Analysis: Inside the Controversial EFFORT
By Oman Uliah, Special to Addis Standard
(Addis Standard) — Every authoritarian regime has its own symbol of economic exploitations and monopoly either in an individual face or in an organizational mask.
Ethiopia, despite its success in persuading its western allies that it is combating poverty using its fast economic growth and democratization, remained to be one of the poorest and most closed countries where a group of few individuals control vast economic shares and absolute political power. Unlike many other authoritarian regimes, the most dominant ruling elite group in Ethiopia has a complex behavior in that it claims to represent a minority ethnic group from the northern part of the country, Tigray. In response it has gotten a relatively overwhelming legitimacy among the people of Tigray as compared to other regions; or at least many people, including myself, believe it receives better legitimacy only in that specific region.
Moreover, this elite group has established a chain of several multi-billion dollar worth business firms under a home-grown umbrella called EFFORT, ‘Endowment Fund for the Rehabilitation of Tigray’, which was originally established to serve a harmless looking purpose of ‘rehabilitating’ Tigray, a war-torn region deprived of a fair chance to prosper during decades of successive regimes. In the past 25 years of TPLF’s dominated political rule in Ethiopia, therefore, EFFORT has emerged as one of the leading economic powerhouses in the name of ‘rehabilitating’ the region.
What is in the name?
On the surface, Endowment Fund for the Rehabilitation of Tigray (EFFORT) is an umbrella company for a group of businesses which are involved in major industrial activities in Ethiopia, such as banking and insurance, import and export, media and communication, construction, agribusiness, and mining, among others.
Having started with an initial capital of around US$100 million, EFFORT’s worth has now reached more than a staggering US$3 billion in paid capital, creating more than 47,000 employment opportunities.
EFFORT companies were first registered as private share companies owned by some of the top leaders of TPLF. Later on, however, the companies were re-registered as “endowment” companies whose profits will not be divided to individuals, according to the 1960 Ethiopian civil code. However, top officials of the TPLF, the most powerful member of Ethiopia’s ruling party EPRDF, remained as the CEOs and GMs of these companies; and some of whom reportedly own small shares designed to motivate them in helping EFFORT stay competitive.
‘The original sin’: How did TPLF accumulate its wealth?
EFFORT’s official profile claims it was established by using seed money from the liquidated amount of capital of the Tigrayan People’s Liberation Front (TPLF), accumulated during Ethiopia’s 17 years civil war of the militarist Derg regime to establish these companies.
In 2008, Aregawi Berhe, a former veteran of TPLF who later on left the party, did his Ph.D. dissertation on ‘The Political History of TPLF’ for Vrije Universteit in Amsterdam, somehow corroborates the story. In his account of the party’s earliest times, Aregawi wrote about one of the first successful operations that the then guerilla fighters ever had: ‘Axum Operation’. It is a military operation that succeeded in raiding a police garrison and a bank in the historic city of Axum in the north during which the TPLF fighters made away with “substantial amounts of arms and ammunition and 175,000 birr (US$ 84,000)”, according to Aregawi.
Having started by raiding public banks, members of the TPLF continued to accumulate wealth and went on to dominate the contested use of ‘aid money’ for political purposes before the party came to control power in 1991. TPLF had also founded the Relief Society of Tigray (REST), a humanitarian wing, during the civil war. “By June 1985,” wrote Aregawi Berhe, “REST had received more than US$100 million from donors in the name of saving famine victims. [… however] the late Meles [Zenawi’s] proposal for the allocation of the relief aid money was as follows: 50% for MLLT [Marxist-Leninist League of Tigray] consolidation, 45% for TPLF activities and 5% for the famine victims.” Predictably, Aregawi’s claim, especially that of aid money allocations, has been vehemently denied by the current TPLF leaders.
Gebru Asrat, another former TPLF veteran who later on established an opposition political party Arena Tigray, has briefly raised this issue in his book, ‘Lualawinet Ena Democracy beEthiopia’, (Sovereignty and Democracy in Ethiopia), and said that the guerilla fighters used to get a lot of money in foreign aid and; ‘it was up to the TPLF [leadership] to allocate which money goes where.” Gebru neither confirmed nor denied Aregawi’s claim that aid money was used for political purposes. If anything, he is of the view that it is impossible to make such allegations.
