5.1  Introduction

The complex political and economic history that witnessed the “maturing” of Ethiopian politics into a form of ethnic politics, the marriage between party and the state, as well as between economy and ethnicity, went into a transition in 2018. This transition opened a kind of Pandora’s box that was previously kept closed by a dominant party state. With that model under reform, the transition raises various questions about the organising principles of the Ethiopian state. Is Ethiopia transitioning away from ethno-nationalism? Is the Ethiopian state detaching itself from the complex political financing web that both nurtured the richest political party in Africa and built clientelistic ties between endowment funds and a coalition party? Or will similar organising principles be adapted to benefit a different network of political actors?[169] Although no definitive assessments can be presented in response to these questions, as the transition is still ongoing, we explore the impact of ongoing changes in the state structure, economic policymaking, political finance, and party politics.

The ongoing transition witnessed organisational changes that were made to allow the new incumbent to forcefully break the welding of state and party, and to take control of the country’s state institutions. The reorganisation of reporting lines and tinkering with the finances of state institutions are indications of the ways in which the political economy of Ethiopia is changing. This chapter examines the impacts of such changes (identified in Chapters 3 and 4) on stability of governance. The chapter is divided into four sections: (1) state structure, considering the changes in the federal arrangements and the emergence of new institutions; (2) the economy, discussing centralisation of decision-making and reorganisation of the principles driving economic policy; (3) state-owned enterprises, and how their reporting structure is being streamlined and put under new accountability structures; and (4) people and political power, considering the impact of the dissolution of the EPRDF and the changing position of the periphery.

5.2  Is ethno-nationalism still at the center?

Within the Ethiopian political scientific debate, some scholars argue that “Most of the historical political complexities experienced in the course of the advent of the modern state or as a result of the distorted federal design anchored in authoritarian political culture caused conflicts.”[170] Formally, the Abiy regime created a number of institutions with the stated aim of addressing such conflicts as a result of formalisation into state structures. These institutions included the Ministry of Peace, the Reconciliation Commission, and the Administrative Boundary and Identity Affairs Commission.[171] Yet, the main shifts in the state structure throughout the transition are the adaptations to the ethnic federal state structure, a structure originally developed under the now-defunct EPRDF and partially maintained but shifted to the detriment of the TPLF. This should be seen in the contexts of the popular demand expressed in protests that formed the impetus for the transition. These demands were not limited to demands for liberal democracy, but rather aimed at the transformation of the state in order to reshape societal life in response to the marginalisation of many of ethnic groups.[172] The transformation of the state should thus be understood as an attempt to address unsettled issues arising out of the federal arrangement; these issues include internal demarcation, the constitution, and ethnic relations as well as wider political economic issues.

Another important change observed during the transition occurred in the political field through the establishment of the Prosperity Party (PP) which absorbed the parties within the EPRDF (except for the TPLF). The emergence of the PP has brought about two changes.

First, it removed members of the TPLF who used to dominate both federal and regional power structures. The consequence, underscored by several regional presidents and other politicians, is that lower tiers of government are now controlled de-centrally instead of being under the direct and indirect control of the TPLF. According to one respondent, “there is a desire to bring an end to the undue and undeserved domination of the state by TPLF, in which state officials were drawn from a single Tigrayan speaking political group […] and the main driver of change is the attempt to leave the hitherto dominated state institutions by individuals and elites from the single region”.[173] The executive has historically been the dominant organ of the Ethiopian state, and has now almost fully been taken over by the PP. The Prosperity Party is made up of individuals from a more diverse range of groups (of less unequal political weight).

