobilisation of such grievances is not related to its reduction in a straightforward manner. Rather, the increasing political space has raised the salience of economic grievances and is increasingly aligning it with ethnic nationalist competition. As such, interventions aiming to stimulate private sector development and job creation are inherently politicised and risk politicising their target sectors or raising existing tensions within them. The informal sector is increasingly politicised, and donor engagements failing to recognise such dynamics risk deadlock, capture by (locally) dominant ethnic groups and other unintended destabilising consequences. Programming that aids livelihoods in part derived from the informal economy may be necessary, but they are by no means sufficient to support stabilisation. The following recommendations are designed to improve programme effectiveness and reduce associated risks.

5.2 Interventions addressing employment or livelihoods more generally should actively avoid aligning with ethnic nationalist divides

The unemployment, poverty and marginalisation experienced by many of young people active in the urban informal economy is a substantial driver of the tensions seen in Ethiopia, and is increasingly mobilised along ethnic nationalist lines driving political contestation. While economic hardship thus expressed is an essential element in political debate, its alignment with ethnic divides is largely a product of the ethnic federalist system reframing many issues as questions of recognition and negotiation between ethnic nationalist groupings. While ethnically based social networks may be rising in importance as a basis for organising in the informal economy, the issues being contested affect urban youth across sectors regardless of their ethnic background. Addressing the hardship experienced in the urban informal sector is an important factor in stabilisation efforts, yet employment and livelihood programmes are easily politicised and have, over the past decade, formed an important tool of political mobilisation. Programming to tackle these issues should thus explicitly consider how to avoid reproducing ethnic nationalist divides or the segregation of economic sectors. While a range of conflict-sensitive measures could be applied across a wide range of interventions, some types of interventions may be more fit for purpose in this context than others. During the inception phase, sector assessment should include a political economic assessment considering to what extent the sector is open to different ethnic groups, besides the technical requirements related to growth and job potential. Sectoral and geographical choices should aim to balance the distribution of benefits to various ethnic groups, including marginalised groups, and value-chain interventions could be selected taking into account how much interaction they enable between different groups. Additionally, perceptions of the intervention should be monitored and actively managed, and include the promotion of non-discriminatory recruitment policies throughout all partner institutions as well as communications in multiple all Ethiopian languages. Approaches related to the decent work agenda, support for labour unions, value-chain development interventions and programming that supports equal access to government services may be particularly worth considering, given their inherent reframing of contestation along non-ethnic lines or their focus on increasing connections between and dependence on separate economic sectors and demographic groupings. Additionally, close monitoring of programme implementation is necessary to avoid ethnic biases arising as an intended or unintended consequence of stakeholder networks.

5.3 Support to organizations in the informal sector to become more inclusive, improve their ability to articulate grievances and represent stakeholder interests

While the informal sector is not regulated, it is by no means unorganised. As well as the above described ethnically based networks, other forms of association occur. Occupational associations, informal workers’ organisations, cooperatives, worker unions, savings groups and/or producer groups can all play a significant role in supporting various types of livelihoods. Such organisations may be significant in solving technical issues in their sector, but if they are able to articulate grievances and overcome ethnic tensions, they may also serve as platforms for collective action and potentially develop into institutional channels to discuss issues with formal stakeholders and regulators. In the limited space available, trade unions are showing some success organising workers along non-ethnic lines (although so far with significant risks to their members). A range of other informal organisational structures organised around other livelihood issues may be able to fulfil a similar role, articulating grievances outside of ethno-nationalist appeals. Support for such organisations in the form of recognition, provision of a platform, interconnection, organisational support, skills training and adjustments to the regulatory environment may be relevant. Close attention to such supported organisations will be required, however, in order to monitor and prevent weakening inclusiveness, elite capture and ethno-nationalist politicisation.