However, legally questionable ways of accumulating wealth seemed to have continued within the party even after it took control of state power. Ermias Legesse, a former Communication State Minister, who is now in exile, has recently published his second book, ‘Yemeles Leqaqit’, in which he raised multiple controversial points against the establishment and functions of EFFORT.
In Chapter six of this 565 pages book, Ermias tells several stories on how EFFORT used to get its finances unfairly from the Ethiopian state and how it transferred it to its own account. Ermias went an extra mile to display a letter written in 1994 and was signed by the then Prime Minister, Tamrat Layne, demanding the Addis Abeba Health bureau to refund TPLF’s medical expenses of the civil war time. The money requested amounted to more than four million birr (almost 67% of the city’s annual budget at that time), but the total amount paid by the Ministry of Health was actually 17 million birr. Ermias also wrote that the medicines that TPLF had distributed to the locals during the civil war, for which it had requested a refund, was actually robbed by the guerilla fighters from public pharmacies. The money that was paid back in such a bizarre demand by the then Prime Minister was put in TPLF’s accounts.
Of continued sins & controversies
Companies that are currently under the umbrella of EFFORT were originally established as PLCs having a few members of TPLF leaders as shareholders. Later on, in August 1995, they were re-registered as ‘endowment’ companies and still remained under the umbrella of EFFORT.
The re-registration of these PLCs as ‘endowment’ companies was done to justify that these companies were established using the money donated by the shareholders of the preceding PLCs, which in itself portrays a picture that EFFORT, as a conglomerate of these companies, did not use public money to be established. According to the Ethiopian civil code, endowment companies are legally prohibited from distributing their profits to individuals. This fact effectively obscures the few individuals controlling these companies behind a party cover.
In 2004, the Amharic version of the ‘Ethiopian Reporter’, a bi-weekly newspaper owned by a former member of the TPLF rebel group, published series of stories concerning EFFORT and its debt in public banks, including the controversial cancellation of the debt. (The copies of these publications are annexed in the latest book of Ermias Legesse, referred above.)
According to this series of publication, EFFORT had borrowed 1.7 billion birr from the state-owned Commercial Bank of Ethiopia (CBE) which later on has risen to 1.8 billion birr debt including the interests. First, CBE officials have denied and said that ‘they did not loan money to EFFORT’. But later on CBE had transferred the debts to yet another state-owned bank, Development Bank of Ethiopia (DBE), for ‘better management’. Finally, DBE reported that the amount of money loaned to EFFORT was ‘none performing’ loan. Ermias claims that the CBE had loaned EFFORT the money with no collateral in the first place. The following year it was reported that DBE, the bank that took over the loan for “better management” was facing a bankruptcy of some 3.5 billion birr; certainly not exclusively attributable to the loan provided to EFFORT, but due in a significant part to it.
The other controversy surrounding EFFORT lies in the manner in which its businesses affiliates operate. Its leaders claim that their extreme obedience to the rule of law and their refusal to bribe local officials often poses a great challenge to their operations, disadvantaging their businesses. However, EFFORT companies are generally known to enjoy a great deal of support from officials. A good example to prove this is a rare ruling by a federal court on the 19th December 2012. The federal First instance court at Lideta ruled that one of EFFORT’s companies, Mega Entertainment Center, which was led by the widow of the late PM Meles Zenawi, Azeb Mesfin, has been running its business in a fraudulent manner by reporting more expenses than the actual and without paying value-added taxes collected from its customers during the preceding eight years.
But the secrecy of most of these companies is such that details like this come to the public’s knowledge only when there is disagreement between stakeholders; this time, it was between Azeb and another management member of Mega, Eqoubay Berhe.
According to a letter by former US ambassador to Ethiopia, Donald Yamamoto, which was one of the Wikileaks documents, Ex-TPLF veteran Seyee Abraha (who later on fell from favor and was subsequently jailed for corruption) was quoted as saying the objectives of EFFORT during its foundation were “to study, and then establish profitable companies that use locally-available resources and provide employment [opportunities] for Tigray.” In this sense, EFFORT, even though it also gets raw materials from and markets its end products to other regions in Ethiopia, mostly (though not exclusively) hires Tigrians.