The second change brought along by the PP’s emergence is in ethnic politics. The PP introduced a new platform of pan-Ethiopian nationalism, rather than the party itself acting as a site of ethnic balancing. The PP has attempted to integrate the leadership from a more diverse range of ethnic backgrounds under one national platform. Most notably, one remarkable accomplishment was “ironically enough, the effort by the reform regime to include what were previously considered peripheral regions of the country into the new political system”.[174] Yet, due to the principle of proportional representation, the large Oromo and Amhara groups still predominate. Members of the new PP leadership are still in charge of ethnically defined regions. Discussions regarding the rearrangement of regional structures are still ongoing in both the public debate and elite circles, yet two regions (Sidama Region and Southwest Ethiopia Region) have already been created out of the SNNPR during Abiy’s administration.

When we look at the emergence of the PP and the ideas it espouses, we see that the party aims to shift away from dividing up the state between ethnic groups to a situation in which regions contest over civic issues. The PP’s manifesto stipulates the equivalence between individual rights and (ethnic)groups’ rights, and calls for a federal arrangement that strengthens the multinational unity of the country.[175] Although the dynamics of political competition may have shifted somewhat away from a solely ethnically based competition, it is important to underline the reappearance of a second political cleavage between pan-Ethiopian nationalism and dissident/ethno-nationalism that is rising in salience. The contestation of ethno-nationalism and pan-Ethiopian nationalism has persisted for quite some time in Ethiopian politics, especially starting from around the end of the imperial period but losing some salience under EPRDF rule.[176] This cleavage may form an important factor shaping political developments in the country. Additionally, although competition may have shifted somewhat with the reintroduction of a second political cleavage, the Ethiopian party system still features a highly contentious interplay between ethno-nationalist forces.[177] The currently dominant Oromo-Amhara alliance, in particular, is seeing fierce internal competition between the two ethnic groups.

5.3  Centering peripheries and co-opting many

Significant changes also occurred within party politics. Notable changes include the metamorphosis of the ruling coalition, the integration of the peripheries, and the changes to the people and power in Ethiopia’s body politic.

First and foremost, is the metamorphosis of the EPRDF (a coalition dominated by the TPLF). The internal contradiction within the EPRDF coalition, a formal commitment to ethnic self-determination through a federal ethno-regional structure rendered inoperable due to top-down authoritarian governance, sustained the TPLF’s dominance within the party and in the country in general. During the transition, the EPRDF coalition party was largely absorbed into a single party, i.e., the Prosperity Party. Although the PP inherited a number of characteristics and institutions from the TPLF, its internal dynamics changed. “Self-determination of nations and nationalities up to secession” is removed from the now-established PP party programme in contravention of the (multi)ethnic federalist ideology spearheaded by the TPLF and enshrined in the federal constitution.[178] The TPLF did not accept the merger of the parties into a single party, noting it as a unitarist move by the PP (as opposed to federalist ethos) which did not follow due legal processes, while PP officials claim a continued multi-ethnic party character.[179] The new configuration hence excludes its former political core (the TPLF), which changed competition within the overarching party. Effectively, the PP’s emergence ushered in the end of the (ethnic)divide and rule that characterised the EPRDF period, during which most regional presidents were ethnic figure heads co-opted by the center to keep their regions compliant.[180] The stated aim for the adapted PP structure is the emergence of a form of federalism where ethnic groups handle their own region’s political economy, although the jury remains out as to what extent this is implemented in practice.

The second noticeable change ushered in by the unification of the parties into the PP is the relegation of the idea of sister (and sometimes called ‘agar’ or allied) parties from the so-called peripheral regions in the country. The PP has integrated some of the peripheries, not only by providing power to some regional governments but also by inviting politicians of several peripheral regions to take up prominent positions in the federal government. For instance, the head of the PP’s party office is from the previously peripheralised Somali ethnic group, as is the Minister of Finance.[181] One of the most prominent politicians in the PP is the Somali regional president Mustafe Omer.[182] As well as increasing the integration of politicians from the periphery, the establishment of the PP led to high turnover in party membership in some regions.[183] Old cadres and mid-level party members were replaced with new blood drawn from various sections of the society. Such changes might result in an increased sense of belonging for the people and elites of communities across the country, but may equally lead to the detachment of the newly integrated politicians from their regions hence hurting the legitimacy of the new governance arrangement. Because political parties also function as training and socialising bodies of new politicians, the integration of the peripheries and high turnover might also bring new faces and ideas to the body politic. This may be influential in breaking previously entrenched political networks that are considered to be adversely affecting socio-political developments in the country.

