Ethiopia: Another T-TPLF White Elephant for Sale?

By Prof. Al Mariam

January 29,2017

Is the T-TPLF setting up the “Ethiopian Railway Line” for a fire sale?

The “Ethiopian Railway Line” opened in October 2016 with all the bells and whistles. Today it is derailed and teeters on the edge of financial disaster.

The T-TPLF (Thugtatorship of the Tigrean People’s Liberation Front) last week announced that the “Ethiopian Railway Corporation” (“ERC”) is drowning in an ocean of debt.

According to a report in the online version of the “Reporter”, a “private newspaper published in Addis Ababa”, Getachew Betru, “CEO” of “ERC” informed the “Ethiopian Parliament” that the Corporation is $102.5 billion birr in the red.

The official currency exchange rate is USD$1 to 22.50 Ethiopian birr. On the black market, one could fetch 27-30 birr for USD$1.

According to the Reporter, the so-called Addis Ababa Light Rail is 1.8 billion birr in the hole.

The “Ethiopian Railway” project is said to connect the Ethiopian capital with Djibouti on the Red Sea coast. The USD$4 billion project is backed by China and built by the China Railway Engineering Corp. and China Civil Engineering Construction Corporation.

The Chinese have built dozens of ghost cities where no one can afford to live, including some in Angola. Now they have built the first ghost railway to nowhere in Ethiopia.

According to Betru, ERC needed 60.2 billion birr for its annual budget in 2016.

The T-TPLF “thought” it could secure a “foreign loan for 25.9 billion birr” and drum up”34.3 billion birr from domestic sources”. But the T-TPLF could only secure 10.5 billion birr from local sources.

Betru provided the following stunning explanation for the humongous shortfall: “We boldly got into such a railway project thinking believing in a principle that we’ll find a way out.

In other words, to borrow a rail metaphor, the T-TPLF thought it could outrun the train at the bridge crossing but found itself stuck on the rail lines.

It is a mind-boggling situation. The T-TPLF decided to build a railway on a wing buffeted by gusts of wishful thinking casting financial caution and prudence to the wind. The T-TPLF started a rail line without establishing a demonstrably viable revenue source to sustain it. Did the T-TPLF configure passenger traffic as part of the revenue source for the long haul rail line or mainly freight? If it calculated freight as the main source of revenue, would that freight be principally “government” freight? Did they calculate the marginal cost of running a train based on expenses for operations, equipment maintenance, fuel, overhead, interest, cost of capital, etc.?

It is clear from Betru’s statement that the T-TPLF expected the “Ethiopian Rail Line” to operate like the toy model trains bought from the China Model Train Company.

The abysmal nitwitedness of the T-TPLF is evident in its own published reports.

A report by the T-TPLF’s Ministry of Trade indicated that in 2015-16 Ethiopia “earned 139 million dollars less in exports than the three billion dollars registered in 2014/15. Last year, the export sector significantly underperformed as it missed its set target of four billion dollars by a wide margin.” The report concluded, “the share of export earnings in the Gross Domestic Product (GDP) of the country has continued its usual pattern of declining by two percentage points between 2010 and 2015, averaging at 13pc. This figure is considerably lower than other countries in the region, with export earnings accounting for 20 and 19pc of the GDPs of Kenya and Uganda, respectively.”

The data on imports is equally dim: “Imports in Ethiopia decreased to 4064 USD Million in the second quarter of 2016 from 4367.40 USD Million in the first quarter of 2016. Imports in Ethiopia averaged 2705.91 USD Million from 2006 until 2016, reaching an all time high of 4382.60 USD Million in the fourth quarter of 2014 and a record low of 1355.50 USD Million in the second quarter of 2006.”

The T-TPLF leaders must have obviously known that there is very little likelihood for export and import freight to provide long-term revenue sources to sustain the rail line and be profitable. That is assuming that they read and understand their own reports, which is highly doubtful.

full commentary, click here(Al Mariam's Commentaries).