In principle, its profit should be used to rehabilitate the region. However, many Tigrians despair the fact that the “Endowment” is merely used by a few corrupt TPLF elites to enrich themselves. Former veteran and ex-president of the Tigray region for a decade, Gebru Asrat, in his book mentioned above admitted that the “endowment” was being exploited by a few TPLF top leaders; he suggested that there must be ways of diverting EFFORT’s profits/wealth to the people of Tigray as the endowment belongs to the Tigrians. His suggestion indicates a return, once again, of the endowment to a share company in which as many individuals could become shareholders. Many Tigrian pro-democracy activists agree with Gebru Asrat’s suggestions.
What do ‘others’ own?
Without a doubt, other regions of Ethiopia have also suffered significant social and economic devastations during the 17 years civil war before it ended in 1991. Military expenditure was Ethiopia’s biggest expense during the entire rule of the militarist Derg regime. Suffice to say, therefore, other regions also needed ‘endowments’ of their own.
It seemed it was in response to this concern that TPLF ‘provided’ seed money for other rehabilitation funds. In Oromia regional state is Dinsho endowment, which was established in 1992 and was renamed Tumsa Endowment for Development of Oromia in 2001. It is led by top officials of the OPDO, the party representing the region within the EPRDF coalition. In Amhara regional state is ‘TIRET’, first established in 1995 and went on to incorporate several pre-existing companies. TIRET is led by senior officials of ANDM, the party representing the region within the ruling EPRDF. And in Southern Nations Nationalities and People’s Region (SNNPR) is WENDO trading, which was established in 1994 and is led by senior officials of SEPDM, the party representing the region within the ruling EPRDF.
Seyee Abraha has admitted: “TPLF gave a portion of its capital to each of the three parties within the EPRDF to establish their own endowment funds”. However, the combined numbers of companies run by these three ‘endowments’ are less than twenty; whereas at least 24 companies are listed under EFFORT; (some put these numbers as high as 380). The nature of secrecy surrounding this delicate matter means one may never find out the real figures.
Nonetheless, the three “endowments” run by OPDO, ANDM and SEPDM were supposed to create employment opportunities for more than 80% of Ethiopia’s population as compared to EFFORT’s targeting of 6% of Ethiopians in Tigray regional state.
According to a research titled ‘Rethinking Business and Politics in Ethiopia’, published in 2011 by Sarah Vaughan and Mesfin Gebremichael, “[TIRET] companies employ only 2,800 staff, as compared with the more 14,000 permanent employees or 34,000 contract staff of EFFORT and its companies.” And the poorest regional states of Ethiopia, namely, the Somali, Afar, Benishangul-Gumuz and Gambella regions do not have ‘endowment companies’ of their own to help them rehabilitate their respective regions, although they are politically administered by EPRDF’s sister parties.
What’s not and what’s owned by EFFORT?
There is a big deal of confusion in identifying EFFORT’s business complexities. Selam Bus Share Company is a good example. Established in 1996, 99.6% of this interregional transport service providing company share is held by Tigray Development Association (TDA); the rest is held by individuals. Although Selam Bus board members, as are EFFORT companies’ board members, are members of the TPLF, EFFORT has no registered share in Selam Bus. However, Selam Bus is a company many people name first when asked to list EFFORT’s businesses. This blurry ownership status is perhaps one of the reasons why Selam Buses were targeted by the last year’s widespread public protesters in Oromia and Amhara regions.
Dejennna Endowment is another example. Established to ‘help promote development in Tigray,’ on the surface Dejenna Endowment is a part of the Relief Society of Tigray (REST). There are 11 companies listed under Dejenna Endowment in its website. In 2009, Dejenna has merged with EFFORT following the appointment of Azeb Mesfin, widow of the late Meles Zenawi, as head of the later. Companies under EFFORT usually hold shares in one another’s companies so that one pulls up when another fails. However, until today little is known about the merger of EFFORT and Dejenna. Besides, the information on the official websites of the two endowments mis-inform readers as if the two are independent of one another. But, some of the companies that are known to be under EFFORT are actually listed as the properties of Dejenna endowment.