A third development can be found in the “politics of personalities”. The Abiy administration has drawn from various pools for its elite recruitment, rather than appointing party cadres as occurred frequently under the EPRDF. The administration has used multiple mechanisms, including bringing in apolitical professionals, co-opting opposition politicians, and assigning academics and other prominent opposition members to various boards and leadership positions. As such, the transition has seen appointments (or returns) of experienced professionals and representatives of previously excluded groups to state institutions, aiming to reestablish trust in state institutions. Examples include the National Electoral Board of Ethiopia, the Ethiopian Human Rights Commission, the Supreme Court, the Policy Study Institute, the Attorney General’s Office, and many more state agencies. These appointments might suggest a shift in political culture aiming to establish stronger state institutions and reinforcing the primacy of the state over the party. On the other hand, however, a considerable number of people appointed have come under criticism for lacking impartiality. Key examples include: the resignation of a number of experts from the economic advisory council due to party-political concerns; accusations voiced at the National Election Board of Ethiopia (NEBE) for regulations and verdicts excluding opposition parties from the electoral process; and criticism of the Sidama Liberation Movement (SLM) for losing its autonomy following co-option by and merger into the PP.[184] In practice, significant continuity can be observed in governance methods from the EPRDF times in spite of promising reforms.

The co-option of leading personalities from the opposition and placing them in government positions is also a novel phenomenon under the new administration.[185] Unlike the EPRDF period, the Abiy administration gave ministerial positions to leaders of opposition parties. Following the 2021 election, the administration appointed three ministers, three state-ministers, and a number of other officials in regions and city administrations from opposition parties.[186] Such appointments have ensured support for the PP from key sections of society, and again reinforces the idea of the prominence of the state over party. Yet, the administration was not only characterised by the inclusion of people and ideas from across the aisle, but also the sidelining (and arrest) of prominent opposition members.[187] The ethos of serving the Ethiopian state and the hyper-nationalism that has at times characterised the transition period has especially intensified during the conflict in Tigray. The public support for, and allegiance to, the Ethiopian state could have limited the space for some opposition voices.

5.4  Bringing the economy back in

Following the demands expressed in previous years of unemployed (and often excluded) youth, one of the priorities of Abiy’s administration has been economic reform. Although the EPRDF regime also prioritised economic growth according to its developmental state model, economic measures of that era featured as a method of control and as a way to sustain the extensive military apparatus. Under the Abiy regime, attempts have been made to disentangle key economic sectors, policies, and assets from ruling party structures and to return them under state supervision. A number of initiatives of Abiy’s administration show an attempt to end party businesses, and thus shift responsibilities and control from the party to the state. Similarly, attempts also appear to be made to “unify” the economy by ending exclusionary ethnic-party control over specific sectors and policies.

Two interrelated tendencies can be observed in the efforts to reestablish state (not party) control over the economy. First, a professionalisation drive is ongoing as party officials in technical or business roles are replaced by experienced and appropriately educated professionals. As such, office holders increasingly move within an institution or sector, rather than between a wider range of state-controlled entities based on their political ties. Increasing professionalisation can also be observed in the reorganisation of the state-controlled economy, with economic rather than political principles as points of departure (as stipulated in the home-grown reform agenda). Additional examples can be found in a number of studies commissioned by PEHAA (the Public Enterprises Holding and Administration Agency, located under the Ministry of Finance) on various issues, including appropriate forms for the capital market and the implementation of corporate governance measures in the SOE sector.

