Debretsion Gebremichael, Tigray Regional President in Mekele, Tigray Region, Ethiopia on June 26 2019. Picture: REUTERS/TIKSA NEGERI
Debretsion Gebremichael, Tigray Regional President in Mekele, Tigray Region, Ethiopia on June 26 2019. Picture: REUTERS/TIKSA NEGERI

Ethiopia’s government ratcheted up economic pressure on the rebel Tigray state in a bid to cow it into submission after two weeks of fighting that’s triggered a humanitarian crisis in Africa’s second-most populous nation.

The attorney-general’s office said it had frozen the bank accounts of 34 subsidiaries of the Endowment Fund for the Rehabilitation of Tigray (Effort), which is administered by the region’s ruling Tigray People’s Liberation Front.

The authorities acted because the companies are allegedly “participating in financing ethnic-based violence, acts of terrorism, connection with the TPLF, which seeks to overthrow the constitutional order,” the office said in a statement on Facebook.

The clampdown on Effort, follows conflict in which hundreds of people have died and tens of thousands have been forced to flee their homes. Ethiopian army forces began an incursion on November 4, after months of tension between the federal and regional governments.

In October, Ethiopia’s government froze budget subsidies to Tigray’s government and said it would instead allocate the funds directly to local authorities. The region had been set to receive 10.4-billion birr ($272m) from the government this fiscal year.

Founded in 1995 with assets acquired during a 17-year armed rebellion, Effort controls some of Ethiopia’s biggest businesses. It has interests in at least 13 companies involved in food production — the mainstay of Tigray’s economy — construction, pharmaceutical manufacturing and mining.

Tigray President Debretsion Gebremichael criticised the attorney-general’s announcement.

“It is an act of daytime robbery on Tigray’s interests,” he said by  text message. “This is part of their plan to damage and weaken the economy of Tigray.”

Ethiopia’s $107bn economy expanded more than 9% a year over the past decade as investment flooded in, making it one of the world’s top performers. Prior to the hostilities, the International Monetary Fund forecast that the fallout from the coronavirus would slow to 1.9% in 2020 — a projection that’s likely to prove overly optimistic.

Economic liberalisation

Besides derailing one of the world’s fastest growing tourism industries, the violence could distract the government from implementing plans to open telecommunications and other state-dominated industries to outside investors.

MTN, Africa’s biggest wireless carrier, echoed growing concerns among investors about Ethiopia’s investment climate when CEO Ralph Mupita said on Wednesday the country was looking “materially less attractive.”

Vodacom, SA’s biggest mobile operator, said earlier this week it was monitoring the crisis before a planned investment decision, while KCB group, Kenya’s largest bank, has postponed plans to expand into the northern neighbor.

Mounting concerns that the crisis could be a protracted one and spread to other parts of Ethiopia or beyond its borders are evident in the financial markers. Yields on the nation’s $1bn of Eurobonds maturing in 2024 have risen 200 basis points since the conflict erupted and traded at 8.25% in London on Wednesday.

The UN Office for the Coordination of Humanitarian Affairs estimates an additional 1.1-million people in Tigray and two neighboring regions are expected to need aid as a result of the conflict. Insecurity, a lack of fuel and a communication blackout have hampered efforts to accurately assess what supplies are needed and deliver them, it said in its latest bulletin.

About 4,000 people are crossing from Tigray into Sudan daily, with more than 30,000 having made the trip by November 18, according to the UN.

Bloomberg

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