The Sheger vs Mekelle narrative
By now, keen observers of the relationship between politics and business in Ethiopia can safely assume that business and politics in Ethiopia are radically divided into two major narratives in defining and perceiving the current TPLF dominated regime. I call these narratives ‘the Sheger narrative’ – a political narrative that is mostly advocated from here in the capital Addis Abeba, and ‘the Mekelle narrative’ – usually advocated by the people in Mekelle, the capital of the Tigray regional state, home to the all too powerful members of TPLF.
However, both narratives go beyond these respective centers depending on whose political view is solicited. The two narratives are only thoughts that do have majority acceptance in their respective centers. ‘The Sheger narrative’ (the most popular one) considers the TPLF dominated administration as a total failure that holds power by force; whereas ‘the Mekelle narrative’ generally sympathizes with the regime and considers it as a legitimate administration, albeit admitting some of its fault lines mostly due to the corrupt practices of some of its leaders.
This definition makes it clear how and why Tigrians (in most cases driven by ‘the Mekelle narrative’) and non-Tigrians (driven by ‘the Sheger narrative’) view the relationship between TPLF and EFFORT differently.
Tigrian pro-democracy activists’ criticism of EFFORT can be clearly seen by how they react to the manner in which former leaders of TPLF, who were expelled during the party’s infamous split in 2001, view EFFORT. Former top leaders of TPLF, Seyee Abraha, as we read him on wikileaks documents, and Gebru Asrat, from his book, both criticize EFFORT’s management. Both regret EFFORT’s failure to rehabilitate Tigray as was stipulated in its foundational principles. However, both believe the people of Tigray are the rightful owners of these ‘endowment’ companies under EFFORT.
On the contrary, most non-Tigrian activists and politicians disown EFFORT and also the rest of ‘endowments’ that are being manipulated by EPRDF leaders. Lidetu Ayalew, former leader of the opposition Ethiopian Democratic Party, and Dr. Berhanu Nega, current leader of the outlawed Ginbot 7, both condemned EFFORT as a party business that monopolized the economy, and both concluded the “endowments” should be dissolved or privatized. Similarly, many other activists want to (and sometimes advocate) boycotting EFFORT services and products to stop TPLF’s hegemonic march.
In the same manner, Tigrian activists claim other home grown charity organizations operating in Tigray, namely REST and TDA, are used to create grassroots networks to dictate the people of Tigray become loyalists of the TPLF, whereas non-Tigrian activists, such as Ermias Legesse, disagree and say these organizations are replicas of EFFORT to simply promote disproportionate social development of Tigrians at the cost of others.
This leads us to conclude that ‘the Mekelle narrative’ generally portrays EFFORT as an organization that rightfully belongs to the ‘Tigrian people’ which is unfortunately being exploited by few members of the top management for personal gains. ‘The Sheger narrative’, on the other hand, defines EFFORT as ‘a tool to exploit the wealth of Ethiopian people and create economic monopoly for the benefit of a [small] group’.
The red line
What is indisputable is speaking truth in a country governed by the TPLF dominated EPRDF is always a dangerous exercise; speaking the truth about EFFORT is even more dangerous. A tax controller from Adama, 100kms south east of Addis Abeba, who is now in Qilinto prison on the southern outskirt of Addis Abeba suspected of ‘corruption’ has recently told me that ‘EFFORT trucks were known to be untouchables on their way to and from Djibouti port’. Similarly, investigating companies under EFFORT is normally a red line no journalist in Ethiopia would like to cross, contributing to the secrecy of the ins and outs of the giant umbrella.
Concealed in this intimidating rubble are crucial facts about EFFORT such as details on tax returns. That is why this article cannot be taken as an exhaustive look into the functions of EFFORT and its affiliates, but just the tip of the iceberg to demonstrate in part some facts about the economic exploitations of the authoritarian regime currently governing Ethiopia.