The second dynamic, centralisation, occurs predominantly through the centralisation of economic policymaking under the prime minister’s office (especially through the establishment of the macro-economic team) and the reallocation of all national SOEs under PEHAA. The latter could be especially significant, considering that the state-owned enterprises previously functioned as an important source of political finance, but might now be asked to report and account for business-oriented results.[188] The endowment companies that belonged to the EPRDF are being transformed into public enterprises, as the current status of companies formerly owned by ANDM (Amhara National Democratic Movement) illustrates. Fundamentally, this transformation involves returning the economic activities that were captured by the political party to the state. Beyond endowment companies, the economic reform impacted how state-owned enterprises operate. The typical example here is the removal of Metals and Engineering Corporation (METEC) from its involvement in the Ethiopian Grand Renaissance Dam (GERD). METEC implemented only 30% of its task in the GERD project by 2018 (though the plan was to finalize the work by 2014) and was replaced by fairly tendered expert companies when the Abiy administration took power.[189]

Centralisation is being implemented through the above-mentioned professionalisation of the economy in two ways: a shift towards experienced and educated professionals in operational roles; and practical experimentation with more effective methods of organizing the economy. Experts in the sector have been positive about the reforms implemented, especially the reduction of political interference due to reorganization of the state-owned enterprises (discussed below). Additionally, involved professionals underscore that the political leadership is more willing to consider expert suggestions on economic issues, rather than prioritising economic policymaking according to political incentives.[190] At the same time, however, this tendency towards professionalisation left the management of Ethiopia’s economy immune from political elements. For example, the decision to replace officials tied to the previous ruling elite with new ones has played an important role in the political struggle between the current and the former ruling factions. Moreover, heated debates within the experts’ committee advising the administration’s economic policies have shown the persisting importance of political dynamics in economic policymaking.[191]

In terms of economic policy, features of both continuity and change can be observed. Although the economy is being brought back under state control, it is done pragmatically. Rather than fully breaking with EPRDF economic policy, the main policy drive aims at learning from the macro-economic instability brought on by the debt-fuelled developmental policies of the past, while at the same time retaining successful policies (for example, by continuing the public-private partnership approach with a renewed focus). Changes mainly relate to attempts to position the private sector as the main operator in the economy. This change can be seen in the liberalisation of resource allocation, in which new methods of market-oriented allocation have tilted the allocation of foreign exchange towards the private sector instead of politically controlled institutions. As a consequence of the investment programme that fuelled growth in Ethiopia in EPRDF times, it is noted that the “share of CBE’s [Central Bank of Ethiopia] credit to the SOEs sector had reached 87 percent in 2019, and about 90 percent of deposits at CBE is lent to SOEs”.[192] The focus under the Abiy administration is on leveraging the hitherto growth for private investment and job creation rather than development, hence shifting the priority of credit allocation to the private sector.

Similarly, the reform in the state-owned enterprises is a pragmatic rather than an ideological shift.[193] Although some SOEs are being privatised, there is no aim to fully privatise all the SOEs in a neo-liberal fashion; rather, reforms aim to optimize portfolios.[194] On the macro level, observed changes include: a more prudent fiscal policy prioritising capital investment; the creation of a capital market; and the establishment of expert committees to monitor, discuss, challenge, and suggest new economic policies. Economic policy is now developed in committees under the macro-economic policy committee, which is chaired by the Prime Minister and comprises key policymakers from the macro-economic institutions (including the Ministry of Finance, the National Bank, and the Planning and Development Ministry).[195] As one expert put it, “there is still top-down (with a bit of bottom-up balancing) decision making and strong organization of the economy”.[196]

The shift in economic policy could be a double-edged sword. The centralising measures are freeing up finance for a new approach oriented to the private sector and simultaneously disentangling the economic sector from EPRDF’s political influences. Yet, centralising assets might make certain sectors an easy target for political capture or paralyse them due to political competition between regional governments over the sectors. Additionally, one of the main arguments advanced in EPRDF times for the government to maintain a leading role in the economy was to combat private-sector capture of the state for corrupt proceeds: “Ethiopia (and indeed Africa as a whole) lacked comparative advantage in any productive field. […] In these circumstances, the best way to make money is through rent: natural resource rent, aid rent, policy rent. So the private sector will be rent-seeking not value creating, it will go for the easy way and make money through rent”.[197] As such, if the actual shift towards the private sector indeed occurs, a new segment of stakeholders and interests may be empowered in the longer term.

