Developmental Patrimonialism and EFFORT Companies

By De Birhan Media 
03-2-2012

A recent research paper  published on behalf of the Africa Power and Politics Programme (APPP) by the Overseas Development Institute in August 2011 with a funding from from UK's development arm, DFID and Irish Aid dealt for the first time with what is termed Developmental Patrimonialism and Endowment Fund for the Rehabilitation of Tigray (EFFORT). 

The paper titled "Rethinking business and politics in Ethiopia: The role of EFFORT, the Endowment Fund for the Rehabilitation of Tigray " was written by Sarah Vaughan and Mesfin Gebremichael through  35 formal interviews and a further dozen informal conversations with senior Ethiopian government officials and policy makers, politicians, business people, journalists and economists; and a range of press articles, internet-based sources, reports and studies of the Ethiopian private sector in the UK, Addis Ababa and Mekelle over a period of roughly 15 days in December 2010.

The report, which for the first time uncovers wealth and detailed profiles of EFFORT companies, has the following new findings :

• EFFORT was established by 25 so-called founder members, each of whom contributed a nominal ETB 2,000 start up capital (equivalent to approximately US$ 320 on the exchange rate applying at the time). They included 16 central committee members of the TPLF’s senior leadership, and nine other non-fighters, peasants and mass association members from different parts of Tigray.
• Senior sources in the leadership of EFFORT confirm their view that corruption has reached serious proportions
• There are three specific areas where EFFORT interlocutors see escalating problems of corrupt practice. These are: the acquisition of land on lease; the (non)payment of tax; and government procurement.
• Senior EPRDF members, that is central committee members, are, according to official party policy, reportedly not allowed to own shares in any share companies, be they endowment-owned, or any other commercial enterprises. Although many doubt the degree of adherence to this rule...
• EFFORT interlocutors stress that whilst an ideological agenda was more visible in the early years of EFFORT’s establishment, commercial objectives and decision-making now guide activities that are designed to generate profit and drive expansion
• Several of the individuals who constitute the top leadership of EFFORT are represented in the 5-person Executive Committee of the TPLF, alongside the leader of the government.
•  EFFORT companies currently report around ETB2.7billion in capital (approx. US$160million), and ETB6 billion in assets (approx US$360million) (researchers interview, 2010).
•  A total of ETB100million was paid out in 1991-2 to the families of fighters killed during the war, at the rate of ETB 3,000 per family
• Overall strategic management of EFFORT, however, is controlled by a Board of between nine and 12 members, which may include up to 25% from amongst management representatives.
• No fees are paid to EFFORT board members for their activities
• Mesebo (an EFFORT subsidiary) had returned to strong profitability, and in 2009 began an expansion programme with Chinese contractor Hanfie at a reported cost of ETB3billion (just under US$180million), including a further loan from the DBE of ETB141.6million (US$8.4million). 
• EFFORT-owned companies do not seem to provide direct financial subsidies to the ruling party and political elite as is the case in Rwanda but provide indirect resources and public goods that feed wider social, political and developmental processes. 
• Business and politics are closely linked in Ethiopia.

Often argued as a company which does not pay tax, EFFORT , this report annexes tax payments of EFFORT in and up to the financial year 2009/2010 or Eth. Calendar 2001.

The full report can be accessed here.