Africa, and specifically Ethiopia, has received significant coverage in today's UK newspapers – prompting reflection on Ethiopia's rapid economic progress, in the context of the development of the continent as a whole.
Prompting some of the interest in Ethiopia is a report that garment workers in Ethiopia are paid only £5 (US$7) per week for working hard shifts in factories in Ethiopia. The story, based upon a report from the New York University Stern Centre for Business and Human Rights, called Made in Ethiopia: Challenges in the Garment Industry’s New Frontier, highlights the difficulties for Asian enterprises who have established factories in Ethiopia but find that their low-paid workers lack motivation or skills. Various points of view are reflected, including a quote from an Asian business-owner who says that it is normal to shout at workers to motivate them, because "In India there’s always shouting. If you don’t shout, workers don’t work." The report quotes Ethiopian workers as saying that they find the raised voices of their supervisors insulting.
The report compliments the Hawassa factory site for being modern and well-organised, but questions whether the low-paid workers, many of whom travel long distances on foot to work, can be expected to sustain the level of productivity required by their employers (often international investors) without improved conditions.
The issues encountered by the investors in this factory complex, which is clearly a narrow sample, raises the broader question of the sustainability of the impressive growth achieved by Ethiopia in recent years, as Africa's fastest growing economy. The World Bank puts its GDP growth at 10.2% for 2017 and 7.7% for 2018.
Ethiopia's progress in improving its business environment and addressing security issues (such as the war with Eritrea) has attracted praise, for example from U.S. Vice President Mike Pence, who last year congratulated Ethiopia's new PM, Abiy Ahmed, on “historic reform efforts”.
World Bank chief Jim Yong Kim said that PM Ahmed “has achieved many great things in just 116 days."
The challenge for Ethiopia will be to maintain its competitive edge, whilst improving the conditions for its workers, and increasing its per capita income. The government has committed itself to seeing welfare improve alongside economic progress. But large parts of Ethiopia's growth has come from new manufacturing industries which rely upon the labour force providing cheap labour and high productivity. The agricultural sector, also an important driver, similarly depends on labour costs remaining low. The low wages which are questioned by the authors of the report cited by the Times seem essential to the country's success, at least in the short to medium term. The difficult thing is for the government to find a balance between the attractive, cheap labour market and the benefits that it wishes to see for its people.
There seems no sign that Ethiopia's growth is a bubble, but careful investors will keep a close eye on the strength of the foundations of the spectacular statistics, including the Government's evolving strategy for improving wages and living conditions.