5.5  The demise of political finance as we know it?

The state-owned enterprises and party businesses were a major source of political finance during the EPRDF period. The SOEs sector consists of large and strategic enterprises such as telecom, transportation, logistics, railway, and energy, which may function as catalysts to economic development in Ethiopia. The political motivations underpinning otherwise major business decisions are seen as one of the causes of a range of economic issues, as “poor project feasibility analysis and implementation, particularly by state owned enterprises, have led to serious macroeconomic imbalances such as debt burden and high inflation”.[198] The reform of the SOEs sector is one of the flagship areas of the regime’s homegrown economic reform agenda. The Ethiopian government aims to improve the competitiveness of the enterprises in the economy as well as ensure the efficiency of public finance/public assets and improve macro-economic stability in the country.[199] It aims for those enterprises with a developmental nature (those that provide public goods) to continue a developmental function, but to push those with a commercial nature into privatisation with shares held in an Ethiopian investment holding company (akin to a government wealth fund).

The reallocation of 42 SOEs (reportedly, jointly contributing approximately 15% of GDP) to PEHAA entails a major shift in terms of transparency and accountability.[200] The enterprises brought under the administration of PEHAA are to be managed according to a range of performance indicators and formal policy, rather than managed according to political imperatives.[201] A system of accountability and responsibility is being created, separating state interest (represented by PEHAA) and CEO responsibilities and establishing a supervisory board. Additional elements being implemented include a corporate code, Key Performance Indicators,[202] a corporate score card, quarterly evaluations, and external audits.[203] Furthermore, a state dividend (of 80% of income) is being established, potentially further changing opportunities to siphon off proceeds for political purposes.[204] For example, it may shift the EPRDF-era personalised clientelistic networks into a competition over disbursements between federal and regional entities over centralised resources (which may still be disbursed onwards towards pork-barrel projects on lower administrative levels). Such an arrangement, as in the case of the centralisation of economic decision-making, emboldens the state (mainly the executive) rather than party structures in political financing arrangements.

5.6  Conclusion

Following the early months of the transition characterized by significant liberalisations and an “Abiymania” throughout the country and beyond, major shifts have happened with regard to the organization of the political sphere and the economy. Politically, Abiy’s administration attempted to move away from dissident ethno-nationalism by (re)introducing pan-Ethiopian nationalism into the political debate and attempting to separate party and state. The creation of a single multi-ethnic political party brought the peripheral regions and their politicians to the center of Ethiopian politics. Reorganisations of state institutions and changed recruitment practices have sought to reinforce primacy of the state over the party and seems aimed at building stronger state institutions.

Economically, steps taken during the transition have brought primacy over the economy back from the party to the state in two major ways. First, the administration sought the demise of ‘party businesses’, which returned party endowment companies to the state. Second, the administration streamlined the state-owned enterprises sector and implemented an accountability drive through the sector aiming to curtail past practices of political finance. In a nutshell, the political economy changes that have been implemented seem to de-emphasise the party in comparison to the state. These processes have reshaped political rent-seeking and affected the hitherto influential political finance arrangements.

Yet, significant resistance has also challenged the reform process. Resistance from the former dominant governing party, the TPLF, has resulted in a civil war destabilising significant parts of the country and leading to vast numbers of casualties. Within the political arena, ethno-nationalist sentiments remain highly salient, while several liberalising reforms and appointment of non-party politicians have come under criticism. Finally, following significant interventions in the economy next to armed conflict, the foreign currency reserves have dwindled; this threatens continued economic growth and job creation, a key legitimating factor under the PP platform.